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The Role of the Private Sector in Zones of Conflict

17-18 April 2002, UN Headquarters New York 



The first meeting of the Global Compact policy dialogue on the Role of the Private Sector in Zones of Conflict took place in March of 2001. At that meeting representatives from companies, labour and NGOs identified four key issues in conflict prevention and peace building, for which they believed that a multistakeholder approach could be most effective. Four working groups were created to focus on these issues. In September of that year, participants came together to take stock of the work carried out up to that point and clearly define the outputs each group should complete by 2002. The working groups developed their work throughout the year by e-mails, phone conferences and face-to-face meetings. There are now 118 participants working together in this dialogue. On April 2002, a meeting was convened to present the outputs of each group and identify the actions needed to disseminate and implement the findings and recommendations.

The separate working groups presented their reports for discussion on the first day of the meeting. On the second day, they made recommendations for the next steps in the Dialogue. The following sections summarize those discussions and recommendations.

The Working Group on Revenue-Sharing

Members of this group presented a report that focused on the revenues generated by the natural resource extractive industry. Revenue-sharing regimes can have a variety of social and political objectives such as the just distribution of resources at the national, regional, and local levels; compensation for resettlement or loss of land; economic development and social investment; and meeting the needs of future generations. Revenue-sharing regimes can contribute to conflict prevention in two ways: first, they address questions of the equitable and just distribution of revenues; second, they require a process in which all stakeholders must work together with shared responsibility for investing revenues in projects that are sustainable and have a positive social impact. The group explored the different roles that corporations, host country governments, and the international community can have in developing revenue-sharing regimes. They emphasized the fact that different types of revenue-sharing mechanisms are possible, including government-controlled resource funds, transparent government funds, corporate-funded social investment funds, and funds managed with the participation of multilateral organizations. Revenue-sharing agreements can be a tool for achieving more transparency, more accountability and better governance

The discussion began with a comment on the fact that while there is a "sea change" in attitudes toward corporate responsibility, good government remains critical to development. Participants argued that the focus must be on developing government capacity and not on having companies deliver public goods – and revenue sharing-regimes can contribute to this goal. The group recommended the need to start with a better understanding of the different types of legal regimes and mechanisms for revenue distribution, considering that the legal framework is critical to any discussion of change. They suggested the need to consider not just the distribution but also the management of revenues, including issues of transparency, corruption, capacity building, and conflict.

Next steps: This group recommended that the UNGC should sponsor regional workshops on best practices in revenue-sharing regimes that might include one for the Caspian region, one in Nigeria in conjunction with the New Partnership for African Development (NEPAD), and one in South Africa on mining and sustainable development. Local NGOs will be crucial to making such workshops successful. However, all agreed the resources of the UNGC are small and therefore these workshops would require partnerships with other organizations.

The Working Group on Conflict Impact Assessment and Risk Management Toolbox

The Working Group presented a report on the conflict impact assessment and prevention toolbox, now renamed the Business Guide. This is different from political risk and financial risk assessment, both of which focus on the effects of external factors on the company. The Guide is a practical approach for businesses to assess the impact of their own operations on local tensions, and vice versa. Assessing and understanding the various risks and responding with mindful solutions helps prevent the escalation of conflict. The Guide developed by the working group contains three sections: the Business Guide; a Stakeholder Analysis matrix; and annexes on impact assessment in Environment, Human Rights, Labour, and Humanitarian Law. The core of the document focuses on key areas of concern, including governance; economics; labor; security; and environment.

The discussion started with some concern that the Guide could be used as a screening device to determine implementation of the Global Compact principles. The Guide needs to be presented as a way to identify priority areas to apply the UNGC principles and not as a standard. Participants underlined the need to emphasize that the guide was designed to help find solutions. It should be designed in such a way that it does not present risks as being so complex as to discourage needed investment nor, alternatively, generate overly ambitious expectations for easy ready-made solutions. All agreed that civil society needed to be strengthened as a critical element of the investment environment.

Next steps: This group suggested field testing the tools they have developed. The UNGC could identify 4-5 companies and NGOs to field test the Guide. The results could be a part of the Learning Forum, and posted to the web portal. The Guide should be publicized by the UNGC, perhaps through regional workshops. The Guide could also be publicized through chambers of commerce around the world; through the UNDP; and through industry associations and business leadership groups such as the Business Roundtable and Keidenran. The World Bank Business Partners for Development program already encourages investors to embed these kinds of assessments into their operations. Finally, the working group agreed to develop a 2-3 page summary of the business case for using this Guide.

The Working Group on Transparency

The working group on Transparency started from the position that transparency is an issue for all organizations, including companies, NGOs and international organizations. Issues raised by the working group included the kind of relevant data that might be made available; the appropriate balance between privacy and other values; and the appropriate mechanisms to evaluate information disclosed. Transparency is critical to enable organizations to decide where to invest human and financial capital, and it is vital to enhance credibility and trust. The pressure for transparency is driven by the Internet and globalization, and the associated rise in effective collective action campaigns. Some mechanisms of transparency include small-group meetings, community advisory panels, partnerships, and joint monitoring. In the financial sector, innovative practices include corporate public reporting on a variety of environmental, social, and ethical business activities; dialogue with stakeholders; interactive use of the Internet both to report information and collect responses; and disclosure of risk-assessment strategy. The working group emphasized the fact that transparency practices are best developed through a stakeholder process.

