At its core, a society based on the rule of law is one in which all actors including governments, business and individuals are equally accountable to clear and predictable laws. While the Auditor-General's report on Senate spending highlights the point at home, there are daily reminders around the globe – Eastern Europe, the Middle East, the South China Sea, Bangladesh, U.S. law enforcement, the FIFA boardroom – that significant work still needs to be done.
It is globally acknowledged that the rule of law is essential for sustainable long-term economic growth. Where the rule of law is weak, it is harder for businesses to function. Where it is strong, it increases the security of contracts, protects intellectual property, lowers levels of corruption and allows for timely, fair and transparent dispute resolution.
But efforts to strengthen and uphold the rule of law are usually left to lawyers and politicians. It can be a hard sell to engage the business world. It is easy to see the tangible cost of the rule of law on budget lines. It's harder to see the safe habitat for growth and profit the rule of law creates. It is also easy to take it for granted or see the rule of law as red tape getting in the way of doing things.
This is dangerous. Take a look at the evidence. Economists have found time and again that the better the rule of law, the richer the nation. In the 1990s, one influential study came up with the "300 per cent dividend," demonstrating that over time, a country's income per head rises by that much if it improves its rule-of-law score by one standard deviation.
Not all research show such dramatic impacts, but almost all do show that rule-of-law improvements help growth, while enhancing the social environment for individuals and for society in their own right.
Despite the evidence that good law means good business, actions in the corporate world often put law in the cost centre, not the profit centre. This is both a missed opportunity for businesses and unhelpful for society. There are many actions business can take to support the rule of law.
To address this, the United Nations Global Compact, which sets out principles on human rights, labour rights, anti-corruption and sustainability for enlightened global business, is developing a Business for the Rule of Law framework to be launched this week, setting out the business case for the corporate world to support and respect the rule of law.
The UN has collected more than 75 examples (and counting) of how business, large and small, is already taking action to support the rule of law. These range from a U.S. conglomerate making grants to non-governmental organizations to improve regulatory transparency in Vietnam to an international clothing brand lobbying the government of Bangladesh to raise the minimum wage.
In a developed market like Canada, business support for the rule of law means something different from what it means in an emerging market. It means not taking our developed legal system at home for granted. It means thinking about ways to clearly demonstrate to private-sector enterprise that strengthening the rule of law will add long-term value, wherever they do business.
Initiatives such as the UN's Global Compact aim to do just that, by making the business case, not just the social case. Our extractive and engineering industries are on the front line.
That means thinking globally. In an increasingly hyper-connected world, our multinationals face complex challenges, particularly in their supply chains, often created by weak rule of law in the places they do business.
Individuals and organizations throughout companies' supply chains are most likely to be vulnerable due to weak rule of law. This risk is contagious. It contaminates companies' abilities to meet their corporate responsibilities and commitments to universal principles.
Support for the rule of law enables transition from the informal sector into the formal economy, empowering individuals and organizations. At the same time, it strengthens the foundations of sustainable economic growth. What's not to like? Few ideals receive global endorsement on this scale.
Our businesses can only win from helping strengthen the rule of law. It's time to get on board.
Kevin Coon is a human- and labour-rights lawyer and managing partner at Baker & McKenzie in Toronto