From CSR to International Framework Agreements: Towards an Internationalisation of Industrial Relations? Isabelle Schömann

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1 From CSR to International Framework Agreements: Towards an Internationalisation of Industrial Relations? Isabelle Schömann CSR PAPER DECEMBER 2007 CSRM Corporate Social Responsibility and Sustainable Management Isabelle Schömann, European Trade Union Institute for Research, Education, Health and Safety, Brussels This paper can be downloaded without charge at: The Fondazione Eni Enrico Mattei Series Index: The opinions expressed in this paper do not necessarily reflect the position of Fondazione Eni Enrico Mattei Corso Magenta, 63, Milano (I), web site:

2 The special issue on Corporate Social Responsibility Papers: The potential to contribute to the implementation and integration of EU strategies (CORE) collects a selection of papers presented at the Marie Curie Conference CORE organised by FEEM. The CORE conferences Series addresses the question of the goals achievement of the EU strategies. The main EU strategies (Lisbon, Sustainability, Integration) can be successful if their implementation involves adequately and effectively the business sector, non-profit partnerships and networks, local communities and civil society. In this setting CSR holds the potential to stimulate corporate contributions to the implementation and integration of the mentioned EU strategies and can be tested as a policy tool. This batch of papers has been presented at the second Core Conference: The potential of CSR to support the implementation of the EU Sustainability Strategy. CORE is financed by the European Commission, Sixth Framework Programme and it is coordinated by Fondazione Eni Enrico Mattei (FEEM). Further information is available at Conferences: The potential of CSR to support the implementation of the EU Lisbon Strategy Milan, June 22-23, 2006 The potential of CSR to support the implementation of the EU Sustainability Strategy Milan, June 14-15, 2007 The potential of CSR to drive integration in an enlarged Europe Nottingham, June19-20, 2008 The potential of CSR to support the integration of core EU strategies Darmstadt, 15-16, 2009 Partners of the CORE network: Fondazione Eni Enrico Mattei, Milano, Italy Oeko Institut, Freiburg, Berlin, Darmstadt, Germany University of Nottingham, Nottingham, UK

3 From CSR to International Framework Agreements: Towards an Internationalisation of Industrial Relations? Summary This article describes the major results of a study undertaken by a consortium of three research institutes on 'the impact of codes of conduct and international framework agreements on social regulation at company level. Accordingly, international framework agreements (IFAs) are compared the evolution of unilateral codes of conduct. As results the negotiation and signing IFAs to ensure corporate socially responsible accountability and competitiveness on international markets is due to a strong motivation on the part of both multinationals and trade unions to address the limits of (domestic) labour legislation, as well as of the industrial relations system at international level. Furthermore, they offer a way of filling the current legal gap in international and European labour law to regulate the social consequences of globalisation, and secure adherence to labour and social standards. They thus form part of the growing political debate on the international working and production standards of private actors. Investigation of the context of this process, the motivations of the parties, the content of the agreements and their implementation measures provide valuable insights into the impact of international framework agreements on multinationals behaviour in respect of social dialogue and core labour standards. Finally, the paper highlights the influence of private actors such as trade unions and multinationals through sui generis agreements on public policy making and discusses the limits of private self-regulation at European and international level. This has to be replaced in the current debate on the need for supra-national structures regulating labour standards and industrial relations. Keywords: International Framework Agreements, Code of Conduct, CSR, Social Dialogue, Internationalisation of Industrial Relations, Transnational Collective Bargaining JEL classification: M14 Address for correspondence: Isabelle Schömann Boulevard du Roi Albert II, Brussels Belgium Phone: ischoema@etui-rehs.or

