Global Policy Forum

The Global Compact's Next Stage of Development

Global Compact
June 24, 2004
The Global Compact's ten principles in the areas of human rights, labour, the environment and anti-corruption enjoy universal consensus and are derived from:
  • The Universal Declaration of Human Rights
  • The International Labour Organization's Declaration on Fundamental Principles and Rights at Work
  • The Rio Declaration on Environment and Development
  • The United Nations Convention Against Corruption
The Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption:

Human Rights
Principle One
Principle Two
Labour Standards
Principle Three
Principle Four
Principle Five
Principle Six
Principle Seven
Principle Eight
Principle Nine
Principle Ten



Businesses should support and respect the protection of internationally proclaimed human rights.

Why Human Rights Are Important for Business

The responsibility for human rights does not rest with governments or nation states alone. Human rights issues are important both for individuals and the organisations that they create. As part of its commitment to the Global Compact, the business community has a responsibility to uphold human rights both in the workplace and more broadly within its sphere of influence. A growing moral imperative to behave responsibly is allied to the recognition that a good human rights record can support improved business performance. Reasons for companies to address human rights issues include:

Compliance with local and international law
As a minimum, business should strive to ensure that its operations are consistent with the legal principles applicable in the country of operation. The consideration of lawsuits against multinationals for poor practice outside their country of origin is a growing trend.

Promoting the rule of law
Businesses operating outside their country of origin may have an opportunity to promote and raise standards in countries where support and enforcement of human rights issues is insufficient. Societies where human rights are respected are more stable and provide a good environment for business.

Addressing consumer concerns
Access to global information means that consumers are increasingly aware of where their goods come from and the conditions under which they are made. A proactive approach to human rights can reduce the potentially negative impacts of adverse publicity from consumer organisations and interest groups.

Supply chain management
Global sourcing and manufacturing means that companies need to be fully aware of potential human rights issues both upstream and downstream. Promoting best practice in human rights will allow business to select appropriate business partners.

Increasing worker productivity and retention
Workers who are treated with dignity and given fair and just rewards for their work are more likely to be productive and remain loyal to an employer. New recruits increasingly consider the social and environmental record of companies when making their choice of employer.

Building good community relationships
Companies that operate on a global basis are visible to a large audience world-wide as a result of the advances in communications technologies. Addressing human rights issues positively can bring rewards both at site level, within local communities, as well as in the broader global commons in which companies operate.

Bringing Human Rights Into Company Policy and Culture
A key starting point is for individuals within companies to develop an understanding of the issues, for example by making reference to the Universal Declaration of Human Rights. Companies also need to ensure that they are respecting existing national laws in the countries where they operate, and identify how these may vary according to local culture. Equally important is that respect for human rights is embedded in the core values and culture of the organization.

The development and implementation of a human rights policy should take into account any appropriate guidelines and, where possible, include input from and consultation with relevant stakeholder groups.

Some ideas for bringing human rights into company policy are by -

  • developing a company policy and strategy to support human rights,
  • developing a health and safety management system,
  • providing staff training on human rights issues and how they are affected by business,
  • providing staff training on internal company policies as they relate to human rights
  • performing human rights impact assessments of business activities and reviewing them regularly,
  • discussing human rights impacts with affected groups, and
  • working to improve working conditions in consultation with the workers and their representatives.
  • Finally, there are a number of examples of how companies can guarantee human rights through their daily activities:

    (a) In the workplace:

  • by providing safe and healthy working conditions,
  • by guaranteeing freedom of association,
  • by ensuring non-discrimination in personnel practices,
  • by ensuring that they do not use directly or indirectly forced labour or child labour, and
  • by providing access to basic health, education and housing for the workers and their families, if these are not provided elsewhere.
  • (b) in the community:

  • by preventing the forcible displacement of individuals, groups or communities,
  • by working to protect the economic livelihood of local communities, and
  • by contributing to the public debate. Companies interact with all levels of government in the countries where they operate. They therefore have the right and responsibility to express their views on matters that affect their operations, employees, customers and the communities of which they are a part.
  • (c) Finally, if companies use security services to protect their operations, they must guarantee that existing international guidelines and standards for the use of force are respected.


    Businesses should make sure they are not complicit in human rights abuses.


    Many agree that "complicity" is a difficult concept to appreciate and categorise [see box below], and understanding complicity in order to avoid complicity in human rights violations, represents an important challenge for business. As the dynamics between governments, companies, and civil society organisations is changing, so too does our understanding of when and how different organisations should take on responsibilities for human rights issues. Whilst recognising that the role of governments in ensuring respect for human rights continues to be extremely important, the changing operating context for business has prompted the Office of the High Commissioner for Human Rights (OHCHR) to lead efforts to define what constitutes corporate complicity in human rights abuses.

