In the United States it’s called “the 9-to-5”; in France it’s métro, boulot, dodo –“subway, work, sleep”; in Japan it’s personified as the “salaryman” and his female equivalent, the “office lady”. Whatever it’s called, the traditional job seems to be something we all identify with.
So it was a surprising to read earlier this year that most jobs are anything but permanent, routine and predictable. According to the International Labour Organisation (ILO), only around one in four workers worldwide have what most of us think of as a traditional job – stable and full-time with predictable earnings and working for a single employer. The rest? They’re all “employed on temporary or short-term contracts, working informally often without any contract, are self-employed or are in unpaid family jobs,” as The Guardian reported.
To be sure, there are major variations. For example, even though there are signs of a slight shift towards higher rates of formal employment, very few people in poor and developing countries have formal jobs. In Sub-Saharan Africa and Southeast Asia, fewer than one in five workers are working 9-to-5, says the ILO.
By contrast, traditional jobs are much more widespread in the wealthy OECD countries. But that, too, is showing signs of change. While part-time and temporary work and self-employment still only accounts for about one in three jobs in OECD countries, it makes up a much bigger share of new jobs. Between 1990 and the crisis, around half of all new employment in OECD countries involved these sorts of jobs.
Part-time and temporary work doesn’t always have a very good reputation – often for good reasons – but it undoubtedly meets the needs of some workers. Women, who still bear the brunt of household chores and parenting duties, are much more likely to work part-time than men. Among women who work, about 40% are part-timers against 28% for working men. Young people, too, are a big presence in non-traditional jobs. Among temporary workers, close to half are aged under 30. Some may be tempted by the gig economy; others are probably finding it impossible to break into the permanent workforce.
The growth of non-traditional jobs is affecting not just workers and their families. Its impact can also be seen in society and the economy, and not least in income inequality. The main reason for this is that part-time and temporary jobs are helping to drive a trend towards job “polarisation” or a hollowing-out of the workforce. In other words, old-style jobs are vanishing in the solid middle of the workforce – middle incomes, mid-level skills – while non-traditional jobs are increasingly prevalent among both low and high-skill workers. So, goodbye full-time accountants, hello part-time cleaners and freelance designers.
This squeeze on the middle would tend to widen the income gap in any case. But its impact is exacerbated by the fact that, for low-paid workers, non-traditional jobs tend to pay less – hour for hour – than traditional jobs. Indeed, about 60% of so-called “working poor” households rely mainly on income from non-standard workers.
And lower pay isn’t the only problem facing low-skill temps and part-timers. As the OECD’s recent report on inequality, In It Together, notes, non-traditional workers “tend to receive less training and, in addition, those on temporary contracts have more job strain and have less job security than workers in standard jobs.” Non-traditional work is also rather less of a “stepping stone” to a traditional job than many people think, especially for part-timers and the self-employed.
And there’s a cost for businesses, too, from the decline of traditional jobs: As the OECD’s Stefano Scarpetta told the FT recently, the rise of temping “is not even good for the firms themselves nor for the economy, because this reduces the build-up of human capital on the job.”
Still, despite the drawbacks, it seems clear that growing numbers of people are going to be temping, working part-time or self-employed in the future. In response, countries will need to find ways of better supporting such workers to ensure they don’t slip beneath the poverty line. That may mean changes to taxes and benefits and more support in areas like training and job search to ensure that non-traditional workers can maximise their earnings and job prospects.
OECD Policy Brief: Adapting to the changing face of work
In It Together: Why Less Inequality Benefits All (OECD, 2015)
“How good is your job? Measuring and assessing job quality” – OECD Employment Outlook 2014
Where do you stand on the income scale? Find out with the OECD’s Compare Your Income web tool.
Andrea Vacchino and Markus Schuller, Panthera Solutions
How can you know whether a multi-asset portfolio is well managed? Many institutions have policy indices built according to the investment management’s preferences and expectations on risks and returns associated to each asset class. Other institutional investors run peer group comparison between multi-asset managers or measure their portfolio against total return indices. But these are workarounds only. Surprisingly, there is no policy portfolio benchmark investors can use at the very beginning of multi-asset investment against which to measure later decisions.
Even seven years after the Great Recession, the world is still suffering significant data gaps in its understanding of the Global Capital Stock, so we decided to build an objective, multi-asset, market-weighted policy portfolio index, based on the measures of the global capital stock.
Initially, we focused on measuring the current stock of different assets worldwide, a big challenge since only limited primary or secondary research is available. We looked especially at illiquid global stock components such as real estate, land and private equity, thanks to the contribution of several international institutions such as the OECD, BIS, Global Data Gaps Initiative, SME Europe, the European Commission and (hedge) fund managers like Strategos Capital Mgmt. Due to their support, we gained access to data or won insights on data interpretation and manipulation. At this point we would like to sincerely thank all the institutions and fund managers who supported our project.