4 Abstract From CSR to international framework agreements: Towards an internationalisation of industrial relations? The European Commission s main aim and not least stakeholders motivation in investing so much energy in CSR is to enhance the positive contribution of enterprises and concretise the inherent obligation of each business entity to account for the way its activity impacts the economic, social and environmental dimensions of its environs. CSR has thus been a response by firms institutionally driven to the emergence of a diversity of stakeholders demanding accountability with regard to the impact of corporate activities. Almost parallel to this recent development, an important trend across industry consists in signing global framework agreements designed to commit major multinationals, wherever they operate in the world, to comply with core standards. Global framework agreements definitely create a dynamic of social dialogue and represent an impetus for negotiation at the European and international levels. Interestingly, most relevant initiatives started with European multinationals and they use, in most cases, existing social dialogue structures set up at the national and European levels. In this context, the European Commission launched a European-level debate on the need for an optional framework for transnational agreements early in Our hypothesis is that the negotiation and signing of international framework agreements to ensure corporate socially responsible accountability and competitiveness on international markets is due to a strong motivation on the part of both multinationals and trade unions to address the limits of (domestic) labour legislation, as well as of the industrial relations system at international level. Furthermore, they offer a way of filling the current legal gap in international and European labour law to regulate the social consequences of globalisation, and secure adherence to labour and social standards. They thus form part of the growing political debate on the international working and production standards of private actors. Investigation of the context of this process, the motivations of the parties, the content of the agreements and their implementation measures will provide valuable insights into the impact of international framework agreements on multinationals behaviour in respect of social dialogue and core labour standards. Finally, the paper highlights the influence of private actors through sui generis agreements on public policy making and discusses the limits of private self-regulation at European and international level, addressing the growing and controversial debate on the need for supra-national structures and regulation of labour standards and industrial relations. 2

5 Corporate Social Responsibility (CSR) has become a major topic of debate in Europe, although it is not a new phenomenon within the Member States. At the top of the list of EU priorities, CSR appears to be a contribution to the strategic goal set by the Lisbon Summit of March 2000 and to the European Strategy for Sustainable Development, as well as enabling the promotion of core labour standards and improvement of social and environmental governance in the context of globalisation. Furthermore, CSR debates are part of the European developments on European governance which contribute to opening up the policy-making process to get more people and organisations involved in shaping and delivering EU policy to promote greater openness, accountability and responsibility for all those involved (COM 2001: 428, 3 and 8). But following a trend announced in its communication of July 2002, the EU Commission has considerably attenuated its ambitious goal of elaborating a European framework for CSR, as mentioned in the 2001 Green Paper, to reduce it to a business contribution to sustainable development and, in the 2006 communication, to remove CSR from its social dimension by explicitly excluding a constructive partnership with social partners, while transferring it from DG Employment and Social Affairs in charge of CSR since 2000 to DG Enterprise. Thus, the European Commission s main aim and not least stakeholders motivation in investing so much energy in CSR is to enhance the positive contribution of enterprises and concretise the inherent obligation of each business entity to account for the way its activity impacts the economic, social and environmental dimensions of its environs. CSR has thus been a response by firms institutionally driven to the emergence of a diversity of stakeholders demanding accountability with regard to the impact of corporate activities. Almost parallel to this recent development, an important trend across industry consists in signing global framework agreements designed to commit major multinationals, wherever they operate in the world, to comply with core standards. Global framework agreements definitely create a dynamic of social dialogue and represent an impetus for negotiation at the European and international levels. European and international trade unions are the main drivers of this development. Their lobbying urges multinationals to adopt more socially oriented commitments, including worldwide respect for labour standards within multinationals sphere of influence (including subcontractors, clients and suppliers). Interestingly, most relevant initiatives started with European multinationals and they use, in most cases, existing social dialogue structures set up at the national and European levels. In this context, the European Commission,early in 2006, launched a European-level debate, based on a data collection (Pichot 2006) on the need for an optional framework for transnational agreements. This paper discusses the link between corporate social responsibility and transnational social dialogue (Bourque 2005) and analyses the motivation of multinationals to switch from unilateral CSR to negotiated instruments, and of trade unions to enter into international framework agreements together with multinationals. 3

6 Our hypothesis is that the negotiation and signing of international framework agreements to ensure corporate socially responsible accountability and competitiveness on international markets is due to a strong motivation on the part of both multinationals and trade unions to address the limits of (domestic) labour legislation, as well as of the industrial relations system at international level. Furthermore, they offer a way of filling the current legal gap in international and European labour law to regulate the social consequences of globalisation, and secure adherence to labour and social standards. They thus form part of the growing political debate on the international working and production standards of private actors. Investigation of the context of this process, the motivations of the parties, the content of the agreements and their implementation measures will provide valuable insights into the impact of international framework agreements on multinationals behaviour in respect of social dialogue and core labour standards. Finally, the paper highlights the influence of private actors through sui generis agreements on public policy making and discusses the limits of private self-regulation at European and international level, addressing the growing and controversial debate on the need for supra-national structures and regulation of labour standards and industrial relations. 1. CSR codes of conduct: stepping-stone towards international framework agreements? 1.1. Evolution International campaigns, consumers, NGOs and trade union pressure, as well as the initiatives of several international organisations, such as the OECD, 1 the ILO 2 and the UN, 3 have urged multinationals to pay more attention to ethics, especially in respect of labour and environmental standards in their core business, including CSR. According to the European Commission (2002), CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. In doing so, companies are supposed to go beyond legal minimum requirements and obligations stemming from legislation and collective agreements in order to address societal needs. In response, a wave of CSR and codes of conduct has overwhelmed the international and European business scenes, giving a mixed picture of corporate commitments to core The OECD Guidelines for Multinational Enterprises (1976) were revised in 2000 after being fairly inactive. Improvements were made mainly to the content, including the inclusion of the core labour standards and supply chains. ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, The Declaration of Fundamental Principles and Rights at Work The UN initiated the Global Compact Initiative in 2000 in order to improve cooperation between the United Nations, the business community and other social groups towards sustainable economic development. The Global Compact is based on ten principles which reflect the General Human Rights Declaration, ILO core labour norms and the principles of Agenda 21 on sustainable development. 4

