PRESS CONFERENCE ON UNITED NATIONS GLOBAL COMPACT

 

The good news, in the present period of uncertainty and extraordinary economic upheaval, was that, in the 10 years since the establishment of the United Nations Global Compact, recognition by corporations around the globe of the non-financial aspects of sound business was near-universal, and the Compact could make an enormous contribution now to restoring trust and confidence, and creating more responsible market behaviour across the board, its Executive Director said today.

The economic downturn was triggering a growing demand for ethics worldwide, as well as for other non-financial concerns, such as environmental, social and governance issues, which the Compact advocated, said Georg Kell, at a Headquarters press conference, presenting the latest [annual review] -- a corporate responsibility survey of more than 700 businesses in more than 90 countries. 

The Global Compact was the United Nations platform to engage business, Mr. Kell explained.  With 5,000 corporate participants from 135 countries, the Compact was now the world’s largest voluntary corporate citizenship initiative.  Based on a leadership commitment by chief executive officers, the Compact went hand-in-hand with a commitment to annually disclose progress made on implementation.  Failure to do so led to de-listing.  The Compact also promoted engagement on development issues and partnerships and associations with non-United Nations organizations. 

Last year was a record year for the Compact in terms of new participants, reinforcing the notion that, in times of economic crisis, there was an increased search for ethics and sustainability, he said, noting that more than 1,400 new participants had joined last year.  There also had been enormous growth in emerging markets, particularly in China and India.  Both countries were now among the Compact’s largest networks.  The other large networks could be found in France, Spain, Mexico, Brazil, United States, Argentina, Colombia and Germany.

As for the Compact’s composition, half of the 5,000 participants were comprised of small- and medium-size companies, equally spread among Organization for Economic Cooperation and Development (OECD) and non-OECD countries, he said.  So, the members were a fair representation of the corporate world.

Among the report’s findings, he said the most important trend in 2008 had been a shift towards increasing attention to non-financial issues.  That was a very important transition and good news for the Compact, because it meant that business today increasingly understood that, unless those issues were addressed, the costs would be very high and opportunities would be missed.  Another positive finding had been that 70 per cent of those participants surveyed dealt with Compact issues at the board level.  That was a big change over several years ago, when those issues had been managed by public relations departments and the like.

However, there were important implementation gaps, he said.  For example, only a small share of participants made the Compact an active tool when dealing with suppliers.  And, only 30 per cent of those surveyed actually required their subsidiaries to fully implement the Compact, and that was a huge implementation gap.  Through a very detailed self-assessment, it was gleaned that less than 10 per cent of participants fell into the category of “advanced corporate citizen”.  Most participants were in the learning stage and were about to embrace the issues and integrate them into policies and activities.

He said there was also a huge gap across the issues underpinning the Compact, namely human rights, labour, environment and anti-corruption.  Human rights and anti-corruption were the most complex issues, causing participants some difficulties.  The labour issues were well-established, thanks to the industrial policies prevailing in most countries.  Concerning the environment, the big development was the sustainability agenda, which was now gaining ground; there was a big shift from the social domain to the sustainability domain in line with resource constraints and the rise of the climate change agenda.  The corporate world was increasingly getting a handle on the sustainability agenda. 

On communication, he pointed out that participation in the Compact was not free; those who committed to it also committed to annually disclose progress made, according to a certain format, he said.  Last year had been a record year for new submissions, totalling more than 1,700.  Also last year, 400 participants had been de-listed, for failure to disclose, which brought to more than 800 the total number that had been de-listed.  In a positive development, some “sister platforms” were growing; there were more than 450 institutional investors seriously looking into environmental, social and governance issues, recognizing their importance to corporate performance.  And an education initiative seeking to change curricula to incorporate the non-financial issues into Masters of Business Administration courses was growing rapidly.

Explaining the de-listing procedure in response to several questions, he said membership in the Compact was a commitment by individual business executives, backed by their board, to use the Compact’s 10 principles as a way of changing organizational behaviour, plus taking action in support of United Nations goals.  With that came the commitment to publicly disclose annually the progress made on implementation.  That was not a benchmarking exercise, but an expectation of a member company’s willingness to undertake continuous improvement in implementing the Compact’s 10 principles. 