    It is important to understand that in a business context the notion of complicity can occur in a number of forms -

    Direct Complicity
    Occurs when a company knowingly assists a state in violating human rights. An example of this is in the case where a company assists in the forced relocation of peoples in circumstances related to business activity.

    Beneficial Complicity
    Suggests that a company benefits directly from human rights abuses committed by someone else. For example, violations committed by security forces, such as the suppression of a peaceful protest against business activities or the use of repressive measures while guarding company facilities, are often cited in this context.

    Silent complicity
    Describes the way human rights advocates see the failure by a company to raise the question of systematic or continuous human rights violations in its interactions with the appropriate authorities. For example, inaction or acceptance by companies of systematic discrimination in employment law against particular groups on the grounds of ethnicity or gender could bring accusations of silent complicity.

    Contemporary Issues

    Human rights issues have become increasingly important as the nature and scope of business has changed. Different actors have different roles to play and it is important for business to be aware of the contemporary factors that have made human rights an organisational issue.

    The growth in private investment has witnessed companies expanding operations to countries previously untouched by global markets. In some instances these countries have poor human rights records and/or the capacity of the state to address these issues is limited. In these cases the role of business in promoting and respecting human rights is particularly important.

    Growth of civil society
    In some instances the capacity of the state to address human rights issues has diminished. As a result, a steady alienation of people has occurred towards just those public institutions that were established to serve them. Non-governmental organisations of all types and sizes have grown to fill the void - progressively influencing both public policy and the market agenda. They include new human rights, labour and corporate accountability organisations.

    Transparency and Accountability
    The need for transparency in business practice has been highlighted both by globalisation, the growth of civil society interests and some recent problems in the corporate sector. Advances in information technologies and global communications mean that companies can ill afford to conceal poor or questionable practices.

    Possible Actions by Business

    An effective human rights policy will help companies avoid being implicated in human rights violations. In order to avoid such situations, companies may wish to consider the following:

  • Has the company made a human rights assessment of the situation in countries where it does, or intends to do, business so as to identify the risk of involvement in human rights abuses and the company's potential impact on the situation?
  • Does the company have explicit policies that protect the human rights of workers in its direct employment and throughout its supply chain?
  • Has the company established a monitoring system to ensure that its human rights policies are being implemented?
  • Does the company have an explicit policy to ensure that its security arrangements do not contribute to human rights violations? This applies whether it provides its own security, contracts it to others or in the case where security is supplied by the State.
  • Does the company actively engage in open dialogue with human-rights organizations?

    With respect to this last issue it is suggested that businesses:

  • respect international guidelines and standards for the use of force (e.g. the UN Basic Principles on the Use of Force and Firearms by Law Enforcement Officials and the UN Code of Conduct for Law Enforcement Officials);
  • if financial or material support is provided to security forces, establish clear safeguards to ensure that these are not then used to violate human rights; and make clear in any agreements with security forces that the business will not condone any violation of international human rights laws; and
  • privately and publicly condemn systematic and continuous human rights abuses.

    Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

    Freedom of Association and Collective Bargaining

    Businesses face many uncertainties in this rapidly changing global market. Establishing genuine dialogue with freely chosen workers' representatives enables both workers and employers to understand each other's problems better and find ways to resolve them. Security of representation is a foundation for building trust on both sides. Freedom of association and the exercise of collective bargaining provide opportunities for constructive rather than confrontational dialogue, and this harnesses energy to focus on solutions that result in benefits to the enterprise, its stakeholders, and society at large.

    A number of studies indicate that the dynamic that results from freedom of association can set in motion a "decent work"-cycle that increases productivity, incomes and profits for all concerned. The guarantee of representation through a "voice at work" facilitates local responses to a globalised economy, and serves as a basis for sustainable growth and secure investment returns. The results help bridge the widening representational gap in global work arrangements, and facilitate the input of those people, regions and economic sectors - especially women and informal sector workers - who otherwise may be excluded from participating in processes that build decent work environments.

    Freedom of Association
    Freedom of association implies a respect for the right of employers and workers to join associations of their own choice. It does not mean that workforces must be organised or that companies must invite unions in. Employers should not interfere in an employee's decision to associate, or discriminate against the employee or a representative of the employee.
    "Association" includes activities of rule formation, administration and the election of representatives. The freedom to associate involves employers, unions and workers representatives freely discussing issues at work in order to reach agreements that are jointly acceptable. These freedoms also allow for industrial action to be taken by workers (and organisations) in defence of their economic and social interests.

    Collective Bargaining
    Collective bargaining refers to the process or activity leading up to the conclusion of a collective agreement. Collective bargaining is a voluntary process used to determine terms and conditions of work and the regulation of relations between employers, workers and their organisations.
    An important part of the effective recognition of the right to collective bargaining is the 'principle of good faith'. This is important for the maintenance of the harmonious development of labour relations. This principle implies that the social partners work together and make every effort to reach an agreement through genuine and constructive negotiations, and that both parties avoid unjustified delays in negotiations. The principle of good faith does not imply a pre-defined level of bargaining or require compulsory bargaining on the part of employers or workers and their organisations.

