Multistakeholderism: a new way for corporations and their new partners to try to govern the world

Guest article by Harris Gleckman

Transnational corporations (TNCs) are and always have been crucial actors in global governance. Much of the international economic and political space is governed by large firms that dominate a given sector or geographic region. Multinational enterprises make an enormous number of decisions that affect the distribution of vital needs, the payments for labour, the products manufactured and the types of technologies used. They also control a massive amount of the world’s financial assets. In this sense, TNCs have de facto control over the daily needs of billions of people.

At the national level, governments function as an institutional mediator between the business community and the population. Governments adopt regulations and provide courts to strike a societal balance between market-driven practices and public values and expectations. Since the earliest multinationals appeared on the political horizon, TNCs have operated in the international market without a state-like constraining force. At the formal intergovernmental level, TNCs do not recognise an obligation to follow United Nations (UN) systems, resolutions, or declarations. If TNCs are just passive non-participants, an intergovernmental declaration may be just words on a piece of paper. TNCs may well then have the ‘final vote’ on an intergovernmental outcome in the sense that they can obstruct - actively or passively - its implementation. The implications for global governance and democratic decision-making are therefore troubling.

Some TNCs and elite corporate bodies such as the World Economic Forum have come to recognise that there are global threats so great that they cannot be managed by TNCs or by globalisation’s internal processes alone. The executives of these TNCs recognise that they need to take dramatic steps to stabilise the globalisation project, particularly after the 2008/2009 global recession. In addition, other executives and international business associations recognise that there an international challenges, such as planet-wide ecological shifts, which need a degree of amelioration for the long-term survival of the capitalist market system. For some other corporate leaders, a new system of global governance is necessary because without some enhanced public engagement with globalisation, there is a likelihood that market-based solutions may become delegitimised over time. In their view TNCs need to join with other actors to develop a quasi-state intervention to attempt to manage these crises. One example of this trend are the 40 to 60 work groups organised by the World Economic Forum’s Global Future Councils Network (GAFN). The GAFN brings together 20 to 30 key individuals from the corporate, academic, government and civil society spheres to formulate global policy directions for cutting-edge global crises. A second example of this interest in a quasi-state role are the UN system-supported bodies, such as Investors for Climate Change, which gives TNC executives an opportunity to convey their understanding of global and regional problems directly to UN ambassadors and senior UN system officials.

The multistakeholder governance structure, such as those used by WEF’s GAFN and the UN Secretary-General’s Global Compact offers a new way to institutionalise international roles for TNCs in conjunction with selected governments, civil society, academia and other social actors. A multistakeholder governance (MSG) project typically combines a TNC or two with a civil society organisation (CSO) or two, a government or two and other individuals to tackle an un-governed task. These are not just any un-governed task, but one whose solution has some beneficial function for the founding organisation. These initiatives are not undertaken by all TNCs. Even those TNCs or divisions of TNCs that have started down this path have insisted that all these new interventions are voluntary. Individual TNCs and other potential global governors in a multistakeholder group can thus step away from a particular multistakeholder project or distance themselves from multistakeholderism as a whole, whenever they feel that these activities are not to their liking.

On the official intergovernmental side, the UN’s member governments have largely stepped back from even trying to govern globalisation. They have instead invited TNCs and multistakeholder groups to implement international policy objectives such as the Paris Agreement on climate change and the Sustainable Development Goals.

Types of multistakeholder governance groups

Multistakeholderism as a form of global governance has a number of different structures. MSG groups tend to fall into three different categories depending on the governance gaps they are designed to address and their self-defined scope of activity.

