Vice Mayor decision: 3/2012 Our reference:

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1 Vice Mayor Decision Vice Mayor decision: 3/2012 Our reference: Decision Date: May 14 th 2012 Archive Code: 180 MONITORING OF SUBGOAL 6 IN THE CITY OF OSLO PROCUREMENT STRATEGY - IMPLEMENTATION OF THE UN GLOBAL COMPACT Presentation of the case Introduction: Target 6 in the City of Oslo Procurement strategy for the period of (City Government Decision ) states that the City of Oslo will conduct procurement with an emphasis upon Social Responsibility. In proposition 192/11 the City Government has further explained how it will follow up this target. The proposition refers partly to strategic guidelines and the main measures of the procurement strategy, which state that the City of Oslo will adopt the principles of the UN Global Compact and do its utmost to operate the City of Oslo s procurement activities in line with these. Background to the case: There has been increasing focus on the importance of public entities acting in a socially responsible manner in all their roles, which is reflected in a number of laws and regulations. In recent years the City of Oslo has taken several measures and worked actively to strengthen its reputation as a socially responsible purchaser. This includes working actively to protect the environment and prevent and fight corruption and corruption-like behaviour in its procurement activities, as well as various measures to take social considerations in service and construction procurement. However, one area stands out as a remaining challenge and risk in the effort to align the City of Oslo's procurement activities with the principles of the UN Global Compact; municipal goods procurement. The reason for this may be that there is no law prohibiting or preventing Norwegian businesses from importing goods which are made in unacceptable conditions. Because production often occurs in distant countries with other social structures and norms than exist in Norway, requirements can be difficult to monitor during the production process. In addition, there has been some uncertainty around which and how social criteria should be set within the boundaries of EEA regulations, which are now increasingly considered to be clarified. City Government Decision 1023/10 and Proposition 192/11 state that the City of Oslo s goal shall be to implement procurement with an emphasis on social responsibility implies that the City of Oslo must preserve an over-all outlook on economic, environmental, social and ethical responsibilities in its procurement policy. In City Government proposition 192/11 the following was determined: The principles of the UN Global Compact on human rights, labour standards, environmental considerations and anti-corruption efforts are important in this context. It follows that companies should support and respect international human rights and central labour rights, promoting environmental responsibility and combating corruption. The principles are based on the Universal Declaration of Human Rights, the ILO core conventions, Rio Declaration of Environment and Development and the UN s Convention against Corruption. 1

2 The Global Compact is the UN's initiative for cooperation with the private sector on sustainable development. The purpose has been to create a UN anchored international business network to promote corporate social responsibility in practice. Through its grounding in the UN and its broad scope, the Global Compact is the most universal framework for corporate social responsibility. UN Global Compact Principles Human rights Principle nr. 1 Businesses should support and respect the protection of internationally recognized human rights, and Principle nr. 2 ensure that they are not complicit in human rights abuses. Standards for the workplace Principle nr. 3 Businesses should uphold the freedom of association and ensure that the right to collective bargaining is recognized in practice, Principle nr. 4 ensure that all forms of forced and compulsory labour are abolished, Principle nr. 5 ensure that child labour is in fact abolished, and Principle nr. 6 ensure that discrimination in the workplace is abolished. Environment Principle nr. 7 Principle nr. 8 Principle nr. 9 Businesses should support a precautionary approach to environmental challenges, take the initiative to promote greater environmental responsibility, and encourage the development and diffusion of environmentally friendly technologies. Fight against corruption Principle nr. 10 Businesses should work against all forms of corruption, including extortion and bribery. Work that supports the principles of the UN Global Compact Combating corruption and corruption-like behaviour: Norway has a number of laws and regulations to combat corruption, including in criminal law and legislation on public procurement. The City of Oslo is working continuously to ensure that its ethics and core values are implemented at all levels of the organization. The City of Oslo has established central and local whistleblower programs The City of Oslo is the pilot City in the project "transparency, integrity and anti-corruption work in the municipal sector", a project organized by KS and Transparency International which will work to develop best practices, systems and skills to prevent, detect and manage corruption and corruption-like situations in the municipal sector. New provisions in the City Financial Management Regulations on? municipal directors obligation to ensure systematic contract monitoring (which at a minimum includes an internal review adapted to the entities function, periodic risk assessments and regular audits) are being conducted. Preserving the environment: Norway has a number of laws and regulations that safeguard the environment. Legislation on public procurement sets explicit requirements that environmental considerations should be emphasized during procurement. 2