    Possible Strategies for Business

    The Global Compact does not suggest that employers change their industrial relations frameworks. However, as organisations such as the International Organisation for Employers have indicated, some 'high performance' companies have recognised the value of using dialogue and negotiation to achieve competitive outcomes.

    What companies can do:

    In the workplace

  • Ensure that all workers are able to form and join a trade union of their choice without fear of intimidation or reprisal.
  • Ensure union-neutral policies and procedures in such areas as applications for employment and record-keeping; and decisions on advancement, dismissal or transfer.
  • Provide facilities to help worker representatives carry out their functions within the company's needs, size and capabilities.
  • These facilities include the ability to collect union dues on company premises, posting of trade union notices, and distribution of union documents related to normal trade union activities in the enterprise, and time-off with pay for union activities.
  • At the bargaining table

  • Recognise representative organisations for the purpose of collective bargaining.
  • Use collective bargaining as a constructive forum for addressing working conditions and terms of employment and relations between employers and workers, or their respective organisations.
  • Address any problem-solving or preventive need within the imagination and interests of workers and management, including restructuring and training needs, redundancy procedures, safety and health issues, grievance and dispute settlement procedures, disciplinary rules, and family and community welfare.
  • Provide information needed for meaningful bargaining.
  • Balance dealings with the most representative trade union to ensure the viability of smaller organisations to continue to represent their members.
  • In the community of operation

  • Take account of the climate in labour-management relations in the country when ensuring freedom of association and collective bargaining. In countries with insufficient legal protections, take steps to preserve the safety and confidentiality of trade unions and their leaders.
  • Support the establishment and functioning of local/national employers' organisations, and trade unions.
  • Inform the local community, media and public authorities of your company's endorsement of the UN Global Compact and its intention to respect its provisions, including those on fundamental workers' rights.

    Businesses should uphold the elimination of all forms of forced and compulsory labour.

    Forced and Compulsory Labour

    Forced or compulsory labour is any work or service that is extracted from any person under the menace of any penalty, and for which that person has not offered himself or herself voluntarily. Providing wages or other compensation to a worker does not necessarily indicate that the labour is not forced or compulsory. By right, labour should be freely given and employees should be free to leave in accordance with established rules.

    Forced labour deprives societies of the opportunity to develop human resources for the modern labour market, and to develop skills and educate children for the labour markets of tomorrow. The debilitating consequences of forced labour are felt by the individual, in particular by children, as well as by the economy itself since the degradation of human capital and social stability results in insecure investments.

    By retarding the proper development of human resources, forced labour lowers the level of productivity and economic growth for society generally. The loss of income due to disruption of regular jobs or income-generating activities reduces the lifetime earnings of whole families and with it, the loss of food, shelter, and health care.

    While companies operating legally do not normally employ such practices, forced labour can become associated with enterprises through their use of contractors and suppliers. As a result, all managers should be aware of the forms and causes of forced labour, as well as how it might occur in different industries. Forced and compulsory labour can take a number of forms:

  • slavery,
  • bonded labour or debt bondage, an ancient practice but still in use in some countries, in which both adults and children are obliged to work in slave-like conditions to repay debts of their own or their parents or relatives,
  • child labour in particularly abusive conditions where the child has no choice about whether to work,
  • the work or service of prisoners if they are hired to or placed at the disposal of private individuals, companies or associations involuntarily and without supervision of public authorities,
  • labour for development purposes required by the authorities, for instance to assist in construction, agriculture, and other public works,
  • work required in order to punish opinion or expression of views ideologically opposed to the established political, social or economic system, and
  • exploitative practices such as forced overtime or the lodging of deposits (financial or personal documents) for employment.
  • Strategies for Business

    Organisations need to determine whether forced labour is a problem within their business sector. It is important to mention that, although high profile cases are typically reported as occurring in developing countries, forced labour is also present in developed countries and as such should be viewed as a global issue.

    Understanding the causes of forced labour is the first step towards taking action against forced labour, which requires a comprehensive set of interventions to address not only the needs of individual forced labourers but also the needs of their families. Therefore, if forced labour is identified then these individuals should be removed and facilities and services should be provided to enable them to make adequate alternatives.

    In general, a combination of workplace and community actions is needed to help ensure the eradication of forced labour practices.

