CORPORATE SOCIAL RESPONSIBILITY

MODULE II
FRAMEWORK OF SOCIAL ORIENTATION

Management Theories
Management theories are concepts surrounding recommended management
strategies, which may include tools such as frameworks and guidelines that can be
implemented in modern organizations. Generally, professionals will not rely solely
on one management theory alone, but instead, introduce several concepts from
different management theories that best suit their workforce and company culture.

1. Scientific Management Theory

American mechanical engineer Frederick Taylor, who was one of the earliest
management theorists, pioneered the scientific management theory. He and his
associates were among the first individuals to study work performance
scientifically. Taylor‘s philosophy emphasized the fact that forcing people to work

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hard wasn‘t the best way to optimize results. Instead, Taylor recommended
simplifying tasks so as to increase productivity.

The strategy was a bit different from how businesses were conducted beforehand.
Initially, a factory executive enjoyed minimal, if any, contact with his employees.
There was absolutely no way of standardizing workplace rules and the only
motivation of the employees was job security. According to Taylor, money was the
key incentive for working, which is why he developed the ―fair day‘s wages for a
fair day‘s work‖ concept. Since then, the scientific management theory has been
practiced worldwide. The resulting collaboration between employees and
employers evolved into the teamwork that people now enjoy.

2. Systems Management Theory

Systems management offers an alternative approach to the planning and
management of organizations. The systems management theory proposes that
businesses, like the human body, consist of multiple components that work
harmoniously so that the larger system can function optimally. According to the
theory, the success of an organization depends on several key elements: synergy,
interdependence, and interrelations between various subsystems.

Employees are one of the most important components of a company. Other

elements crucial to the success of a business are departments, workgroups, and
business units. In practice, managers are required to evaluate patterns and events in
their companies so as to determine the best management approach. This way, they
are able to collaborate on different programs so that they can work as a collective
whole rather than as isolated units.

3. Contingency Management Theory

The main concept behind the contingency management theory is that no one
management approach suits every organization. There are several external and
internal factors that will ultimately affect the chosen management approach. The
contingency theory identifies three variables that are likely to influence an

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organization‘s structure: the size of an organization, technology being employed,
and style of leadership.

Fred Fiedler is the theorist behind the contingency management theory. Fiedler
proposed that the traits of a leader were directly related to how effectively he led.
According to Fiedler‘s theory, there‘s a set of leadership traits handy for every
kind of situation. It means that a leader must be flexible enough to adapt to the
changing environment. The contingency management theory can be summed up as
follows:

 There is no one specific technique for managing an organization.

 A leader should be quick to identify the particular management style suitable
for a particular situation.
 The primary component of Fiedler‘s contingency theory is LPC – the least
preferred co-worker scale. LPC is used to assess how well oriented a
manager is.

4. Theory X and Theory Y

Do you believe that every individual gets maximum satisfaction from the work
they do? Or are you of the opinion that some view work as a burden and only do it
for the money? Such assumptions influence how an organization is run. The
assumptions also form the basis of Theory X and Theory Y. Douglas McGregor is
the theorist credited with developing these two contrasting concepts. More
specifically, these theories refer to two management styles: the authoritarian
(Theory X) and participative (Theory Y).

In an organization where team members show little passion for their work, leaders
are likely to employ the authoritarian style of management. But if employees
demonstrate a willingness to learn and are enthusiastic about what they do, their
leader is likely to use participative management. The management style that a
manager adopts will influence just how well he can keep his team members
motivated.

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Theory X holds a pessimistic view of employees in the sense that they cannot work
in the absence of incentives. Theory Y, on the other hand, holds an optimistic
opinion of employees. The latter theory proposes that employees and managers can
achieve a collaborative and trust-based relationship. Still, there are a couple of
instances where Theory X can be applied. For instance, large corporations that hire
thousands of employees for routine work may find adopting this form of
management ideal.

Types of Managers
1. Vertical Management: - Vertical management, also called top-down
management, refers to the various levels of management within an organization.
Managers at different levels are free to focus on different aspects of the business,
from strategic thinking to communicating information to operational efficiency.
During the nineteenth century and much of the twentieth century, vertical
management was highly structured with many layers of management (as depicted
by a pyramid). In industries where processes and conditions are stable and where
ongoing innovation is less critical, the vertical structure of management can still be
very efficient. Workers in labor-intensive industries such as manufacturing,
transportation, and construction need to follow established procedures and meet
specific goals. Everyone knows who is in charge and assumes the job they do
today will be the same next year or in five years. Vertical management in a
traditional organizational structure

A main disadvantage of vertical management is that it limits information flow from

the lower levels of the organization to the upper levels (like water, information
flows downhill easily). Without easy two-way communication, top management
can become isolated and out of touch with how its plans affect core processes in
the organization. It also fosters vertical thinking. Vertical thinking refers to using
traditional and recognized methods to solve particular problems. It is the opposite
of ―thinking outside of the box.‖ The digital age exposed the shortcomings of
management that addressed problems in formal or bureaucratic approaches at the
expense of creativity and innovation. Today, many organizations use ―flatter‖
structures, with fewer levels between the company‘s chief executives and the

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employee base. Most organizations, however, still have four basic levels of
management: top, middle, first line, and team leaders.

