Governing the World outside the United Nations

Can you explain and describe the nature and purpose of MSIs?

At its broadest, “multi-stakeholderism” is a term used to describe any efforts that bring together different stakeholders such as corporations, governments, civil society organisations, and rights holders. This can cover anything from private-public partnerships to UN bodies with observer chambers for civil society.

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Within that grouping sit standard-setting MSIs. These are some of the most visible and well-known MSIs. They are initiatives that give decision-making power to all stakeholders, who use that power to set standards that their members promise to meet. Big brands now commonly use MSI labels and certification marks on their food, clothing and toys – like the labels offered by Fair Trade or the Roundtable on Sustainable Palm Oil. Other MSIs do not focus on product certification, but instead set principles for company behaviour. Two examples in case are the Global Network Initiative, which outlines principles for how tech companies should respect privacy and freedom of expression online, and the Fair Labor Association, which sets manufacturing standards for companies like Apple and Nike and their suppliers. Other initiatives, such as the Extractive Industries Transparency Initiative, focus on changing the behaviour of governments, bringing companies and civil society together in efforts to set new sectoral rules.

Although standard-setting MSIs might seem wildly diverse, they all share the same basic architecture: (1) a multi-stakeholder governing body; (2) the creation of standards that their members must follow and that include or affect human rights; and (3) public assurance that their members are complying with their standards, usually combined with some verification mechanisms such as third-party monitoring or a grievance mechanism. Setting standards for their members, MSIs create forms of regulation that are in some sense private – since they are not appointed by or accountable to the wider public – but that trade on the legitimacy derived from their broad base of stakeholders.

How did MSIs originate and what explains their proliferation?

International and domestic law has yet to provide an adequate response to many of the harmful impacts of corporate conduct. This gap in governance has driven many actors to turn to voluntary compliance initiatives in an attempt to mitigate and remedy such harms.

The first MSIs emerged following governments’ failure, at the Rio Earth Summit in 1992, to reach a binding agreement addressing deforestation. In response, a handful of civil society organisations and companies decided to take action, creating two MSIs: the Forest Stewardship Council and the Sustainable Forestry Initiative. These initiatives gave rise to standards aiming to curb deforestation by selling timber with a label that signalled good practice. This label was “certified” through third-party audits. The basic idea was to delineate good companies from bad, and to help close the governance gap that was contributing to deforestation.

Over the next two decades, each major civil society campaign that exposed the role of corporations in major human rights and environmental abuses in the Global South seemingly fostered another MSI in the Global North. There are now at least 40 different international standard-setting MSIs. However, unlike the early MSIs that had been developed after governments failed to produce binding international agreements, later MSIs were deployed as soon as global scandals emerged, either before, or in parallel to, government responses. For example, after it was revealed in the mid-2000s that Google, Microsoft and others were willing to comply with Chinese censorship requirements, those corporations worked with NGOs to launch the Global Network Initiative. The Fair Labor Association emerged after President Clinton convened NGOs, unions and companies to address sweatshop labour in the apparel sector. In both instances, legislation was pending in the United States, but fell away after the initiatives were launched.

One central debate among both scholars and practitioners today is thus why MSIs proliferated. For some, it is because they offered feasible and practical solutions to global challenges. Others, however, suggest that their proliferation has been a clever move by multinational companies and industries to avoid hard regulation and retain control over their global operations.

Is “multi-stakeholderism” overrated?

It depends on what “multi-stakeholderism” is supposed to achieve. A decade researching standard-setting MSIs confirms that they can be powerful forums for dialogue, learning, experimentation, relationship-building and policy reform. However, their record has been much less convincing on closing governance gaps, ensuring the accountability of companies, or reliably providing access to remedy.

Why is that so?

As laid out in our forthcoming MSI Integrity report, there are a series of factors impeding MSI’s effectiveness – let me outline four.

First of all, there is growing evidence that the approaches used by MSIs to monitor or detect abuses, such as self-reporting by companies or third-party audits, fail to reliably detect certain types of misconduct. For example, while they tend to detect visible issues such as the presence of fire extinguishers in factories, they are less effective in identifying “invisible” issues such as freedom of expression or association.

Secondly, when abuses occur it is difficult for rights holders to obtain remedies, or to force a company to comply. Ultimately, if a company or government does not want to change its behaviour, it can simply withdraw from the initiative. The original belief that a company (or government) being suspended or leaving an MSI would endure all sorts of reputational damage, has unfortunately not transpired.

Thirdly, standards set by MSIs are often not comprehensive enough as they remain limited to narrow industry-specific issues or impose an asymmetric burden on actors from the Global South. For example, farms and factories may have to pay for audits and certification, whereas aggressive pricing or demands from multinationals go unheeded.

Fourthly, MSIs are premised on the idea that civil society organisations, which MSIs frequently rely on to play a “watchdog” role, are empowered participants in MSIs. However, the governance structures and policies, as well as limited resources of civil society organisations, often undermine civil society’s ability to effectively do so.

Under what conditions could MSIs be more effective?

Ultimately, as MSIs are voluntary initiatives relying on the good faith of participants, they can only be as effective as their members – and, in particular, corporations – make them. Much of the debate around MSIs therefore focuses on consolidating member commitment through increasing political will, fostering knowledge exchange capacities and favouring a flexible and problem-oriented approach to rules and standards.

As MSIs are voluntary initiatives relying on the good faith of participants, they can only be as effective as their members – and, in particular, corporations – make them. Despite these efforts, MSIs continue to be hampered by a fundamental structural impediment. The corporate form – the legal and organisational form that corporations take – strongly limits what MSIs can do and commit to. Most notably it curtails the way major corporations can share power with other stakeholders – such as rights holders and affected communities – as they primarily remain accountable to their shareholders. As long as corporations are beholden to investors, there will necessarily be resistance to human rights initiatives – whether voluntary or mandatory – that attempt to challenge their profits or power.

The corporate form should thus be reimagined if we believe that rights holders should be placed at the centre of solutions that aim to improve their lives and livelihoods. As long as corporations continue to exclude workers or community interests in their governance and ownership, they risk making decisions that harm people and the environment and exacerbate economic inequality.

Put another way, if the underlying problem is that corporations make decisions without sufficient accountability to workers or communities, then why not try to solve the problem at its core, pushing for businesses that are governed on behalf of, and are accountable to, affected stakeholders?