    In the workplace

  • make available to all employees, employment contracts stating the terms and conditions of service, the voluntary nature of employment, the freedom to leave (including the appropriate procedures) and any penalties that may be associated with a departure or cessation of work
  • in planning and conducting business operations, ensure that workers in debt bondage or in other forms of forced labour are not engaged and, where found, provide for the removal of such workers from the workplace with adequate services and provision of viable alternatives in the community of operation
  • institute policies and procedures to prohibit the requirement that workers lodge financial deposits with the company
  • if hiring prisoners for work in or outside prisons, ensure that their terms and conditions of work are similar to those of a free employment relationship in the sector involved, and that they have given their consent to working for a private employer
  • ensure that large scale development operations in which an employer participates do not rely on forced labour in any phase
  • In the community of operation

  • assist in the development of guidelines by sectoral industrial associations and small or medium enterprises where debt bondage or such practices are known to be commonplace
  • support and help design education, vocational training, and counselling programmes for children removed from situations of forced labour
  • help develop skills training and income-generating alternatives, including micro-credit financing programmes, for adults removed from situations of forced labour
  • encourage supplementary health and nutrition programmes for workers removed from dangerous forced labour, and provide medical care to assist those affected by occupational diseases and malnutrition as a result of their involuntary work

    Businesses should uphold the effective abolition of child labour.

    Child Labour

    Child labour has occurred at some point in time in virtually all parts of the world as nations have undergone different stages of development. It remains a serious issue today in many developing countries - although it also exists (more invisibly) in the developed, industrialised countries where it occurs for example in some immigrant communities.

    Forced labour deprives societies of the opportunity to develop human resources for the modern labour market, and to develop skills and educate children for the labour markets of tomorrow. The debilitating consequences of forced labour are felt by the individual, in particular by children, as well as by the economy itself since the degradation of human capital and social stability results in insecure investments.

    Child labour deprives children of their childhood and their dignity. Many of the children work long hours for low or no wages, often under conditions harmful to their health, physical and mental development. They are deprived of an education and may be separated from their families. Children who do not complete their primary education are likely to remain illiterate and never acquire the skills needed to get a job and contribute to the development of a modern economy. Consequently child labour results in scores of under-skilled, unqualified workers and jeopardises future improvements of skills in the workforce.

    Child labour occurs because of the pressures of poverty and lack of development, but also simply as a result of exploitation. It exists both in the formal and in the informal economy. However, it is in the latter case where the majority of the worst forms of child labour are found.

    Although children enjoy the same human rights as adults, their lack of knowledge, experience and power means that they also have distinct rights by virtue of their age. These rights include protection from economic exploitation and work that may be dangerous to their health or morals and that may hinder their development. This does not mean that children should not be allowed to work, rather that there are standards that distinguish what constitutes acceptable or unacceptable work for children at different ages and stages of their development.

    Employers should not use child labour in ways that are socially unacceptable and that lead to a child losing his or her educational opportunities. The complexity of the issue of child labour means that companies need to address the issue sensitively, and not take action which may force working children into more exploitative forms of work. Nevertheless, as Principle 5 states, the goal of all companies should be the abolition of child labour within their sphere of influence.

    It is useful to mention that the use of child labour can damage a company's reputation. This is especially true in the case of transnational companies who have extensive supply and service chains, where the economic exploitation of children, even by a business partner, can damage a brand image and have strong repercussions on profit and stock value.


    ILO conventions recommend a minimum age for admission to employment or work that must not be less than the age for completing compulsory schooling, and in any case not less than 15 years. Lower ages are permitted - generally in countries where economic and educational facilities are less well-developed the minimum age is 14 years and 13 years for 'light work'. On the other hand the minimum age for hazardous work is higher at 18 years.

    Developed countries Developing countries
    Light Work 13 Years Light Work 12 Years
    Regular Work 15 Years Regular Work 14 Years
    Hazardous Work 18 Years Hazardous Work 18 Years

    Priority is given to eliminating, for all persons under the age of 18, the worst forms of child labour, including hazardous types of work or employment. The worst forms of child labour are defined as -

  • all forms of slavery - this includes the trafficking of children, debt bondage, forced and compulsory labour, and the use of children in armed conflict;
  • the use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic purposes;
  • the use, procuring or offering of a child for illicit activities, in particular the production and trafficking of drugs; and
  • work which is likely to harm the health, safety or morals of the child as a consequence of its nature or the circumstances under which it is carried out.
  • Strategies for Companies

    Developing an awareness and understanding of the causes and consequences of child labour is the first step that a company can take toward action against child labour. This means identifying the issues and determining whether or not child labour is a problem within the business. Companies sourcing in specific industry sectors with geographically distant supply chains need to be particularly vigilant.

    Forced labour deprives societies of the opportunity to develop human resources for the modern labour market, and to develop skills and educate children for the labour markets of tomorrow. The debilitating consequences of forced labour are felt by the individual, in particular by children, as well as by the economy itself since the degradation of human capital and social stability results in insecure investments.

