5.1 Relationship between Public and Private Standards
Neither private nor public standards exist in a vacuum. Private standards have long interacted with, and are often developed in response to, public law-making and regulatory efforts. They can serve as gap-fillers or the technical foundation for existing public laws, as portents and precursors of new public law, or as pre-emptive efforts to retard or derail public regulation. For example, in terms of a technical foundation, under Europe’s ‘New Approach’, quasi-private standards form the underpinnings of much legislation in the EU.19 Under this approach, which was initiated in the 1980s, the European Commission, trying to facilitate expanded regional trade, set only the ‘essential requirements’ for a product or service to be sold throughout the market. The technical specifics were left to voluntary standards developed by private bodies, especially the European standards body CEN (Comité Européen de Normalisation or European Committee for Standardization, known by its French acronym). This approach has been used in EU directives on the energy performance of buildings, the promotion of the use of biofuels in transport, and on waste from electrical and electronic equipment. As for gap-filling, consider measurement protocols. Treaties may specify that states are to monitor environmental impacts, but they may not specify exactly how or with what measurement approaches. Private standards are often aimed at allowing producers, and thus indirectly and ultimately governments, to employ uniform, agreed-upon measurement protocols. The GHG Protocols are a case in point. In both cases, the use of private standards reduces government costs and the time required to implement public law obligations.
Based on the recognition of these realities, government agencies have for decades actively supported the integration of voluntary consensus standards into their policies and activities. In the United States, for example, reliance upon private standards in policymaking and public standard setting goes back to the late 1970s. Voluntary References(p. 521) standards were useful, according to the Office of Management and Budget, to: (1) ‘encourage federal agencies to benefit from the expertise of the private sector’; (2) ‘promote federal agency participation in such bodies to ensure creation of standards that are usable by federal agencies’; and (3) ‘reduce reliance on governmentunique standards where an existing voluntary standard would suffice.’20 In order to codify these policies, the US Congress in 1996 passed the National Technology Transfer and Advancement Act (NTTAA) (Public Law 104-13). The act requires federal agencies to use voluntary standards to the extent practicable, to report when they have developed agency-specific standards, and to consult with both domestic and international voluntary consensus standards bodies when developing and adopting government standards. When a voluntary standard fails to address, or is inconsistent with, the mission of a government agency, an exception clause in the NTTAA permits a governmental agency to elect or develop other technical standards.
Private voluntary standards can also presage future national or international regulation. Private standards suggest the recognition of a problem area, an approach to addressing it, and an acknowledgment that industry has both the desire and the capacity to implement controls and to do so in a manner that optimizes economic efficiency. At the international level, private standard-setting processes may be more effective and agile than multilateral negotiations, especially where highly technical protocols are at issue, since they tend to include more of the directly affected parties rather than generalist diplomats. On the other hand, industry may sometimes enter into or advocate standards-creating processes in hopes that a voluntary, private approach will forestall more onerous public regulation at either the national or international level.
An example from the regime for control of marine oil pollution may be instructive. It became clear in the wake of the 1967 Torrey Canyon oil spill that a regulatory regime was in the offing. Oil tanker owners negotiated a private, voluntary Tanker Owners Voluntary Agreement Concerning Liability for Oil Pollution, in part hoping to avoid stricter mandatory controls. However, the existence of a voluntary agreement did not stop the completion of a public convention, but rather showed states that the general approach was feasible and economically viable. Public international regulation of information regarding pesticides and other hazardous chemicals also followed this route from private to public.
Further evidence of this at times strained relationship between public and private standards can be found in the run-up to the 2002 World Summit on Sustainable Development (WSSD), where a coalition of groups led by Friends of the Earth International floated proposals for a multilateral treaty on corporate accountability, which would have committed states to ensuring that corporations doing business in their territory complied with certain minimum standards. While the proposal failed, References(p. 522)
in large part due to heavy lobbying by industry, the WSSD’s plan of action includes several references to corporate accountability, including the exhortation to:
The WSSD example is emblematic of the many debates surrounding both the changing nature and scope of private standards as well as their evolving role in public policy. While private standards once typically played only a technical supporting role in government policy, they are now encroaching towards becoming a centerpiece of policy instruments.
