Policy Innovations Digital Magazine (2006-2016): Commentary: Multi-stakeholder Governance Seeks to Dislodge Multilateralism

Nov 15, 2013

The World Economic Forum (WEF) convened an international expert group in 2009–2010 to formulate a new system of global governance, one designed to better manage the uncertainties in multilateralism and globalization that were exposed by the global financial crisis. One of the innovative concepts proposed by WEF's aptly named Global Redesign Initiative (GRI) project is a new system of multi-stakeholder governance as a partial replacement for intergovernmental decision-making.

WEF created 40 Global Agenda Councils and industry-sector bodies to craft a range of theme-specific governance proposals for its GRI. Each Global Agenda Council (GAC) consisted of a mix of corporate executives, academics, government officials, and civil society leaders. The structure of the GRI final report centers around their thematic proposals, plus a series of policy essays and organizing principles that lay out the WEF framework for multi-stakeholder governance.

In the intergovernmental arena, multi-stakeholder consultations have gained wide support as an umbrella framework for bringing together independent constituencies to develop common approaches to contemporary global challenges. The outcomes of these multi-stakeholder processes have provided the basis for joint advocacy at official United Nations events. In Rio (1992), for example, Agenda 21 recognized nine discrete "non-state" groups which were able to engage officially with governments at Rio and subsequently at the Commission on Sustainable Development.

Outside the UN system, the largest multi-stakeholder consultations have been hosted by the World Economic Forum. For over three decades, WEF has hosted an annual series of elite global and regional multi-stakeholder events involving leaders from the corporate, government, entertainment, religious, civil society, and academic worlds.

By 2007, the Helsinki Process, a government-led multi-stakeholder study on global governance, could summarize the diversity of purposes of multi-stakeholder activities in the following manner:

Numerous past initiatives stand to demonstrate that multi-stakeholder cooperation—bringing together representatives of government, civil society, the private sector, religious organisations, academia and media—may take a range of different forms and contribute to global governance and problem-solving in various ways: [they can] help to broaden discussion and identify global public needs... introduce the element of global issue interest into intergovernmental negotiations, alongside the traditional national interest... help to overcome stalemate in highly conflict-ridden policy arenas... and gather and disseminate knowledge by bringing together actors with different views on and approaches to issues.

What WEF proposes is to take these previous attempts at multi-stakeholder engagement and elevate them into a "multi-stakeholder governance" system. WEF is not alone in this effort. At various UN bodies there have been recommendations for institutionalizing global public-private partnerships. There are, however, sharp differences between multi-stakeholder consultation and multi-stakeholder governance, some of which are often blurred by loose use of the terms multi-stakeholder and partnership.

WEF's View of Stakeholders and Multi-stakeholderism

For WEF, the multi-stakeholder concept is centered on the corporation, with stakeholders being constituents associated with the corporation. As WEF founder Klaus Schwab outlined in 1971 and then reiterated in the organization's 40th anniversary history book (2010), the "management of the modern enterprise must serve all stakeholders (die Interessenten), acting as their trustee charged with achieving the long-term sustained growth and prosperity of the company." The concept is illustrated with a graphic depicting the company in the center with ovals from top to bottom that read "shareholders (owners)," "creditors," "customers," "national economy," "government and society," "suppliers," and "collaborators."

The three crucial elements of what WEF means by multi-stakeholder are embedded here. First, that multi-stakeholder structures do not mean equal roles for all stakeholders; second, that the corporation is at the center of the process; and third, that the list of WEF's multi-stakeholders is principally those with commercial ties to the company: customers, creditors, suppliers, collaborators, owners, and national economies. All the rest of the potential stakeholders are grouped together as "government and society."

The existing multilateral system of nation-states is fundamentally different than a framework that puts the multinational firm at the center of the power. Under WEF's proposal, the selection of key multinational executives for a multi-stakeholder governance arrangement would be done either by the initiating organization (in the GRI report, typically WEF is cited as the convening organization) or by self-selection of leading firms interested in managing a particular global challenge with other constituents.

However, there is a tension in the report around the concept of multilateralism. The introductory essays welcome a better multilateral governance system and the creation of a new multi-stakeholder governance system. The essays call for "extending intergovernmental norms and legal frameworks" and for "reinforcing the capacity of intergovernmental institutions."