    However, discovering if child labour is being used can be difficult, for example in the case where documents or records are absent, and companies may consider using local non-governmental organisations, development organisations or UN agencies to assist in this process.

    If an occurrence of child labour is identified, the children need to be removed from the workplace and provided with viable alternatives. These measures often include enrolling the children in schools and offering income-generating alternatives for the parents or above-working age members of the family. Companies need to be aware that, without support, children may be forced into worse circumstances such as prostitution, and that, in some instances where children are the sole providers of income, their immediate removal from work may exacerbate rather than relieve the hardship.


    What can business do concretely?

    In the workplace

  • adhere to minimum age provisions of national labour laws and regulations and, where national law is insufficient, take account of international standards
  • use adequate and verifiable mechanisms for age verification in recruitment procedures
  • when children below the legal working age are found in the workplace, take measures that provide for their removal along with adequate services and viable alternatives both for the children and their families
  • exercise influence on subcontractors, suppliers and other business affiliates to combat child labour
  • develop and implement mechanisms to detect child labour
  • make sure adult workers are given secure employment and decent wages and working conditions so that they do not need to send their children to work
  • In the community

  • assist in the development of guidelines by sectoral industrial associations and small to medium sized enterprises
  • support and help design educational, vocational training, and counselling programmes for working children, and skills training for parents of working children
  • encourage and assist in launching supplementary health and nutrition programmes for children removed from dangerous work, and provide medical care to cure children of occupational diseases and malnutrition

    Businesses should uphold the elimination of discrimination in respect of employment and occupation.


    The definition of discrimination in employment and occupation is "any distinction, exclusion or preference which has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation", and is made on the basis of "race, colour, sex, religion, political opinion, national extraction or social origin". Discrimination may also occur on the basis of physical or mental disability. Obviously, distinctions based strictly on the inherent requirements of the job are not discrimination.

    Discrimination can arise in a variety of work-related activities. These include access to employment and to particular occupations, and to training and vocational guidance. Moreover, it can occur with respect to the terms and conditions of the employment, such as for example equal remuneration, hours of work and rest, paid holidays, maternity leave, security of tenure, advancement, social security, and occupational safety and health. In some countries additional issues for discrimination in the workplace, such as age and HIV status, are growing in importance. It is also important to realise that discrimination at work arises in a range of settings, and can be a problem in a rural agricultural business or in a high technology city-based business.

    Non-discrimination means simply that employees are selected on the basis of their ability to do the job and that there is no distinction, exclusion or preference made on other grounds. Employees who experience discrimination at work are denied opportunities and have their basic human rights infringed. This affects the individual concerned and negatively influences the greater contribution that they might make to society.

    Discrimination - Direct and Indirect

    Discrimination can take many forms, both in terms of gaining access to employment and in the treatment of employees once they are in work.

    It may be direct, such as when laws, rules or practices explicitly cite a reason such as sex or race to deny equal opportunity. Most commonly, discrimination is indirect and arises where rules or practices have the appearance of neutrality but in fact lead to exclusions. This indirect discrimination often exists informally in attitudes and practices, which if unchallenged can perpetuate in organisations. Discrimination may also have cultural roots that demand more specific individual approaches.

    Strategies for Business

    From a business point of view discrimination does not make sense. It is an issue that should be of concern to all businesses because discriminatory practices in employment and occupation restrict the available pool of workers and skills, and slow economic growth for society as a whole. The lack of a climate of tolerance results in missed opportunities for development of skills and infrastructure to strengthen competitiveness in the global economy. Finally, discrimination isolates an employer from the wider community and can damage a company's reputation, potentially affecting profits and stock value.

    First and foremost, companies need to respect all relevant local and national laws wherever they are operating. Any company introducing measures to promote equality needs to be aware of the diversities of language, culture and family circumstance that may exist in the workforce. Managers and supervisory staff, in particular, should seek to develop an understanding of the different types of discrimination and how it can affect the workforce. For example, women constitute a growing proportion of the world's workforce, but consistently earn less than their male counterparts. Disabled employees may have particular needs that should be met, where reasonable, in order to ensure that they have the same opportunities (e.g. for training and advancement) as their peers.

    Companies should develop and promote an equal opportunity policy that applies qualification, skill and experience as the grounds for recruitment. Increasingly, young graduates and new employees are judging companies on the basis of their social and ethical policies at work. In addition, they must promote equality at work, which means that all individuals are accorded equal opportunities to develop the knowledge, skills and competence that are relevant to their job.