This was the most comprehensive research conducted in the field so far, but was only the beginning of an ongoing optimization process. We concentrated on the Global Capital Stock of 11 assets and their major changes since 2005 because pre-2005, the tradeoff with regards to the quality and availability of data would have been too unfavorable. It’s only in recent years that academia has benefitted from the increasing reach and quality of databases like OECD Stats. We want to highlight research on specific asset classes in certain geographies such as New Estimate of Value of Land of United States (Larson, 2015). We used this kind of work not just for retrieving data but also to interpolate applicable findings to other uncovered areas.
The two figures below visualize our findings when measuring the Global Financial Stock per asset class, firstly expressed as percentage and then in Trillions of USD (click to see full size).
Outstanding trillion USD
The graph below plots the evolution of nonsecuritized loans in terms of geographic exposure. We would like to highlight the growing weight of China and the relative decline of Japan as a result of the rebalance in the global economies.
Nonsecuritized loan composition
Lastly we tested the performance of the Policy Portfolio against a global 60-40 portfolio and the gestaltu portfolio, which represents an alternative liquid market portfolio.
By comprehensively measuring the Global Capital Stock and its two byproducts, the Policy Portfolio and the investable policy portfolio, we understand our research as a first step towards reliably defining a natural benchmark for multi-asset portfolios. When comparing a multi-asset portfolio with the policy portfolio, one can derive preliminary conclusions on asset managers’ active decisions in terms of their strategic asset allocation configuration.
The limitations of our research revolve around the margin of error in measuring the Global Capital Stock. However we feel strongly optimistic about future development about data gap initiatives which will further reduce the margin of error.
We will continue our efforts on searching for better measures of the Global Capital Stock, for finding better indices to covering the Global Capital Stock for the Policy Portfolio, and for converting the Policy Portfolio into an Investable Policy Portfolio. The results of our ongoing optimization process will be accessible through the quarterly publication of the PS Policy Portfolio Index.
For fuller details of the methodology and findings, see the report this article is based on here or click on the cover page above.
Capital stock data at the OECD – status and outlook Paul Schreyer et al, OECD (2011, Word document)
Follow the BEPS Project on Twitter
The OECD presented today the final package of measures for a comprehensive, coherent and co-ordinated reform of the international tax rules to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru. The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low/no tax environments, where little or no economic activity takes place. The BEPS measures were agreed after a transparent and intensive two-year consultation process between OECD, G20 and developing countries and stakeholders from business, labour, academia and civil society organisations.
Revenue losses from BEPS are conservatively estimated at $100-240 billion annually, or anywhere from 4-10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant.
Undertaken at the request of the G20 Leaders, the work to address BEPS is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 actions to put an end to international tax avoidance. The plan was structured around three fundamental pillars: introducing coherence in the domestic rules that affect cross-border activities; reinforcing substance requirements in the existing international standards, to ensure alignment of taxation with the location of economic activity and value creation; and improving transparency, as well as certainty for businesses and governments.
The final package of BEPS measures includes new minimum standards on: country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises; treaty shopping, to put an end to the use of conduit companies to channel investments; curbing harmful tax practices, in particular in the area of intellectual property and through automatic exchange of tax rulings; and effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.
The BEPS package also revises the guidance on the application of transfer pricing rules to prevent taxpayers from using so-called “cash box” entities to shelter profits in low or no-tax jurisdictions, and redefines the key concept of Permanent Establishment, to curb arrangements which avoid the creation of a taxable presence in a country by reliance on an outdated definition.
The BEPS package offers governments a series of new measures to be implemented through domestic law changes, including strengthened rules on Controlled Foreign Corporations, a common approach to limiting base erosion through interest deductibility and new rules to prevent hybrid mismatch arrangements from making profits disappear for tax purposes through the use of complex financial instruments.
Nearly 90 countries are working together on the development of a multilateral instrument capable of incorporating the tax treaty-related BEPS measures into the existing network of bilateral treaties. The instrument will be open for signature by all interested countries in 2016.
Examples of BEPS schemes to be eliminated
The final outcomes of the BEPS Project are being presented on Monday 5 October 2015 at 2 p.m. (CET) – more details of webcast streaming here.
Time was when the only people who had gigs were long-haired types who stayed in bed till noon and played in bars till dawn. These days, it seems, everyone’s hopping from one gig to another – drivers, software designers, cleaners. Bye-bye full-time work, hello freedom and flexibility.
Well, maybe …
The “gig economy” has emerged as potentially one of the major shifts in what the Financial Times calls “the new world of work” (paywall). It’s certainly one of the most eye-catching. Unlike other trends in this brave new world, the gig economy seems to represent a significant shift in what it means to be a worker. Depending on where you stand, it will either liberate millions of people to become mini-entrepreneurs free from the 9-to-5 grind or imprison them in a world of low-wage self-servitude and insecurity.
If you’re confused by what defines the gig economy, you’re not alone. The term is used to refer to everything from old-style temping to the sharing economy – think amateur-hotelier sites like Airbnb or car-rental sites like RelayRides. But it seems mostly to describe various forms of self-employment and independent contracting facilitated by online platforms like TaskRabbit and Uber. Indeed, in France, uberisation has become shorthand for the gig economy.
