PRESS BRIEFING ON GLOBAL COMPACT

PRESS BRIEFING ON GLOBAL COMPACT

Secretary-General Kofi Annan will convene the Global Compact Leaders Summit at United Nations Headquarters on 24 June, the largest gathering ever of chief executive officers, government officials and leaders of civil society and labour, on the topic of corporate responsibility, Georg Kell, Executive Head of the Global Compact, announced today at a Headquarters press briefing.

At the Summit, participants will assess the progress of the Global Compact initiative and chart its future course.  The Global Compact has grown rapidly since its launch by the Secretary-General in July 2000. More than 1,400 companies, along with international labour and civil society organizations, are participating in the initiative, making the Global Compact the largest voluntary corporate responsibility initiative in the world.

Joining Mr. Kell was John Ruggie, Special Adviser to Secretary-General Kofi Annan on the Global Compact, and Les Silverman, Director at McKinsey & Company, which prepared a comprehensive study of the Global Compact.

Mr. Ruggie noted that the study by McKinsey was the first time that a voluntary initiative in corporate citizenship had benefited from a systematic and sophisticated external analysis by a disinterested party.  The intent behind the Global Compact was and remained to engage the corporate sector in the implementation of United Nations principles in the areas of human rights, labour standards and environmental sustainability.

What made the Global Compact unusual in the “constellation of corporate social responsibility initiatives” was that half of the companies came from developing countries, he noted.  In addition, the Compact had generated activities and networks at the country level, and two thirds of those were in developing countries.  The impact of the Compact had not only been through the community of multinational corporations, but also in the public and private sectors in developing countries.

What the Global Compact was committed to, he explained, was universal principles that governments themselves had endorsed in the areas of human rights, labour standards and environmental sustainability.  The purpose of the Summit was to review where the Compact had come from in four years, to share experiences, and to devise and propose a new strategic concept for going forward.

Mr. Silverman elaborated on the comprehensive report prepared by McKinsey & Company on the Global Compact entitled “Assessing the Global Compact’s Impact”.  The report was based on extensive data analysis, interviews and surveys conducted with a range of stakeholders, including Global Compact participants, as well as outside observers and detractors.

Ultimately, he said, the Global Compact was attempting to promote inclusive globalization, which in many parts of the corporate world was difficult to quantify.  In conjunction with the Global Compact Office, the study looked at the adoption of the Compact’s principles among its members, as well as its impact on civil society, governments and the United Nations itself, in terms of collaboration with business.

Summarizing the highlights of the study, Mr. Kell said that the basic outcome was a good one, which attested to a systemic change attributed to the Global Compact along three lines.  First, many corporate participants -- 67 per cent of respondents -- had instituted internal policy changes within organizations.  The Compact challenges CEOs and boards of companies to go public, thus empowering internal change agents.  Many corporations from the developing world had been exposed for the first time to corporate citizenship and the biggest issue taken up was human rights.

It was in the area of human rights, he added, that corporations had so far lagged behind relative to environment and workplace issues.  The “big thing” was to convince CEOs and companies that, in today’s world, they could no longer afford to say that human rights was not their business and was the job of governments.  The choice business leaders had was sitting on a fence and taking that position while human rights abuses might occur, or stepping down into the arena and exploring proactive activities.  A growing number of companies were recently opting for the proactive stance on the issue.  But, it was a new area and getting it into “the DNA” of corporate thinking was a relatively new feature of the Global Compact.

There had also been a systemic change for the United Nations, reconnecting the Organization with the commercial world at large, he continued.  There had been dozens of projects in support of the Millennium Development Goals (MDGs) and other United Nations goals.  However, the study also clearly recognized that to carry the momentum forward now, it was necessary to be focused and very selective on how to move forward.  “We have a big challenge ahead”, he said.  The Summit would energize much more intake into the idea, but the whole organizational support structure to carry forward a truly global initiative was not yet defined.

Also, the report rightly recognized that the small office that had sustained those efforts had not been very service-oriented, and effective in responding to opportunities, he added.  “The Compact, in short, remains an ongoing experiment.”  Clearly, the challenge ahead was to carry the momentum forward.

In response to a question, Mr. Kell noted that the Compact’s major contribution had been in accelerating change.  There were two reasons why some companies that had responded to the survey had indicated no change.  The first was that half of the companies participating in the Compact had only joined in the last 12 months.  Going from leadership commitment to organizational change took time.

Second, he reiterated that the major contribution of the Compact had been to accelerate change.  The Compact had empowered the change agents within organizations to carry forward issues such as human rights, labour, environment and anti-corruption.  There was still much to be done.

Mr. Ruggie added that some 660 companies had joined since 2003, and they could not have been expected to internalize the Compact in such a short period of time.  A lot of those companies were from developing countries.  The impact there would be profound in the long term.  The overwhelming number of companies in the developing world said that they had never participated before in a corporate citizenship initiative of any kind, and looked to their participation in the Compact as a way to learn what it was all about and to differentiate themselves from other companies in those particular countries.

As to why the percentage of participants from North America was very low, Mr. Ruggie noted that the Compact was no different from any other corporate citizenship initiative.  North American companies were equally underrepresented among similar initiatives, mainly due to fear of litigation.  “This is a much more litigious society than any other on the face of the planet.” 

Mr. Kell added that a number of large American corporations, including GAP, had just recently joined the Compact.  “It looked very promising”, he maintained. 

Asked about what was anticipated for the Summit, Mr. Ruggie said that the McKinsey report had assessed that the Compact had been “quite opportunistic” in the past few years, grabbing new opportunities as they came along.  It needed to become more strategic and leverage its resources on some key priority opportunities.  The report also suggested that the huge comparative advantage of the Compact was in the universality of its principles and in the extraordinary uptake it had had in the developing countries.  Linking the global with the local was something that required more attention, and something that would appear in the new strategic concept.

The study, said Mr. Kell, also found out that some of the Compact’s efforts were not adding much value and not making much of a difference.  Therefore, it needed to recalibrate, and the Summit would, hopefully, help set priorities in that regard.

Responding to a question on why companies were joining, Mr. Kell said that there was a recognition that viable business could only exist when societies also prospered.  The long-term sustainability of long-term investment presupposed a healthy society.

Mr. Ruggie underscored the strategic nature of what companies were doing.  More and more, global companies associated with corporate social responsibility issues were developing a concept of corporate risk management that included social and environmental dimensions.  They were beginning to look at social risks and mainstreaming broader concepts of risk management within firms.

“It isn’t that companies have all of a sudden gone soft”, he stated.  There were aspects of humanitarian issues that companies had discovered that could have a real strategic and bottom-line impact for them, and they’ve got to incorporate them in the way they manage risk.  It was not that they had all of a sudden become saints.

In response to another question, Mr. Kell said that the Compact had reignited the relationship between business and society.  From a developing country angle, there were a number of reasons why that was so.  First, they wanted to be suppliers; they know those issues were important in consumer markets.  Also, many had recognized the issue as one of competitiveness.  In some very poor countries, the Compact was primarily seen as motivating business to contribute to the anti-poverty agenda.

For more information on the Summit, see Press Release ECO/64 issued today.

* *** *