7 labour and environmental standards (Liv and Stein, 2003). Among the most common features of the majority of tools developed by multinationals such as codes of conduct are their voluntary nature, the emphasis on management initiatives and on managing the social and environmental impact of corporate activities, as well as the idea that stakeholders interests must be taken into account. Furthermore, codes of conduct remain a unilateral exercise, addressing a wide range of disparate issues in relation to the core business affecting multinationals and their subsidiaries, but rarely their subcontractors and suppliers, and have little or no reference to ILO and OECD guidelines or even to a model code of conduct developed by the ICFTU (now ITUC) and the global unions. Those declarations of intent do not set out to bind anyone and do not even take an interest in how these guidelines or goals might be implemented. The absence of implementation and monitoring mechanisms also indicates multinationals lack of interest in concretising the content of the codes. Under these circumstances, stakeholders in general and unions in particular were and to some extent still are very sceptical of such tools, seen mostly as PR exercises on the part of multinationals and having little to do with any kind of obligation to respect core labour and environmental standards. This mistrust was reinforced by the fact that issues directly linked to labour standards and working conditions were sporadically and selectively addressed, thus creating a confusion of genre in the setting up of private norms and a real danger, as many of the issues fall within the prerogative of trade union collective bargaining. Indeed, fears were expressed that CSR can have a corrosive effect on social dialogue, as labour standards can be levelled down for example, by taking the lowest common denominator as a reference or selecting amongst stakeholders in a way that runs counter to or dilutes the legitimate interests of other players, such as workers' representatives (Jenkins 2001; Schömann 2004). Indeed, since the mid-1990s CSR has gone hand in hand with the weakening of social dialogue despite the emergence of legal tools at European level aimed at increasing information for salaried employees and involving them in restructuring. Furthermore, due to the voluntary nature of CSR measures and the lack of efficient implementation and monitoring, multinationals reliability is uncertain, something that might bring the social acquis and the European Social Model under pressure. But the corrosive effect that has stamped the introduction of CSR in Europe appears to be gradually giving way to more acceptable, negotiated CSR practices (Peeters 2003). In some recent codes of conduct management has tended to inform or even consult workers representatives. One striking development is that multinationals tend to acknowledge the need for a new generation of CSR-related instruments in whose development not only management but also labour is involved. Much more than a unilateral declaration, negotiation takes place with a view to reaching a jointly signed document in most cases between the multinational s central management and international unions. Such initiatives make it clear that multinationals CSR policy is going beyond the sphere of philanthropy in order to have a broader impact and greater resonance amongst stakeholders. This new generation of CSR instruments appears to be more than a tentative step whereby 5