    Companies can put in place specific activities to address the question of discrimination and eliminate it within the workplace. Some examples are:

  • institute company policies and procedures which make qualifications, skill and experience the basis for the recruitment, placement, training and advancement of staff at all levels;
  • assign responsibility for equal employment issues at a high level, issue clear company-wide policy and procedures to guide equal employment practices, and link advancement to desired performance in this area;
  • establish programs to promote access to skills development training and to particular occupations;
  • work on a case by case basis to evaluate whether a distinction is an inherent requirement of a job, and avoid systematic applications of job requirements in a way that would systematically disadvantage certain groups;
  • keep up-to-date records on recruitment, training and promotion that provide a transparent view of opportunities for employees and their progression within the organisation;
  • where discrimination is identified, develop grievance procedures to address complaints, handle appeals and provide recourse for employees;
  • be aware of formal structures and informal cultural issues that can prevent employees from raising concerns and grievances;
  • provide staff training on disability awareness and reasonably adjust the physical environment to ensure health and safety for employees, customers and other visitors with disabilities.
  • Outside the workplace companies also have a role to play in eliminating discrimination, for example by encouraging and supporting efforts in the community to build a climate of tolerance and equal access to opportunities for occupational development. Two examples could be through adult education programs and the support of health and childcare services.

    In foreign operations, companies may need to accommodate cultural traditions and work with representatives of workers and governmental authorities to ensure equal access to employment by women and minorities.


    Businesses should support a precautionary approach to environmental challenges.

    What Is a Precautionary Approach?

    The Rio Declaration firmly established the link between environmental issues and development by stating that:

    " order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot be considered in isolation from it."

    Therefore, if environmental protection is to be considered as an integral part of the development process, how can the environmental risks associated with human activities be assessed?

    The Rio Declaration sets out an extremely important idea, now widely accepted by policy makers, of a precautionary approach to environmental protection -

    "In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation."

    The concept is not new having emerged in association with Clean Air legislation in the Federal Republic of Germany in the 1970s. It has become an accepted principle in the European Union and a part of international environmental law. The German concept of 'vorsorgprinzip' embraces notions of risk prevention, cost effectiveness, ethical responsibilities towards the environment, and the (sometimes) uncertain nature of human knowledge and understanding.

    Precaution is founded on a number of key concepts, such as -

    Preventative anticipation - taking action if necessary before scientific proof is available on the grounds that a delay in the action will cause damage to nature and society.

    Safeguarding ecological 'space' - not impinging on ecological margins so that we protect and widen the assimilative capacity of the natural environment. This means refraining from undesirable resource use.

    Proportionality of response - to show that selected degrees of restraint are not unduly costly. In other words, allowing for the possibly greater dangers for future generation if important life support systems are undermined.

    Duty of care - placing the onus of proof on those undertaking an activity or carrying out change to demonstrate no environmental harm.

    Promoting intrinsic natural rights - allowing natural processes to function such that they maintain essential support for all life on earth.

    Paying for ecological debt - or compensating for past errors of judgement as indicated by the notion of 'common but differentiated responsibility' enshrined in the UN Framework Convention on Climate Change.

    It is important here to point out the existence of two concepts - the "precautionary approach", as embodied in Principle 15 of the Rio Declaration, and the "precautionary principle".

    A Business Approach to the Concept of Precaution

    The key element of a precautionary approach, from a business perspective, is the idea of prevention rather than cure. In other words, it is more cost-effective to take early action to ensure that irreversible environmental damage does not occur. Companies should consider the following:

    1. While it is true that preventing environmental damage entails both opportunity – and implementation – costs, remediating environmental harm after it has occurred can cost much more, e.g. for treatment costs, or in terms of company image.
    2. Investing in production methods that are not sustainable, i.e. that deplete resources and degrade the environment, has a lower, long-term return than investing in sustainable operations. In turn, improving environmental performance means less financial risk, an important consideration for insurers.
    3. Research and development related to more environmentally friendly products can have significant long-term benefits.

    Nevertheless, interpretation of the precautionary approach can present difficulties for companies. They will be more effectively placed to assess any potential environmental harm if they have a thorough understanding of current environmental impacts, as well as the baseline environmental conditions, within their sphere of influence. This requires developing a life-cycle approach to business activities that can:

  • manage the uncertainty, and
  • ensure transparency.
  • With respect to assessing the uncertainty, a number of useful tools are available to gather information on the potential issues and impacts associated with technological, process, planning and managerial changes, such as -

  • environmental risk assessment - establishes the potential for unintended environmental damage alongside other risks
  • life cycle assessment (LCA) - explores the opportunities for more environmentally benign inputs and outputs in product and process development
  • environmental impact assessment - ensures that impacts of development projects are within acceptable levels
  • strategic environmental assessment - ensures that impacts of policies and plans are taken into account and mitigated.
  • These tools provide the data that organisations need when deciding what actions to take. When precaution is a fundamental, strategic issue for business, a range of actions is possible -

  • build-in safety margins when setting standards in areas where significant uncertainty still exists
  • ban or restrict an activity whose impact on the environment is uncertain
  • promote best available technology
  • implement cleaner production and industrial ecology approaches
  • communicate with stakeholders.