Policy-oriented multistakeholder governance groups

The first of these functional categories are MSG structures with a founding premise to address an international policy issue. These policy-oriented MSG groups tend to be created from the conjuncture of two factors: an unwillingness of governments or an intergovernmental organisation to tackle a policy matter and a strong self-interest of major global actors that some policy intervention is absolutely necessary. Consequently, most policy-oriented MSG processes, such as the Kimberley Process for managing blood diamonds, are intentionally convened independent of the multilateral system. Some of these policy-oriented MSG groups may establish a pro forma connection with the multilateral system. After a policy-oriented group establishes its direction in a specific area, associated governments may bring these initiatives to the intergovernmental system for its endorsement or acceptance. But any multistakeholder group that involves TNCs and other non-state actors and that takes the lead in addressing complex global policy issues weakens the perceived effectiveness of the multilateralism system.

Product and process-oriented standard-setting multistakeholder groups

The second functional category of MSG structures are organisations set up to create criteria for products and processes in international trade and to provide a platform where potentially conflicting views between commercial participants in a given market can be reconciled. The proliferation of these non-state standard-setting bodies has been so extensive that they now have their own specialised trade association, the International Social and Environmental Accreditation and Labelling Alliance (ISEAL), to support their certification, verification and internal organisational requirements.

A sub-category of standard-setting MSG groups are those, like the internet governance system, which have the primary purpose of convening the leading firms in a given market for new and high-impact technologies in order to build a consensus on how these new technologies can function across national boundaries without the central engagement of governments. This sub-category also provides a platform to reconcile the views of social justice CSOs and academic and government bodies on the best route forward. While these independent standard-setting multistakeholder bodies engage some TNCs, exporting countries and large domestic purchasers in a market, they face challenges from other powerful actors, including other TNCs, other exporting countries and other large purchasers, who are quite comfortable maintaining the business-as-usual market system with its harmful environmental, social and economic aspects. In other words, multistakeholder standard-setting groups have no effective sanctioning power over the parts of their market that elect not to follow the lead of the voluntary standard-setting body.

Project-oriented multistakeholder groups

The third functional category, into which, most likely, the largest number of independent MSG groups fall, are those that take on a specific global or local task that reasonably one might have expected, say 25 years ago, to have been considered a responsibility of a government or the multilateral system. At the international level, these project-oriented groups fill a governance implementation gap created by the multilateral system itself. This governance gap may be self-declared, such as when the UN system acknowledges that it lacks the managerial and financial capacity to implement its own declared goals. At the national level these project-oriented multistakeholder groups are usually called public-private partnerships (PPP). PPPs provide TNCs, which perceive a market opportunity where there is an under-met public need and the relevant government authority either does not have the capacity to act or does not perceive that it has the capacity, with a mechanism to act as a local governor.

A new governance role: the convener

In a multilateral world, the role of gatekeeper and guard of legitimacy in global affairs is performed by the nation-state, working with other nation-states directly or collectively through the UN system. In a multistakeholder world, the convener of an MSG group takes on this gatekeeping function.

The convener provides the leadership in choosing the appropriate collection of multistakeholder categories that are required for a new group. The convener is almost certainly going to ensure that the group contains actors that, in the mind of the convener, are most likely to be able to make changes happen. Conveners of MSGs can select a limited number of categories for all other potential actors. They can aggregate categories of a ‘similar’ type. A CSO category, for example, could be said to represent academics, media and religious bodies as well as the more obvious types of CSO or social movement. Or they can disaggregate a category, such as the CSO category, into a number of sub-categories, such as women-focused CSOs and environment-focused CSOs. The convenor will have a lead role in designating the individuals and organisations assigned to ‘represent’ categories of stakeholders, and are more likely to designate individuals and organisations that are supportive of the convener’s preference regarding the expected outcome of the group. This means that categories of stakeholders that are not seen by the sponsors as potentially cooperative - particularly those groups that will be negatively affected by the likely outcome of an MSG process - are generally excluded from the start of the process. As the boundaries between stakeholder categories and the number of different stakeholder categories in a given stakeholder group are not governed by informal or formal standards, the convener’s choice defines and controls the process from the very beginning. The largely unrestrained power of the convener means that it is difficult to sustain a claim to democratic legitimacy for multistakeholderism in global governance.

