The Global Compact and the Challenges of Corporate Citizenship

Gavin Power,
Director of Public Affairs,
The Global Compact,
United Nations,
New York.

The United Nations Global Compact initiative has grown rapidly since the overwhelming response to Secretary-General Kofi Annan's speech at the World Economic Forum in Davos in January 1999. In his address, the Secretary-General called on global business leaders to embrace nine universal principles in the areas of human rights, labour conditions and environmental practices. Referring to the plight of the world's poorest, he suggested that business should work in a spirit of enlightened self-interest to help bring about a more sustainable and inclusive global economy, the ultimate vision of the Global Compact.

The objectives are two-fold: first, to make the nine principles part of business strategy and operations everywhere; and second, to enable cooperation between different stakeholders and facilitate practical solution-finding to problems related to globalisation.

To achieve these complementary objectives, the Global Compact recently refined its strategic approach, articulating an array of "engagement mechanisms" with special emphasis on the Global Compact's Policy Dialogues, the multi-stakeholder forums that address pressing global and business issues. (The new strategic approach is described in greater detail below.)

From the initial roster of some 50 companies that pledged their support, the Global Compact has expanded into an international network encompassing more than 700 companies from every continent, dozens of organisations representing civil society, labour, and other spheres including national and local government.

Indeed, a unique aspect of the Global Compact, one that sets it apart from other corporate citizenship initiatives, is that it involves all the relevant social actors: governments, who defined the principles on which the Global Compact is based; companies, whose actions it seeks to influence; labour, in whose hands global production takes place; civil society organisations, representing the wider community; and the United Nations, the world's global political forum.

It is not surprising that rising interest in the Global Compact is occurring at a time of crisis in the private sector. The business scandals that rocked the United States during the past two years have spilled over into many other regions of the world, triggering a significant deterioration in the public's trust of business in general. Thus, the theme of this year's World Economic Forum: "Building Trust".

Research shows that the public's expectations of the role of the company have changed fundamentally in recent times; today, global citizens expect business to be conducted in ways that respect ethical and social values. Viewed another way, they have rewritten the "social contract" with business: in exchange for granting companies the license to operate, societies are now demanding that business consider a broad range of responsibilities and objectives beyond the profit motive.

Business leaders understand that their corporate reputations, arguably their most important non-human asset, are at stake. In survey upon survey "corporate/brand reputation" continues to top the list of the key drivers of corporate social responsibility (CSR) policies, followed by such factors as employee motivation, operational efficiencies, risk management and access to capital.

Clearly, corporate social responsibility is no longer merely about philanthropy. Nor is it really just about ethics as usual. The new CSR concerns the fact that companies increasingly are held accountable to society at large. As one observer has put it: "CSR is about how you make your money, not what you do with it afterwards".

The Global Compact was conceived to offer a corporate citizenship platform to fill a void between regulatory structures on the one hand, and standards and codes of conduct on the other. By creating a space for companies to move beyond compliance and pursue innovative approaches to corporate responsibility, the Global Compact seeks to make business part of the solution to problems related to globalisation.

The Global Compact uses a host of instruments, or engagement mechanisms, to achieve these aims: the Leadership Model, Policy Dialogues, the Learning Forum, Country Networks and Partnership Projects.

The Leadership Model represents a company's entry point and overall commitment to the Global Compact and its principles. The goal is to create a critical mass of dedicated business leaders to sustain the movement. The new strategic approach, adopted in January 2003, asks CEOs to consult with their boards of directors before providing support to the Global Compact in order to deepen and broaden the corporate commitment. In addition, rather than requiring companies to submit annual examples of activities as had been the case, businesses are now asked to describe actions undertaken in support of the nine principles in their annual reports and/or other prominent public corporate reports (e.g., sustainability reports). This move increases public transparency and accountability.

A centrepiece of the Global Compact moving forward will be the Policy Dialogues, multi-stakeholder, action-oriented meetings that focus on specific issues related to globalisation and corporate citizenship. The first two dialogues , "The Role of the Private Sector in Zones of Conflict" (2001) and "Business and Sustainable Development" (2002), produced significant outcomes, including a business guide to help companies minimise the negative effects and maximise the positive effects of investing in areas of conflict or potential conflict; and an initiative to advance sustainable business development in the world's Least Developed Countries, launched at the World Summit on Sustainable Development in Johannesburg.

Companies and other stakeholders participating in the Global Compact see strong value in the Policy Dialogues, which play to the convening power of the UN. As a result, rather than focusing on one issue per year, the Global Compact will address a range of imperative topics to appeal to a broad spectrum of participants. In 2003, for example, the Global Compact plans to address six issues: HIV/AIDS in the workplace; Partnership Projects; Sourcing and Supply Chain Management; Sustainable Consumption and Production; Transparency and Anti-Corruption; and the Roles and Responsibilities of Societal Actors.

Through the Learning Forum, companies and others have the opportunity to better understand how an organisation's commitment to the nine principles can be translated most effectively into management practices. Companies are encouraged to develop case studies, in partnership with academic institutions, in order to share good practices and identify knowledge gaps. These case studies and other examples of activities are then posted on the Global Compact website (www.unglobalcompact.org). The activities being shared by companies have proved inspiring:

• Novartis established an internal Corporate Citizenship Policy that requires business managers to include Global Compact principles in business development and decision-making.
• Volkswagen launched a program in Brazil, and recently in South Africa, called "AIDS Care", providing employees and their dependents with medical care, outpatient care at home, and the support of social workers, in addition to launching a broad information and education campaign.
• Samarco launched an oil-recycling program to reduce negative environment impacts caused by the fishing industry.

To make the Global Compact truly global, the initiative in creating Country Networks, involving local actors, is often led by business and government who root the Compact and its principles at the national and regional levels. Networks in developing countries tend to focus on project activities in support of the UN Millennium Development Goals and in attracting sustainable investment. In developed countries or regions, networks have an important mutual learning function and they reinvigorate dialogue with various stakeholders, including universities, business schools and NGOs with regard to the implementation of the nine principles and more general globalisation issues. Thus far, the Global Compact has been launched in nearly 50 countries. (A list is provided at www.unglobalcompact.org.)

Finally, the Global Compact encourages companies to participate in partnership projects with UN agencies - such as the United Nations Development Programme - and civil-society organisations that are aligned with UN development goals. This is an area that will be more fully developed in 2003.

Amazingly simple in concept, the Global Compact can be challenging to execute. A commitment to the Compact requires substantive change. However, at its core the Compact is nothing more than a moral compass. By acting as a unifying umbrella and providing a neutral space in which to dialogue and interact, the Global Compact suggests that multiple actors with often seemingly irreconcilable beliefs can work in concert towards a common vision.

The Global Compact

Fax: +1 212 963 1207

globalcompact@un.org

www.unglobalcompact.org