This ambiguity is not a trivial matter. Uncertainties over the gig economy, and what it means to be a gig worker, have sparked reviews and court cases in a number of countries. In the United States, for example, a judge in California recently gave the green light to a group of Uber drivers to sue to establish their legal status. The drivers contend they are effectively employees of Uber, and so entitled to be reimbursed for expenses, including the cost of buying petrol and maintaining their cars. Uber argues that they are independent contractors, which means it is not required to cover payroll taxes, health insurance and the cost of maintaining cars. As The New York Times pointed out, the outcome of the case “could strike at the heart of the ride-hailing company’s business model.”
That’s not the only uncertainty hanging over the gig economy. As the Wall Street Journal (paywall) reported last month, despite all the hype there doesn’t currently seem to be a lot of evidence in US jobs data of a big upsurge in self-employment. The same is true, too, of the United Kingdom, according to Ian Brinkley of The Work Foundation. But, as he also points, the emergence of the gig economy may still be “too recent a development to show up in the aggregate figures”.
Indeed, given the rapid growth of services like Uber so far, it’s hard not to feel that we are witnessing genuine shift in the economy. That may well continue, if for no other reason than demographics. By many accounts, the so-called Millennial generation – the oldest of whom are now approaching their mid-30s – are particularly keen on gig working. According to research in the US, almost half of millennials “will choose workplace flexibility over pay”. Of course, a few years down the road, when they’re trying to feed children and pay school fees, Millennials’ taste for job security may well increase.
Indeed, for individual workers, that tension between the freedom of freelancing and the security of the 9-to-5 may become a core issue. “There’s certainly something empowering about being your own boss,” Arun Sundararajan of the NYU Stern School of Business wrote in The Guardian. “[…] But there’s also something empowering about a steady pay cheque, fixed work hours and company-provided benefits.”
There will be dilemmas, too, for government policy, both in terms of wider regulation of the gig economy and unleashing what some argue is its potential to create jobs. According to consultants McKinsey, it could contribute $2.7 trillion, or 2%, to the global economy over the next 20 years and add the equivalent of 72 million full-time equivalent jobs.
But will they be good jobs? That question is relevant not just to the gig economy but to other trends in the world of work, such as temporary and short-term employment, both of which are on the rise. As we’ll discuss in the next post, some fear that the benefits of these shifts may be outweighed by the loss to workers of both income and job security.
OECD work on employment
Where do you stand on the income scale? Find out with the OECD’s Compare Your Income web tool.
Mounting fears of another slowdown in the global economy call for bolder policy responses. Trade and investment are a case in point.
The latest WTO forecasts suggest 2015 will be the fourth year running that global trade volumes grow less than 3%, barely at—or below—the rate of GDP growth. Before the crisis, trade was growing faster than GDP. In addition, global flows of foreign direct investment (FDI) remain 40% below pre-crisis levels. If we are to achieve the ambitious Sustainable Development Goals agreed in New York in late-September, and underpin broad-based improvements in living standards, we need to reignite these twin engines of growth and we need to do it for the ultimate goal of improving people’s prospects and wellbeing.
Trade and investment have always been intertwined in business, but they have never quite come together in policymaking. In a world of Global Value Chains (GVCs), characterised by the fragmentation of production processes across countries, the interdependencies between trade and FDI are sharper. Technological improvements, reductions in transport and communications costs, and regulatory developments allow firms to combine multiple channels–- imports, FDI, movement of business personnel, licenses — to optimize their international business strategies. Businesses do not think in terms of trade or investment, but in terms of maximizing expected profitability. On the contrary, policymakers have long addressed trade and investment on separate tracks. In the face of new economic realities, policymakers need to up their game.
The symbiosis between trade and investment is more complex than ever before. Multinational enterprises (MNEs) play a key role in this relationship, with their activities driving a large share of world trade. The decision of a firm to invest in a foreign country is influenced by the ease with which it can sell its products, but also by how easy it is to source inputs from its affiliates (intra-firm trade) or independent suppliers (extra-firm trade) abroad. Hence, trade barriers become indirect barriers to investment. In addition, “world factories” make emerging trade patterns more complex, as not only goods and services cross borders, but capital, people, technology, and data do too. Without a transparent framework, it is also difficult to upgrade and upscale responsible business conduct.
Services are an increasingly critical node in the relationship between trade and investment. The WTO’s General Agreement on Trade in Services (GATS) explicitly recognizes this by defining FDI in services as one of the four ways in which services can be traded (mode 3, or ‘commercial presence’). This reflects how trade and investment interact with one another. Clearly, services will be central in any further efforts to liberalize investment and to improve the business environment. The OECD FDI Regulatory Restrictiveness Index shows that investment barriers are overwhelmingly in the services economy. Reforms in backbone services, notably digital services, transport, and logistics are key to unclogging GVCs. Domestic reforms to allow for more competition in the service sectors is also a source of growth and equality. Moreover, there is untapped potential in services value chains that could be realized if services markets were opened further. The OECD Services Trade Restrictiveness Index (STRI) provides a tool for identifying these barriers and measuring their costs, in order to prioritize and sequence reforms.
