Suresh Kr Pramar
Few ethical business initiatives have evoked as much interest among corporates, civil society organizations and the media as the UN Global Compact. Founded in 2000 by Georg Kell and promoted by the then Secretary-General of the UN Kofi Annan the Global Compact has grown in number and reach. According to the latest count, there are over 3600 companies in 120 countries who have become a part of the Compact.
The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, the environment, and anti-corruption. As the world's largest, global corporate citizenship initiative, the Global Compact is first and foremost concerned with exhibiting and building the social legitimacy of business and markets.
Business, trade, and investment are essential pillars of prosperity and peace. But in many areas, business is too often linked with serious dilemmas - for example, exploitative practices, corruption, income equality, and barriers that discourage innovation and entrepreneurship. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable markets.
The Global Compact is not a regulatory instrument – it does not “ police”, enforce or measure the behavior or actions of companies. Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labor and civil society to initiate and share substantive action in pursuing the principles upon which the Global Compact is based.
The Executive Director Georg Kell was in India recently, among other things to attend the Third National Convention of the UN Global Compact Society India. Before his arrival in India CRBiz sent Kell a questionarie seeking his views on various issues concerning the Global Compact
Why the Global Compact ?
The United Nations Global Compact dates back to a speech by then-UN Secretary-General Kofi Annan at the World Economic Forum in Davos in 1999, during which he challenged business leaders from around the world to form a “global compact of shared values, which will give a human face to the global market.”
This call to action resonated well, and on July 26 2000, roughly 40 chief executives of some of the world’s largest companies came to New York for the official launch of the Global Compact.
Companies that join the initiative commit to making ten universal principles in the areas of human rights, labor standards, environmental standards, and anti-corruption part of their corporate strategy, operations and culture. They also pledge to facilitate cooperation among global stakeholders in support of broader development objectives, such as the Millennium Development Goals.
In the seven years since its launch, more than 3,600 businesses in over 120 countries have joined the Global Compact. In addition, more than 800 non-business participants contribute to the initiative’s work around dialogue and learning. The Global Compact is now the world’s largest voluntary corporate citizenship initiative – a unique UN initiative that enjoys universal support by business, civil society, and governments.
With respect to geographic distribution, over half of all Global Compact participants are from developing countries. This gives the Global Compact a high degree of credibility and opportunity where needs are the greatest and Global Compact objectives are seen as delivering special value. One of the most important assets of the Global Compact is the more than 70 country networks that have been established around the world.
The UN Global Compact continues to gain momentum. Over the past year, major developments have given the initiative stronger grounding, broader reach and a clearer perspective for the future.
The UNGC is today a global brand with global reach – in more than 120 countries. The new governance framework allows the initiative to scale up engagement on a truly international scale, combining global advocacy and stewardship with local actions and ownership.
The modus operandi of the initiative – a combination of leveraging public authority and building incentives for private engagement, together with an open-source model incorporating integrity measures and a strong emphasis on brand management – offers a new management model for the United Nations. Indeed, the Global Compact enterprise has show that more can be done with fewer resources and, equally important, that is possible to renew the United Nations from within.
It should be noted that the recent joint declaration of the 2007 G8 Summit has encouraged companies around the world “to participate actively in the Global Compact and to support the worldwide dissemination of this initiative”.
The benefits of participation in the Global Compact are wide-ranging and diverse. Firstly, the Global Compact offers unique opportunities to dialogue and collaborate on critical issues with literally thousands of other businesses around the world, with civil society, labor, and governments. More broadly speaking, the United Nations’ unprecedented reach and convening power facilitate a global exchange of experiences and good practices inspiring practical solutions and strategies to key issues, ranging anywhere from supply chain challenges to climate change, from human rights to workplace issues.
While the moral case for responsible business practices remains as strong as ever, we also like to stress the business case, which is increasingly shifting from “avoiding costs for getting it wrong” to “creating value for getting it right”. Companies have shown time and time again that proactive policies and practices that respect human rights and ensure safe and decent workplace conditions, environmental protection and good corporate governance are creating sustainable value and benefits for the business, workers, communities and society at large. They are also enabling the business to attract and retain skilled workers, save costs, enhance productivity, create trust and positive reputation with stakeholders, and build brands.
Bolstering this business case is the fact that the financial markets are beginning to truly take notice of the value of values. From asset managers, pension trustees and stock exchanges to project lenders and insurers, the investment community increasingly connects environmental, social and governance — or ESG —performance to the long-term viability and financial performance. For example, mainstream financial analysts are incorporating these issues into research and processes, while institutional investors are recalibrating policies and mandates to reflect this new reality. The mainstreaming of ESG in the investment community will provide a most powerful incentive for companies to implement the Global Compact’s principles.