8 multinational companies seek to increase their legitimacy in the eyes of their stakeholders, and much more a commitment to comply with new international regulations on corporate governance Risks and opportunities There are a range of risks linked to the development of codes as unilateral declarations by multinational managements in respect of core labour and environmental standards. Some are linked to the laying down of private norms by private actors and their relation to legislation and collective agreements, the voluntary nature of such instruments, the notion of stakeholders and the legitimacy of the actors involved, the lack of reporting and verification mechanisms, the development of auditing agencies and the lack of common principles and guidelines on how they should operate, as well as the lack of transparency. On the trade union side, for example, experience shows that, in the end, workers rights and interests are advanced or protected only through the proper application of good laws and regulations and/or through collective bargaining. Deregulation of (labour) law leads inevitably to (anarchic) proliferation of private norms as substitutes for hard law and negotiated norms. To prevent this, regulatory frameworks are needed to ensure that business activities are socially responsible. In addition, the interdependence of different interest groups, such as consumers and workers, may lead to conflicts of interest. Multinationals may exploit such divergence and organise a random selection of stakeholders to favour one group to the detriment of others, according to the multinationals interests. There are some conceptual difficulties with the stakeholder idea. One is that not all stakeholders have a legitimate claim on the company (Justice 2002). Unions have supported the stakeholder idea up to a point but not when it substitutes for the social partners. Furthermore, good industrial relations and especially collective bargaining have proved to be effective means of increasing the positive impact of business activities in respect of workers rights that fall under union prerogatives. A biased selection of market oriented (labour) issues, such as child labour, may be misleading, hiding other non-socially responsible practices of multinationals for example, in relation to workers freedom of association or workers right to collectively bargain. Finally, some observers have stressed the argument that codes of conduct are mainly affirmative instruments for guiding social behaviour and shaping the image of the company in the way that senior company managers desire, in order to convey and improve legitimacy outside the organisation rather than having a real impact on labour standards, fundamental rights and working conditions. Other critics believe codes of conduct prevent or at least delay the adoption of new legally binding social regulations (Jenkins 2001). Business also uses codes of conduct and other forms of private standardsetting in the social area to redefine or reinterpret standards so as to make their responsibility seem less than it really is (Hepple 2002; Barnard & Deakin 2002). 6

9 Concerns have also been expressed with regard to the setting up of private norms and their complex and ambiguous relations with legislation (Daugareilh 2005). The challenge for trade unionists is to prevent CSR from becoming a substitute for the proper role of governments and trade unions. But CSR has proven to be a path probably opened up by multinationals involuntarily that civil society in general, and trade unions and environmental NGOs in particular, have to take as stakeholders in order to monitor the social and environmental consequences of multinationals activities and to influence firms core businesses accordingly. The opportunity for trade unionists is to use CSR as a way of promoting a culture of legal compliance and respect for core labour standards, as well as to promote good industrial relations. Furthermore, CSR may be a (necessary) means of using soft law to temporarily compensate a lack of enforceable international tools in respect of core labour standards in the world. Additionally, CSR may also propose soft law measures to adapt to the new boundaries of firms (networks of firms, subcontracting networks), as well as to new forms of labour mobilisation to overcome the limits of domestic labour standards in a process of increasing globalisation. A striking development in CSR management practice is the current trend to enter into dialogue with unions leading to the signature of agreements at international level. In the following section, we analyse the context in which global framework agreements are elaborated, as well as their content in order to discuss their impact on social dialogue structures and industrial relations systems. Our hypothesis is that international framework agreements are part of the necessary evolution of current CSR unilateral tools towards more efficiency in valorising social dialogue procedures and structures at international level. 2. Codes of conduct versus international framework agreements: from a marketing exercise to the valorisation of social dialogue in multinationals 4 Parallel to the development of codes of conduct, albeit starting at a later stage, so-called international or global framework agreements have been promoted, mainly by global union federations, to address an emerging need for the internationalisation of industrial and labour relations in the global context (Drouin 2005; Hammer 2005; Sobczak 2006). First adopted in two French multinational companies at the end of the 1980s and in the mid-1990s, and after a slow increase during the 1990s, the number of these agreements has increased at a much faster rate since As of May 2007, 53 agreements had been signed. So far, little research has been conducted on the real impact of international framework agreements on labour standards and industrial relations, for example inquiring whether they are used as a binding reference by management and labour and whether international framework agreements have changed, at least partially, the strategies of both parties in 4 The following developments are part of the results of a research project Codes of conduct and international framework agreements: new developments in social regulation at company level under the direction of the European Foundation for the Improvement of Living and Working Conditions. Project Forthcoming. 7