It is in this regard that the ISO’s movement towards the standardization of ‘management systems’ (first quality, then environmental) is notable because it has marked a shift in the organization’s focus from technical engineering standards to standards that have greater (and more direct) implications for society and public policy. In other words, while local communities may have little interest in the thread width of a screw used in a company’s product, they are likely to be profoundly concerned about the methods by which an organization manages its environmental risks, given the potential impact on the community’s welfare. In this sense, unlike all other ISO standards, which primarily affect their users (and customers), the ISO 14000 series standards directly affect a much larger set of stakeholders. These stakeholders often carry the burden of environmental ‘externalities’, such as the costs of resource consumption and pollution, while industry stands to enhance profits by ‘externalizing’ environmental impacts.
Likewise, because the ISO 14000 standards aim to tackle issues relating to the environmental performance of companies and sustainable development more generally, they enter realms that are of interest to regulatory authorities, policymakers, and the public. However, given the ISO’s fifty-year history of developing technical standards almost exclusively out of an interest to industry, the institution remains heavily influenced by the private sector. Thus, as discussed earlier, while the ISO’s scope of work has substantially expanded to encompass activities that may have significant societal impacts, there has not been a corresponding increase in the representation of public stakeholders. This fact has been the source of consternation to some government agencies and civil society groups who have expressed a preference for the development of public standards whenever practical and feasible.
A corollary debate has emerged regarding the appropriateness of private voluntary standards to solve pressing public policy challenges. Private voluntary standards, (p. 523) which producers must pledge to abide by and which are enforced by indirect market pressures rather than regulators, have undeniable advantages. They reduce the cost of public regulation and enforcement, shifting enforcement costs to the producers themselves, who must pay for certification or the documentation of compliance. The administration costs of private standards should be lower than for equivalent public standards. Moreover, if the leaders in an industry are conforming to private voluntary standards, regulators can use shrinking enforcement or standards development budgets to greater effect in targeting the laggards. Private standards can often be more easily arrived at and more easily revised than public agreements—contrast the less than three years it can take to develop an ISO EMS standard with the decade or more it can take for the drafting, signing, and entry into force of a treaty. In part, this contrast is due to the less than fully participatory and open nature of the private standards development process, as discussed earlier, and so it is a dubious virtue. Nonetheless, the costs of standards development are at least partially borne by the private sector, and the participation of technical personnel and those from the industries or entities to be subject to the standard may make for quicker as well as more practical and workable arrangements because the ‘real parties in interest’ are directly at the negotiating table.
Moreover, private standards, because they are often self-imposed, allow for more precise tailoring to the needs of a particular enterprise. An enterprise can choose to focus on certain aspects of its environmental management, for example, or choose to report on those issues of greatest concern to inside or outside constituencies. As such, it can, under ideal circumstances, create ‘buy-in’ throughout an organization for the environmental goals espoused rather than having these goals become routine, minimalist exercises in box checking. In theory at least, these efforts will allow for improvement beyond the threshold compliance levels specified in international or local law and will allow those enterprises with the interest and means to do so to pioneer new approaches to as yet unregulated problems.
These strengths of private standards are also their weakness. The very flexibility that businesses appreciate reduces the credibility of these standards with local community, NGO, and regulatory audiences. If enterprises can pick and choose which environmental issues to focus on, which indicators/measures to report and the like, there will be little assurance that major problems are not being swept under the rug. And if the private standards are rigorous enough in design and verification mechanisms to avoid this problem, they will also, by definition, be too rigorous to entice any but a few leading companies into choosing to implement them, despite the incentives for doing so. There is, therefore, an inherent tendency for private standards to be, overall, less stringent than public ones covering the same subject matter.
