Implications of OECD responsible business conduct guidelines for directors

What you should know

International pressure is growing for responsible business practices to be followed.
The OECD has issued guidelines and created a complaints mechanism.
New Zealand has made a binding commitment to implement these guidelines and the complaints mechanism.
Large companies with an international presence are clearly subject to these guidelines and the complaints process, but increasingly smaller entities, including “for purpose” organisations, could be caught as a result of having international supply chain or other relationships.

If your organisation is operating overseas, or you’re a multinational operating in New Zealand, you need to be aware of the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises on Responsible Business Conduct (the Guidelines) and the public complaints mechanisms associated with them.

The Guidelines are intended to encourage responsible trade and investment and thereby multiply the benefits of trade and investment, through continuous engagement and improvement in all parts of the world. International trade and investment strengthen the ties between countries and regions and generate substantial benefits that are required for societies to achieve sustainable development outcomes.

The Guidelines address various aspects of business responsibility, from information disclosure, employment and consumer interests to science, technology, and competition. The 2023 update includes crucial additions like climate change, biodiversity, and technology-related due diligence.

Understanding these guidelines and how they impact your organisation can help manage stakeholder expectations and protect your organisation’s reputation.

New Zealand's role and complaints mechanisms

New Zealand has made a commitment to the implementation of the OECD Guidelines. As a consequence, there is an expectation that multi-nationals in New Zealand fulfil the Guidelines’ recommendations. There is also an expectation that other New Zealand based enterprises observe the Guidelines’ recommendations to the fullest extent possible, recognising that domestic or smaller enterprises do not have the same capabilities to respond.

The Ministry of Business, Innovation, and Employment (MBIE) acts as the National Contact Point for Responsible Business Conduct (NCP). It operates a complaints mechanism to resolve issues related to the Guidelines' implementation. Any complaints brought by any person against multinationals operating or headquartered in New Zealand can be assessed and investigated by MBIE. Likewise, contact points in other jurisdictions can assess and investigate complaints lodged in those jurisdictions.

Multinationals are the main focus, such as a New Zealand company that also operates in Thailand, or an American-owned company operating in New Zealand. It’s important to note that ‘multinational’ may be interpreted very broadly, which means a smaller organisation could potentially find themselves embroiled in an inquiry or complaints process.

The IoD’s Governance Leadership Centre serves on MBIE’s OECD NCP Liaison Group and will continue to watch how the complaints mechanism is being developed in New Zealand.

Implications for directors

While adherence to the Guidelines is voluntary, it aligns businesses with internationally recognised standards and best practices. Directors should familiarise themselves with the Guidelines and evaluate how their business practices can align with the principles.

Adopting responsible business practices not only promotes sustainable development but also enhances the reputation and credibility of organisations operating in the global marketplace. Embracing the Guidelines can position your organisation as a responsible player in the international business landscape.

Complying with the Guidelines has value for all enterprises. As outlined by the OECD, the advantages of acting responsibly include, among others:

effective risk and reputation management
portfolio diversification
operational efficiency gains
social licence to operate
compliance with internationally recognised principles and standards
attracting and retaining talent
increase in added value for consumers
first-mover advantages in some markets
access to new markets.

Countries may vary in how they promote the OECD Guidelines and utilise the complaints mechanism. Directors of New Zealand companies operating abroad should be mindful of these differences and be prepared to address disputes with stakeholders in various jurisdictions.

OECD Watch is an organisation committed to raising international standards and laws for corporate accountability. It actively supports communities, individuals and workers to use the OECD Guidelines as a standard against which to assess corporate conduct, and to use the associated complaints mechanisms as a tool for accountability. Their complaints database provides a useful overview of the types of complaints that have been processed to date and the impact the process may have on affected organisations.