10 the context of social conflicts or social dialogue. Moreover, little research exists on the perception of its appropriation at local level by both management and labour. Finally, it would be of interest to analyse whether international framework agreements have already impacted multinationals behaviour in respect of core labour standards. A project supported by the European Foundation for the Improvement of Living and Working Conditions Codes of conduct and international framework agreements: new developments in social regulation at company level conducted from June 2006 to May 2007, 5 had the objective of analysing the influence of international framework agreements (in comparison to codes of conduct) on multinationals behaviour in respect of labour conditions, social dialogue and corporate culture. In what follows we present the main findings in respect of context, the motives of the parties, the content of the international framework agreements and monitoring Context and motivation A global framework agreement is an agreement signed between the management of a multinational company and the relevant global union federation which commits the company to respect minimum labour standards in its operations around the world. In most cases, it is based on a negotiation and bargaining process. First concluded in multinationals based in Europe (France, Germany and the Nordic countries and indeed 80% of such companies are still headquartered in Europe), many other countries now feature, such as the USA. Whereas codes of conduct are clearly a management initiative that leave no room for union input, international framework agreements, on the contrary, are considered, at least by some companies, as embedded in the company s international human resources policy and as part of the company s social dialogue. Furthermore, only the representatives of the company s headquarters sign the international framework agreement, which reflects the reality of economic power within the company. But each subsidiary has its own legal personality, even if it is highly integrated in a group. Consequently, the fact that only a representative of headquarters signs the international framework agreement precludes it from being considered as a collective agreement as defined in labour law. On the workers side, global union federations are the main drivers and sign international framework agreements. The International Metalworkers Federation (IMF), the Building 5 The present research project was carried out jointly by a consortium of Wilke, Maack and Partner in Hamburg, the Audencia Nantes School of Management and the ETUI-REHS Institute in Brussels. The following section will present the main findings. 6 In a similar vein, there is an increasing debate as to whether an optional legal framework in this field would encourage or halt the development of these tools (Ales et al., 2006). This issue, which is the subject of a controversial debate between the social partners in Europe, has not been part of the study. The developments presented in part 3 of the present paper solely reflect the personal views of the author. 8

11 and Wood Workers International (BWI), the International Federation of Chemical, Energy, and Mining Workers (ICEM) and Union Network International are the more active unions in this respect. International framework agreements are in some cases cosigned by national unions. Although this co-signing is discussed among the different actors involved, from a legal point of view, it seems to transform the international framework agreement into a collective bargaining agreement in the country where the headquarters are located. Furthermore, the involvement of EWCs promoted by some international unions up to the co-signature of the agreement appears to be a strategy of the IMF only. Although not falling within the competence of EWCs according to the EU directive, this strategy seeks to guarantee EWCs future involvement in the dissemination and monitoring process. By including more partners on the side of the workers, unions secure the appropriation of the international framework agreement by labour at all levels and in doing so combine competences and manpower. In most cases the initiative for negotiations lies with the global union federations, with the participation on a case-by-case basis of European and/or national unions, and of world, European and national works councils. In rare cases, international framework agreements are the result of a joint initiative of management and labour or even a management initiative. On the management side, the negotiations closely involve the human resources department, which relies on its experience in social dialogue. In this way human resources managers reaffirm their role in CSR issues. Other departments may be involved in negotiation rounds. Although objective factors of influence (either company specific such as structure, size, home country or international environment, sector, market, etc.) may favour the adoption of codes of conduct and the negotiation of international framework agreements, they are insufficient to explain why a company adopts a code of conduct or negotiates an international framework agreement. A closer look at the more subjective motivations and interest constellations of the parties involved tells us that both management and workers negotiate international framework agreements in order to reduce social dumping and, by increasing adherence to core labour standards, to raise competitiveness in international markets and secure good and better workplaces. Another joint motivation is to develop social dialogue between management and labour at all levels in order to solve potential difficulties, and by doing so to create an alternative dispute resolution mechanism. On the part of the trade unions, international framework agreements constitute formal recognition of social partnership at the global level and provide a global framework for protecting trade union rights and encouraging social dialogue and collective bargaining. Furthermore, international framework agreements help to adapt good domestic social dialogue structures to the multinational level. An additional motivation is to strengthen the fight against violations of core labour standards both internally and externally, as well as to contribute to the harmonisation of good working conditions. Furthermore, they help to appropriate CSR issues and issues related to transnational social dialogue and provide strong channels of communication with union members of all levels, and not least to improve relations with local and international management. 9