3 In the City Government decision about membership in Green Point Norway (GPN), decision 1107/10, the City of Oslo commits to require that suppliers of goods are members of GPN or equivalent recycling schemes for used packaging. There is a separate point for environmental provisions in the? contract form for the City of Oslo s standard contracts. Human rights and labour rights: Norway has both in the Constitution and in a number of laws and regulations provisions intended to safeguard fundamental human rights and labour rights in Norway and working life in Norway is organized on this basis. When it comes to service and construction work carried out in Norway, the procurement of these are regulated by a number of legal requirements relating to workers' rights, including regulations on wages and working conditions in public contracts of 8 February 2008 No. 112 (Changed by regulations 25 January 2010 No. 66, November 15, 2011 No. 1104, November 21, 2011 No. 1118). The City of Oslo s goods contracts - challenges and risks Goods sold in Norway are often produced in countries where labour is cheap. Today extreme overtime, hazardous work environments and wages that barely cover housing and food expenses are everyday realities for millions of workers in global trade and production. Grave forms of child labour, forced labour and critically harmful environmental activities also occur. Poor working and environmental conditions are linked to the issue of poverty and weak national legislation. The result is that goods Norwegian businesses buy and sell can be produced under conditions that are both illegal and unacceptable, which includes forced labour, child labour, health damaging labour, gross discrimination and a salary upon which it is not possible to live, in short, conditions which are upsetting to us when we hear about them. Because there is no law prohibiting or preventing Norwegian businesses from importing goods that are made under illegal and undignified conditions, businesses must address ethical trade issues themselves. There is a growing focus on ethical trading among politicians, businesses and consumers. Both in Norway and internationally, there are currently rising expectations that public and private enterprises shall safeguard social responsibility in their own supply chains. Norway has formulated these expectations in the White Paper The business world s social responsibility in a global economy (2009). Supply chain responsibility is also on the agenda of international organizations, for example through the UN Global Compact, as are efforts to operationalize social responsibility for human rights. In light of the above, I believe that an active stance linked to social / ethical requirements in the City s supply contracts is necessary and crucial to the efforts to implement the UN Global Compact in procurement. Further implementation and operationalization of the principles of the Global Compact in the City s procurement policy The International Labour Organization (ILO) is the UN's special agency for elabour issues The ILO is a coalition of representatives from national governments, unions and employers organizations. The ILO has drawn many conventions - the most important and central are referred to as the ILO core conventions. Core conventions, a total of eight, define minimum standards for working conditions in selected areas within the workplace. Self-issued declarations have been discussed as a tool to ensure that the supplier meets contractual requirements related to social responsibility. However, there is a risk that a declaration from the 3

