3.
Sustainability Standards and
Instruments
Since the late 1990s there has been a proliferation of transnational, voluntary standards for
what constitutes responsible corporate action, including standards that have been developed by
states; public/private partnerships; multi-stakeholder negotiation processes; industries and
companies; institutional investors; functional groups such as accountancy firms and social
assurance consulting groups; NGOs; and non-financial ratings agencies. Notable multi-sector
standards initiatives have included Social Accountability 8000 and the Ethical Trading Institute,
and influential multilateral initiatives have included the OECD’s Guidelines for Multinational
Enterprises, the ISO 26000 Corporate Responsibility standards, the UN Global Compact and
the “Protect, Respect and Remedy” framework in the UN’s Guiding Principles on Business and
Human Rights that articulates the human rights responsibilities of states and companies. Most
of the corporate responsibility standards are voluntary; however, many of the topics generally
included within the general subject of CSR have been addressed to some degree in domestic
regulations covering labor rights, environmental and consumer protection, anti-discrimination
and anti-bribery.
3.1. CSR Initiatives of Governmental or
Intergovernmental Bodies
Many companies have looked to CSR initiatives of governmental or intergovernmental bodies
as the foundation for creating their own CSR commitments. Instruments developed and
promoted by the United Nations and the other entities referenced below are widely recognized
as legitimate standards that have emerged from a careful process of deliberation and input from
a wide range of stakeholders with substantial experience in identifying problems and assessing
potential solutions.
United Nations Global Compact
The United Nations Global Compact (www.unglobalcompact.org/) is a voluntary initiative
launched in 1999 based on CEO commitments to implement universal sustainability principles
and to take steps to support United Nations goals. As of April 2020, there were over 10,000
signatories to the UN Global Compact in 166 countries, both developed and developing,
representing nearly every sector and size, making it the world’s most popular multi-stakeholder
CSR initiative. The UN Global Compact’s Ten Principles, which encompass human rights, labor,
environment and anti-corruption, are derived from: the Universal Declaration of Human Rights,
the International Labour Organization’s Declaration on Fundamental Principles and Rights at
Work, the Rio Declaration on Environment and Development and the United Nations Convention
Against Corruption.
OECD Guidelines for Multinational Enterprises
The OECD Guidelines for Multinational Enterprises (http://mneguidelines.oecd.org/) are the
most comprehensive set of government-backed recommendations on responsible business
conduct in existence today. The governments adhering to the Guidelines, all thirty-four OECD
countries and twelve non-OECD countries, aim to encourage and maximize the positive impact
multinational enterprises can make to sustainable development and enduring social progress.
The Guidelines were first adopted in 1976 and have been revised five times since then to
ensure that they remain a leading tool to promote responsible business conduct in the changing
landscape of the global economy. The most recent update in 2011 took place with the active
participation of business, labor, non-governmental organizations (NGOs), non-adhering
countries and international organizations. The Guidelines are part of the OECD Declaration and
Decisions on International Investment and Multinational Enterprises, and provide voluntary
principles and standards for responsible business conduct in areas such as employment and
industrial relations, human rights, environment, information disclosure, combating bribery,
consumer interests, science and technology, competition and taxation. Among other things, the
Guidelines call for enterprises to take fully into account established policies in the countries in
which they operate and consider the views of other stakeholders.