Indian companies were among the founding participants of the UN Global Compact. At present, there are 119 Global Compact participants from India (including companies, business associations, NGOs and even one city – the city of Jamshedpur). Although some major Indian companies have not yet joined the initiative, I would attribute this fact to lack of outreach on our part rather than lack of interest. We need to do much more to raise awareness about the value of the Global Compact in India.
We do have plans to interest and engage additional Indian companies in the Global Compact. The Global Compact Society in India plays an important role in promoting the Compact and in assisting Indian participants in implementing the Global Compact principles. It also provides a forum for participants to exchange experiences, network and work together on activities related to Global Compact.
Further, we expect that our new partnership with the Confederation of Indian Industry (CII) will be an important catalyst in recruiting additional companies. In September 2007, CII and the Global Compact Office signed a Memorandum of Understanding whereby the CII formally strengthened its commitment to advancing the principles of the UN Global Compact – both in India and around the world. CII further pledged to build the capacity of corporations operating in India and around the world to implement the principles of the Global Compact within their business operations, and to leverage the delivery capacity of the Global Compact through the organization’s “Centres of Excellence”.
The Global Compact welcomes any participant that pledges to work towards implementation of the GC principles through learning, dialogue, projects, process improvements or other such measures. Moreover, it is not, and does not aspire to become a compliance-based initiative. Nevertheless, safeguarding the reputation, integrity and good efforts of the Global Compact and its participants requires transparent means to handle credible allegations of systematic or egregious abuse of the GC’s overall aims and principles.
The Global Compact’s Integrity Measures outline a process for dealing with allegations of systematic or egregious abuses. However, the purpose of these measures in the first instance always will be to promote continuous quality improvement and assist the participant in aligning its actions with the commitments it has undertaken with regard to the Global Compact. The Global Compact Office will not involve itself in any way in any claims of a legal nature that a party may have against a participating company.
To date, the Global Compact has not suspended any company for violation of the Compact’s principles, but rather encourages companies to engage in dialogue directly with the party raising the matter. However, the Global Compact has removed a few corporate participants for unethical behaviour inconsistent with the spirit of the Global Compact.
119 Indian companies have joined the Global Compact, some of these have been delisted for failure to comply with the initiative’s participation requirements. On a worldwide scale, the number is reportedly quite large. Does the non-compliance indicate a lack of interest in the UNGC’s effectiveness/need?
Although the Global Compact has delisted a number of companies for failing to comply with the annual Communication on Progress requirement, a large number of Global Compact participants are indeed submitting COPs. Companies are increasingly finding value in communicating their progress and Global Compact Local Networks continue to develop the capacity to provide important support to participants.
In the early years, some participants may have joined the Global Compact without the willingness to actively engage in the initiative. These also seem to be the companies who have been delisted. Now, with the expectations of GC participants more clearly defined, companies are taking their engagement more seriously.
The Global Compact Office will continue to improve the process and technology related to the COP. The Office will also produce tools and trainings in order to support the work of Global Compact participants.
Although the Global Compact office does not have the mandate nor the capacity to monitor or audit companies, we have a set of Integrity Measures, including a policy on communicating progress. Participating companies are required to publicly communicate at least once a year on progress made in the implementation of the ten principles. On the Global Compact website you can find links to hundreds of these Communications on Progress (COP), documenting many good practices from around the world.
The purpose of the COP requirement is to ensure and deepen the commitment of Global Compact participants, safeguard the integrity of the initiative and to create a rich repository of corporate practices that serves as a basis for continual performance improvement.
Global Compact participants are required to post a first COP within two years from the date of joining the UN Global Compact. Should a company fail to meet this initial deadline, they will be marked as “non-communicating” in the participant database of the UN Global Compact website.
After an additional year, if the company still does not respond, the company will be removed from the UN Global Compact database of active participants and listed as “inactive” on the UN Global Compact website. Non-communicating companies can become active participants again by posting a link to their COP. Companies that have been de-listed need to reapply to join the Global Compact along with their COP.
This development underscores the UNGC’s drive towards quality and accountability and was widely noted and praised by a range of stakeholders, including other businesses. It also makes the UNGC the first voluntary initiative of its kind to incorporate such an accountability framework.
