Global Policy Forum

Laura Turengano

In an address to the World Economic Forum in January 1999, United Nations Secretary-General Kofi Annan challenged world business leaders to "help build the social and environmental pillars to sustain the world's global economy." A year later, the UN established the UN Global Compact, based in New York. This multilateral initiative, which encourages interaction between the UN and the private sector in an effort to promote positive change within the corporate sector, was created with the support of 50 leading companies, international labor movements, and civil society organizations.

Today, about five hundred companies worldwide have joined the UN Global Compact. Most of the members hail from Europe, Asia, and Latin America including Stockholm-based Ericcson, Beijing-based China Petroleum and Chemical Corporation, and Sao Paulo-based Natura Cosmeticos. But while half the Fortune 500 list of the world's largest companies are based in the U.S., the Global Compact claims only two dozen U.S. Companies, including Cisco, Nike and DuPont, as members.

"U.S. companies have not understood what the Global Compact is about," says Gavin Power, Communications Director at the UN Global Compact. "We need to do a better job in communicating what the Global Compact is in order to reflect the reality of the worldwide business community today," he admits.

The UN Global Compact's stated aim is to promote core values in corporate social responsibility with respect to human rights, labor standards, and the environment. Its nine guiding principles were drawn from the1948 Universal Declaration of Human Rights, the 1998 International Labor Organization's Fundamental Principles on Rights at Work, and the 1992 Rio Principles on Environment and Development. Power describes it as "a universal platform to promote good corporate citizenship". However, with no mandate from the Secretary General to monitor compliance, it lacks teeth. "It relies on the good faith of companies," says Power.

The debate over voluntary compliance with such agreements vs. international regulations is playing out in many forums. Recently, Peter Frankental of Amnesty International argued in Ethical Corporation Magazine that compulsory reporting on social and environmental issues could, in fact, have solid advantages for business. On the other hand, the European Commission recently released its white paper on corporate social responsibility, coming down firmly on the side of voluntary initiatives.

For a company interested in joining the Global Compact, "no formalities are involved other than a letter of commitment from the company's chief executive officer to the UN Secretary General" explains Power. The letter expresses the company's support for the Global Compact and pledges that the company will publicly advocate it.

"Companies are then asked to demonstrate their adherence by taking corporate action to support the core values of the Compact," says Power. Once a year, the member companies submit a concrete example of progress made or a lesson learned in implementing the principles. These lessons are posted on the Global Compact Web site, which acts as a forum for shared learning and the promotion of best practices.

Power argues that the Global Compact offers many benefits for companies including: "public relations and corporate reputation benefits, improved risk profiles, increased employee morale, opportunities to engage with civil society at the local level with the UN acting as a convener for these collaborations, and opportunities to share information at varying levels based on the different experiences of participating companies."

The modest levels of participation by U.S. companies, however, may signal, if not a lack of confidence in the declared benefits, at least a desire to see more tangible evidence.

In a March 2002 article published by "Business for Social Responsibility," Dr. Simon Zadek, CEO of the London-based firm AccountAbility, discusses the potential of business-multilateral partnerships for moving beyond traditional philanthropy and creating new business models. For example, proponents of The Global Compact see it as a new, experimental model that fosters interaction and collaboration between business and non-business members, such as unions and civil society organizations.

However, Zadek explains that businesses may shy away from engaging in partnerships with multilaterals because companies often cannot justify their participation in direct terms. The benefits of joining an initiative such as the Global Compact are long-term and indirect, as are most benefits from corporate community involvement. According to Zadek, "a major constraint in the evolution of business-multilateral engagement is the difficulty for both business and multilaterals of assessing the risk-reward potential."

Research, he says, has identified three crucial areas for assessing this potential:
· Short vs. longer-term benefits· Direct vs. Indirect gains· Philanthropy vs. new business models

Unlike some multilateral partnerships that are purely philanthropy or, on the other hand, seek to alter the behavior of the businesses involved, he sees the Global Compact as "a hybrid that involves companies engaged in purely philanthropic ventures, and yet is fundamentally about changing the way markets work."

The Global Compact's Gavin Power also admits that measurement is a challenge. "How do you measure things that are rather intangible? Labor standards and environmental impact are easier to quantify. It is unclear in the area of human rights," says Power. He thinks benchmarking programs or performance against what other companies are doing could be an effective way to measure.

However, until the effectiveness of these partnerships is widely accepted, and the risk-return potential for all parties is measured, many U.S. corporate community involvement professionals will find it difficult to argue the benefits of business-multilateral relationships.

Zadel notes "we are at a very early stage in the evolution of collaborative arrangements" such as the Global Compact. He reports that those businesses that do engage in such initiatives perceive "the dependence of their future financial success on their ability to handle social and environmental opportunities and risks in innovative, value-adding ways."

Sources

"Mandatory Social Reporting - an Idea Whose Time Has Come?" Peter Frankel, Ethical Corporation Magazine, June 2002 (www.ethicalcorp.com) "Working with Multilaterals," Dr. Simon Zadek, Business for Social Responsibility Report, March 2002. (www.bsr.org) Mallen Baker Corporate Social Responsibility website (http://www.mallenbaker.net/csr/nl/34.html#Anchor-The-4869)For more information visit the UN Global Compact Website at www.unglobalcompact.orgAbout the Author: Laura Turegano is a Director in the Philanthropy Division of Changing Our World Inc.

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