G20/OECD Principles of Corporate Governance
Elements of CSR, including recognition of the rights of stakeholders along with shareholders
and the need for regular and transparent reporting of the corporation’s governance practices
and performance, found their way into the G20/OECD Principles of Corporate Governance,
which among other things call on corporations to:
● Protect and facilitate the exercise of shareholder rights and ensure equitable treatment of all
shareholders, including minority and foreign shareholders
● Recognize the rights of stakeholders established by law or through mutual agreements and
ensure that where stakeholder interests are protected by law that stakeholders have the
opportunity to obtain effective redress for violation of their rights
● Encourage active cooperation between corporations and stakeholders in creating wealth,
jobs and the sustainability of financially sound enterprises
● Permit mechanisms for employee participation to develop
● Ensure that stakeholders participating in the corporate governance process have access to
relevant, sufficient and reliable information on a timely and regular basis and are able to
freely communicate their concerns about illegal or unethical practices to the board and to the
competent public authorities without compromising their rights
● Publish regular and accurate disclosure concerning the company’s financial situation,
performance, ownership and governance that includes, among other things:
○ company objectives and non-financial information in accordance with high quality
standards including policies and performance relating to business ethics, the
environment and, where material to the company, social issues, human rights and other
public policy commitments
○ foreseeable risk factors including business conduct risks and risks related to the
environment
○ key issues relevant to employees and other stakeholders that may materially affect the
performance of the company or that may have significant impacts upon them
○ governance structures and policies, including the content of any corporate governance
code or policy and the process by which it is implemented
● Implement a corporate governance framework that ensures the strategic guidance of the
company, the effective monitoring of management by the board, the board’s accountability to
the company and the shareholders and effective disclosures and communications to
stakeholders
● Ensure that the board applies high ethical standards and takes into account the interests of
stakeholders through the adoption, implementation and enforcement of company-wide
codes of conduct that serve as a standard for conduct by both the board and key executives
and set the framework for the exercise of judgement in dealing with varying and often
conflicting constituencies
International Labour Organization
The International Labour Organization (ILO) (www.ilo.org) is the only tripartite United Nations
agency and brings together governments, employers and workers representatives from 187
Member States, to set labor standards, develop policies and devise programs promoting decent
work for all women and men. Subjects covered by ILO standards include freedom of
association, collective bargaining, forced and child labor, equality of opportunity and treatment,
tripartite consultation, labor administration and inspection, employment policy, employment
promotion, vocational guidance and training, employment security, wages, working time,
occupational safety and health, social security, maternity protection, social policy, migrant
workers, HIV/AIDS, seafarers and fishers, dock workers, indigenous and tribal peoples and
other specific categories of workers. Other key ILO documents include the 2008 Declaration on
Social Justice for a Fair Globalization, which expresses the universality of the Decent Work
Agenda and calls for all ILO members to pursue policies based on their strategic objectives that
include employment, social protection, social dialogue, and rights at work; the 1998 Declaration
on Fundamental Principles and Rights at Work, which commits ILO members to respect and
promote principles and rights with respect to freedom of association and the effective
recognition of the right to collective bargaining, the elimination of forced or compulsory labor, the
abolition of child labor and the elimination of discrimination in respect of employment and
occupation; and the Tripartite Declaration of Principles Concerning Multinational Enterprises and
Social Policy, which sets out principles in the fields of employment, training, conditions of work
and life and industrial relations that multinational enterprises, as well as governments and
employers’ and workers’ organizations, are recommended to observe.
International Finance Corporation
The latest version of the IFC Performance Standards on Environmental and Social
Sustainability went into effect on January 1, 2012. The Performance Standards are directed
toward clients, providing guidance on how to identify risks and impacts, and are designed to
help avoid, mitigate and manage risks and impacts as a way of doing business in a sustainable
way, including stakeholder engagement and disclosure obligations of the client in relation to
project-level activities. In the case of its direct investments (including project and corporate
finance provided through financial intermediaries), IFC requires its clients to apply the
Performance Standards to manage environmental and social risks and impacts so that
development opportunities are enhanced. Together, the Performance Standards establish
standards that the client is to meet throughout the life of an investment by IFC and cover:
assessment and management of environmental and social risks and impacts; labor and working
conditions; resource efficiency and pollution prevention; community health, safety and security;
land acquisition and involuntary resettlement; biodiversity conservation and sustainable
management of living natural resources; indigenous peoples; and cultural heritage.
Principles for Responsible Investment
The Principles for Responsible Investment (www.unpri.org) calls itself the world’s leading
proponent of responsible investment and works to understand the investment implications of
ESG factors and to support its international network of investor signatories in integrating these
factors into their investment and ownership decisions. The PRI, a non-profit organization,
defines “responsible investment” as an approach to investing that aims to incorporate ESG
factors into investment decisions, to better manage risk and to generate sustainable, long-term
returns. Environmental factors include climate change, greenhouse gas emissions, resource
depletion (including water), waste and pollution and deforestation. Social factors include working
conditions, including slavery and child labor; local communities, including indigenous
communities; conflict; health and safety; and employee relations and diversity. Governance
factors include executive pay, bribery and corruption, political lobbying and donations, board
diversity and structure and tax strategy. Signatories agree to follow six principles: we will
incorporate ESG issues into investment analysis and decision-making processes; we will be
active owners and incorporate ESG issues into our ownership policies and practices; we will
seek appropriate disclosure on ESG issues by the entities in which we invest; we will promote
acceptance and implementation of the principles within the investment industry; we will work
together to enhance our effectiveness in implementing the principles; and we will each report on
our activities and progress toward implementing the principles.