The Global Compact has been a major force in placing corporate social responsibility and sustainable development issues on the agenda of boardrooms around the world. This has been possible due to a number of factors, namely the universality of the Global Compact’s principles, the convening power of the United Nations and the voluntary nature of our approach. No other initiative has such a broad reach. We are uniquely positioned in this field, and through our strategic alliance with the Global Reporting Initiative, which we announced in October 2006, we can now provide the global private sector with an opportunity to embrace a responsible business strategy that is at once comprehensive, organizing, integrated and enjoys near or total universal acceptance.
On the issue side, the Global Compact has over the years engaged in a broad variety of groundbreaking activities. For example, the UNGC’s financial markets initiatives will increasingly constitute the most important driver for the UNGC as investors and analysts begin to factor social and environmental issues – as embodied in the GC principles – into investment decision-making and capital allocation. Some of the more recent developments:
- The Principles for Responsible Investment (PRI), launched by Kofi Annan in April 2006, are now backed by over 100 institutions (pension funds, asset management firms) from all continents representing more than USD 5 trillion.
- Caring for Climate: The Business Leadership Platform is a voluntary platform for those Global Compact participants who want to demonstrate leadership on the climate issue. It shows how committed business leaders can advance practical solutions, shape public opinion and government attitudes. CEOs that support the statement are prepared to set goals, to change strategies and practices and to disclose publicly emissions. They also commit to communicate on an annual basis on the progress made as part of their existing disclosure commitment within the Global Compact framework.
- The CEO Water Mandate was launched at the Global Compact Leaders Summit - representing both a call to action and a strategic framework for companies seeking to address the issue of water sustainability in their operations and supply chains. The CEO Water Mandate is voluntary and designed to assist companies in developing a comprehensive approach to water management.
- The Principles for Responsible Management Education (PRME) were formally introduced at the 2007 Global Compact Leaders Summit. These Principles will undoubtedly bring about a major change in business education, potentially embedding the Global Compact on a global scale in academia.
Few ethical business initiatives have evoked as much interest among corporates, civil society organizations and the media as the UN Global Compact. Founded in 2000 by Georg Kell and promoted by the then Secretary-General of the UN Kofi Annan the Global Compact has grown in number and reach. According to the latest count, there are over 3600 companies in 120 countries who have become a part of the Compact.
The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, the environment, and anti-corruption. As the world's largest, global corporate citizenship initiative, the Global Compact is first and foremost concerned with exhibiting and building the social legitimacy of business and markets.
Business, trade, and investment are essential pillars of prosperity and peace. But in many areas, business is too often linked with serious dilemmas - for example, exploitative practices, corruption, income equality, and barriers that discourage innovation and entrepreneurship. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable markets.
The Global Compact is not a regulatory instrument – it does not “ police”, enforce or measure the behavior or actions of companies. Rather, the Global Compact relies on public accountability, transparency and the enlightened self-interest of companies, labor and civil society to initiate and share substantive action in pursuing the principles upon which the Global Compact is based.
The Executive Director Georg Kell was in India recently, among other things to attend the Third National Convention of the UN Global Compact Society India. Before his arrival in India CRBiz sent Kell a questionarie seeking his views on various issues concerning the Global Compact
Why the Global Compact ?
The United Nations Global Compact dates back to a speech by then-UN Secretary-General Kofi Annan at the World Economic Forum in Davos in 1999, during which he challenged business leaders from around the world to form a “global compact of shared values, which will give a human face to the global market.”
This call to action resonated well, and on July 26 2000, roughly 40 chief executives of some of the world’s largest companies came to New York for the official launch of the Global Compact.
Companies that join the initiative commit to making ten universal principles in the areas of human rights, labor standards, environmental standards, and anti-corruption part of their corporate strategy, operations and culture. They also pledge to facilitate cooperation among global stakeholders in support of broader development objectives, such as the Millennium Development Goals.
In the seven years since its launch, more than 3,600 businesses in over 120 countries have joined the Global Compact. In addition, more than 800 non-business participants contribute to the initiative’s work around dialogue and learning. The Global Compact is now the world’s largest voluntary corporate citizenship initiative – a unique UN initiative that enjoys universal support by business, civil society, and governments.
With respect to geographic distribution, over half of all Global Compact participants are from developing countries. This gives the Global Compact a high degree of credibility and opportunity where needs are the greatest and Global Compact objectives are seen as delivering special value. One of the most important assets of the Global Compact is the more than 70 country networks that have been established around the world.
Has the Global Compact lived up to expectations?
