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six arguments for corporate regulation

Mobilizing both citizen and government support for a binding set of international rules that mandate corporate accountability will be a significant task. Yet we have clearly reached a turning point in the global economy where it is no longer sufficient to hope that things will turn out right or to believe that current global institutions will fix many of the problems brought about by an increasing flow of capital and investment.

Governments, together with the citizens they must represent, need clear and concrete solutions to the international issues we face. Indeed, only through such approaches can we begin to address the controversy that has emerged over corporate globalization in the past several years. Mandatory standards for multinational corporations, in particular, are needed for a number of reasons that FoE groups and others can draw on in their campaigning.

1. Multinational national investment has outstripped the bounds of national regulation.
We are in an historical period that is roughly comparable economically to the period in the developed countries at the end of the 19th and beginning of the 20th century. Increasingly integrated national economies in that earlier period led national governments to develop regulatory standards to protect citizens. Laws regulating hours of work, health and safety standards, and monopolies first took hold then. The increasing integration of the global economy means that we now need worldwide standards that multinational corporations will be held accountable to.

2. Countries need a level playing field.
A binding code for TNCs can help to ensure that countries are not placed in the position of competing for investment by maintaining low standards or allowing (or even cooperating with) egregious corporate behaviour. Moreover, many corporations operate using double standards for their operations in the global North and South, a situation that global standards would address. A treaty allowing citizens harmed by corporate behaviour to bring challenges in a home country or international court would help provide protection against unequal treatment.

3. Companies need a level playing field and more stable expectations.
As some companies begin to take a more proactive role in making their global operations responsible, an international set of standards would level the playing field by limiting the competitive advantage of companies that refuse to undertake positive action. A worldwide set of requirements would also create more certainty and stability for companies doing business around the globe, clarifying the expectations for social and environmental responsibility in their operations.

4. Investment should be increased and appropriately channelled.
As multinational investors respond to the clear expectations and stability created by a global code of standards, businesses may be more likely to increase their appropriate investments in developing countries. At the same time, a binding global code will enable citizens in developing countries to better ensure that investment is channelled towards social and environmental benefits.

5. Communities should be empowered.
One of the key features of any binding code for TNCs must be the protection of communities' control over their own resources and ability to address poor social and environmental conditions. Prior consultation with affected communities, disclosure of local impacts, and corporate liability in home country or international courts would help to ensure that communities do control their own destinies. In addition, a binding global code can help empower communities to effectively develop and control their own natural resources for use in a global economic context.

6. Citizens, consumers and investors need information and accountability.
A global set of standards that includes disclosure requirements about local impacts can provide critical information about corporate activities. In developing countries, required information about corporate operations can enable citizens to more effectively challenge the harmful impacts they face, while consumers and investors in corporations' home countries can choose to redirect their purchases or investments away from harmful corporate practices.

David Waskow, FoE United States