    Businesses should undertake initiatives to promote greater environmental responsibility.

    The Background to Principle 8

    The Rio Earth Summit in 1992 acted as a 'wake-up call' for many parts of society, not least of which the business sector. For the first time a comprehensive group of stakeholders gathered together to discuss the issues raised by the patterns of industrialisation, population growth and social inequality around the world. The conference highlighted the true fragility of the planet and in particular it drew attention to three concerns:

  • the damage occurring to many natural ecosystems,
  • the threatened capacity of the planet to support life in the future, and
  • our ability to sustain long term economic and social development.
  • The message to companies was spelt out in Chapter 30 of Agenda 21, in which the role of business and industry in the sustainable development agenda is discussed. And an outline of what environmental responsibility means for business is presented -

    "[the] responsible and ethical management of products and processes from the point of view of health, safety and environmental aspects. Towards this end, business and industry should increase self-regulation, guided by appropriate codes, charters and initiatives integrated into all elements of business planning and decision-making, and fostering openness and dialogue with employees and the public." (30.26)

    "In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation."

    In the ten years since "Rio", the imperative for business to conduct its activities in an environmentally responsible manner has not lessened. On the contrary, as recent analyses of the "state of the planet" indicate, despite progress in some areas (e.g. ozone-depletion, air-pollution in many developed regions, or advances towards reducing greenhouse gases under the Kyoto Protocol) the overall trends are negative and much work still remains to be done. Scientists and experts are reporting disturbing global trends concerning not only vital aspects of our life support system, but also the foundation of our social development system.

    Given the increasingly central role of the private sector in global governance issues, the public is demanding that business manage its operations in a manner that not only enhances economic prosperity and promotes social justice, but also ensures environmental protection in the regions and countries where it is based. Through Principle 8, the Global Compact provides a framework for business to take forward some of the key challenges made 10 years ago.

    Towards Environmentally Responsible Business Practice

    Business gains its legitimacy through meeting the needs of society, and increasingly society is expressing a clear need for more environmentally sustainable practices. One way for business to demonstrate its commitment to greater environmental responsibility is by changing its modus operandi from the so-called "traditional methods" to more responsible approaches to addressing environmental issues -


    inefficient resource use => resource productivity
    end-of-pipe technology => cleaner production
    public relations => corporate governance
    reactive => proactive
    management systems => life-cycles, business design
    one way, passive communication => multi-stakeholder, active dialogue

    Such a change in business strategy brings with it a number of benefits. UNEP-DTIE has pinpointed the following reasons why a company should think about improving its environmental performance -

  • Application of cleaner production and eco-efficiency leads to improved resource productivity
  • New economic instruments (taxes, charges, trade permits) are rewarding clean companies
  • Environmental regulations are becoming tougher
  • Insurance companies prefer to cover a cleaner, lower risk company
  • Banks are more willing to lend to a company whose operations will not burden the bank with environmental lawsuits or large clean-up bills
  • Environmental stewardship has a positive effect on a company's image
  • Employees tend to prefer to work for an environmentally responsible company (such a company also often has good worker health and safety records)
  • Environmental pollution threatens human health
  • Customers are demanding cleaner products
  • However, once a company has decided to adopt a more environmentally responsible corporate policy, what initiatives does it need to undertake? 7 key elements that contribute to environmental responsibility are shown below -

  • apply a precautionary approach,
  • adopt the same operating standards regardless of location,
  • ensure supply-chain management,
  • facilitate technology transfer,
  • contribute to environmental awareness in company locations,
  • communicate with the local community, and
  • share benefits equitably.
  • And in order to turn these concepts into concrete, environmentally responsible actions, a company can choose to

  • implement the International Declaration on Cleaner Production [see below],
  • work with suppliers to improve environmental performance (supply chain management),
  • re-define company strategies and policies to include the 'triple bottom line' of sustainable development - economic prosperity, environmental quality and social equity,
  • set quantifiable objectives and targets,
  • develop sustainability indicators (economic, environmental, social),
  • measure, track, and report progress in incorporating sustainability principles into business practices, including reporting against global operating standard,
  • adopt voluntary charters, codes of conduct, codes of practice in global and sectoral initiatives, and
  • ensure transparency and unbiased communication with stakeholders.

    Businesses should encourage the development and diffusion of environmentally friendly technologies.

    What is meant by an 'environmentally friendly technology'?

    Encouraging the development and diffusion of environmentally friendly technology is a longer-term challenge for a company that will draw on both the management and research capabilities of the organisation. For the purposes of engaging with the Global Compact, environmentally friendly technologies are considered to be those that are described in Chapter 34 of Agenda 21 as being "environmentally sound". Agenda 21 outlines environmentally sound technologies (ESTs) as those which -

    "...protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than the technologies for which they were substitutes. [ESTs] are not just individual technologies, but total systems which include know-how, procedures, goods and services, and equipment as well as organisational and managerial processes."