The UN Global Compact continues to gain momentum. Over the past year, major developments have given the initiative stronger grounding, broader reach and a clearer perspective for the future.
The UNGC is today a global brand with global reach – in more than 120 countries. The new governance framework allows the initiative to scale up engagement on a truly international scale, combining global advocacy and stewardship with local actions and ownership.
The modus operandi of the initiative – a combination of leveraging public authority and building incentives for private engagement, together with an open-source model incorporating integrity measures and a strong emphasis on brand management – offers a new management model for the United Nations. Indeed, the Global Compact enterprise has show that more can be done with fewer resources and, equally important, that is possible to renew the United Nations from within.
It should be noted that the recent joint declaration of the 2007 G8 Summit has encouraged companies around the world “to participate actively in the Global Compact and to support the worldwide dissemination of this initiative”.
Why should companies join the Global Compact? What is there in it for them ?
The benefits of participation in the Global Compact are wide-ranging and diverse. Firstly, the Global Compact offers unique opportunities to dialogue and collaborate on critical issues with literally thousands of other businesses around the world, with civil society, labor, and governments. More broadly speaking, the United Nations’ unprecedented reach and convening power facilitate a global exchange of experiences and good practices inspiring practical solutions and strategies to key issues, ranging anywhere from supply chain challenges to climate change, from human rights to workplace issues.
While the moral case for responsible business practices remains as strong as ever, we also like to stress the business case, which is increasingly shifting from “avoiding costs for getting it wrong” to “creating value for getting it right”. Companies have shown time and time again that proactive policies and practices that respect human rights and ensure safe and decent workplace conditions, environmental protection and good corporate governance are creating sustainable value and benefits for the business, workers, communities and society at large. They are also enabling the business to attract and retain skilled workers, save costs, enhance productivity, create trust and positive reputation with stakeholders, and build brands.
Bolstering this business case is the fact that the financial markets are beginning to truly take notice of the value of values. From asset managers, pension trustees and stock exchanges to project lenders and insurers, the investment community increasingly connects environmental, social and governance — or ESG —performance to the long-term viability and financial performance. For example, mainstream financial analysts are incorporating these issues into research and processes, while institutional investors are recalibrating policies and mandates to reflect this new reality. The mainstreaming of ESG in the investment community will provide a most powerful incentive for companies to implement the Global Compact’s principles.
What has been the response to the Global Compact from companies in India ? Major business houses in India, particularly the newer companies, are still out of the Global Compact. Do you have any plans to bring these companies into the Global Compact ?
Indian companies were among the founding participants of the UN Global Compact. At present, there are 119 Global Compact participants from India (including companies, business associations, NGOs and even one city – the city of Jamshedpur). Although some major Indian companies have not yet joined the initiative, I would attribute this fact to lack of outreach on our part rather than lack of interest. We need to do much more to raise awareness about the value of the Global Compact in India.
We do have plans to interest and engage additional Indian companies in the Global Compact. The Global Compact Society in India plays an important role in promoting the Compact and in assisting Indian participants in implementing the Global Compact principles. It also provides a forum for participants to exchange experiences, network and work together on activities related to Global Compact.
Further, we expect that our new partnership with the Confederation of Indian Industry (CII) will be an important catalyst in recruiting additional companies. In September 2007, CII and the Global Compact Office signed a Memorandum of Understanding whereby the CII formally strengthened its commitment to advancing the principles of the UN Global Compact – both in India and around the world. CII further pledged to build the capacity of corporations operating in India and around the world to implement the principles of the Global Compact within their business operations, and to leverage the delivery capacity of the Global Compact through the organization’s “Centres of Excellence”.
The UNGC has delisted participants for non-compliance with the COP requirements. Do you have any provision to delist companies for violation of any of the ten principles of the UNGC ? Has the UNGC suspended any company for violation of its principles ?
The Global Compact welcomes any participant that pledges to work towards implementation of the GC principles through learning, dialogue, projects, process improvements or other such measures. Moreover, it is not, and does not aspire to become a compliance-based initiative. Nevertheless, safeguarding the reputation, integrity and good efforts of the Global Compact and its participants requires transparent means to handle credible allegations of systematic or egregious abuse of the GC’s overall aims and principles.
The Global Compact’s Integrity Measures outline a process for dealing with allegations of systematic or egregious abuses. However, the purpose of these measures in the first instance always will be to promote continuous quality improvement and assist the participant in aligning its actions with the commitments it has undertaken with regard to the Global Compact. The Global Compact Office will not involve itself in any way in any claims of a legal nature that a party may have against a participating company.