It was expected that that implementation progress, in turn, would be properly disclosed in annual reports, or related documents, such as sustainability reports, especially to the stakeholders, or shareholders where it counted most, he explained further.  And the link must be shared with the Compact.  If the company did not disclose that information in a year, then the company was reminded, and if another six or eight months passed, then the company was deemed inactive and finally de-listed.  The names of de-listed participants were made public.  Such a company could reapply, but it needed to do so with a “fresh commitment”. 

He added that the Compact was presently working on improving the disclosure content, but the responsibility for implementation did not lie with the Compact office, but with those who made the pledge to implement.

As for whether a company had ever been de-listed on the basis of its conduct, he said there had been many instances where local networks had taken up complaints about performance.  Many such discussions were taking place.  Globally, the Compact had de-listed a dozen or more companies on grounds of fraudulent or gross behaviour, or use of the Compact for purposes other than its stated goals.  The Compact was not a judgmental authority, nor did it have that kind of information.  But, it was increasingly supporting local country networks to build up capacities where such information was best known.  Information about actual behaviour on the ground was usually not available globally, and it required enormous resources and a mandate, which the Compact did not have.  The Compact’s best tool, in that regard, was public disclosure. 

As for how fully candidate companies were vetted or investigated, Mr. Kell said the Compact did not investigate companies.  Essentially, the Compact was a learning platform and it was betting on proper conduct and transparency as a way to promote positive change.  It operated largely through country networks, which now existed in 80 countries.  In those networks, likeminded peers worked together, and civil society and labour were encouraged to participate.  So, the Compact promoted “social vetting”, public disclosure and accountability.

He said that some indirect vetting took place before countries joined, so as to ensure that the business did not have a legal liability pending with an international organization.  The Compact did not want fraudulent organizations to “smuggle themselves in”.  However, it could not measure the seriousness of the intent or the nature of the commitment of a company; that was revealed over time. 

To a further question, he said the Compact’s mandate of disclosing progress was a very effective and powerful tool.  Disclosure and public transparency combined was probably the best “change agent” available and promoted public disclosure on a very large scale.  Over the years, because of that concept, the Compact had significantly contributed to mainstreaming the non-financial issues, which businesses otherwise might not take seriously.  So, some progress had been made, but the agenda had not been fully accomplished -– “by far not”, he stressed.

The fact that companies operated in very different political environments, which had very different histories and different laws and regulations, and different degrees of implementation, did not hinder a participant from implementing the principles, within its own sphere of influence, he said.  There were many examples of how companies operating in very difficult environments could create a very positive workplace environment, including as concerned freedom of association, where companies could actively encourage independent workers’ associations within their operations.  There were also examples of companies in countries where conflict or high levels of violence prevailed, which were not only taking proactive action, but which were contributing to peacebuilding.

The Compact was a call to “CEOs” to do their utmost within their own operations, thereby setting an example, in the hope that those examples would spill over into the broader context, he added.

To the many questions concerning the effect of the current economic downturn on the Compact, he agreed there was a growing demand to redefine ethics.  And yes, the cuts hurt the Compact somewhat; many companies were panicking, as they had to reduce staff.  But, the good news was that the majority were careful not to cut what was essential to the core of the corporation, including for its values and its principles.  It should be remembered that the economic crisis had been triggered by the housing bubble and financial market crisis, and macroeconomic imbalances.  The ethical shortcomings were found largely in the financial market, and even within the financial market, in only one segment of it.  Most corporations around the world suffered as much as the workers they laid off.  So, one had to distinguish between the real economy and the financial world. 

[The 10 principles of the Compact compel businesses to support and respect the protection of internationally-proclaimed human rights; ensure that they are not complicit in human rights abuses; uphold the freedom of association and the effective recognition of the right to collective bargaining; elimination of all forms of forced and compulsory behaviour; effective abolition of child labour; elimination of discrimination in respect of employment and occupation; support a precautionary approach to environmental challenges; undertake initiatives to promote greater environmental responsibility; encourage the development and diffusion of environmentally-friendly technologies; and work against corruption in all its forms, including extortion and bribery.]

Further information on the Global Compact and the current review is available at http://www.unglobalcompact.org/.

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For information media • not an official record