2. Top-Level Managers: - As you would expect, top-level managers (or top

managers) are the ―bosses‖ of the organization. They have titles such as chief
executive officer (CEO), chief operations officer (COO), chief marketing officer
(CMO), chief technology officer (CTO), and chief financial officer (CFO). A new
executive position known as the chief compliance officer (CCO) is showing up on
many organizational charts in response to the demands of the government to
comply with complex rules and regulations. Depending on the size and type of
organization, executive vice presidents and division heads would also be part of the
top management team. The relative importance of these positions varies according
to the type of organization they head. For example, in a pharmaceutical firm, the
CCO may report directly to the CEO or to the board of directors.

Top managers are ultimately responsible for the long-term success of the
organization. They set long-term goals and define strategies to achieve them. They
pay careful attention to the external environment of the organization: the economy,
proposals for laws that would affect profits, stakeholder demands, and consumer
and public relations. They will make the decisions that affect the whole company

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such as financial investments, mergers and acquisitions, partnerships and strategic
alliances, and changes to the brand or product line of the organization.

3. Middle Managers: - Middle managers must be good communicators because

they link line managers and top-level management.

Middle managers have titles like department head, director, and chief supervisor.
They are links between the top managers and the first-line managers and have one
or two levels below them. Middle managers receive broad strategic plans from top
managers and turn them into operational blueprints with specific objectives and
programs for first-line managers. They also encourage, support, and foster talented
employees within the organization. An important function of middle managers is
providing leadership, both in implementing top manager directives and in enabling
first-line managers to support teams and effectively report both positive
performances and obstacles to meeting objectives.

4. First-Line Managers: - First-line managers are the entry level of management,

the individuals ―on the line‖ and in the closest contact with the workers. They are
directly responsible for making sure that organizational objectives and plans are
implemented effectively. They may be called assistant managers, shift managers,
foremen, section chiefs, or office managers. First-line managers are focused almost
exclusively on the internal issues of the organization and are the first to see
problems with the operation of the business, such as untrained labor, poor quality
materials, machinery breakdowns, or new procedures that slow down production. It
is essential that they communicate regularly with middle management.

5. Team Leaders: - A team leader is a special kind of manager who may be

appointed to manage a particular task or activity. The team leader reports to a
first-line or middle manager. Responsibilities of the team leader include
developing timelines, making specific work assignments, providing needed
training to team members, communicating clear instructions, and generally
ensuring that the team is operating at peak efficiency. Once the task is complete,
the team leader position may be eliminated and a new team may be formed to
complete a different task.

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ORGANIZATION CLASSIFICATION

The organization can be classified on the basis of authority and responsibility

assigned to the personnel and the relationship with each other. In this way, an
organization can be either formal organization or informal organization. Both
formal organization and informal organization are explained below.

1. Formal Organization: - Formal organization is formed on the basis

of delegation of authority. Each formal organization has its own objects and the
activities are performed to achieve them. Under formal organization, the duties and
responsibilities of each employee are well designed and exhibited in the
organization chart. It is a conscious determination by which people accomplish
goals by adhering to the norms laid down by the structure. This kind of
organization is an arbitrary set up in which each person is responsible for his
performance. Formal organization has a formal set up to achieve pre- determined
goals.

Features of Formal organization

The main features of formal organization are presented below:
 Formal organization is consciously designed.
 It provides for specialization.
 It is based on delegation of authority.
 The authority, responsibility, duties, policies and rules are properly
well defined.
 The principle of unity of command is usually observed.
 It is deliberately impersonal.
 It is supported by organization chart.

Merits of Formal Organization

The merits of formal organization are briefly described below:
 There is no conflict among the employees since their respective duties and
responsibilities are clearly defined.
 Overlapping of responsibility is easily avoided.

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  It results in the motivation of employees.
 There is no personal bias since clear cut rules and regulations are framed and
followed.
 It makes the organization less dependent on one man.

Demerits of Formal Organization

The followings are the demerits of formal organization.
 It reduces the spirit of initiative.
 There is a delay in taking a decision since rules and regulations are
getting importance than situation.
 It does not give any importance to sentiments and values of employees.
 It reduces the free flow of communication.
 It creates the problems of co-ordination.