    Important here is an understanding that this broad definition includes end-of-pipe and monitoring techniques but that explicitly encourages more progressive preventative approaches, such as pollution prevention and cleaner production technologies. The aspiration of this principle is, therefore, towards clean technology where the function is to provide a human benefit or service, rather than concentrating on products per se.

    Reasons to Develop and Diffuse (EST's)

    Environmentally proficient technologies allow us to reduce the use of finite resources and to use existing resources more efficiently. For example, improvements in the power to weight ratio of batteries has led to a significant reduction in the use of toxic heavy metals whilst bringing substantial benefits to the consumer.

    Waste storage, treatment and disposal is costly both in financial as well as in environmental and social terms. Since environmentally sound technologies generate less waste and residues, the continued use of inefficient technologies can represent increased operating costs for business. In addition it also results in a retrospective focus on control and remediation rather than prevention. In contrast avoiding environmental impacts through pollution prevention and ecological product design increases the efficiency and overall competitiveness of the company and also may lead to new business opportunities.

    As environmentally sound technologies reduce operating inefficiencies, they also lead to lower emissions of environmental contaminants. This benefits in the first case workers who are exposed to much lower levels of hazardous materials on a daily basis and also results in a substantially reduced risk of accidents or technological disasters.

    Methods to Promote the Use and Diffusion of ESTs

    Engagement with Principle 9 will depend to some extent on the size and nature of the business. However all companies will want to pursue the business benefits that come from a more efficient use of resources. As this principle captures both 'hard' technologies and 'soft' systems the potential entry points are broad.

    Waste storage, treatment and disposal is costly both in financial as well as in environmental and social terms. Since environmentally sound technologies generate less waste and residues, the continued use of inefficient technologies can represent increased operating costs for business. In addition it also results in a retrospective focus on control and remediation rather than prevention. In contrast avoiding environmental impacts through pollution prevention and ecological product design increases the efficiency and overall competitiveness of the company and also may lead to new business opportunities.

    At a basic factory site or unit level, improving technology may be achieved by four principle means:

    1. Changing the process or manufacturing technique - from simple modifications to more advanced changes that require research and development.
    2. Changing input materials - in order to use raw materials that are less toxic, for example.
    3. Changes to the product - for example by switching from solvent- to water-based paints.
    4. Reusing materials on site - separating, treating and recovering useful materials from waste, so-called "by-product synergies".

    Strategic level approaches to improving technology include:

  • Establishing a corporate or individual company policy on the use of EST's
  • Making information available to stakeholders that illustrates the environmental performance and benefits of using EST's.
  • Refocusing research and development towards 'design for sustainability'.
  • Use of life cycle assessment (LCA) in the development of new technologies and products, so as to take into account impacts in manufacture, use and at the end of life of the product.
  • Employing Environmental Technology Assessment (EnTA) - an analytical tool designed to ensure that decision making processes related to technology adaptation, implementation and use are sustainable.
  • Examining investment criteria and the sourcing policy for suppliers and contractors to ensure that tenders stipulate minimum environmental criteria.
  • Co-operating with industry partners to ensure that 'best available technology' is available to other organisations.
  • An example of how environmentally friendly technologies are being promoted comes from the area of climate change and the work of the IPCC (Intergovernmental Panel on Climate Change) . Here the goal is to encourage the use of technologies that result in lower emissions of greenhouse gases (GHG's), and in particular of carbon dioxide CO2. In its Inventory of Technologies, Methods and Practices for Reducing Emissions of Greenhouse Gases the IPCC has focussed on the energy sector. As a first step it has defined the Energy Cycle starting with the primary fuel resources and going right through the lifecycle until delivery of the energy service to the customer. This is shown in the diagram below for the generalised or reference energy cycle. It has then identified the environmental aspects that are sources of GHG's for each part of the cycle. Finally, it has addressed the technologies that are involved with each step in the process and provided an inventory of the technologies at the present that respond best to the objective to reduce GHG emissions.


    Transparency and the Fight Against Corruption

    The Tenth Principle: "Businesses should work against corruption in all its forms, including extortion and bribery"

    On 24 June 2004, during the Global Compact Leaders Summit, UN Secretary-General Kofi Annan announced that "at your urging, and after extensive consultations with all participants that yielded overwhelming expressions of support, the Global Compact henceforth will include a tenth principle, against corruption, reflecting the recently adopted United Nations convention on that subject."

    On 9 December 2004, marking International Anti-Corruption Day, the Global Compact launched a worldwide effort to raise awareness and deepen the commitment of its participants to combat and eliminate corruption.



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