The recommendations of this group are directed at the different parties/actors. Civil society is an important constituency for accountability, and it should be involved in pressing for transparency; monitoring government-business relationships; monitoring public-sector reforms; and, at the same time, NGOs should be transparent themselves. Governments should agree to create transparency in their relationships with business, requiring disclosure of taxes, royalties and fees; have export credit and investment guarantee agencies require transparency; and reduce the discretionary powers of the central governments. The multilateral agencies should place transparency on their agendas for governments, be transparent about their own lending practices, and de-bar corrupt enterprises from their programs. Transnational corporations should commit to public disclosure of information that is not subject to confidentiality clauses; work with stakeholders to reduce opacity in contracts; develop transparency codes and standards; and work with civil society and government to build incentives for efficient and effective anti-corruption initiatives.

The discussion raised the concern that the report and recommendations did not make an explicit link between the lack of transparency and conflict. Participants agreed that the current conjuncture provides a favorable environment for advancing transparency as a means of conflict prevention. They pointed to the recent SG report on conflict prevention highlighting corruption, and the NEPAD attempt to develop African guidelines on governance issues; the initiative by Transparency International and Social Accountability International (SAI) to jointly develop Voluntary Principles based on the OECD Convention; the development of the Global Reporting Initiative; the IMF guidelines on fiscal transparency; and the BP commitment to publicly report its payments to the Angolan government. Barriers to good transparency practice identified by participants include bank secrecy laws, confidentiality clauses in contracts, and specific types of attorney-client privileges. A broad policy platform to advance transparency was presented by Transparency International as a result of the discussion of this working group. This platform provides an inspirational basis to make transparency an integral part of Global Compact activities.

Next steps: This group will continue to explore ways and means to support the ongoing process for increased transparency at the sectoral levels such as efforts in the mining and petroleum-industry sectors, multilateral development bank efforts on good governance, and the World Bank's review of the natural-resource industry. The issue of transparency will be raised at the next G8 meeting in June, and the group will consider any actions that may ensue. In general this group recommended the need to support the development of indicators and metrics for transparency, the development of both market and government incentives for transparency, guidelines about data integrity and collection, and the training of managers and government policymakers in good practice.

The Working Group on Multistakeholder Partnerships

The report of this Working Group described five multi-stakeholder partnerships submitted by members of the UN Global Compact. Each case demonstrates the value of such partnerships for conflict prevention and management and post-conflict reconstruction. These cases included a range of different partners and different structures for achieving their goals. The five cases are: the US-UK Voluntary Principles on Human Rights and Security regarding the use of public and private security forces in unstable societies; the partnership initiated by International Alert with major oil companies in Azerbaijan; the War Torn Societies project for reconstruction in Somaliland; the Counteract Program of the Irish Congress of Trade Unions in Northern Ireland addressing workplace issues; and the Mines to Vines Croatia landmine removal and re-development project of Roots of Peace. These cases show that the process of developing a partnership is itself important, and that this process is facilitated by participant-driven analysis and information gathering. The issues need to be framed in a way that resonates with current and potential partners to facilitate dialogue and support. Committed leadership by individuals or a core group, and the vision to sustain the process, can be critical to success.

The discussion pointed out other sources of information, such as UNCTAD, the World Resources Institute, and the World Bank Business Partners for Development, and recent initiatives in Sri Lanka and Nigeria. The University of Michigan School of Business might be interested in supporting research on multistakeholder partnerships, as would the Carlson School or the Kennedy School. The cases provide a model for others to follow, as in the expansion of Mines to Vines to other regions and other agricultural products, including Afghanistan and potentially Angola. The US-UK Voluntary Principles may be expanded beyond the original participants.

Next steps: This Group recommended that the cases be widely disseminated, in order to promote the idea of partnerships as a tool of conflict prevention, management and reconstruction. The group suggested publishing the cases to the web portal and using them in the Learning Forum. In addition, the cases should be re-formatted into summaries which can be distributed at upcoming events, placed in industry and venture philanthropy newsletters and in the media, and distributed via the UN system. The cases could be provided to business schools and public policy schools, and the authors should be encouraged to write them up as articles for publication in journals. The group also recommended that we develop deeper analysis to provide solid recommendations focusing on what conditions the partnership strategy is most useful, and how to implement such a strategy. This requires developing more cases, either submitted by UNGC members or drawn from the literature. The analysis should identify different types of partnership, from simple alignment of interests to joint delivery of services and pooling of resources. The analysis should also define the relevant stakeholders and their roles. It should clarify the different stages, levels, and types of conflict and how these influence which partnerships do or do not work. This could build on the work of International Alert, which is doing a survey of the literature on partnerships, and on the work of Amnesty International, which has mapped conflict around the world. The UNGC should convene a group of experts to examine the cases and develop guidelines on how and when to poursue a partnership strategy.

(Last updated on 9 May 2006)