United Nations Sustainable Development Goals
The seventeen Sustainable Development Goals (SDGs) of the 2030 Agenda for Sustainable
Development were adopted by world leaders in September 2015 and went into effect on
January 1, 2016. It was intended that over the fifteen year period running through 2030 the
SDGs, and their accompanying 169 targets, would be universally applied to all and that
countries would mobilize efforts to end all forms of poverty, fight inequalities and tackle climate
change, while ensuring that no one is left behind. While the SDGs are not legally binding, it is
intended that national governments will be expected to take ownership and establish national
frameworks for the achievement of the seventeen SDGs and that countries will have the primary
responsibility for follow-up and review of the progress made in implementing the SDGs.
Provisions have also been made for monitoring and review of the SDGs using a set of global
indicators developed by the UN Statistical Commission and adopted by the Economic and
Social Council and the UN General Assembly. Topics addressed by the SDG including no
poverty; zero hunger; good health and wellbeing; quality education; gender equality; clean water
and sanitation; affordable and clean energy; decent work and economic growth; industry,
innovation and infrastructure; reduced inequalities; sustainable cities and communities;
responsible consumption and production; climate action; “life below water”; “life on land”; peace,
justice and strong institutions; and partnerships for the goals.
United Nations Human Rights Instruments
The term “human rights” was mentioned seven times in the United Nations’ founding charter,
making the promotion and protection of human rights a key purpose and guiding principle of the
Organization. The Office of the UN High Commissioner for Human Rights (www.ohchr.org/) has
lead responsibility in the UN system for the promotion and protection of human rights and
supports the human rights components of peacekeeping missions in several countries, and has
many country and regional offices and centers. The Universal Declaration of Human Rights
(1948) was the first legal document protecting universal human rights. Together with the
International Covenant on Civil and Political Rights and the International Covenant on
Economic, Social and Cultural Rights, the three instruments form the so-called International Bill
of Human Rights. A series of international human rights treaties and other instruments that have
been adopted since 1945 have expanded the body of international human rights law including
the Guiding Principles on Business and Human Rights: Implementing the United Nations
“Protect, Respect and Remedy” Framework, which was approved in 2011 and has become the
global standard for the respective roles and duties of states and businesses relative to human
rights and been integrated as central elements of other well-known international standards such
as the OECD Guidelines for Multinational Enterprises, IFC Performance Standards and ISO
26000 Social Responsibility Guidance.
3.2. Sectoral CSR Commitments
Sectoral CSR commitments emerge from collective CSR initiatives among companies and other
stakeholders involved in particular business sectors and/or with a common interest in a specific
social or environmental responsibility issue. Examples of sectoral CSR initiatives include the
following:
● The International Council on Mining and Metals has developed ten principles that serve
as a best-practice framework for sustainable development in the mining and metals industry
(www.icmm.com/en-gb/about-us/icmm-10-principles)
● The Sustainable Agriculture Initiative Platform is the primary global food and drink value
chain initiative for sustainable agriculture and has developed (or co-developed) tools and
guidance to support global and local sustainable sourcing and agriculture practices
(www.saiplatform.org/)
● The Voluntary Principles on Security and Human Rights (www.voluntaryprinciples.org/)
are the only human rights guidelines designed specifically for extractive sector companies
and are based on a collaboration of governments, companies and NGOs
3.3. International Multi-Stakeholder Processes
International multi-stakeholder processes have become a popular strategy for discussing and
resolving questions and conflict relating to issues of social and environmental responsibility.
Multi-stakeholder processes have been described as decision-making bodies, voluntary or
statutory, comprising two or more interest groups (i.e., stakeholders) who perceive a common
problem and realize their interdependence in solving it and come together to share their views
and agree on strategies and activities for collectively solving the problem.
AccountAbility
AccountAbility (www.accountability.org/) is a leading global organization formed in 1995 to
provide innovative solutions to the most critical challenges in corporate responsibility and
sustainable development and promote accountability for sustainable development.
AccountAbility works with corporations, non-profits and governments to embed ethical,
environmental, social and governance accountability into their organizational DNA.
AccountAbility provides assurance and accountability management tools and standards through
its AA1000 series, which includes the AA1000 AccountAbility Principles Standard (AA1000APS)
(a framework for an organization to identify, prioritize and respond to its sustainability
challenges); the AA1000 Assurance Standard (AA1000AS) (a methodology for assurance
practitioners to evaluate the nature and extent to which an organization adheres to the
AccountAbility Principles); and the AA1000 Stakeholder Engagement Standard (AA1000SES) (a
framework to help organizations ensure stakeholder engagement processes are purpose driven,
robust and deliver results).