2. Informal Organization: - Informal organization refers to the informal

relationships develop among the group of employees in an organization. These
groups fulfill their needs which are largely personal in nature by creating informal
relationships. Informal organizations develop relationships which are built on likes,
dislikes, feelings and emotions. Therefore, the network of social groups based on
friendships can be called as informal organizations. There is no conscious effort
made to have informal organization. It emerges from the formal organization and it
is not based on any rules and regulations as in case of formal organization.
Relationships are created during breaking hours of an office (say coffee or tea
break, lunch hour etc.) and in sometimes even outside the office.
One cannot predict the time of formation of such informal organization. At the
same time, the informal organization can be dissolved at any time by itself. The
group members of the informal organization may be consisting of not only from
the same department but also from the several other departments and cut across the
status boundaries. Generally, these groups‘ members are having same type of taste,
opinions, views and expectations.

Features of Informal Organization

The features of informal organization are given below:
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  An informal organization arises spontaneously.
 It is based on personal attitudes, emotions and likes and dislikes.
 It provides social satisfaction to its members.
 It is an integral part of a total organization and the management
cannot eliminate it.
 It has no place in the formal chart.
 It is a network of personal and social relations.
 It has its own rules and traditions.
 It is indefinite and has no structure.

Merits of Informal Organization

The followings are the merits of informal organization.
 The informal organization overcomes deficiency and fills up the gaps of
the formal organization.
 The flow of communication is very fast.
 The motivation of employees is very easy.
 Decisions are taken very quickly.

Demerits of Informal Organization

The demerits of informal organization are presented below.
 It ruins the morality among the employees.
 It acts according to mob psychology.
 There is no evidence available for the information received under
informal organization.
 It spreads rumor among the employees regarding the attitude or approach of
top management unnecessarily.

INTERNATIONAL FRAMEWORK OF CORPORATE SOCIAL

RESPONSIBILITIES

Over the last few years, corporate social responsibility (CSR) has gained
importance on the international stage and undergone conceptual changes. New

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tools have been developed and existing ones updated and enhanced. After the ISO
26000 Guidance on Social Responsibility was published in 2010, the updated
OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on
Business and Human Rights were released in 2011. The UN Sustainable
Development Goals of the 2030 Agenda for Sustainable Development, which
appeared in 2015, also emphasize the contribution the private sector can make to
sustainable development.

OECD Guidelines for Multinational Enterprises

The OECD Guidelines for Multinational Enterprises constitute comprehensive
recommendations for conduct provided by governments to multinational
enterprises. They help enterprises exercise their responsibility and can be applied
wherever the enterprises operate. The OECD guidelines are not legally binding but
the National Contact Points (NCPs) of the signatory states support their
implementation. Any suspected breaches against the OECD guidelines can be
reported to the NCPs, which offer a platform for dialogue or a mediation
procedure. General and sector-specific guidelines (covering minerals, agriculture,
textiles, finance, etc.) support implementation of the OECD guidelines and
enterprises‘ due diligence in particular.

UN Global Compact
Thanks to its 10 universal principles on human rights, working standards, the
environment and combating corruption, the United Nations Global
Compact (UNGC) offers an introduction to CSR issues and serves as a networking
and learning platform. With more than 10,000 participating enterprises and
organisations, it is now the biggest network in the world for responsible business
conduct. The UNGC is a multi-stakeholder platform whose primary goal is to
facilitate dialogue between the individual interest groups working together to
implement the principles. Participating enterprises are obliged to publish a report
on the progress they have made in implementing the principles each year. The
federal government supports the Global Compact Network Switzerland by means
of a partnership.

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ISO 26000 Guidance on Social Responsibility
The ISO 26000 guidance on social responsibility was elaborated as part of a broad-
based international process between industry and developing countries, enterprises,
and workers‘, consumers‘ and non-governmental organisations. It helps enterprises
and organisations take a strategic approach to their business processes in
accordance with responsible business conduct principles. Although ISO 26000
provides a comprehensive take on social responsibility, it is not certifiable like
other ISO standards.

Global Reporting Initiative

The Global Reporting Initiative (GRI) provides a globally applicable framework
for drawing up sustainability reports in accordance with internationally recognised
criteria. The reporting framework covers principles and indicators for enterprises
and other organisations to measure their economic, environmental and social
performance. At the same time, a report oriented towards the GRI also provides
interest groups with a transparent representation of the relevant sustainability
aspects of an enterprise.