Without a UN system-style rulebook or a governing convention, there is no mechanism to ensure that the convener’s selection of stakeholder members reflects geographic balance, gender balance, worker inclusion, the communities most likely to be affected by the actions of the group, or the participation of organisations and individuals at the bottom end of the global social structure. Designating a person to participate in an MSG group from one of the under-represented communities does not solve the challenge. Having one token woman or one member of the global southern community among 12 men or an equal number of international experts can easily mean that, while there is a minimum presence, that voice is dwarfed by the unbalanced weight of an entire MSG group.

The flexibility in the coverage of a category can lead to internal confusions inside a given MSG group and significant misconceptions outside the group. Internally, some stakeholders may look at others and assume they cover a wider range of communities and stakeholders than is perceived by the actual participant, who may have a very different understanding about their own role in the process. Individuals and organisations outside the MSG group may look at the legitimacy of the undertaking with a high degree of suspicion if they don’t see what they take to be their constituent category being explicitly engaged in the process. This winnowing process, while it has some clear organisational and efficiency benefits, may well open the MSG group to critiques about fairness and legitimacy, hampering its own consensus-building process.

Transition process from multilateralism to multistakeholderism

Even for the proponents of multistakeholderism, the transition from the nation-state as the actor in international affairs to ‘stakeholders’ as global governors has been an uneven process. One major element of the transition for these new claimants as global leaders is learning to work with a heterogeneous group of organisations, some or which were, or still are, institutional opponents. The differences in types of power external to an MSG group create a fundamental asymmetry of power within the group. Operational challenges for multistakeholderism include those of how to trust other participants, how to develop shared goals, how to manage internal power imbalances and how to accommodate diverse institutional working styles. The shift from viewing other actors in an institutionally competitive light to recognition of a potential collaborative partnership is a difficult endeavour and a challenge undertaken only by selected members of each competitive stakeholder group.

Some participants have asserted that there is no change in their policy-making activities compared to practices under multilateralism, as they are simply continuing in their role as advocates, knowledge experts, or lobbyists, only now working directly with the relevant powerful actors without the interference of governments. Other participants see themselves as engaged in more ‘off-the-record’ brainstorming sessions without consciously recognising the de facto global governance functions their encounters represent. While most members of each stakeholder category remain on the sidelines, a minority of stakeholders in each are becoming governance explorers. They are looking for ways that their institutionally competitive organisations might find the appropriate political-economic space to cooperate on issues that they perceive as under-managed or un-attended to by traditional nation-states and the UN system. The principle of volunteerism in multistakeholder governance also allows some governance explorers to drop out of a given process and move back into the broader community of organisations.

In this sense, proponents of multistakeholderism are hoping that these governance experiments, in conjunction with various theoretical writings,^[1] can move multistakeholderism into being the next form of global governance, all without a serious democratic reflection on this form of global governance. Various counter-forces and institutions are examining ways to develop a more democratic successor to multilateralism.^[2]  

Steps toward a proper evaluation of multistakeholderism

CSOs can engage directly in a proper evaluation of multistakeholderism is at least four ways.

First, at the national level, parliaments and national administrations sometimes seek input from a range of constituencies via public hearings and town hall meetings before they take official actions. These engagements with diverse constituencies have now become commonplace at the international level. However rather than being called what they are, ‘multi-constituency consultations’, they have been called ‘multistakeholder consultations’, giving historical and linguistic acceptance to ‘stakeholder’ as an appropriate category in global governance. The civil society community can avoid adding false legitimacy to multistakeholderism by using the more accurate term of ‘multi-constituency’ to describe these consultations and can insist that UN system bodies do likewise.