There is still no global set of rules governing investment and trade, however. Apart from GATS, two other WTO agreements—TRIMS and SCM–cover aspects of FDI, but they are not comprehensive. The OECD Codes are also a reference on capital flows, but does not address the link with the trade dynamics. The void has been filled with a complex network of nearly 3,000 bilateral investment treaties (BITs) of different quality and with different coverage.. Investors and States need certainty. A uniform regime would help, providing a consistent interpretation of the rules that apply to investment flows, taking into account the interest of all stakeholders. We urgently need a clear, coherent and coordinated approach at multilateral level. Multiplying the number of BITs further muddies the water and moves us further away from the multilateral ideal. A better way forward may be to start consolidating and replacing BITs on the road to a comprehensive multilateral framework. We also need to take a hard look at investment dispute settlement mechanisms, transparently addressing stakeholders’ legitimate concerns.
Replace BITs with what? Regional Trade Agreements (RTAs) are already providing some closer policy linkages. Over 330 RTAs contain comprehensive investment chapters, reflecting more advanced thinking of how trade and FDI interact in the real economy. These agreements also cover ‘deep integration’ disciplines that are essential to investments, such as movement of capital, business persons, intellectual property rights, competition, state-owned enterprises, and anti-corruption. New generation RTAs are not perfect, but they are taking us several steps forward in addressing the services-trade-investment-technology nexus. Being regional, however, they are not applied uniformly at a global level, and create their own overlaps and incoherence. It would therefore be useful to create clearer rules for co-existence among RTAs and mega-regional blocs. Above all, it is important to foster information-sharing on emerging practices from these negotiations, so that good practices can be diffused more widely and uniformly, and provide a pathway for multilateral convergence. In this way, RTAs and mega-regionals can become the building blocks of an integrated and truly multilateral trade and investment regime.
We are at a critical juncture, both economically and politically. The global economy needs a helping hand for recovery from the global financial crisis and to give people the improvements they expect in their daily lives. At the same time, we have both an opportunity and obligation to upgrade the policy framework to meet the changing reality of how trade and investment are conducted across the world, to enhance policy coordination, and to ensure that both have a positive impact on people’s well-being. Mega-regional agreements like TTIP and TPP are on track to deliver new frameworks over the coming months. These can be stepping stones towards the future of global trade and investment rules. As these mega-regional deals approach the finish line, the 10th WTO Ministerial in Nairobi in December is an opportunity to break the current impasse in the Doha Round. Finally, all of this is taking place as we enter a new “Post-2015” era with the new SDGs, where trade and investment are expected to do more of the heavy-lifting in global development.
Against this backdrop, the G20-OECD Global Forum on International Investment (GFII), being held on 5 October 2015 in Istanbul, back-to-back with the meeting of G20 Trade Ministers, will bring together the trade and investment policy communities—along with the business community–to reflect on the main axes of a pragmatic strategy to enhance the international regime for investment, including through closer links with trade. The agenda cannot be delayed: trade and investment decisions must go hand-in-hand in policy, just as they do in global business.
Women entrepreneurship is increasingly recognised as a key source of employment creation and innovation, and for addressing inequalities. McKinsey for example have just published a study estimating that “$12 trillion could be added to global GDP by 2025 by advancing women’s equality.” Women entrepreneurs could be a major part of this, but the latest figures presented in the OECD’s Entrepreneurship at a Glance 2015 show that in OECD countries there are two and a half times more men than women that are self-employed with paid employees. On average, 2.2% of all employed women are entrepreneurs who employ paid personnel, while the average for men is 5.6%. There are gender differences also when looking at the sectors of entrepreneurial activity, with a higher concentration of women in the services sector, particularly trade and hotels, while only few have businesses in manufacturing and construction. However, these patterns seem to be changing for young women entrepreneurs. Evidence points to considerable diversity in many OECD countries, including high shares of young women owning businesses in the construction sector, suggesting that stereotype barriers may be eroding.
Encouraging findings are also observed in terms of earnings from self-employment. Although a gender gap continues to exist in all countries, it has nevertheless decreased significantly in many. This is particularly true for Belgium, Finland, Iceland, Luxembourg, and the Netherlands where the gap has closed by more than 10% in recent years (see figures 1 and 2).
Figure 1. Gender gap in self-employment earnings
Figure 2. Changes in gender gap in self-employment earnings
Percentage points, 2010-11 average compared to 2006-07 average
This could be an important driver for inspiring entrepreneurial motivation among women. Indeed, the fear of low or erratic earnings is one of the main reasons why many people do not become entrepreneurs. While entrepreneurship is a pathway to wealth for highly successful individuals, many people that are self-employed struggle instead with relatively low incomes, a condition that results in lower opportunities to accumulate savings and a higher likelihood of falling into poverty if the business fails.