The Role of International Organizations in Promoting Corporate Social

Responsibility
International organizations play a major role in promoting better governance, and
better economic processes in general, said Kathryn Gordon of the Organization for
Economic Cooperation and Development (OECD). The OECD has a very
distinctive way, a consensus-based way, of promoting better governments—
governance among its member countries. A consensus development at the OECD
is based on soft law instruments, meaning nonbinding statements of values and
principles. To make these soft law instruments meaningful, OECD engages in
consensus-based peer reviews about how these values and principles are
implemented in different national policy contexts. The instruments provide
guidance for both government and corporate responsibilities in the investment area.
On the government responsibility side, the instruments express the core investment
values of transparency, nondiscrimination between foreign and domestic investors,
and investment protection. On the corporate responsibility side, the OECD
Guidelines for Multinational Enterprises provide guidance for international
business. It is a comprehensive code of conduct that covers such areas as
environmental management, human rights, anticorruption, and supply chain

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management. The OECD guidelines implementation procedures involve a
distinctive and unique combination of voluntary and binding elements. Observance
by business of the guidelines is voluntary, but the OECD governments assign a
binding commitment to promote the principles of the guidelines among
multinational enterprises operating in, or from, their territories.

MILLENIUM DEVELOPMENT GOALS

The United Nations Millennium Development Goals (MDGs) are the eight goals
set by the 189 UN member states in September 2000 and agreed to be achieved by
the year 2015. The Millennium Declaration was signed at the September global
summit held at the UN headquarters in New York and the 149 international leaders
in attendance committed to combating disease, hunger, poverty, illiteracy,
discrimination against women and environmental degradation. The MDGs were
derived from this Declaration, and specific indicators and targets were attached to
them.
The following are the eight Millennium Development Goals:
1. To eliminate extreme poverty and hunger;
2. To achieve global primary education;
3. To empower women and promote gender equality;
4. To reduce child mortality;
5. To promote maternal health;
6. To fight malaria, HIV/AIDS, and other diseases;
7. To promote environmental sustainability; and
8. To develop a universal partnership for development.

The implementation of these eight chapters of the Millennium Declaration was

agreed to begin in 1st January 2001, and the UN agreed to be holding such
summits every five years to assess its progress towards achieving the MDGs. The
first follow-up to the Millennium Summit was held in 2005 at the 2005 World
Summit.
Since 2001, the UN has given a lot of priority to the implementation of these
MDGs, and though most of the targets had not been achieved by 2015, a
substantial positive progress has been recorded over the 15 years.

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Important Features

1. It synthesizes, in a single package, many of the most important commitments

made separately at the international conferences and summits of the 1990s;
2. recognize explicitly the interdependence between growth, poverty reduction
and sustainable development;
3. acknowledge that development rests on the foundations of democratic
governance, the rule of law, respect for human rights and peace and security;
4. It is based on time-bound and measurable targets accompanied by indicators
for monitoring progress; and
5. It brings together, in the eighth Goal, the responsibilities of developing
countries with those of developed countries, founded on a global partnership
endorsed at the International Conference on Financing for Development in
Monterrey, Mexico in 2002, and again at the Johannesburg World Summit
on Sustainable Development in August 2003.

SUSTAINABLE DEVELOPMENT GOALS

The Sustainable Development Goals are a set of seventeen pointer targets that all
the countries which are members of the UN agreed to work upon for the better
future of the country.
The documentary screened at the Rio+20 conference – ―Future We Want‖
presented the idea of a post-2015 development agenda. Sustainable Development
Goals (SDGs) is an intergovernmental agreement formulated to act as post-2015
Development agenda, its predecessor being Millennium Development Goals.
It is a group of 17 goals with 169 targets and 304 indicators, as proposed by
the United Nation General Assembly‘s Open Working Group on Sustainable
Development Goals to be achieved by 2030. Post negotiations, agenda titled
―Transforming Our World: the 2030 agenda for Sustainable Development‖ was
adopted at the United Nations Sustainable Development Summit. SDGs is the
outcome of the Rio+20 conference (2012) held in Rio De Janerio and is a non-
binding document.

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The 17 goals under the Sustainable Development Goals are as mentioned below:

1. End poverty in all its forms everywhere

2. End hunger, achieve food security and improved nutrition and promote
sustainable agriculture
3. Ensure healthy lives and promote well being for all at all stages
4. Ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for
all
7. Ensure access to affordable, reliable, sustainable and modern energy for all
8. Promote sustained, inclusive and sustainable economic growth, full and
productive employment and decent work for all

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 9. Built resilient infrastructure, promote inclusive and sustainable
industrialization and foster innovation
[Link] inequalities within and among countries
[Link] cities and human settlements inclusive, safe, resilient and sustainable
[Link] sustainable consumption and production pattern
[Link] urgent actions to combat climate change and its impact
[Link] and sustainably use the oceans, seas and marine resources
[Link], restore and promote sustainable use of terrestrial ecosystems,
sustainably managed forests, combat desertification and halt and reverse
land degradation and halt biodiversity loss
[Link] peaceful and inclusive societies for sustainable development,
provide access to justice for all and build effective, accountable and
inclusive institutions at all levels
[Link] the means of implementation and revitalize the global partnership
for sustainable development