Moreover, the penalties for non-compliance with management or certification schemes, or false or misleading reporting of environmental protocols, are extremely limited. With respect to ISO standards, the ISO’s Conformity Assessment Committee (CASCO) produces international standards and guides that provide information (p. 524) and general requirements on conformity assessment procedures—that is, deciding whether an organization has successfully implemented the standard. However, it is national accreditation bodies that set the criteria for certifiers. The International Accreditation Forum (IAF) is a world association of national conformity assessment accreditation bodies and other organizations interested in conformity assessment, mainly to ISO 9000 and ISO 14001. Its primary function is to encourage the development of a single worldwide system of mutual recognition of conformity assessment certificates, with an end goal of eliminating non-tariff barriers to trade. Both the IAF and CASCO have developed mutual recognition and other protocols. Nonetheless, harmonization of conformity assessment to private standards generally is in its infancy, as are attempts to set up worldwide standards for the qualification of certifiers, accreditation bodies, and independent standards auditors. It will take some time for these efforts to actually result in credible conformity assessment protocols that are accepted across borders, especially given the pressures on developing country certifiers and accreditation bodies to certify large numbers of companies.
Theoretically, companies can lose their ISO certification, and participants in other private schemes may be ejected from the schemes for continuing non-conformity with the standard. This happens rarely though and only after extensive negative publicity. The most common compliance assurance schemes involve private auditing and accounting firms, but several studies have shown that such audits are often incomplete and biased towards management. And with a few exceptions, such as the revamped Responsible Care programme, most industry standards do not even require external verification. A few attempts at stakeholder/labour/NGO monitoring have taken place in the labour standards context, but they have not become a widely accepted model. One complaint, therefore, is that private standards are for the most part toothless and cannot differentiate good players from bad. Related to this criticism is the more general complaint that all voluntary codes of conduct are enforced only by self-declaration and self-certification, with sporadic NGO denunciations of particularly egregious abuses being the only check.
The tension between stringency and widespread adoption has been a problem given the non-mandatory nature of private standards. With the exception of ‘green’ companies that stake their reputation on environmental probity, and large ‘blue’ companies subject to consumer scrutiny and sensitive to small changes in market share, the uptake of voluntary standards has been limited. Fewer than 25 per cent of large multinational corporations provide public information on their environmental performance, and this number has not grown significantly.22 While most major industrial players now have some version of an EMS in place, very few provide public information derived from the EMS or pursue third party certification. (p. 525) Environmental labelling, while growing, still covers a marginal percentage of goods sold. To truly affect environmental outcomes on a global scale, voluntary private standards are unlikely to be enough.
5.2 Revitalized Push to Create Public Standards
The combination of a lack of oversight, inadequate enforcement mechanisms, and the spotty uptake of private standards, in the midst of increasing perceptions that private enterprises play a key role in sustainable (and unsustainable) development and that states by themselves have insufficient resources to tackle emerging challenges, has led to new efforts to move standard setting for enterprise behaviour into the public realm. These efforts take several forms. First, there is the attempt to open up private/public bodies such as ISO to greater transparency and inclusiveness by providing a more prominent role for civil society organizations, small businesses, and other underrepresented sectors. Second, efforts continue to strengthen and augment existing public voluntary standards on corporate behaviour, including the OECD Guidelines for Multinational Enterprises, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the UN Secretary General’s Global Compact.
A third effort involves moving beyond voluntary principles, codes of conduct, and private standards towards some form of mandatory international supervision of private sector commitments. A step in this direction might involve international guidelines accompanied by a reporting and/or monitoring mechanism. One such effort includes the UN Commission on Human Rights’s efforts to prepare Norms and Guidelines on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. A draft version of these norms was approved by the Sub-Commission on the Promotion and Protection of Human Rights in 2003, but it has been prevented by some states and corporate interests from being more formally adopted by the UN to date. The norms include obligations on private corporations to respect national and international law on the protection of the environment, to observe the precautionary principle, and to generally conduct their activities in a manner contributing to sustainable development. The norms create a non-binding guideline recommending that business enterprises internally implement them, use them in their supply chain policies, and report on their progress. In its ongoing effort to advance the norms, the Office of the High Commissioner for Human Rights released a report linking corporate responsibilities to intergovernmental agreements in early 2005. Many of the participants in the UN process, especially NGOs, envision eventually some kind of monitoring and/or complaint system through the UN as well as through states and companies themselves, although the contours of such a system are as yet unclear. In part, the problem References(p. 526) stems from the fact that, aside from general exhortations to respect human rights and a limited number of international crimes, such as war crimes, crimes against humanity, and genocide, international law does not impose obligations directly upon private actors.23