Inevitably, there are risks when choosing to set-up a new business. But some of these risks, like achieving a gratifying remuneration or attaining a satisfactory work-life balance are often more inhibiting for women than for men. In fact, independently of a country’s economic context and cultural attitude toward entrepreneurship, women always appear less prone to take the risk of creating their own business than men (see figure 3). The share of men who would rather take a risk and build their own business than work for someone else is larger in virtually all countries, from high income OECD countries to least developed low income economies. There are a few exceptions where woman are more willing to take the risk, including Mexico and South Africa.
Figure 3. Willingness to take the entrepreneurial risk
Why are women less willing to engage in entrepreneurship? Perhaps because the share of women declaring that they have access to money or training to start-up and grow a business is always inferior to the corresponding share of men. As expected, the average share of women having access to money or training is the highest in OECD countries and lowest in low income countries. However, the main fact remains that across all countries in the world there is an important gender gap in accessing funds and training which are key ingredients for becoming an entrepreneur.
Evaluating the policies that support women entrepreneurs is complicated by the difficulty of measuring gender differences in entrepreneurship. The evidence presented Entrepreneurship at a Glance 2015 clearly shows that policy initiatives are needed to improve access to finance and training for setting up a business. Such initiatives would have a beneficial impact on women’s willingness to become entrepreneurs.
Corporate Accountability and the UN Sustainable Development Goals: How Responsible Business Conduct could and should play a decisive role
Professor Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)
The UN has now agreed to the Sustainable Development Goals, a set of 17 goals which will define the post-2015 development agenda. It is recognised that the private sector has an important role to play in economic and social development. Private sector growth can create income opportunities, contribute to human capital development and lead to technology transfers, among other positive economic and social effects. For example, in Bangladesh the apparel sector has been credited in lowering the official poverty rate from 70% to less than 40%. Today it employs tens of millions of workers globally, predominantly women, which has contributed to empowering women from poor communities.
However, as we have also witnessed in Bangladesh in the context of the apparel sector, in order to avoid other negative impacts, businesses must behave responsibly. Not just within their direct operations but throughout their supply chains and business relationships. This is particularly important in weak regulatory contexts. Given that a significant portion of global manufacturing takes place in such contexts, if multinationals would commit to promoting sustainability and responsible business conduct throughout their supply chains this would have a decisive impact on the success of the SDGs.
The OECD Guidelines for Multinational Enterprises on Responsible Business Conduct currently represent the most comprehensive set of government-backed recommendations on responsible business conduct. They are an important tool for promoting responsible business conduct globally, and therefore for supporting global development.
The OECD Guidelines state as an overarching objective that enterprises should contribute to economic, environmental and social progress with a view to achieving sustainable development. Furthermore under the Guidelines enterprises are expected to avoid causing or contributing to adverse impacts (social, environmental, human rights, etc.), through their own activities, and address such impacts when they occur. Therefore the Guidelines promote a concept of responsible business conduct which includes both the idea that business should do no harm and that they can do well by doing good. This applies to an enterprise’s direct operations as well as products, operations and services throughout its supply chain.
Currently 46 countries adhere to the Guidelines, and therefore make a binding commitment to promote RBC amongst businesses operating in or from their territories. Adherent countries represent diverse geographies and include OECD member states as well as 12 non-OECD member countries (Argentina, Brazil, Colombia, Costa Rica, Egypt, Jordan, Latvia, Lithuania, Morocco, Peru, Romania and Tunisia). These 46 countries account for around four-fifths of outward FDI and two-thirds of inflows and are home to the majority of multinational enterprises. This means that the Guidelines are relevant even for non-adherent nations looking to attract investment or home to companies operating abroad.
Linkages amongst the OECD Guidelines and SDGs
Given the instrumental role that business has to play in sustainable development the OECD Guidelines directly support many of the aims of the SDGs. Some of the main complementarities amongst the OECD Guidelines are outlined in the table here: MNE Guidelines SDGs
Perhaps the most important feature of the Guidelines is the National Contact Point mechanism, the built in grievance mechanism of the Guidelines. Countries adhering to the Guidelines are obligated to establish NCPs which are tasked with promoting the Guidelines as well as providing a platform for mediation and conciliation of alleged non-observance by the Guidelines. Given the substantive overlap between the RBC recommendations of the OECD Guidelines and the SDG’s the NCP system can serve as an important tool in advancement of the objectives under the SDGs.