To date, the Global Compact has not suspended any company for violation of the Compact’s principles, but rather encourages companies to engage in dialogue directly with the party raising the matter. However, the Global Compact has removed a few corporate participants for unethical behaviour inconsistent with the spirit of the Global Compact.
119 Indian companies have joined the Global Compact, some of these have been delisted for failure to comply with the initiative’s participation requirements. On a worldwide scale, the number is reportedly quite large. Does the non-compliance indicate a lack of interest in the UNGC’s effectiveness/need?
Although the Global Compact has delisted a number of companies for failing to comply with the annual Communication on Progress requirement, a large number of Global Compact participants are indeed submitting COPs. Companies are increasingly finding value in communicating their progress and Global Compact Local Networks continue to develop the capacity to provide important support to participants.
In the early years, some participants may have joined the Global Compact without the willingness to actively engage in the initiative. These also seem to be the companies who have been delisted. Now, with the expectations of GC participants more clearly defined, companies are taking their engagement more seriously.
The Global Compact Office will continue to improve the process and technology related to the COP. The Office will also produce tools and trainings in order to support the work of Global Compact participants.
Does the UNGC have any mechanism to effectively monitor and measure whether companies are living up to their commitments/claims ?
Although the Global Compact office does not have the mandate nor the capacity to monitor or audit companies, we have a set of Integrity Measures, including a policy on communicating progress. Participating companies are required to publicly communicate at least once a year on progress made in the implementation of the ten principles. On the Global Compact website you can find links to hundreds of these Communications on Progress (COP), documenting many good practices from around the world.
The purpose of the COP requirement is to ensure and deepen the commitment of Global Compact participants, safeguard the integrity of the initiative and to create a rich repository of corporate practices that serves as a basis for continual performance improvement.
Global Compact participants are required to post a first COP within two years from the date of joining the UN Global Compact. Should a company fail to meet this initial deadline, they will be marked as “non-communicating” in the participant database of the UN Global Compact website.
After an additional year, if the company still does not respond, the company will be removed from the UN Global Compact database of active participants and listed as “inactive” on the UN Global Compact website. Non-communicating companies can become active participants again by posting a link to their COP. Companies that have been de-listed need to reapply to join the Global Compact along with their COP.
This development underscores the UNGC’s drive towards quality and accountability and was widely noted and praised by a range of stakeholders, including other businesses. It also makes the UNGC the first voluntary initiative of its kind to incorporate such an accountability framework.
What is your vision for the future of the Global Compact ?
The Global Compact has been a major force in placing corporate social responsibility and sustainable development issues on the agenda of boardrooms around the world. This has been possible due to a number of factors, namely the universality of the Global Compact’s principles, the convening power of the United Nations and the voluntary nature of our approach. No other initiative has such a broad reach. We are uniquely positioned in this field, and through our strategic alliance with the Global Reporting Initiative, which we announced in October 2006, we can now provide the global private sector with an opportunity to embrace a responsible business strategy that is at once comprehensive, organizing, integrated and enjoys near or total universal acceptance.
On the issue side, the Global Compact has over the years engaged in a broad variety of groundbreaking activities. For example, the UNGC’s financial markets initiatives will increasingly constitute the most important driver for the UNGC as investors and analysts begin to factor social and environmental issues – as embodied in the GC principles – into investment decision-making and capital allocation. Some of the more recent developments:
- The Principles for Responsible Investment (PRI), launched by Kofi Annan in April 2006, are now backed by over 100 institutions (pension funds, asset management firms) from all continents representing more than USD 5 trillion.
- Caring for Climate: The Business Leadership Platform is a voluntary platform for those Global Compact participants who want to demonstrate leadership on the climate issue. It shows how committed business leaders can advance practical solutions, shape public opinion and government attitudes. CEOs that support the statement are prepared to set goals, to change strategies and practices and to disclose publicly emissions. They also commit to communicate on an annual basis on the progress made as part of their existing disclosure commitment within the Global Compact framework.
- The CEO Water Mandate was launched at the Global Compact Leaders Summit - representing both a call to action and a strategic framework for companies seeking to address the issue of water sustainability in their operations and supply chains. The CEO Water Mandate is voluntary and designed to assist companies in developing a comprehensive approach to water management.
- The Principles for Responsible Management Education (PRME) were formally introduced at the 2007 Global Compact Leaders Summit. These Principles will undoubtedly bring about a major change in business education, potentially embedding the Global Compact on a global scale in academia.
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