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close this bookPartners in Time? Business, NGOs and Sustainable Development (UNRISD, 1999, 85 p.)
close this folderPart 2: Toward civil regulation
close this folderGovernmental Policy Frameworks for Civil Regulation
View the document(introduction...)
View the documentGovernment as Facilitator
View the documentToward Global Private Regulation
View the documentOther Policy Options and Obstacles
View the documentConclusion


As mentioned earlier, governments are finding it difficult to provide a regulatory function in a global economy. The declining desire and capacity of the state to regulate, police and enforce is illustrated well in the case of deforestation. Against a history of land disputes and illegal logging, in 1997 both the Brazilian and Venezuelan governments announced that they would privatize forests in order to conserve them. The assumption is that major international corporations have greater resources than governments to police forest management in their concessions. There are concerns that the governments may not be able to regulate such companies effectively. It seems likely that the “regulatory” power of NGOs will be required to ensure that forests are not being managed irresponsibly.

In this section of the paper, we consider the role of governments in civil regulation and the need for supportive policy frameworks at the national and international levels.

Government as Facilitator

There is a range of opinion on the role of government in promoting greater business responsibility for environmental protection in the South. As the role of NGOs in greening business is closely related to the inability of governments to regulate effectively on environmental and social matters, a number of NGOs may be tempted to ignore what government has to offer. The go-it-alone attitude can be found in the new fourth generation NGO strategies, which include a focus on building capacity in the NGO sector for facilitating sustainable development (Korten, 1990). The broad NGO coalition now arguing against an international forest convention for reasons roughly summarized as “it would be a distraction”, is one example of this new thinking in civil society. Many of their partners in industry believe that the role of legislation is a limited one and that market-based mechanisms should prevail. However, a number of managers of companies involved in business-NGO partnerships do not believe that partnerships and voluntary initiatives should replace flexible and efficient legislation.

We believe that governments and inter-governmental bodies should actively promote global social and environmental responsibility in the business sector. To begin with, governments could support the ability of their citizens to promote civil regulation. This could be achieved by strengthening civil society through protecting the ability of people to organize, to speak freely, to protest and to suggest alternatives. Much of the violence against those campaigning for land rights or against particular development projects can be linked to the activities of companies or entrepreneurs. Many governments are equally culpable in the repression of environmental and social activists in the South: the violence of the Nigerian regime against the Ogoni is one example.

The problem appears to be that governments are seeking economic development in very narrow terms. The big and modern is valued more than the small and appropriate. The environment is seen as something to be dominated rather than worked with. Consequently, environmental issues are seen as a barrier to economic progress, a view which can be challenged on many fronts.

A fresh approach would see governments recognizing environmental challenges as opportunities for economic success. Given the growing power of civil society in the North, there are increasing opportunities for Southern governments to lever new funds to help exporters access new markets, and to work in partnership with foreign companies to promote cost-effective resource management. Southern entrepreneurs that recognize the social and environmental demands of Northern markets and adjust their strategies accordingly may be able to achieve greater success. Governments can support such efforts by obtaining additional financial resources for commercial projects that support sustainable development. One example is the partnership between WWF-International and the World Bank, which aims to provide millions of dollars of credit for timber projects that are independently certified as well-managed.

Southern governments could also assist their national companies to access new markets. There is a widely held belief that the Northern “green” consumer is only a niche market. However, green consumerism is not dictating the size of the green market. Instead it is the buying power of corporations, adjusting to the pressures and opportunities of consumer politics, that provides the real opportunity. For example, about 25 per cent of the British and 50 per cent of the Dutch timber markets are not niche markets. To help Cameroonian companies supply these growing markets, the Cameroon Ministry of Forestry recently began working with the European Commission and environmental NGOs.

Furthermore, governments could work in partnership with foreign companies to promote cost-effective resource management. Faced with huge costs to enforce environmental regulations in remote areas, granting natural resource concessions to companies that meet independently monitored environmental and social standards could prove an effective tool for sustainable development. Currently this strategy is being frowned upon by many campaigners and commentators. However, if the standards used were to be developed in consultation with a variety of stakeholders, including local communities, then this strategy might be widely welcomed. New systems of globally applicable, multi-stakeholder negotiated and independently monitored environmental, social or ethical standards for business offer Southern governments new economic opportunities and regulatory mechanisms.

Toward Global Private Regulation

The FSC is perhaps the best current model of a civil regulation organization. It sets global multi-stakeholder standards for forest management, based on a democratic decision-making process. Compliance with these civil standards is then independently monitored, which is similar to the way compliance with legal standards is measured. One of the possible problems with this model is that the business pays the civil regulation bills. This could compromise the independence of the regulator. To combat this, accreditation is used. The actual monitoring and certification is performed by companies or organizations (certification bodies) who are paid for the regulatory service. These certification bodies are then accredited by the FSC to ensure that they uphold the standards and criteria of the FSC. Whereas the certification bodies might be vulnerable to compromised independence, the accreditation process ensures the credibility of the system.

The standard-setting process is paid for by donations from governments, companies, trust funds and so forth. Companies pay for the actual certifications, and eventually pass on the costs to the end consumer. In this way, companies or individuals pay for the regulation of a particular product when they buy that product. Independent certification of business against multi-stakeholder defined sustainability standards represents a privatization of the regulatory function of government, while protecting the democratic participation of citizens. We believe that this system could become the new regulatory framework for business in a global economy. We call it global private regulation.