Although the NCP mechanism does not have legal authority and thus cannot impose sanctions nor mandate that parties participate in the process, it has nevertheless proven to be an effective tool in promoting sustainable development. Utilizing the NCP mechanism provides a venue for enterprises to discuss and explore issues regarding responsible business conduct in a low-cost, non-adversarial manner, which can avoid further escalation of disputes. The OECD NCP mechanism has a growing track record of agreements resulting through mediation. For example in 2014 the UK NCP resolved a complaint brought by the World Wildlife Fund based on the activities of Soco, an oil exploration company, in Virunga national park, a world heritage site in the Democratic Republic of the Congo (DRC). The mediation resulted in Soco agreeing to cease its operations, to never again jeopardise the value of another world heritage site and to conduct environmental impact assessments and human rights due diligence in line with international standards. Such a result directly supports the environmental agenda of the SDGs.
A complaint submitted by UNI Global Union and the International Transport Workers Federation against DHL also led to a useful agreement at the German NCP. The complainants and the company agreed to respect the rights of workers to establish and join trade unions in Turkey, India, Colombia, Indonesia and Vietnam. In another case concerning the Tazreen factory fire in Bangladesh, the complainant, Uwe Kekeritz, member of the German Bundestag, and Karl Rieker, a garment company, reached an agreement in which Karl Rieker committed to improve the fire and building safety standards in its supplier factories. Measures included reducing of the number of supplier factories, establishing long-term supplier relations, close supervision by local staff, and signing the Bangladesh Accord on Fire and Building Safety. The conclusion of these cases supports the SDG goal of protecting labour rights and promoting safe and secure working environments for all workers.
Many NCP cases tackle multiple issues and thus can contribute to several aspects of the SDGs. For example in a complaint by several NGOs against the Cameroon palm oil giant Socapalm and its owners (France’s Bolloré) the French NCP brokered an agreement in which Socapalm agreed to improve workers’ conditions in Socapalm and its suppliers, improve stakeholders engagement with local communities, and reduce environmental damage.
Although non-binding, this soft law mechanism can have hard consequences. If mediation in the context of an NCP procedure fails an NCP may issue a statement with recommendations, sometimes including a statement on whether a company did or not act in adherence with the recommendations of OECD Guidelines. While such determinations may cause significant reputational damage to a company they can also protect a company’s reputation in instances when conduct is found to be consistent with the recommendations of the OECD Guidelines. Furthermore in some contexts governments consider NCP statements with regard to economic decisions, e.g. in the context of public procurement decisions or in providing support to international operations. For example, export credit agencies of OECD member countries must take into account the final statements of NCPs when they make decisions on export credit guarantees. Additionally, some countries have taken NCP decisions and processes into account with regard to their commercial diplomacy.
Beyond government related commercial consequences, increasingly financial institutions are conducting human rights due diligence. This process is being conducted to avoid ethical and commercial risks associated with being linked to such operations. Likewise institutional investors have increasingly started to apply pressure in situations where human rights issues are identified and in some cases have been known to pull their investment where adverse impacts are not adequately addressed. For example in 2010, investors withdrew from mining company Vedanta following an upheld NCP complaint. All this can increase the cost of capital.
The private sector has an important role to play in realizing the SDGs and in this respect, the OECD Guidelines provide a strong existing framework for corporate accountability supporting the aims of the SDGs. Specifically, where the SDG address behaviour of enterprises the NCP mechanism of the Guidelines will continue to function as a strong tool for encouraging responsible behaviour. Governments should take a whole of government approach to this tool and strengthen the NCP system with the SDG’s in mind. For countries with an existing NCP this means strengthening the mechanism and providing it with adequate resources to fulfill its tasks. Finally, multinationals should play their role by behaving responsibly within their direct operations as well as throughout their supply chains.
Suzi Tart, OECD Environment Directorate
The current Volkswagen diesel emissions scandal highlights the difficult reality of making the transition to a low-carbon economy. It also highlights the growing need for governments to make smart policies, based on actual costs.
One might think air pollution is not a big problem because in most cases we can’t see or smell it until it reaches a critical level. Data shows that we should be concerned. Health costs from outdoor air pollution in OECD countries in 2010 amounted to $1.7 trillion. Of that amount, road transport accounted for nearly $1 trillion. Outdoor air pollution not only takes away from the quality of one’s life, it also kills. The number of premature deaths due to outdoor air pollution is estimated to be around 3.3 million each year. The growth in vehicles being added to the streets in China and India mean that this figure is on an upward trend worldwide, although it has been declining in many OECD countries due to emissions controls on vehicles.
Car companies such as VW that are cheating the system therefore risk derailing the modest progress that has been made. Tighter emissions standards for vehicles in OECD countries were a step in the right direction; yet as we have learned, one step is not enough to get us to our destination. Policymakers had no doubt hoped to encourage innovation and investment in clean fuels with such measures. Rather than losing hope however, governments should maintain their strong regulatory regimes and emissions controls. They can also help unlock the potential market power for clean fuels by supporting more research and development in this field, as well as implementing wise tax structures.
Diesel is an example of an unwise tax. Diesel-fuelled engines are considered to be more damaging to both the environment and human health than gasoline-fuelled ones. Yet diesel has a lower tax rate than gasoline does in most OECD countries. Many people fear that diesel-fuelled cars outside of the US will also be found to have “defeat devices” installed on them. If that is indeed the case, at least some of the damage inflicted on our environment and health presumably could have been avoided. Had tax structures properly reflected the degree of environmental and social costs, the higher tax on diesel would have yielded a lower demand for diesel-fuelled cars, hence fewer consumers would be driving them today.