Yet the only specific examples cited in the body of the report are to create a global systemic financial risk watchdog and to change the IMF Articles of Agreement on expanding international liquidity. With the sole exception of proposals on marine matters, the GRI provides no concrete examples of extending intergovernmental norms and standards in any of the social, environmental, human rights, or labor fields. The only references to strengthening the capacity of institutions involve the World Bank, IMF, and ILO. The report contains no specific proposals to change the mandate or to enhance the finances of any major UN body.

But the balance of this tension is clearly resolved in their major strategy message:

Redefine the international system as constituting a wider, multifaceted system of global cooperation in which intergovernmental legal frameworks and institutions are embedded as a core, but not the sole and sometimes not the most crucial, component.

Multi-stakeholder Governance in Practice

Several examples of practical multi-stakeholder governance exist already: the Marine Stewardship Council, the Forest Stewardship Council, the Global Fund to Fight AIDS, Tuberculosis and Malaria, the Kimberley Process, and the Secretary-General's new UN Partnership Facility. Each of these sector-focused organizations has a different configuration of corporations, governments, and civil society participants; each has had a different procedure to set its terms of reference; each has a different set of rules for making decisions and adopting policy statements; and each has a different level of success.

Here the definition of success is obviously crucial. The Kimberley Process has "solved" its original problem but is sharply split internally; the Global Fund has generated considerable new capital for global health but has also threatened the legitimacy of the World Health Organization; Forest Stewardship Council has set standards for consumer purchases and transformed a significant portion of the global timber market; and the Secretary-General's Partnership Facility is explicitly aligned with the Millennium Development Goals without, however, allowing any explicit supervisory intergovernmental oversight.

WEF's proposal is to elevate these practical experiments, along with their Davos multi-stakeholder model, into a new explicit form of global governance. Multi-stakeholder groups, public-private partnerships, or coalitions of the willing and able, as they are variously termed in the GRI report, would be expected to take the lead in addressing unsolved global issues. There is no need to wait for the intergovernmental system to gain universal consensus to act: Those multinational enterprises, countries, civil society bodies, academic institutions, and parts of the UN staff that share a common approach should take it upon themselves to act. The official intergovernmental system can defer to these joint partnerships, provide de facto recognition to a multi-stakeholder process, or provide de jure legality after the fact to the outcomes of a given public-private partnership.

WEF's approach therefore embraces efficient action for those who are ready to act, while marginalizing in the process the government-led multilateral system. What is left unsaid is that leaving governance to self-selected and potentially self-interested elite bodies risks undermining public acceptance and democracy.

As the Global Redesign Initiative project directors explain:

While experimentation with individual public-private and multistakeholder partnerships has flourished over the past decade, including in many international organizations, they continue to play an incremental, even experimental, role in the international system rather than a systematic one. For this to change, policy-making processes and institutional structures themselves will need to be adapted and perhaps even fundamentally repositioned with this in mind.

Were WEF's proposals for multi-stakeholder governance to be become widely accepted, there are at least four crucial new elements which would be added to global governance. The new elements are:

  1. defining a global issue, heavily influenced by the needs of multinational corporations, rather than governments;
  2. introducing a selection system of participants for a given multi-stakeholder governance arrangement without public review;
  3. creating decision-making processes within particular multi-stakeholder groupings without protections for minority views; and
  4. undermining the nature of the commitment to the outcome of a global decision-making system.

Control over the Definition of Issues

Framing a global issue is the first step in a political process. Governments often spend considerable time negotiating the wording used to frame an issue. This sometimes ends up in a lengthy resolution reflecting compromises between diverse viewpoints. Other times this ends up with an ambiguous phrase that keeps complex issues open for future negotiations. The reason for these outcomes is that control of over the definition of a problem is the first step in both gaining attention for an issue and in solving it, according to the interests of the participants.

Of course any group can define an issue in its own frame of reference. What WEF proposes is that when important global issues appear on the international political horizon, a multi-stakeholder group can be quickly created to take the lead in defining the issue, taking that role away from the multilateral process. They may, if the leading MNCs wish, scope the issue very narrowly, or they may, from the outset, frame an issue in a way such that a market-based solution is likely to be the "best" outcome.

For example, Global Witness, a civil society organization, defined the sale of diamonds to fund regional wars in Africa as "blood diamonds," while the multi-stakeholder process led by the diamond industry (the Kimberley Process) changed this into the more neutral "conflict diamonds." Similarly, industry-led groups have redefined sustainable development with its balance between its economic, environmental, and social pillars as "eco-efficiency," a better return on using natural resources.

