Green lines. Companies, Governance, and the Biosphere

A recent paper on Transnational Corporations, Biosphere Stewardship, and Sustainable Futures, highlights both the critical role of, and rationale for Transnational Corporations (TNCs) to engage in corporate biosphere stewardship (covering climate, nature and other sustainability topics). Though whilst the authors observe that “TNCs provide benefits”, they also state that they “have earned a poor reputation, often for legitimate reasons.”

In over 30 years since the first Rio sustainability summit, the role of TNCs in driving biosphere stewardship has grown in importance. Initially this was through voluntary global systems such as the Forest Stewardship Council (FSC) and the Marine Stewardship Council (MSC). More recent has been the emergence of the Science Based Targets Initiative, the Task Force on Climate-related Financial Disclosure and the Task Force on Nature-related Financial Disclosure.

Whilst the FSC and MSC created democratic governance processes with representation from those impacted by the activities of companies, the latter voluntary global schemes have been built with self-appointed and/or corporate dominated governance structures.

Now doubts are creeping in about not only the governance (and subsequent rigour) of voluntary global schemes. And also the interlinked questions around the governance of TNCs in general, and their relationship to nations and national governments.

Governments are not Stakeholders

Governments have prepared national biodiversity action plans, and nationally determined (climate) contributions, based upon their national democratic mandates and national priorities. These have been rolled up to create global approaches to climate and nature rooted within international (UN) processes.

However, these national and global governmental priorities increasingly sit in a disconnected space from the global commitments of TNCs. A recent review of 24 major global companies by the Pentland Centre at the University of Lancaster did not find any evidence that companies are taking into account national biodiversity priorities in framing their biodiversity targets, and determining their actions. It is not clear therefore whether their actions are supporting government priorities or undermining them. Similarly, it is not clear if the approach of TNCs to climate is rooted in national mitigation and adaptation priorities.

Which raises a question of the relationship of TNCs towards Governments. Most TNCs have sophisticated stakeholder engagement approaches. But it is also wise to reflect that a government is not a stakeholder. It is the government.

Trans-national Governance of TNCs

Global governance of TNCs has had limited success. National oversight of their activities and actions is a fraught affair, evidenced by attempts to set a common, fair (even just) framework for taxation. There are long standing efforts to address this voluntarily via GRI, and more recently in Australia through legislation. Despite this, the pushback is significant, and even the OECD is facilitating the maintenance of secrecy. The result is that TNCs are able to ‘optimise’ their global tax affairs. This undermines national government efforts to tackle inequality.

A similar issue occurs with global climate targets where interventions and investments in carbon reductions and carbon removals takes place in the countries and places where the costs for a TNC are lowest. This is irrespective of a company’s own national level emissions, It means that there is no guarantee that they are aligned with the emission efforts and climate strategies of all the countries that they operate in. TNCs may even therefore be undermining individual (and collective) government priorities and attempts to drive forward the Paris Agreement.

Aligning TNCs with Governments

All of which suggests the need for a more active discussion on governance of TNCs. And how we can ensure that they align better with governments. The temptation is to build a new set of guidelines, perhaps based upon an expansion of the OECD Guidelines. There are however simpler ways in which this could happen:

The first is to adjust the way TNCs report. Companies setting global ambitions and targets on biodiversity and climate should report on their impacts and actions at the level of the nation states they operate in. This would provide important context to be able to judge their actions vs impacts and against the national context. And ensure that their actions align with and contribute to national biodiversity action plans and the priorities of national climate mitigation and adaptation plans. Scrutiny of this disclosure by investors and civil society would provide the necessary ratchet mechanism to drive improvement and alignment with national priorities.

Alternatively a more action orientated mechanism would be to adopt a ‘Ruggie Framework’ approach for the biosphere. In high level terms, this could mirror the three pillars of the existing Ruggie Framework replacing ‘human rights’ with ‘biosphere’, as follows,

• The state duty to protect against biosphere abuses by third parties, including business.
• The corporate responsibility to respect the biosphere.
• Greater access by victims to effective remedy, both judicial and non-judicial.

This is not to diminish the Ruggie Framework attention to human rights. Rather it is a recognition that the rigour it has brought to human rights can equally apply to the environmental sphere. It is also a recognition of the way that TNCs have adopted the Ruggie Framework to address human rights abuses – setting a global ambition, but rooting action at the national, local and individual levels.

Could a Ruggie Framework for the Biosphere Work?

It is not difficult to imagine how it would work in practice. There is plenty of guidance here, here and here. It could easily form the basis for actions and reporting.

A Ruggie Framework approach would bring a more action orientated dynamic. Companies would be forced to link actions to the analysis of the status of the biosphere and impact of their operations. It would align companies and governments, by clearly defining their respective roles. It would also tie companies more explicitly to the national jurisdictions in which they operate, forcing a nationally focussed approach that will balance the global consistency that companies can bring.

The need for consultation of stakeholders would force a discussion and alignment at a national/local level and introduce the national/local level context to actions. It would force: an honest appraisal of abuses of the biosphere; what ‘respect’ means; and shift the discourse on ‘reducing impact’ to ‘remedy’. This latter point may not be a big step: companies are already moving in this direction, with ambitions to be ‘forest positive’ or ‘nature positive’ which explicitly seeks to remedy past biosphere abuses.

Of course this does raise the question of who is representing ‘nature’. Some countries have already provided legal status to rivers and nature, whilst at least one company has given nature a board seat. There is a growing body of legal expertise able to represent nature.

TNCs have by and large adopted the Ruggie Framework on human rights, giving it the status of ‘soft law’. It is positioned in companies closer to the legal & compliance function than the corporate affairs function (which often oversees sustainability). This has an added benefit in moving companies away from the current approach of incremental improvements and a focus on burnishing reputation, to drawing new ‘green lines’ in the protection of the biosphere.

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