While the world waits to see just how many cars are cheating the system, citizens continue to suffocate and Earth continues to overheat. Transitioning to a low-carbon economy will not be easy, but with the right mix of policies, it can be achieved.
Avoiding death by diesel, Simon Upton, OECD Insights
Christian Kroll, expert on sustainability at the Bertelsmann Stiftung and the Sustainable Governance Indicators (SGI) project manager
When world leaders from all UN member countries meet today in New York for the largest ever gathering of heads of state, it will be about so much more than a unique photo opportunity. Beyond the grand gestures and speeches, we are going to have to ask our leaders if they have done their homework. Seventeen new goals will be adopted at the summit in order to guide public policy over the next fifteen years: the Sustainable Development Goals. They follow on from the Millennium Development Goals, which have helped to halve child mortality, as well as fight hunger and disease since 2000. The key difference is that these new goals will be universal and include the high-income nations of this world – not just as donor countries for development assistance. The Sustainable Development Goals will demand fundamental policy changes in the rich countries themselves. These goals have the power to question the way we live, how we structure our economies, the way we produce, the way we consume. They can highlight the particular responsibilities of the rich nations for sustainable development and spark much-needed reform debates.
A first systematic assessment of how the rich nations perform with regard to all of the seventeen new goals reveals that most OECD nations are currently on track to fail the targets that they are about to set for themselves. The analysis was published by the Bertelsmann Stiftung with the support of the Sustainable Development Solutions Network just ahead of the historic summit. In his foreword, Kofi Annan, who was the driving force behind the Millennium Development Goals, writes: “This study will hopefully spark reform debates on sustainability and social justice in many high-income countries. We owe it to our planet and its people”.
In fact, the rich nations must take immediate policy steps to make their economic and social model more sustainable and inclusive. But we are not starting from zero: We can and must learn from each other. Sweden, Norway, Denmark and Finland perform best across the 17 new UN goals. These countries show that a strong economy with employment-to-population rates in the case of Sweden of 75 percent (ranked 4th of 34 OECD countries) can go together with sound social policies and an environmentally friendly infrastructure (the share of renewable energy in Sweden is 47 percent, ranked 3rd). By the way, these are also among the world’s happiest countries, thereby deconstructing the myth that a sustainable lifestyle is one where you will have to forsake all those precious things that make you happy.
Most high-income nations, however, are on the wrong track with economic systems that widen the gap between rich and poor, and their highly un-sustainable consumption and production patterns. In 23 OECD countries, the wealthiest 10 percent of the population now earns at least as much as the poorest 40 percent. The earnings of the richest 10 percent in the USA are even 1.7 times as great as those of the poorest 40 percent. Countries such as the United States and Denmark generate 725 and 751 kg, respectively, of municipal waste per person every year. The United Kingdom and Estonia overexploit 24 and 22 percent, respectively, of their fish stocks.
When the ink has dried on the outcome document of the New York summit, the work to implement the SDGs should start immediately. In the next fifteen years, let us learn from best practices on the seventeen goals. As the goals are merely political and not legally binding, civil society will have to hold governments to their pledges at the UN summit and accelerate the change over the next fifteen years. That is you, me, and everyone who is not going to be in that historic picture dated 25 September 2015. It is in our hands.
Sustainable Development Goals: Are the rich countries ready? Christian Kroll, Bertelsmann Stiftung, SGI Network, 2015
On 14 September, we published an article on health and the Sustainable Development Goals by Eduardo Pisani, Director General of IFPMA – the International Federation of Pharmaceutical Manufacturers and Associations. Today, Echo Collins-Egan, ACCESS Health International’s Country Manager in Morocco, gives her opinion.
It is 2015 and we have reached the deadline. The Millennium Development Goals (MDGs), which we aimed to achieve by this year, have a new incarnation.
The Sustainable Development Goals (SDGs) represent a renewed and revitalized global effort to come together and face our common human challenges. There is so much to applaud about both the how and the what of these new goals. The United Nations has sought to address many of the criticisms aimed at the MDGs in terms of both creation and content. The SDGs have been arrived at through a thorough consultation process involving non-governmental organizations, academia, the private sector and, of course, governments. They place a new emphasis on topics such as gender equality, the importance of partnerships and the part that business and industry have to play. Although the Millennium Development Goals were, in theory, universal they were tacitly considered to be objectives for low and middle income countries to aim for with the financial aid of richer nations. The Sustainable Development Goals help undermine the age old paradigm that there are developed and developing countries. Instead these new Goals will apply to all of us.
