From transparency to due diligence? Regulating CSR in global supply chains in the ‘home state’ of multinational enterprises
In the past 20 years, most multinational enterprises have voluntarily adopted CSR standards which they usually implement into their supply chain relations. These private governance initiatives address issues such as labour standards by, for example, prohibiting the use of forced labour. However, despite these private CSR standards, there are continuing reports about violations of CSR principles in global supply chains. This has led to a recognition, not least in the UN Guiding Principles on Business and Human Rights, that the ‘home state’ of multinational enterprises can contribute towards filling the ‘governance gap’ of global supply chains.
Against this background, there has recently been a wave of transparency legislation in a number of Western countries such as the USA or the UK, for example the California Transparency in Supply Chains Act 2010 or the transparency in supply chains clause in the UK’s Modern Slavery Act 2015. These pieces of legislation directly affect an important CSR issue, i.e. the combatting of forced labour. Whist these legislative efforts require companies to report about the steps that they have taken to prevent forced labour in their supply chain, NGOs continue to push for more stringent legislation, particularly for due diligence requirements. An example of due diligence that affects the global supply chain can be found in the UK Bribery Act 2010.
This paper will critically assess and compare the ability of these recent legislative developments in the USA and the UK to promote CSR in global supply chains. The paper will argue that the present state of the transparency legislation falls short off sufficiently impacting on the way how multinational enterprises use their bargaining power in their supply chains in order to genuinely promote CSR. Due diligence requirements, on the other hand, are capable of better steering corporate behaviour. However, ultimately, the discussions surrounding the CSR record of Western multinational enterprises also require a re-thinking of the underlying corporate doctrine away from a strict shareholder value theory of the corporation.