12 For management, signing international framework agreements enables them to secure the competitiveness of the multinational in global markets and, especially, improves their position in the stock market with regard to ethical standards, thus influencing investors. Furthermore, international framework agreements contribute to a better risk management strategy by providing implementation measures (for a corporate code of conduct). They also create a coherent framework for the group s commitment in the field of CSR to consumers and clients, as well as NGOs, and reinforce multinationals credibility. They also make it possible to share initiatives and to foster the group s internal culture and values. Neither codes of conduct nor framework agreements have a clear legal status. From a legal point of view, the adoption of these tools is completely voluntary, even if national legislations or public purchasing policies, as well as the pressure of stakeholders, may favour their adoption. The legally binding character of codes of conduct (Sobczak 2002) and international framework agreements is still an issue and will be discussed within the framework of the growing debate on whether an optional legal framework in this field would encourage or halt the development of these tools (Ales & al. 2006) Content Both instruments may contribute to the definition of minimum standards, reaffirmation of core labour rights or more effective enforcement of labour laws among the different subsidiaries of the company, within the company and among its suppliers. To contribute to improved industrial relations and working conditions, codes of conduct and international framework agreements can introduce new rights for workers, workers representatives and trade unions, or can emphasise making existing rights more effective. For workers in countries outside the European Union, the recognition of fundamental social rights may be a priority. Indirectly, this may also be of benefit to workers in the European Union insofar as it contributes to the defining of minimum labour standards and thus to the fight against social dumping. But even within the European Union, there is potential for progress, in particular in the development of rights that are not directly related to working conditions and that correspond to much broader social or environmental aspects of the lives of workers and their families. As we will show, the content analysis of international framework agreements and our sample of codes of conduct reveals that both instruments sometimes differ significantly on the issues raised and on the quality of the commitments. Typically, international framework agreements offer commitments on trade union rights, collective bargaining rights, information and consultation of the workforce, equal opportunities, health and safety, decent wages and the banning of child and forced labour. While the issues covered are quite similar to codes of conduct, international framework agreements contain implementation and monitoring measures that allow unions to take a central part in participating to and monitoring the multinational s core business. Analysis of the issues raised in international framework agreements and codes of conduct and of the international standards they refer to, confirms the rather different profiles: whereas 10

13 international framework agreements focus on issues related to labour rights and industrial relations and refer to the ILO, codes of conduct have a much broader scope, including also other CSR or business ethics issues. Another way for codes of conduct and international framework agreements to contribute to new rules in international industrial relations is to define a broad scope of application covering the company s worldwide subsidiaries and suppliers. One of the major problems for working conditions and labour law standards in the era of globalisation is the fact that they are limited to the regulation of relations between companies and those who are bound to them through a contract of employment, thus excluding, in most cases, legal liability for the workers in subsidiaries and in subcontracting companies. Content analysis of international framework agreements and codes of conduct shows that many texts in both categories deal with the social regulation of the company s suppliers. In general this is much more detailed in international framework agreements than in codes of conduct. This applies to both regulations and explicit references to subsidiaries, as well as to suppliers and business partners. But the surprisingly high rate of both international framework agreements and codes of conduct stipulating suppliers codes indicates a growing need for more effective social regulation in global supply chains, as well as the added value international framework agreements and codes might have in this field. Looking at implementation measures, two basic approaches can be differentiated (similar to CSR agreements found at European and/or sectoral level). Either existing transnational structures or procedures such as EWCs are used (EWCs seem to be playing an increasing role in this area), or a new supranational management union forum or process is established. These two approaches can be combined or, alternatively, there can be simple consultation on compliance with workers representatives, with the appointment at management level of a person responsible for compliance control, and, if necessary, there can be recourse to an arbitration process. International framework agreements can be considered as a vector for promoting respect for fundamental social rights among multinational companies and their economic partners, whereas this is only partly the case with codes of conduct. Consequently, international framework agreements tend to correspond to an emerging form of social dialogue at the international level, whereas codes of conduct are mainly used as guidelines for behaviour and instruments of legal risk management for companies. Whereas international framework agreements aim at regulating labour relations within multinational companies, though they may sometimes include broader issues, codes of conduct on the contrary aim at reaffirming norms related to the broader concept of corporate social responsibility and business ethics, and thus also include references to labour standards. In the case of international framework agreements, labour standards are the main focus, whereas they are only one issue among others in codes of conduct Impact 11