The advantage of such a joint declaration of global intention is that it acknowledges all the pillars that must be simultaneously erected to make development work for the people it is built for. Education is no good without health, a healthy justice system no use without gender equality. And none of these will be relevant if climate change catches up with us. I call them pillars because they must be strengthened together to be able to support sustainable development. Ignore one of these pillars and the others will struggle to stabilize. As the SDGs state we must find integrated solutions to our collective problems; that means across sectors and across countries. The down side of all this of course is scale. Each of the Goals represents a thousand challenges and a thousand complexities. In other words the problems in poverty eradication, gender equality, economy and health are sometimes overwhelming in their size and scope. We could accuse the SDGs of being too aspirational or too vague. To arrive at global objectives which we can all agree upon is difficult, that they be actionable and accountable seems almost impossible. Yet there is no way around the fact that we have to try. The Goals are an expression of that unavoidable reality, we must come together to solve our common problems. They serve the very real purpose of focusing the development sectors’ minds. They help drive funding and streamline our efforts.
Ultimately however the question has to be how we translate our ambitions into action. How we make those actions accountable. How we measure their impact. ‘We will also build upon the achievements of the Millennium Development Goals and seek to address their unfinished business.’ We need to think about why we did not achieve all our previous goals by 2015 and how we can improve upon them this time around.
Sometimes it can feel as though these Global Challenges, Partnerships, Projects, Alliances and Goals are something vague and somehow separate from those of us working in the development sector, in the field or even in local government. I work for a global healthcare organization in Morocco and often find myself asking how we can link these global objectives to the practical realities faced by the four hundred million people in the world who still lack access to good quality healthcare. This globalized world has become a smaller place but one whose complexities are more obvious than ever. We have more information and the means of communicating it; we are living in a moment where we have more tools than ever before to help us close the gap between ambitious global vision and local on the ground realities.
I, like Eduardo Pisani, want to focus on two of the Sustainable Development Goals:
Goal 3. Ensure healthy lives and promote well-being for all at all ages and specifically its sub point 3.8 Achieve universal health coverage, including financial risk protection, access to quality essential healthcare services and access to safe, effective, quality and affordable essential medicines and vaccines for all.
And Goal 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development
As someone who spends a lot of her time thinking about Universal Health Coverage I welcome the inclusion of this goal. The concept of Universal Health Coverage has gained astounding momentum over the last few years and helped pushed the agenda for more accessible healthcare service for all. But what does it mean? Like the SDGs themselves, we could accuse Universal Health Coverage of being a vague pipe dream which although worthy, is almost impossible to achieve (or define!). But like the goals it also provides a platform for us as an industry to reflect on the multifaceted challenges we face if we are to one day offer access to quality essential healthcare services for all.
Which leads me to Goal 17. There is something deeply insightful that one of the Goals revolves around the concept of partnerships. It is one of the first lessons I learned about development: nothing can be achieved without strong complementary partnerships. We cannot have Goal 3 without it. Goal 17’s sub points cover precisely the areas I see are needed all around me every day and they demonstrate that these Goals are about implementation. Finance; Technology; Capacity Building; Systemic Issues; Multi-stakeholder partnerships; Data, monitoring and accountability. Music to my colleagues’ and my ears.
To make both these Goals a reality we need practical tools that support the kinds of partnerships that will help us achieve this dream. Mario Pezzini, director of the OECD Development Center emphasised the need for knowledge-sharing platforms for policymakers to dialogue and develop common strategies to achieve the Sustainable Development Goals.
I would like to briefly talk about one such platform that I have had the honor to work with. The Joint Learning Network for Universal Health Coverage (JLN) is for me an example of what partnerships can help us achieve when it comes to health and development. The Joint Learning Network connects practitioners and policymakers across countries to help bridge the gap between theory and the practical ‘how to’ of implementing reforms to achieve universal health coverage. Practitioners and policymakers from member countries set the agenda and technical priorities. Technical Facilitators frame the issues based on international experience and harvest the tacit knowledge of members. Network members participate in a variety of joint learning activities to share their experiences, learn from one another, and co-produce new knowledge. Technical Facilitators work closely with members of the network to develop and adapt new knowledge products focused on the ‘how to’ of health reform implementation. Members so far include Ghana, Kenya, Indonesia, India, Philippines and many more.
It is an active community of people trying to convert a big goal into a day-to-day reality. Last month, we helped organize a workshop for costing of health services for provider payments in Bangalore, India. An essential but often challenging topic for countries on the path to Universal Health Coverage. Participants from ten countries learned about different costing methodologies, how to manage costing data and how to use that data to reform provider payments. But most crucially they were trained to become trainers themselves, to go back to their countries and share the lessons learned with others. A month later, costing workshops are being organized in almost all the countries that participated.
Platforms such as these allow for an understanding that each country has unique contexts and challenges but that working together makes us stronger.
I would advocate for many more such networks and the resources to support them.
Ultimately the Sustainable Development Goals are an expression of hope. They represent a grand vision rather than a work plan. It is our leaders who will sign this declaration but it is the millions of us on the ground who must really act, in partnership, to make these goals a reality. So let’s get to work.