CRT Principles for Business
One of the most interesting stakeholder-focused standards for corporate governance has been
developed by the Caux Round Table (CRT) (www.cauxroundtable.org), which describes itself as
an international network of principled business leaders working to promote a moral capitalism.
The CRT believes that the world business community should play an important role in improving
economic and social conditions and, to that end, has developed the CRT Principles for Business
to embody the aspiration of principled business leadership. Noting that businesses can be
powerful agents of positive social change, the CRT Principals admonish businesses that they
are expected to act responsibly and demonstrate respect for the dignity and interest of its
stakeholders (i.e., customers, employees, owners/investors, suppliers, competitors and
communities) in their policies and actions. The following General Principles in the CRT
Principles were intended to serve as a foundation for dialogue and action by business leaders in
search of business responsibility and a means of implementing moral values into business
decision making:
● Principle 1. The responsibilities of businesses extend beyond shareholders toward
stakeholders
● Principle 2. The economic and social impact of business should be focused on innovation,
justice and world community
● Principle 3. Business behavior should extend beyond the letter of the law toward a spirit of
trust
● Principle 4. Respect for rules
● Principle 5. Support for multilateral trade
● Principle 6. Respect for the environment
● Principle 7. Avoidance of illicit operations
Extractive Industries Transparency Initiative
The Extractive Industries Transparency Initiative (https://eiti.org) is a multi-stakeholder initiative
involving governments, businesses and civil society that has developed a global standard to
promote the open and accountable management of natural resources and address the key
governance issues of the oil, gas and mining sectors.
Forest Stewardship Council
The Forest Stewardship Council (FSC) (www.ic.fsc.org) is a multi-stakeholder initiative formed
to promote environmentally appropriate, socially beneficial and economically viable
management of the world’s forests. The FSC claims to be the world’s strongest certification
system, in terms of global reach, robustness of certification criteria and number of businesses
involved in the system. The FSC has developed regionally appropriate guidelines and standards
for sustainable forest management and FSC certification is frequently required as a condition to
contracting with governmental agencies.
Marine Stewardship Council
The Marine Stewardship Council (MSC) (msc.org) is an international, independent,
multi-stakeholder non-profit organization established to address the problem of unsustainable
fishing and safeguard seafood supplies for the future. The MSC works with scientists, fisheries,
seafood producers and brands and sets credible standards for sustainable fishing and supply
chain traceability. Organizations meet these standards in order to demonstrate the sustainability
of their products and the blue MSC label makes it easy for everyone to choose seafood that has
been caught by fisheries that care for the environment.
Social Accountability International
Social Accountability International (SAI) (www.sa-intl.org) is a non-profit organization that seeks
to advance human rights at work, driven by diverse perspectives to navigating evolving labor
issues. SAI works to protect the integrity of workers around the world by building local capacity
and developing systems of accountability through socially responsible standards. SAI
established one of the world’s preeminent social standards—the SA8000® Standard for decent
work, a tool for implementing international labor standards that is based on the principles of
international human rights norms and which includes the following elements: child labor, forced
or compulsory labor, health and safety, freedom of association and right to collective bargaining,
discrimination, disciplinary practices, working hours, remuneration and management system.
Roundtable on Sustainable Palm Oil
The Roundtable on Sustainable Palm Oil (www.rspo.org) is a multi-stakeholder learning and
criteria development process formed to advance the production, procurement, finance and use
of sustainable palm oil products; develop, implement, verify, assure and periodically review
credible global standards for the entire supply chain of sustainable palm oil; monitor and
evaluate the economic, environmental and social impacts of the uptake of sustainable palm oil
in the market; and engage and commit all stakeholders throughout the supply chain, including
governments and consumers.
3.4. International Reporting and Management
Standards
It is now widely acknowledged that best practices relating to the implementation of effective
CSR practices must include a commitment to transparency and reporting on CSR-related
activities and impacts to the organization’s stakeholders, either as part of or in addition to any
other disclosures that may be required of the organization by law or statute. In addition, CSR is
like any other important strategic initiative and should be carried out pursuant to a formal
sustainability management system and process that includes due diligence, development and
implementation of strategic and operational goals and plans, monitoring and assessment of
impacts overseen by the members of the governing body of the organization. Several of the
most influential and widely used CSR-related standards that specifically address reporting and
management have been developed by the Global Reporting Initiative (www.globalreporting.org);
the International Integrated Reporting Council, or IIRC (www.integratedreporting.org); the
Sustainability Accounting Standards Board (www.sasb.org); and the International Organization
for Standardization (e.g., ISO 14001 (environmental management), ISO 9001 (quality
management) and ISO 26000 (social responsibility)).