Sustainable Development Goals in India

India‘s record in implementing Sustainable Development Goals

 Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is

being implemented to provide jobs to unskilled labourers and improve their
living standards.
 National Food Security Act is being enforced to provide subsidized food
grains.
 The government of India aims to make India open defecation free under its
flagship programme Swachh Bharat Abhiyan.
 Renewable energy generation targets have been set at 175 GW by 2022 to
exploit solar energy, wind energy and other such renewable sources of
energy efficiency and reduce the dependence on fossil fuels. (Read
about International Solar Alliance in the linked article.)
 Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and
Heritage City Development and Augmentation Yojana (HRIDAY) schemes
has been launched for improving the infrastructure aspects.
 India has expressed its intent to combat climate change by ratifying the Paris
Agreement.

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UNITED NATIONS (UN) GLOBAL COMPACT 2011

The United Nations Global Compact is a strategic initiative that supports global
companies that are committed to responsible business practices in the areas of
human rights, labor, the environment, and corruption. This UN-led initiative
promotes activities that contribute to sustainable development goals to create a
better world.

Understanding the United Nations Global Compact

The UN Global Compact is based on 10 principles that should define a company‘s

value system and approach to doing business. These principles were collectively
founded in the Universal Declaration of Human Rights, the International Labor
Organization‘s Declaration on Fundamental Principles and Rights at Work, the Rio
Declaration on Environment and Development, and the UN Convention against
Corruption. Member companies are expected to engage in specific business
practices that benefit the people and the planet while pursuing profitability with
integrity.

The UN GC – Vision & Objectives

 At the heart of the UN Global Compact lies the conviction that business
practices which are rooted in universal principles help the global
marketplace to be more socially and economically inclusive, thus advancing
collective goals of international cooperation, peace and sustainable
development.
 The UN Global Compact works toward the vision of a sustainable and
inclusive global economy which delivers lasting benefits to people,
communities, and markets.
 To help realize this vision, the initiative seeks to:
1. Mainstream the UN Global Compact‘s Ten Principles in business strategy
and operations around the world; and
2. Catalyze business action in support of UN goals and issues, with emphasis
on partnerships and collective action.
 The implementation of universal principles into business is a long-term
process. The UN Global Compact thus encourages participants to follow a

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 path of continuous improvement with priority for addressing the most
serious adverse impacts first.
 This commitment requires the sustained support of leadership through
ongoing activities and partnerships, as well as a company‘s engagement in
dialogues, willingness to learn and dedication to practical actions.

The Ten Principles

 The UN Global Compact asks companies to embrace, support and enact,

within their sphere of influence, a set of core values in the areas of human
rights, labour standards, the environment, and anti-corruption:
 The UN Global Compact's ten principles in the areas of human rights,
labour, the environment and anticorruption enjoy universal consensus and
are derived from:
1. The Universal Declaration of Human Rights
2. The International Labor Organization's Declaration on Fundamental
Principles and Rights at Work
3. The Rio Declaration on Environment and Development
4. The United Nations Convention Against Corruption

 Human Rights

Principle 1: Businesses should support and respect the protection of

internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses. •

 Labour Standards

Principle 3: Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

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Principle 6: the elimination of discrimination in respect of employment and
occupation.

 Environment

Principle 7: Businesses should support a precautionary approach to environmental

challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility;

and

Principle 9: encourage the development and diffusion of environmentally friendly

technologies

 Anti-Corruption

Principle 10: Businesses should work against all forms of corruption, including
extortion and bribery

Companies that join the compact are expected to integrate these principles into
their corporate strategies, culture, and day-to-day operations. Companies are also
expected to advocate the principles publicly and communicate
with stakeholders on progress toward meeting the principles. Any company that
commits to upholding the principles may join the compact, which is not legally
binding and is purely voluntary.

UN GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS

The Guiding Principles on Business and Human Rights are one of the most
common topics in business and human rights courses today. Since state members
of the United Nations Human Rights Council unanimously endorsed them in 2011,
the UN Guiding Principles have provided a conceptual framework and common
language used by many stakeholders working at the intersection of business and
human rights. A typical business and human rights course syllabus often covers
most, if not all, of the principal issues addressed by the UN Guiding Principles.

The UN Guiding Principles detail how states and business enterprises can
implement the ―Protect, Respect and Remedy‖ Framework (2008). Both the UN

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Framework and UN Guiding Principles were developed by John Ruggie, a Harvard
University professor in human rights and international affairs who served from
2005 to 2011 as the UN Secretary General‘s Special Representative on Business
and Human Rights. During his six-year mandate, Ruggie is credited with forging a
working consensus among governments, companies, and human rights advocates
on key issues surrounding the human rights responsibilities of business enterprises.
For many stakeholders, the UN Guiding Principles have become a global standard
for preventing and addressing adverse impacts on human rights linked to business
activity.

