The ESG remedy ecosystem – working backwards from an OECD National Contact Point complaint

How companies can reduce their risk of an OECD NCP complaint 8 min read

A global increase in complaints under the OECD Guidelines for Multinational Enterprises (OECD Guidelines) to state-based National Contact Points (NCPs) shows that the OECD Guidelines are an established part of the toolkit for NGOs and civil society groups seeking to influence corporate behaviour and obtain remedy for allegedly affected parties. We have seen a 58% uptick in complaints to the Australian NCP (AusNCP) in the past 18 months, with 25% of new complaints lodged worldwide filed in Australia.

The OECD Guidelines contain standards with which multinational enterprises are expected to comply on a range of topics, including human rights, labour, the environment and consumer protections. Allegedly affected parties and their representatives can lodge complaints of breaches by companies to NCPs located in OECD countries.

NCP complaints can give rise to financial and reputational consequences, and be a precursor to potential harm ligation. Against this uptick in complaints, in this Insight we work backwards to consider how companies can mitigate the risk of an OECD NCP complaint arising.

Key takeaways 

• Complaints against multinational companies to the OECD National Contact Points are on the rise around the world. The increase in Australian complaints, in particular, is likely due in part to the combination of the ESG megatrend and characteristics of the Australian political and corporate environment – such as the global footprint of the Australian extractive and oil and gas industries, the Australian Government's position on climate change, and the absence of Australian human rights legislation akin, for example, to the European Convention on Human Rights.
• The OECD Guidelines are not legally binding, nor can the NCPs issue formal decisions, since the primary focus of the NCP process is mediation/conciliation. However, the NCPs do publish findings on whether the company has breached the OECD Guidelines, and provide recommendations for company action and redress. These findings and recommendations can pose significant reputational and commercial impacts, and be a precursor to harm litigation as part of the complainant's broader strategy.
• Steps that companies can take to mitigate the risk of a NCP complaint arising include having in place a policy commitment to respect human rights and the environment, due diligence processes to identify and mitigate impacts, and processes to remediate adverse impacts. Design and implementation of effective grievance mechanisms that are tailored to the local operating environment can be a significant mitigating factor to grievances rising to the level of an NCP complaint.

Complaints globally to the OECD National Contact Points are on the rise

What are the OECD National Contact Points?

The OECD NCPs receive and respond to ‘specific instances’ of alleged corporate breaches of the OECD Guidelines. A ‘specific instance’ is the OECD Guidelines’ official term for a case or complaint about a company’s alleged breach of the Guidelines. The OECD NCP process focuses on resolving the complaint by facilitating dialogue between the parties, in a process akin to a structured mediation or conciliation.

The OECD NCP's jurisdiction is broad. The AusNCP, for example, handles complaints that allege breaches of the OECD Guidelines occurring in the following ways:

• alleged breaches that happen inside Australia by a company headquartered anywhere in the world; and
• alleged breaches that occur anywhere in the world (even in a country that has not adopted the OECD Guidelines) by a company headquartered in Australia.

Complaints can be initiated by allegedly adversely impacted individuals and groups, as well as by their representatives, such as unions and civil society. Complaints can be made by a third party on behalf of an anonymous complainant, in certain circumstances.

Increasing instances of OECD NCP complaints globally

We have seen a 58% uptick in complaints to the AusNCP in the past 18 months, and 25% of new complaints worldwide have been filed in Australia.

Worldwide, there have been 524 complaints made to NCPs since 2000, 28 of which have been made in the 18 months to July 2021.

The below map highlights examples of these cases. 

What activities tend to be the subject of OECD NCP complaints?

The OECD Guidelines contain chapters setting out recommendations on a broad range of topics, such as human rights, employment and industrial relations, the environment, bribery and corruption, and consumer interests.

To date, the majority of complaints to the OECD NCPs have concerned the human rights and environmental chapters of the OECD Guidelines. Increasingly, however, we are seeing reliance on less-utilised chapters, such as consumer interests in the context of 'greenwashing' complaints. Complainants are also relying on well-traversed recommendations, such as those on environmental protections, to frame complaints in emerging areas such as climate change.

Potential signifiers of an OECD NCP complaint

The OECD National Contact Points are especially attractive to claimant groups where domestic remedies may be denied. Potential signifiers of a complaint include:

• large or complex complainant groups, particularly where there may be varying degrees of commonality across the alleged class;
• issues with jurisdiction or standing, due to the complexities of modern international business and corporate structures, or because of domestic legal frameworks (such as the US Alien Tort Claims Act); and
• the existence of alleged historic or legacy impacts that would make bringing a judicial claim challenging for limitation reasons.