Other Policy Options and Obstacles

As we mentioned above, Southern governments have the opportunity to invite global corporations to invest, with the proviso that their operations are independently certified against standards set by a variety of national and international stakeholders. For the government this is free regulation; and it offers the potential for international trade to promote sustainable and equitable future incomes. Northern governments should also promote this process, as it allows for further politicization of the market and therefore the effective translation of consumer politics into beneficial social change.

However, the option of developing countries welcoming foreign direct investment (FDI) on the condition that it meets civil regulation standards appears threatened by the possibility of a Multilateral Agreement on Investment (MAI), of the type which was being drafted within the OECD until negotiations broke down in October 1998. It aimed at smoothing the international rules governing foreign direct investment. As we described earlier, FDI is now a critical determinant in development. Many NGOs were concerned that the OECD initiative would rule against the use of environmental conditions on FDI (Coates, 1997, personal communication). Other analysts believe that an investment agreement could, in principle, strengthen the ability of governments to place environmental conditions on FDI, and even propose a code of conduct for companies investing in developing countries (Esty and Gentry, 1997). Developing countries that sign such an agreement in order to attract greater inward investment may therefore be prevented from facilitating sustainable development through a fresh approach of partnership with business and civil society. Our hope is that if a global investment agreement is eventually negotiated, it should contain an exemption so that signatory governments can require investing companies to meet globally recognized environmental and social standards.

The concern with how the MAI would affect government policies for sustainable development reminds us of the importance of intergovernmental agreements. No matter how effective corporate environmentalism, civil regulation or global private regulation could prove to be, international co-operation and mechanisms of global governance are urgently required. United Nations agencies could provide these mechanisms. The Pakistan case referred to in part 1 suggests a new activist role for United Nations agencies in the area of civil regulation. A revitalized UNEP may be able to assume the kind of monitoring and verification role currently being undertaken by the ILO in the Pakistan child labour project. As part of the United Nations Secretary-General’s plans for reform, there is promise of future action to “develop new measures” to reorganize and strengthen UNEP. Kofi Annan wants UNEP to re-affirm its role as “the environmental agency of the world community” and promises to ensure that it has the “status, strength and access to resources” needed to fulfil this task (Cohen, 1997, personal communication). In Annan’s words: “Without good governance - without the rule of law, predictable administration, legitimate power, and responsive regulation - no amount of funding, no amount of charity will set us on the path to prosperity” (Annan, 1997).

Although we have argued that both government and intergovernmental agencies do have a role to play in a changed global economy, this role is not widely recognized. At the same time, the role of consumer politics, civil regulation and global private regulation in facilitating the contribution of the business sector to sustainable development is largely overlooked. Companies and governments are wary of NGOs, while activists remain wary of managing directors and politicians. Many Southern government ministers see calls for the inclusion of environmental or labour standards in trade and investment agreements as attempts at protectionism by Northern countries, rather than as opportunities for sustainable development. Negotiation toward a free trade area of the Americas is one example, where trade ministers of certain Latin American countries have stalled attempts by Costa Rica to discuss environmental standards and trade. Southern ministers still view weak environmental and social standards as a competitive advantage. Until this changes, the potential for civil regulation in the South will not be realized. One country that is seeking the opportunities afforded by sustainable development is the Philippines:

Philippine Agenda 21 [PA21] is the country’s blueprint for sustainable development. It holds great promise for “another” development. PA21 clearly defines the parameters for the involvement of FDI in the Philippine economy. The Philippines has realized, at least some segments of the Philippine bureaucracy, that if it does not clearly define its own vision, it will be defined from the outside by ODA and FDI. The real test will come when we clearly specify... investment parameters connected to productivity, profitability, equity and sustainability, among others. Then we will see if FDI will be willing to work under these new parameters, and not simply flow where the labor is cheap, or the resources plentiful and unregulated (Perlas, 1997, personal communication).

The behaviour of FDI in the Philippines over the coming years will indicate whether corporate environmentalism extends to accepting the will of the people - and acting on it.


In part 2 of this paper, we have argued that:

· corporate environmentalism is a political phenomenon;

· through the politics of both pressure and engagement, NGOs are creating the new agenda for business, as much as companies are themselves;

· the political power of NGOs is not a passing fad but an expression of a new form of consumer politics which is the result of social, economic and cultural change;

· by describing a continuum of protest and partnership relations between business and NGOs we can observe a new form of regulation for global business, called civil regulation;

· civil regulation organizations, like the FSC and MSC, will probably be replicated in other industrial sectors and come to be known as systems of global private regulation;

· these developments rely on the sensitivities of Northern markets, thereby limiting the extent of their impact on the developing world;

· changes in the global economy mean that governments need to assume a greater role as leaders and facilitators, but they are in danger of negotiating that role away through trade and investment agreements such as the MAI;

· the uncertainty that surrounds the issue of corporate environmentalism suggests the need for greater international collaboration in this area.

This paper has explored the potential and limits of business-NGO partnership and civil regulation as new tools to promote corporate responsibility for sustainable development. At the close of the twentieth century, the jury is still out on the role of such initiatives - and indeed of business itself - in the sustainable development process. It could even be said that the jury is still hearing the evidence for and against. Those who wish to prosecute business can present a catalogue of environmental disasters, human rights abuses, worker health and safety violations, etc. Those who wish to defend the role of partnership can present a growing array of policy statements, environmental and social projects, civil regulation schemes and other fledgling initiatives. What this paper shows is that we cannot deliver a verdict at this time, and there is a need to collect more evidence for a fair trial. Eventually we may find that “business” and “partnership” should not be the only ones on trial but instead a cadre of company managers, government officials, United Nations experts, NGO campaigners, voters and consumers, who individually and collectively could be doing much more to promote a more sustainable and equitable future.