Ruggie‘s appointment as Special Representative followed an earlier UN effort by

an expert body of the UN Commission on Human Rights (now the Human Rights
Council) to apply binding human rights standards to companies. The Norms on the
Responsibilities of Transnational Corporations and Other Business Enterprises
with Regard to Human Rights (2003) ,which sought to hold companies directly
responsible for human rights obligations under international law, while supported
by civil society groups, met opposition from states and from the business sector,
and were ultimately never acted upon by the UN Commission on Human Rights.

In 2005, the Commission established the mandate for an individual expert to

―identify and clarify‖ existing human rights standards for businesses; elaborate the
role of states regulating business conduct in relation to human rights; and research
key concepts such as corporate complicity in human rights abuses. During his
mandate, Ruggie sought to move ―beyond the mandatory-vs.-voluntary dichotomy
to devise a smart mix of reinforcing policy measures that are capable over time of
generating cumulative change and achieving large-scale success—including in the
law.‖ He has described the approach that produced the Framework and Guiding
Principles as ―principled pragmatism.‖ The Special Representative conducted
research, consulted with stakeholders and piloted specific principles.

The UN Framework, contained in the Special Representative‘s 2008 report to the

Human Rights Council, has three ―pillars‖:

1) ―The State duty to protect against human rights abuses by third parties,
including business enterprises, through appropriate policies, regulation, and
adjudication;

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2) ―The corporate responsibility to respect human rights, which means that
business enterprises should act with due diligence to avoid infringing on the rights
of others and to address adverse impacts with which they are involved; and

3) ―The need for greater access by victims to effective remedy, both judicial and
non-judicial.‖

The interrelated pillars of the ―protect, respect and remedy‖ Framework, which
reflect Ruggie‘s view of the human rights responsibilities of both states and
business enterprises under international law, highlight both the legal and policy
dimensions of the state duty to prevent, investigate and punish human rights abuses
by non-state actors. The Framework defines the corporate responsibility to respect
human rights as a responsibility that goes beyond legal compliance, and that
companies cannot satisfy through corporate philanthropy. This corporate
responsibility is a social norm, or global expectation, that companies can meet by
―knowing and showing‖ that they do not infringe on others‘ rights. The scope of
the responsibility to respect human rights includes all ―internationally recognized
human rights.‖ The Principles state that nothing in them creates new international
law obligations. (Nor are the Principles intended to limit the further development
of international law.)

The Guiding Principles, published in 2011, build upon the topics introduced in the
UN Framework by elaborating ―the implications of existing standards and
practices for states and businesses.‖ Thirty-one Guiding Principles, organized as
―foundational― and ―operational‖ principles for each of the three pillars, are
accompanied by commentaries clarifying the meaning and implications of each
Principle. More detailed interpretation of each Principle, approved by the Special
Representative, was subsequently published by the UN Office of the High
Commissioner for Human Rights.

While the Guiding Principles are considered to be ―universally applicable‖ to all

states and to all business enterprises, the Special Representative emphasizes that
they are not an ―off the shel‖ tool kit; means for their implementation will vary.

The state duty to protect against human rights abuse (Principles 1-10) requires
states to take ―appropriate steps to prevent, investigate, punish and redress‖ abuses
by business enterprises ―within their territory and/or jurisdiction.‖ While the

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Shantiniketan Business School, Nagpur
Guiding Principles note that states are ―not generally required under international
human rights law‖ to regulate the extraterritorial activities of companies, they also
emphasize that ―nor are they generally prohibited from doing so.‖ The operational
principles of Pillar 1 encourage states to: adopt a ―smart mix of measures‖ to
protect against abuses by business; address state-owned businesses and commercial
business relationships; highlight the risks of human rights abuses in conflict-
affected areas; and ensure policy coherence internally and externally.

Under the corporate responsibility to respect human rights (Principles 11 – 24), the
Guiding Principles expand upon the Framework by calling on companies to ―avoid
causing or contributing to ‗adverse human rights impacts‘ through their own
activities‖ and to ―seek to prevent or mitigate‖ those ―directly linked to their
operations, products or services by their business relationships.‖ To meet their
responsibility, companies must ―know and show that they respect human rights.‖
The operational principles of Pillar 2 detail steps companies should take: adopting
a human rights policy that is embedded throughout the enterprise; conducting
human rights due diligence, including assessing and acting to address actual and
potential human rights impacts, and tracking and communicating what they have
done; and remediating adverse impacts.

The Pillar 3 principles (Principles 25 – 31) describe ways that states must, and
businesses can, ensure access to remedy for victims of human rights abuses,
including judicial, non-judicial, and non-state-based grievance mechanisms; and
provide effectiveness criteria for all non-judicial mechanisms.