4 supplier may not adequately ensure that the supplier is working actively and systematically to ensure that requirements relating to social responsibility in their own operations and supply chain are met. In this Vice Mayor Decision it is, therefore, decided that municipal supply contracts considered to be at risk of violations of internationally recognized human rights and ILO core conventions in the supply chain / manufacturing process, shall set contractual requirements for the contractor and its subcontractors to respect internationally recognized human rights and to comply with the ILO core conventions. Additionally, it is decided that in competitions for these goods contracts a qualification requirement shall be set for the supplier to have a quality assurance system that enables systematic monitoring of contractual claims relating to the ILO core conventions in the supply chain. In assessing this risk, the size of the current contract shall be taken into account. In the above contracts it shall also be stipulated that the supplier carries out regular controls and reports on its specific monitoring of subcontractors in the supply chain, including investigations and audits conducted. The City of Oslo shall additionally contractually regulate that the City itself also has the right to carry out inspections and audits of suppliers and their subcontractors. It must also be stated in the contracts that significant deviations in contractual requirements, including contractual monitoring / control and reporting shall be invoked as grounds for contract termination. Having requirements set for suppliers to respect internationally recognized human rights will give a signal that the values expressed through these are important to the procurer. ILO core conventions are considered, however, to cover the areas of internationally recognized human rights which can be stipulated in concrete requirements for employment conditions in the production process which are possible to control, report on specifically and follow up in practice. Specific contract requirements on the basis of risk assessments, including monitoring, control / audits and reporting are, therefore, linked to the requirements set by the ILO core conventions. To ensure that the City of Oslo s suppliers have the opportunity and /intention to follow up the contract terms relating to the ILO core conventions, the City shall set a quality assurance system qualification requirement for the supplier that enables monitoring of contractual requirements related to the ILO core conventions. This shall be documented with a description of how the contractual requirements can and will be followed up throughout the supply chain / manufacturing process. This will disqualify casual providers who do not take these responsibilities seriously and will provide fair conditions of competition for suppliers who actively work to ensure the protection of internationally recognized human / labour rights throughout their supply chain. Guidance material The Agency for Improvement and Development will prepare necessary and appropriate standard formulations to be incorporated in tender documents and contracts where there is considered to be a risk of violations of internationally recognized human rights and ILO core conventions in the supply chain / manufacturing process. The agency will also prepare guidance materials for the City's municipal entities and suppliers, to enable them to handle the demands in a resource efficient and appropriate manner. Decision Competence: In City Government Decision adopted on February 19th 2003, case 53, the City Government delegated authority to adopt administrative regulations that deal with support for the administration. According to the City Government rules the City of Oslo may delegate authority to subordinate organs when the City Council has not decided otherwise. 4

5 March 9 th 2006 the City Government adopted proposition 1042, Oslo's regulations on municipal entities responsibility to properly carry out the procurement process. In regulatory point 7.1 the City Government delegates the responsibility "to provide detailed rules for the implementation of this legislation" to the Vice Mayor in charge of procurement. The City of Oslo s regulations on municipal entities responsibility to properly carry out the procurement process point discusses the preparation of competitive conditions and contracts. Authority to carry out aforementioned implementation and operationalization of the Global Compact principles in municipal goods procurement lies with the Vice Mayor for Finance. The Vice Mayor for Finance adopts the following resolution: 1. In the City of Oslo s contracts for goods where there is considered to be a risk of violations to internationally recognized human rights and ILO core conventions in supplier chain / manufacturing process, contractual requirements shall be set for contractors and their subcontractors to respect internationally recognized human rights and actively work to ensure that ILO core conventions are adhered to in the production process / supplier chain. The contracts should also require that the supplier carries out regular controls so as to be in compliance with contractual requirements related to the ILO core conventions and report on concrete follow-up of subcontractors in the supply chain, including describing how the control, investigations and audits based on risk assessments are implemented. The City of Oslo will also have contractual provisions which give the City itself authority to conduct inspections and audits both of the main provider and with its subcontractors. It must be stated in the contract that if significant discrepancies occur which apply to compliance of the contract to the ILO core conventions, including requirements for control, follow-up and reporting, this should be invoked as a basis for termination of contract. 2. The procurement competition in the City of Oslo shall have set qualification requirements for the provider to ensure a quality assurance system that enables systematic follow-up of contractual requirements related to the ILO core conventions, including control and audits, encompassing the entire supplier chain / manufacturing process in competitions for goods contracts where there are contractual requirements to ensure compliance with ILO core conventions. The supplier shall be requested to document this by describing its quality assurance system and its efforts to ensure that the monitoring is consistent in the whole of the supply chain actively working to comply with the ILO core conventions. City Government Kristin Vinje Vice Mayor for Finance Enclosed: 1. ILO core conventions 2. Letter of Commitment to the UN Global Compact 5