Second, the current process of multi-constituency consultation is a mixture of the very restricted old UN Economic and Social Council (ECOSOC) rules and a variety of rules adopted in an ad hoc fashion by a different of intergovernmental bodies. The rules for these consultations and the designation of organisations that can speak on behalf of different social groups, different environmental concerns and different economic positions should be formally reviewed. Some of the core rules for multilateralism are codified in Vienna conventions that establish key principles of international cooperation. The way to institutionalise and improve the legitimacy of engagement by non-commercial bodies across all of the UN system would be have a new Vienna Convention on Rights and Obligations for Multi-Constituency Participation in Global Governance.

Third, the regular budget of the UN system is funded by a complicated formula premised on the ability of countries to pay. While the principle is sound, the approach assumes that governments have all the money for international undertakings and ignores that globalisation has changed where money is. It also ignores the fact that project-specific and tied grants to the UN system by governments, TNCs and foundations have displaced core mandatory government funding as the lead component in UN system resources. Part of the allure of multistakeholderism is the presumption that TNCs will increase their donations to international affairs in part by becoming significant donors to specific MSG projects. But the voluntary nature of multistakeholder group participation and the significant underfunding of global needs and institutions require a new funding system. CSOs and others should endeavour to design a new mandatory global taxation formula covering all flows of international capital to meet global common needs and reduce global inequities.

Fourth, civil society participation is crucial for multistakeholderism to work. When a convenor or a proponent of a MSG process approaches a CSO to join or approve an MSG group to solve a global or national problem, the CSO should not only examine the potential effectiveness of the group but also the appropriateness of the governance of the group itself. Box 1 has a number of questions that could form the basis for a due diligence review of any MSG process.

The combination of these specific changes could put multilateralism back in the forefront of global governance. What is relevant is that there are a good number of institutional structural changes that could radically transform multilateralism, were nation-states collectively willing to replace post-Second World War-style multilateralism with a framework that could address a greater proportion of today’s risks and challenges.

Changed role of private sector actors in global governance

For most TNCs, the dominant reality in a multistakeholder world remains that the UN system is marginal to their business interests. TNCs will continue to compete with other TNCs to exert global control over access to natural resources, markets, technologies, workers and the flow of capital. Multistakeholderism provides a new way to create global markets for products directed at environmentally and socially concerned consumers. It is also a new way to develop stable global markets for high-impact technologies without obligatory public hearings and government oversight. And it introduces a new ‘stakeholder’-based governance system with asymmetric power relations between the various designated ‘stakeholders’.

The democratic governance challenge from multistakeholderism has multiple dimensions. In national democratic systems, businesses are not formally inside the parliamentary system or the executive administration. Under multistakeholderism, TNCs and their partner organisations are claiming the right to be internal actors in global governance with a full seat at the table. Under multilateralism, the nation-state has a wide of legal responsibilities, obligations and liabilities. Over time, TNCs and their partners are likely to need to accommodate themselves to public claims of responsibility and liabilities for any perceived failure from any PPP or MSG process in which they participate.

As these are the relatively early days for multistakeholder governance, there remain plenty of opportunities to challenge the momentum toward multistakeholderism as a replacement for multilateralism, and to push for more democratic forms of multi-constituency governance.

About the author

Harris Gleckman is a Senior Fellow, Center for Governance and Sustainability, University of Massachusetts, Boston and Director, Benchmark Environmental Consulting, USA. Dr Gleckman has also been a participant for over 20 years in international economic and environmental negotiations and a consultant to intergovernmental organizations, transnational corporations, and CSOs. He is the former Chief of the New York Office of the UN Conference on Trade and Development (UNCTAD), Project Planning Officer for the first UN Financing for Development Conference and Chief of the Environmental Unit of the UN Centre on Transnational Corporations. He can be reached at . His contribution to the CIVICUS reimagining democracy report is based on research for his new book, ‘Multistakeholder Governance and Democracy: A Global Challenge’, to be published by Routledge in October 2018.

See also our 2017 report on civil society and the private sector