Ruggie has described the endorsement of the UN Guiding Principles by the UN

Human Rights Council as the ―end of the beginning‖ – the Guiding Principles
establish a ―common platform for action‖ by the stakeholders at the intersection of
business and human rights. Inter-governmental bodies have incorporated elements
of the Guiding Principles in other international standards. Aspects of the UN
Guiding Principles have been adopted by states in National Action Plans, by
advocates in campaigns seeking corporate accountability, and by companies
seeking to demonstrate respect for human rights. It remains to be seen what the
long-term impact of the UN Guiding Principles will be, but they are already
shaping the business and human rights agenda for practitioners and teachers alike.

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Shantiniketan Business School, Nagpur
The UN Guiding Principles, their conceptual foundations, the process that
produced them, and implementation efforts since, have also generated criticism
from key business and human rights stakeholders. Critics, for example, consider
international legally-binding standards as the most effective means to challenge
corporate abuses, and see the UN Guiding Principles as an impediment to true
accountability; argue that the Principles inaccurately characterize corporate and
state obligations under international law; question the ability of corporate human
rights due diligence to prevent human rights abuses or improve human rights
conditions on the ground; and challenge the notion that companies should have any
role providing a meaningful remedy to victims of human rights abuses connected
to business activity. These criticisms have contributed to renewed efforts to draft
an international business and human rights treaty, including an inter-governmental
Working Group established by the UN Human Rights Council in 2014.

OECD (Organization for Economic Cooperation and Development)

The OECD, or Organization for Economic Cooperation and Development, is an

international organization that promotes policy coordination and economic
freedom among developed nations. The OECD was derived from the Organization
for European Economic Cooperation (OEEC) that was established in 1948 to
monitor American and Canadian contributions under the Marshall Plan.

Headquartered in Paris, France, the OECD was formed in 1961 and included
members from democratic states such as the United States, countries in Western
Europe, Japan, Canada, Australia, and New Zealand. The organization expanded in
the 1990s to include Mexico, South Korea, and Eastern European nations. In recent
years, India, Brazil, China, and Indonesia also made contributions to the work
agenda of the OECD.

The OECD’s Mission

The mission of the OECD is to promote policies that will improve the economic
and social welfare of people in developed nations.

The OECD’s Objectives

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The main purpose of the OECD is to improve the global economy and
promote world trade. It provides an outlet for the governments of different
countries to work together to find solutions to common problems. It includes
working with democratic nations that share a commitment to improving the
economy and well-being of the general population.

The OECD‘s main focus is to help governments around the world achieve the
following:

 Improve confidence in markets and the institutions that help them function.
 Obtain healthy public finances to achieve future sustainable economic
growth.
 Achieve growth through innovation, environmentally friendly strategies, and
the sustainability of developing economies.
 Provide resources for people to develop the skills they need to be productive.

The OECD’s Organizational Structure

The organization is structured in three tiers: the Council, the Secretariat, and the
Committees.

1. The Council

The Council consists of ambassadors from the member nations. They exercise
authority over decision-making and establishing goals for the organization. They
are in charge of the strategic direction of the OECD.

2. The Secretariat

The second tier is the Secretary-General, the deputy, and the directorates. The
current OECD Secretary-General is Jose Angel Gurria, a Mexican economist and
diplomat. The Secretariat lists 2,500 members and includes economists, scientists,
and lawyers who are in charge of the collection of data and research and analysis.
The council and the Secretary-General oversee the work of the Secretariat.

3. The Committees

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Shantiniketan Business School, Nagpur
The third tier is the committees, which include representatives from different
member nations that meet to discuss the environment, education, trade, and
investment.

The OECD’s Functions

The OECD uses information on various topics to fight poverty, help governments
prosper, and prevent financial instability. The organization monitors the economies
of member and non-member nations, and the Secretariat collects and analyzes
information on different aspects of society. The committee discusses relevant
policies to be implemented using the information, and the council makes the final
decisions on the policies. The governments of the different states execute the
recommended strategies.

1. Peer Reviews

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There are processes where individual member countries‘ performance is supervised
by the other members of the OECD. This is a core function of the organization and
helps them create more effective policies. It can also help governments gain
support for the implementation of difficult policies in their home country. An
example of a peer review is when the UK was told to keep foreign aid at a
commendable 0.7% level. It was done to ensure that the extra money is spent in the
most efficient way possible.

2. Standards and Recommendations

At the committee level, member countries of the OECD discuss general policies
and rules for international cooperation. There are formal agreements on issues such
as exports, imports, investments, and combating bribery. They also set the
standards that all countries need to follow regarding the tax system and treaties,
and provide recommendations on environmental practices and corporate
regulations.

3. Publications

The OECD publishes articles on economic outlooks, statistics, and a general

overview.