Case studies

• Australia (human rights, financial sector): In late 2014, Equitable Cambodia and Inclusive Development International lodged a complaint against an Australian financial institution with the AusNCP, on behalf of approximately 700 Cambodian families. The complaint alleged that the bank had failed to meet its obligations when financing a project, by not carrying out appropriate human rights due diligence, and not seeking to mitigate harm and apply leverage. In February 2020, the parties agreed that the bank would contribute the profit of the loan to the affected communities, and review and strengthen its human rights policies.
• Australia (climate change, financial sector): In late January 2020, Friends of the Earth, an environmental NGO, lodged a complaint against an Australian financial institution, arguing that a failure to disclose adequately climate change impacts prevented its consumers from making informed investment decisions. The complaint sought that the bank disclose its greenhouse gas emissions, divest its interest in fossil fuel industries, commit to greenhouse reductions, and conduct and disclose climate-related scenario analysis. This follows a similar 2017 complaint to the Netherlands NCP against ING.
• Australia (Indigenous rights, renewables): In October 2020, a complaint was lodged alleging that, in constructing electricity transmission lines, ElectraNet had destroyed or disturbed Aboriginal heritage sites and had not carried out adequate human rights due diligence.
• Norway (human rights, Myanmar): In July 2021, the Centre for Research on Multinational Corporations, a Netherlands-based sustainability not-for-profit, submitted a complaint against Telenor ASA to the Norwegian NCP on behalf of 474 Myanmar-based civil society organisations. The complaint contends that Telenor’s sale of its Myanmar business to the Lebanese company M1 Group failed to meet the standards of responsible disengagement set out in the OECD Guidelines (particularly around due diligence, meaningful engagement, and transparency).
• United Kingdom (climate change, greenwashing): In late 2019, ClientEarth lodged a complaint against BP, alleging that its global 'Keep Advancing' and 'Possibilities Everywhere' advertising campaigns breached the environment and consumer interest chapters of the OECD Guidelines by focusing misleadingly on BP's low carbon energy products, when more than 96% of BP's annual spend is on oil and gas. The complaint was discontinued in February 2020, when BP withdrew the advertisements and committed to redirecting advertising resources towards advocating for progressive climate policies.

Actions to mitigate the risk of an OECD NCP complaint

Actions before a complaint crystallises

The accepted international standard is that business has in place a policy commitment to meet its responsibility to respect human rights and the environment, due diligence processes to identify and mitigate impacts, and processes to remediate adverse impacts that the business causes or to which it contributes. It is important to understand what the business has committed to do, then use stress tests and periodic audits to check that it is keeping those commitments. This reduces the risk of non-alignment with policy commitments and/or the OECD Guidelines, and therefore of a NCP complaint being commenced.

On remedy, a key expectation is that companies have in place, or participate in, operational-level grievance mechanisms for individuals and communities that may be adversely impacted by their operations. Under the international standards, these grievance mechanisms should be legitimate, accessible, predictable, equitable, transparent, rights-compatible, based on engagement and dialogue, and a source of continuous learning. Design and implementation of effective grievance mechanisms that are tailored to the local operating environment can be a significant mitigating factor to grievances rising to the level of an NCP complaint.

Companies that engage at an early stage with potential adverse impacts and with stakeholders may open up communication lines, and be better able to manage consultation and grievances on an ongoing basis.

Once a grievance has become a complaint

Companies can take strategic action once a complaint has been lodged to an NCP, to mitigate potential reputational and litigation impacts. Depending on the nature of the complaint, these steps are typically akin to those taken in the face of potential litigation. At the same time, there is a flexibility to the NCP process that can allow for novel or innovative approaches to seeking to assess and address risk.

How can we help?

Given stakeholder activist focus on this area, and the rapidly increasing focus on ESG issues, it is important for every business to have a strong and well-integrated approach to human rights compliance, including ensuring that human rights policies and practices are properly embedded in overall compliance frameworks.

Allens has deep expertise in advising on human rights issues and has been at the forefront of developments in this area for more than a decade. We can advise you on:

• setting your policy position on key social issues by reference to international standards and best and peer practice;
• conducting audits against human rights commitments made by your company;
• benchmarking your policies and procedures against best practice;
• governance arrangements surrounding human rights risk management;
• internal and external reporting on human rights issues;
• grievance mechanisms and conducting investigations; and
• matters before non-judicial dispute resolution mechanisms, such as OECD NCPs and UN forums.