14 International framework agreements and codes of conduct differ to an important extent in their dissemination and monitoring procedures. Whereas the dissemination and monitoring of international framework agreements involve both social partners and thus contribute to creating new issues for social dialogue, the implementation of codes of conduct usually remains in the sole hands of the management, control sometimes being entrusted to external auditors. This finding is confirmed by the fact that some companies have decided to conclude an international framework agreement to improve the dissemination and monitoring of their existing code of conduct. International framework agreements and codes of conduct also differ as to the duties they impose on employees. Many codes of conduct explicitly provide for disciplinary or even civil sanctions for employees whose behaviour does not conform to the principles they lay down. In many cases, the employees are also required to report any violations of the code they may observe using anonymous hotlines. International framework agreements contain no such provisions. On the contrary, the latter sometimes create dispute settlement procedures involving the social partners at the local, national and international levels. They thus underline the signatory parties willingness to use international framework agreements to identify possible violations of fundamental social rights in subsidiaries or even at suppliers at an early stage and to solve these problems internally through social dialogue rather than go to court or bring the matter to the attention of the general public. Furthermore, the involvement of both management and unions in the elaboration, dissemination and monitoring of international framework agreements makes it more likely that the enforcement of fundamental labour rights will have a real impact, since it is based not only on one tool and one key actor, but on several instruments and the involvement of both social partners. Although both corporate codes and international framework agreements have a positive impact on the implementation of basic labour and social rights, certain fundamental rights such as freedom of association and collective bargaining, in contrast to other fundamental labour rights, are covered by corporate codes to a much lesser degree. Furthermore, domestic workers consultation bodies such as (European) works councils and/or national unions may play an important role in the elaboration and/or implementation of international framework agreements. Works councils, as well as EWCs, are legally established bodies enabling the exchange of information between management and workforce. As such, they are an institutional platform with resources and access to information on the national and European activities of firms. Furthermore, they also have consultation rights and are part of the social dialogue structure at business level. It is therefore obvious that they may play a role in the development of international framework agreements, although not all EWCs play an important role. 7 According to 7 The involvement of EWCs is characterised by a certain heterogeneity from one multinational to another. Differences in the practices and effective roles of EWCs may be influenced by a common set of factors (Marginson et al., 2004): the degree of internationalisation of production in the multinational and the need to create a business alignment in the subsidiaries which allows the European Works Councils to intervene; its capacity to appropriate the issues of globalisation and CSR; the management strategy; the 12

15 Hammer (2005), the development of EWCs has influenced international framework agreements in recent years. This proves to be the case in sectors in which European federations such as the European Metalworkers Federation are particularly engaged in supporting EWC involvement as a facilitator in the negotiation of international framework agreements (Bourque 2004; Pulignano 2004). A general trend seems to be that the unions are increasingly recognising the usefulness of the EWCs as a source of information and, at times, as a forum for coordination to the extent that EWCs are invited to sign agreements (Teljohann 2005). This may lead to trade unions cooperating more effectively with EWCs in order to promote European-level negotiation but also in the context of international framework agreements. As a consequence, some unions have started to change their strategy by investing more in EWCs. In this respect, EWCs are contributing to the Europeanisation of industrial relations systems based on the transnational dimension of the workforce (Daugareilh 2005; Moreau 2006; Voss 2006). Interestingly, and according to the circumstances, the existence of a well functioning European Works Council may have a certain influence on the willingness of the management to negotiate an international framework agreement (Moreau, 2006). Furthermore, EWCs may serve as the precursor of a wider, broader information and consultation body that the partners of international framework agreements may set up to ensure the reporting and monitoring of their agreements. In some cases, the EWC fulfils this task beyond its European scope of application, but in other cases the use of EWCs can be a strong limitation (see Liv & Stein, 2003). Finally, clear differences between international framework agreements and codes of conduct result from their different natures: international framework agreements represent a formative approach to industrial relations and social dialogue, which also includes the acceleration of the elaboration of global structures of dialogue, information and consultation and the exportation of a certain domestic or European social model of employer employee relations. In contrast, corporate codes of conduct represent an affirmative approach which seeks to reinforce good corporate practice and both illustrate and implement the excellence of the respective company in fields such as management integrity and compliance with basic human rights and national laws, including basic labour rights. Concrete impacts are much harder to discern in this respect. Based on these developments, our hypothesis is that the switch still gathering pace from CSR policies such as simple PR a unilateral exercise to company-specific strategies, including trade union involvement and negotiation of international framework agreements, is due to a strong motivation on the part of both multinationals and unions to close the current legal gap in international and European labour law to (self-) regulate the social consequences of globalisation, and ensure adherence to labour and social standards, though for different reasons. The concluding section discusses the challenges and limits of self-regulation in labour issues. structure and acceptance of the workers representative body (Teljohann, 2005); capital structure (Müller/Platzer, 2003); and the functioning of the body itself. 13