OECD Economic Outlook – Provides a forecast for member and non-member

nations

OECD Factbook – Serves as a guide-book for economies that are implementing

new policies

Going for Growth – A comparison of countries, based on national performance

The peer review, standards, and agreements, and publications help the OECD
achieve economic growth for nations while also providing a base for the
implementation of future policies.

ILO TRIPARTITE DECLARATION OF PRINCIPLES CONCERNING

MULTINATIONAL ENTERPRISES AND SOCIAL POLICY

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Shantiniketan Business School, Nagpur
The Tripartite declaration of principles concerning multinational enterprises and
social policy (MNE Declaration) is the ILO instrument that provides direct
guidance to enterprises on social policy and inclusive, responsible and sustainable
workplace practices. The aim of this Declaration is to encourage the positive
contribution which multinational enterprises can make to economic and social
progress and the realization of decent work for all; and to minimize and resolve the
difficulties to which their various operations may give rise. These principles do not
aim at introducing or maintaining inequalities of treatment between multinational
and national enterprises. They reflect good practice for all. Multinational and
national enterprises, wherever the principles of the MNE Declaration are relevant
to both, should be subject to the same expectations in respect of their conduct in
general and their social practices in particular.

Its principles are addressed to MNEs, governments of home and host countries,
and employers‘ and workers‘ organizations and cover areas such as employment,
training, conditions of work and life, and industrial relations as well as general
policies.

1. General policies
2. Employment

• Employment promotion
• Social security
• Elimination of forced or compulsory labour
• Effective abolition of child labour: minimum age and worst forms
• Equality of opportunity and treatment
• Security of employment

3. Training
4. Conditions of work and life

• Wages, benefits and conditions of work

• Safety and health

5. Industrial relations

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• Freedom of association and the right to organize
• Collective bargaining
• Consultation
• Access to remedy and examination of grievances

The guidance is founded substantially on principles contained in international

labour standards (ILO conventions and recommendations listed in Annex I of the
instrument), and on obligations that States have through their ILO membership and
following their ratification of ILO conventions.

The MNE Declaration highlights the importance of the rule of law, law
enforcement and social dialogue and recalls that all parties should respect workers‘
rights and contribute to the realization of the fundamental principles and rights at
work. It emphasizes the importance of dialogue and consultations among the
different parties to ensure inclusive, sustainable, responsible business behavior of
MNEs in host countries and compatibility with national development objectives
and policies. It encourages home and host country governments of MNEs to
engage in consultations with each other as well as with their enterprises on social
and labour policy.

The MNE Declaration is the only global instrument in this area that was elaborated
and adopted by governments, employers‘ and workers from around the world.
Adopted by the Governing Body of the ILO at its 204th session (Geneva,
November 1977), the instrument was amended several times. It was last amended
in March 2017 following a tripartite review process to respond to new economic
realities and to take into account developments since the last update in 2006. These
developments included new labour standards and policy outcomes adopted by the
International Labour Conference, the Guiding Principles on Business and Human
Rights endorsed by the Human Rights Council in 2011, and the adoption of the
2030 Agenda for Sustainable Development.

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Aim and Scope

1. Multinational enterprises play an important part in the economies of most

countries and in international economic relations. This is of increasing interest to
governments as well as to employers and workers and their respective
organizations. Through international direct investment, trade and other means,
such enterprises can bring substantial benefits to home and host countries by
contributing to the more efficient utilization of capital, technology and labour.
Within the framework of sustainable development policies established by
governments, they can also make an important contribution to the promotion of
economic and social welfare; to the improvement of living standards and the
satisfaction of basic needs; to the creation of employment opportunities, both
directly and indirectly; and to the enjoyment of human rights, including freedom of
association, throughout the world. On the other hand, the advances made by
multinational enterprises in organizing their operations beyond the national
framework may lead to abuse of concentrations of economic power and to conflicts
with national policy objectives and with the interest of the workers. In addition, the
complexity of multinational enterprises and the difficulty of clearly perceiving
their diverse structures, operations and policies sometimes give rise to concern
either in the home or in the host countries, or in both.

2. The aim of this Declaration is to encourage the positive contribution which

multinational enterprises can make to economic and social progress and the
realization of decent work for all; and to minimize and resolve the difficulties to
which their various operations may give rise.

3. This aim will be furthered by appropriate laws and policies, measures and
actions adopted by the governments, including in the fields of labour
administration and public labour inspection, and by cooperation among the
governments and the employers‘ and workers‘ organizations of all countries.

4. The principles of this Declaration are intended to guide governments,

employers‘ and workers‘ organizations of home and host countries and
multinational enterprises in taking measures and actions and adopting social
policies, including those based on the principles laid down in the Constitution and

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Shantiniketan Business School, Nagpur
the relevant Conventions and Recommendations of the ILO, to further social
progress and decent work.

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Shantiniketan Business School, Nagpur