OECD review of state-owned enterprises needs to aim higher

An OECD review of its Guidelines on Corporate Governance of State-Owned enterprises (SOEs) set up this year to “ensure that SOEs contribute to sustainability, and economic security and resilience” should aim higher on the sustainability of our planet, the economic security of working people and the resilience of global supply chains warns TUAC.

The global market economy is surprisingly heavily dependent on the state, not only on services such as education and infrastructure, but also in funding and running enterprises. By the end of 2022, 11% of global market capitalisation of listed companies were held by the public sector. The share of state-owned enterprises in the top 500 global companies has increased three-fold over the last two decades.

But despite an OECD view of SOEs being central to the low carbon transition, and the guidelines stating that “SOEs should develop and encourage meaningful stakeholder engagement in advancing sustainability and ensuring a just transition”, social and environmental sustainability appears to be given less importance in the revisions of the guidelines by the OECD than the interests of shareholders.

TUAC argues that states
• ought to be able to use their public investments in enterprises to achieve objectives in the public interest such as fair pay and decent work, gender and racial equality, climate protection and public health.
• need to promote implementation of OECD standards, including on responsible business conduct, and of ILO conventions – through their investments in SOEs.

“While the review does require SOEs to address sustainability, it risks being a missed opportunity” warned Veronica Nilsson, General Secretary of TUAC.

“SOEs need to be model enterprises and have the highest standards of sustainability – including workplace health and safety, wages and benefits – and use their market power to promote social dialogue and engage in collective bargaining and climate action, regardless of what non-SOEs are doing.

“The sustainability chapter should be about promoting social and environmental sustainability, not focusing on shareholders’ rights.”

‘The SOE guidelines need to clearly state that SOEs should apply the OECD’s multinational enterprise guidelines for responsible business conduct throughout their supply chain.”