3.5. Securities Exchanges and Regulators
Governments play a variety of roles in the financial system including enforcing disclosure rules
and norms that facilitate the transfer of information from those in need of capital to those willing
to provide capital in order to ensure that capital providers are able to make informed decisions
about whether to invest or lend. One of the ways in which regulators intervene in the capital
raising process is through the imposition of rules relating to corporate governance. While the
public securities markets in the U.S. remain the largest and deepest in the world, there is clearly
competition from other markets that are achieving extremely high levels of growth including
capital markets in the Eurozone, the Asia-Pacific region and in emerging markets such as China
and India, and securities exchanges and regulatory authorities in these jurisdictions have often
shown global leadership in integrating corporate governance and CSR.
Global companies in Europe have been guided by the EU Commission’s Green Paper on
Promoting a Framework for CSR and the European Code of Conduct Regarding the Activities of
Transnational Corporations Operating in Developing Economies. Since 2003 EU accounting
rules as stated in the EU Accounts Modernization Directive have required companies to report
on environmental and labor issues “to the extent necessary” to provide investors with an
accurate view of the company’s financial position and the risks to that position. The EU has
implemented a directive that requires nearly 7,000 large companies and “public interest
organizations”, such as banks and insurance companies, to “prepare a nonfinancial statement
containing information relating to at least environmental matters, social and employee-related
matters including diversity, respect for human rights, anti-corruption and bribery matters”. When
preparing their reports companies are expected to describe their business model and the
outcomes and risks of their policies. Larger companies are also required to include and evaluate
information on their supply chains, which means that smaller companies that act as suppliers to
the reporting companies will need to expand their own data collection and information reporting
activities even though they are not directly subject to the public reporting requirements. In
addition, several stock exchanges around the world require social and/or environmental
disclosure as part of their listing requirements including exchanges in Australia, Brazil, Canada,
India, Singapore, South Africa and the London Stock Exchange. Also, pension funds in
countries such as Australia, Belgium, Canada, France, Germany, Italy, Japan, Sweden and the
U.K. are required to disclose the extent to which the fund incorporates social and environmental
information into their investment decisions.
A number of individual countries in Europe have also taken actions driven, at least in part, by a
series of resolutions adopted by the European Parliament to facilitate the development of the
incorporation of CSR principles in its member economies such as, for example, requiring that
companies adopt “triple bottom line” reporting on their environmental and social performance:
Belgium passed legislation requiring pension fund managers to disclose the extent to which they
consider ethical, social and environmental criteria in their investment policies and legislation
requiring companies to report on social performance, although companies have not been forced
to adhere to and comply with specific ILO conventions; France requires listed companies to
disclose their impact on social and environmental issues in their annual reports and accounts;
Germany requires public companies to issue reports including environmental and/or social
information; and each of the Scandinavian countries have mandated publication of sustainability
reports by public companies that are consistent with widely recognized frameworks such as the
Global Reporting Initiative (GRI) and the UN Global Compact and which are expected to
address labor issues, human rights concerns, gender equality, anti-discrimination and
environmental issues.
In contrast to Europe and the other countries mentioned above, the U.S. has been slower in
using formal regulation to incorporate CSR into the business strategies and operations of
corporations, an approach that is consistent with the preference in the U.S. for minimal
legislative control of business, and has instead emphasized developing specialized
organizations that set rules and standards, and provide enforcement regimes, for certain
aspects of CSR including the Occupational Safety and Health Administration, Equal
Employment Opportunity Commission, Consumer Product Safety Commission and the
Environmental Protection Agency. Areas in which the Securities and Exchange Commission
(SEC) has engaged in rule-making, often with middling success due to legal challenges, or
issuance of guidance on disclosures have included disclosures of environmental litigation
against any government agency where a penalty of $100,000 is sought; explanation of climate
risks to their future profitability, either from physical changes associated with climate change, or
from regulatory initiatives designed to mitigate climate risk; disclosure of the ratio of the CEO’s
total pay to the median employee pay; mine safety disclosure; “conflict minerals” disclosure
where tin, tantalum, tungsten or gold from the Democratic Republic of the Congo or neighboring
countries were incorporated into listed companies’ products; and “publish what you pay”
transparency disclosure for extractive company payments to host countries.