However a specific global agenda item may get defined, the WEF multi-stakeholder proposal marginalizes the engagement of governmental representatives and heightens engagement of firms looking to solve a problem in a way that benefits the global market.

Selection and Exclusion of Participants

In multilateralism the nation-state is the central and key actor. Only governments can vote, only governments can designate representatives to attend official meetings, and only governments can submit conventions to their parliaments for confirmation. In a multi-stakeholder arrangement, the designation of key actors and of acceptable representatives becomes ambiguous and heavily influenced by the internal pre-process for that particular group. This selection system has no parallel in multilateralism where governments are the only formal decision-making agents.

All categories of actors in a multi-stakeholder governance system are not necessarily created equal. State, non-state, and corporate actors have asymmetric capacities to finance their participation in multi-stakeholder groups. The various actors also vie for the leadership role. WEF's governance proposals therefore mean moving from a system where non-state actors influence the state-centric multilateral system, to one where the state is one player among many and not necessarily the dominant one.

In multilateralism, there are clear rules for how a government designates an individual as an ambassador or representative at an international conference. In a multi-stakeholder governance arrangement, representatives are seldom, if ever, designated by their corporate board, NGO board of directors, or university trustees to act on behalf of that institution.

Decision-making Processes and the Rule of Law

In the UN system there are well developed rules on voting procedure, on how smaller or weaker nations can engage on issues with a sense of equity, and even on resolving procedural disputes. These rules grew out of 300 years of evolving international law on the responsibilities, obligations, and liabilities of governments.

A multi-stakeholder system disrupts this history. What happens to the responsibilities of states when a multi-stakeholder group takes over on a specific global issue? Do MNCs and civil society assume some obligations and liabilities, traditionally designated to nation-states, when they start to participate in global governance?

Most multi-stakeholder governance groups work with a high degree of internal confidentiality and vagueness about their decision-making rules. For the Global Agenda Councils, the agendas are not public, let alone the outcomes. They don't explain how their conclusions were reached, except to say that the final report does not necessarily reflect the views of all members of that GAC.

There are no recognized standards governing the internal decision-making process of multi-stakeholder groups or ones that clarify the obligations, responsibilities, and liabilities of these new "governors."

Implementation of Outcomes

In multilateralism, the outcome of a negotiation generally includes a set of instructions to an international body to implement the agreement, plus a funding mechanism to provide the resources to carry out the agreement, or a set of commitments by governments that they will take independent actions to implement it. In most cases, this is done through a clear set of procedures to report back to the capital on the outcome of agreement, arrange funding from national budgets, and, where necessary, seek endorsement by a parliamentary process.

In multi-stakeholder governance, the pressing issue is that there is no obligation for any of the participants to commit resources to implement the outcome of a given undertaking. This opt-in and opt-out approach is the essential component of WEF's global governance approach.

The test of any international program is Does it work? Does it act to alleviate poverty? Does it protect a species or ecosystem? Does it make citizens more secure? Does it ban a harmful substance? GRI asserts that a multi-stakeholder governance project will make significant contributions to international efficiency for two crucial reasons. It can act faster, and it can bring to global political life the efficient management tools of participating multinational corporations. The claim that corporate management experience can be transferred to the global public arena in a meaningful manner has not yet been documented.

Concluding Observations

The World Economic Forum proposals for multi-stakeholder governance are a timely reminder that we need to take a new look at the current rules of engagement in international affairs.

After World War II, the most powerful governments created the Security Council with special seats for themselves, and the Bretton Woods Institutions with special voting powers for themselves. A few years later, these governments also agreed to the Universal Declaration on Human Rights, putting in place principles to constrain how governments can treat their own citizens, and expressing what citizens can appropriately expect from governments.

As a result of the financial crises, an association led by today's powerful actors is recommending the next system of global governance. As with the post-WWII situation, today's powerful actors, multinational corporations, are recommending how to use their power to establish themselves in crucial governance roles. At the same time, this process will not be effective unless a new Universal Set of Sustainable Development Rules is in place to constrain their adverse behavior in the global marketplace and as it affects individual communities and people.

Governments, which are being bypassed by this WEF governance proposal, and civil society organizations and other non-state constituency groups, who are partially being invited in to the new governance system, can play an essential role in writing the rules of engagement with multinational corporations and the rules for constraining the worst effects of globalization.

Harris Gleckman is senior fellow at the Center for Governance and Sustainability at UMass Boston and an author of the online Readers' Guide to the Global Redesign Initiative.

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