The UN Global Compact

The idea of a United Nations compact between the UN and business was floated on 31 January 1999 at the World Economic Forum in Davos, Switzerland by UN Secretary-General Kofi Annan. The UN Global Compact was formally launched on 26 July 2006 at the UN in New York, USA.

A background to the UNGC

I have been involved in the UN Global Compact since its inception in the late 1990s. ‘Embroiled’ rather than ‘involved’, might be a better word as the ongoing discussion around its efficacy, usefulness and morality has continued throughout the period. I had previously been actively engaged in the early deliberations and development of two other major global voluntary corporate citizenship initiatives, SA8000 and the Global Reporting Initiative (GRI), and thought the UN Global Compact complemented them and the many other CSR initiatives under development around the world.

The idea of a compact between non-state business actors and the UN built on earlier work by the UN Centre for Transnational Corporations which operated between 1974 to 1992 and was than demoted to a minor role within UNCTAD. It was clear to me from the outset that those enlightened companies who signed up to the UNGC would probably also be dabbling in, and grappling with, a range of other sectoral, geographic, compliance or voluntary, agreements, standards, management systems and initiatives around difficult issues of corporate governance and accountability.

The Compact’s ten principles

The compact is a policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles. The original nine principles on human rights, labour standards and environmental protection became ten in July 2004 with the addition of an anti-corruption principle.

The short sharp, and in some cases rather ambiguous, principles were the result of intense negotiations not only between business and the UN Secretary-General’s secretariat but also involved NGOs and academics. The actual wording of the principles, and their ambiguity, is due as much to business calling for simplicity, as UN agencies arguing for the use of language already embedded in international agreements to be used in the principles. So it is, that the labour principles are specific, the human rights principles high minded, and the environmental principles amorphous – remembering that this is the late nineteen nighties. The tenth principle began life as an international discussion concerning corporate responsibility and accountability and morphed into a broad principle on anti-corruption.

The principles are an early triumph for what the High Level Group advising the UN Secretary-General for the Rio+20 Earth Summit in 2012 called “‘a new political economy’ for sustainable development” because, as they said, it is at the juncture of politics, economics and the environment that a real understanding of sustainable development can be found. The Compact reaches across intellectual, organizational and institutional boundaries. It has at its heart what all political economists have strived for, to engage in a philosophical debate on the nature of economics and life, and relations between people, resources and contentment.

What is the Compact in practice?

There are two statements that get to the heart of this instrument. The first is from the then UN Secretary-General Kofi Annan in 2004, who said: ‘For some, the Compact is primarily a value proposition and an ethical framework. For others, it is a framework for learning how to build alliances with other participants in support of common goals’.  The second statement is from the Compact’s ‘parents’, John Ruggie and Georg Kell, who in 2000, said: ‘The Global Compact has explicitly adopted a learning approach to inducing change, as opposed to a regulatory approach; and it comprises a network form of organisation, as opposed to the traditional hierarchic / bureaucratic form’. As they said: ‘These distinctive (and for the UN, unusual) features lead the Compact’s critics to seriously underestimate its potential, while its supporters may hold excessive expectations of what it can deliver’. 

But, fundamentally, and this is not in any of the ruminations by Ruggie and Kell, it has been a learning tool for the UN system and many of the statists who work within the world’s only international governance body. There is still a vast lacuna when it comes to private and public policy understanding each other’s systems, processes, restraints and predilections.

How do corporates treat the Compact?

While the UNGC is touted as being ‘the world’s largest voluntary corporate citizenship’ this is so only because most of the companies understand that being ‘a corporate citizen’ accords with Peter Drucker’s statement in the 1950s that ‘corporate citizenship is about being an active member of society with rights and responsibilities’. In other words for most of these companies (but certainly not all, and certainly not those who have been delisted over the years) being a corporate citizen means following the four basic principles of corporate citizenship in that all organisations:

  • should be able to articulate their role, scope and purpose,
  • should have an understanding of their social and environmental impact as well as their financial performance,
  • should be transparent and accountable,
  • and, should be in compliance (McIntosh et al 1998/2003).

Given the activities of most signatories to the UNGC it’s also true that many of them at some time have transgressed both these four principles and the ten principles of the UNGC. It has, of course, been pointed out that most members of the UN, being nation-states, have similarly not acted in accordance with the word and the spirit of the 1945 UN Charter at all times, but this is not to argue that corporations have the same status or legitimacy as nation-states, the former being a creation of the latter under the current rules.

Signatories to the Compact, and de-listings

Within the first ten years of the Compact the number of listed signatories rose to 10,000 with a target of 20,000 within the next few years. Over the years delisting based on an integrity system has come into force for signatories that have failed to comply with the most basic requirement of the Compact, such as not submitting a communication on progress regularly.

Challenges for the Global Compact success story

The main points of contention remain now as they were at the outset: Does the Compact hinder or help efforts to control the most damaging aspects of the market and does it help regulate business activity to bring it into line with sustainable development efforts? In an effort to align UN activities with economic globalisation and recognise that free-market ideology and supraterritorial corporations are the order of the day, is the UN selling its moral authority and allowing business to engage in what has been termed ‘bluewash’?

Challenges for the UN

The Compact has given birth and life to a number of important initiatives, not least the UN Principles for Responsible Management Education (PRME) and the Principles for Responsible Investment (PRI). It has also learnt to embrace other CSR initiatives such as the Global Reporting Initiative (GRI) and the SA8000. As it strives for 20,000 signatories the questions remain that were asked in its early days: How do norm entrepreneurs (those seeking to establish new common patterns of behaviour, such as the UN) manage initiatives that have gone global and taken on the characteristics of an uncontrollable virus? How does the UN maintain its moral mandate when dealing with organisations whose values, roles, scopes and purposes may ultimately by antithetical to the UN?

January 2013