16 3. Opportunities and limits of international framework agreements in paving the way to the internationalisation of industrial relations The increasing negotiation and signature of international framework agreements should be put in perspective. A small number of multinationals is involved, mostly based in the European Union. The scope for further agreements remains for the moment rather limited, given that, on the one hand, global unions acknowledge the need for an evaluation of the process in respect of impact assessment and indicators of good practices, while on the other hand managements rarely initiate negotiations on international framework agreements. Nevertheless, international framework agreements are stepping stones in a process of creating social dialogue between multinational managements and the workforce for dealing with the social consequences of globalisation (1). However, the message to public policy given out by the initiatives of private actors via sui generis agreements is clear: it is their intention to overcome the current legal gaps in the regulation of international labour issues by self-regulation. Thus, private actors cannot take over the role of public authorities (2) Workers involvement as a benchmark for strengthening international corporate social responsibility Previous developments show clearly that international framework agreements point towards new opportunities and space for trade union organisation and bargaining, as they pursue the same goals of promoting social dialogue with multinationals. In most cases, international framework agreements have been negotiated on the basis of existing good relations between the multinational s headquarters and the workforce, represented by global, local and/or national unions and/or (European) works councils. Here again, the existence of a well functioning industrial relations system applied at company level plays a decisive role in the promotion of such good social relations within a broader, international arena. Furthermore, international framework agreements are not intended to substitute local and national collective agreements, but rather function as a supplement and additional level of dialogue to local practice. Moreover, international framework agreements need the local level to secure the efficient appropriation and implementation of the issues. Furthermore, one striking result is that international framework agreements represent a new means by which unions at all levels are able to raise awareness and promote union rights and additional core labour standards and to make them applicable within the scope of multinationals activities, thus adapting domestic (legally) binding rights outside their national scope of application. On the one hand, companies recognise the positive impact of international framework agreements on corporate culture, industrial relations and the corporate image, to the extent that in a few cases employers have initiated negotiations, thereby acknowledging 14

17 the win win character of international framework agreements. On the other hand, international framework agreements tend to transform firms CSR policies into more concrete and binding commitments, thus enriching both the transparency of their principles and objectives and their internal and external credibility. In doing so, international framework agreements give unions the possibility to monitor corporate behaviour on an agreed basis and to act upon any violation of workers rights by entering into direct consultation and negotiations with the company management. Thus international framework agreements seem to have an increasing function as early warning systems and are starting to operate as alternative dispute resolution mechanisms by creating the means for mediation and consultation. A last resort in the case of violation of international framework agreements would be for unions to campaign against the multinationals, as the relevant legal procedure is still uncertain, at least on the basis of labour regulations. On the basis of consumer law and competition law, however, consumers and rival enterprises can make claims against, respectively, unfair and misleading advertising and failures to respect good faith and morals in competition. Both stakeholder groups can exert considerable public pressure on a company which uses the fact that it observes certain social minimum standards as a form of manipulative advertising for its products. However, a code of conduct or an international framework agreement will not be suit on the basis of the violation of a fundamental social right, but on the ground of violation of a company s obligation to inform consumers fairly. In this way, international framework agreements seem to be a way of promoting a culture of legal compliance and respect for core labour standards, as well as good industrial relations and respect for the role of trade unions alongside processes of globalisation (Liv and Stein 2003; Justice 2002). However, they also open up new challenges and a need for clarification Limits of self-regulation The challenge has been to prevent CSR and codes of conduct from becoming a substitute for proper regulation, thus avoiding government and trade union intervention (Justice 2002). The challenge faced in the case of international framework agreements is that they correspond to a new form of social regulation created by the social partners without a legal framework, thus leaving open many questions. The main areas of clarification concern (i) the legal nature and impact of these texts, (ii) the representativeness and mandates of the signatory parties, from multinational managements to (global, regional or local) unions, including EWCs, (iii) the scope of application of international framework agreements as concerns groups of enterprises and coverage of workers in subsidiaries and suppliers, (iv) the legitimacy of the actors involved in dealing with other issues, such as core labour standards, AIDS or the environment, and (v) their legal status (Sobczak, 2006). The lack of legal certainty leads unions to mistrust international framework agreements, which are seen as part of company CSR strategies. On the other hand, multinationals are unable to properly evaluate the risks they may face in signing international framework agreements for example, the legal risk of court proceedings. Imbedded in the debates on the development of soft law and the trend towards labour law deregulation (Schoemann, 2004), CSR in general and international framework 15