The Compact isn’ttough enough
Bart Slob
Dear Georg,When the Global Compactwas created, in July 2000,several civil society organisations expressedtheir concerns about the UN partneringwith business. Pierre Sané, Amnesty Inter-national’s secretary-general at the time, saidthat for the Compact to be “effective andcredible” there must be publicly-reportedindependent monitoring and enforcementvia a sanctions system “so companies whoare violating these principles cannotcontinue to benefit from the partnership”.SomequestionedtheCompact’sassump-tion that the current form of globalisationcould be made sustainable and equitable,the purely voluntary nature of the initiative,and the fact that some companies wrapthemselves in the UN flag to “bluewash”their image.Since 2000, you have adopted somemeasures to increase the credibility andeffectiveness of the Compact, but unfortu-nately these measures have not led tohigher standards of corporate responsibility.
Is the Compactraising corporateresponsibility standards?
UN Global Compact
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Debate Ethical Corporation
• May 2008
No saysBart Slob,senior researcher atDutch-based Somoand co-ordinator of GlobalCompactCritics.org Yes, countersGeorg Kell,executive headof the UN GlobalCompact
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The most relevant measures that have been implemented by the Compact in thepast eight years are the policy on communi-cating progress and the grievancemechanism.The policy on communicating progressrequires participants to explain annuallywhat they are doing to meet their commit-ment to the Compact’s ten principles. Manycompanies fail to do this. Sanctions for suchfailure are unimpressive. Companies aredeemed “inactive” only afterfailing to report within threeyears of signing up. The onlyimmediate consequence for“non-communicating partici-pants” is that they aremarked as “non-communi-cating” on the Compact’swebsite, denoted by a tinyyellow traffic triangle withan exclamation point in it.Another problem with thecommunications on progressis the quality and trustwor-thiness of the informationprovided. The information isoften superficial, unclearand, in some cases, untrue. TransparencyInternational in Argentina found in 2007that companies reported a very largenumber of activities, many of which bore norelation to the ten principles of theCompact. In this way, the Compact unfortu-nately generates free publicity forcompanies that make a mockery of theflawed policy for communicating progressand do not seem to care about complyingwith international standards of corporateresponsibility.As for the grievance mechanism, itspurpose is noble: “To promote continuousquality improvement and assist the partici-pant in aligning its actions with thecommitments it has undertaken with regardto the Global Compact principles.” Despitethis, complaints against Compact partici-pants have not led to quality improvementor higher standards of corporate responsi- bility, for two reasons.First, the mechanism lacks transparency.Your office does not divulge which compa-nies are involved, who has made thecomplaints, or the specifics of the charges brought under the integrity measures. Thepublic is kept in the dark about how manycomplaints have been raised since thecreation of the grievance mechanism andhow many companies have been removedfrom the list of participants as a result ofconduct “detrimental to the reputation andintegrity of the Global Compact”.Second, you limit the complaints proce-dure to instances that illustrate “systematic”or “egregious” abuses, yet these types ofabuses are not clearly defined. This vagueformulation makes it difficult for stake-holders to determine whether a breach hasoccurred, ie whether a company has failedto support and protect internationallyproclaimed human rights or is complicit inhuman rights abuses.The Compact could be animportant stepping stone tothe promotion of stricter, binding and universallyacceptable standards, suchas the UN Norms on theResponsibilities of Transna-tional Corporations andOther Business Enterpriseswith Regard to HumanRights. As this initiativefaded away, the GlobalCompact became the singleUN-led effort in the area ofcorporate responsibility. John Ruggie, one of theGlobal Compact’s architects, has declaredthat the UN Norms are dead. If this isindeed true, the UN needs to come up withsomething far more ambitious than theGlobal Compact to meaningfully and effec-tively address irresponsible corporate behaviour.Kind regards,Bart
Disclosure drives performance
Georg Kell
Dear Bart,Youareraisingimportantissuesandyouaredoing so with a deep understanding of thedetails. Unfortunately, you focus on a fewtrees and you don’t seem to see the forestwhen assessing the UN Global Compact.Worse, you seem to fall victim to surrealprojections of what the purpose of theCompact is and how it works.Your main point is the old argument thatthe Compact does not work as a compli-ance-based system. As a matter of fact, theCompact never pretended to do so, nor wasit designed as one. The fact that someobservers continue to criticise the Compactfor something it never pretended to be isremarkable. Ever since the inaugural launchon 26 July 2000, we have been very clearthat the Compact is about learning,dialogue and partnerships. The UN doesnot endorse companies or their perform-ance. Rather, it seeks to promotecollaborative efforts, transparency andpublic accountability.Our annual requirement to publiclyreport on progress made in the implemen-tation of the Compact’s principles (the“communication on progress”) has led to
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Ethical Corporation
• May 2008
Debate
“Measures to increase the credibility and effectiveness of the Compact have not led to higher standards of corporate responsibility” – Bart Slob
UN Global Compact fordummies
A beginner’s guide to what the Compact is, andhow it works.What is the UN Global Compact?
A voluntary, principles-based initiative to encouragecompanies to follow responsible business practices.
What do member companies sign up to?
Companies agree to advocate the Compact’s ten princi-ples (which cover human rights, labour andenvironmental standards, and anti-corruption) and takesteps to make them central to the way they do business.
How many companies have signed up?
The Compact has 3,800 members in more than 100countries. It is increasingly popular in emerging markets,such as central and eastern Europe and China, wherecorporate responsibility is a relatively new concept.
How does the Compact get companies to follow itsprinciples?
The Compact does this through 70 local networks,where member companies meet to share best practicewith peers in the same region. These groups meettogether in an annual Local Networks Forum. Everythree years, the Compact holds its Leaders Summit, themost recent having taken place in July 2007.
How does it check that companies are makingprogress?
Every year, the Compact asks member companies toreport on what steps they are taking to implement itsprinciples, in so-called “communications on progress”.
How does it check that companies are doing whatthey say?
The Compact does not verify whether companies are infact doing what they claim in their communicationson progress. As a non-binding, voluntary initiative,the Compact does not pass judgment on companies’performance against its principles. But since October2006, 1,000 participants have been “delisted” – ornamed and shamed for failing to report on progressfor two years running.
the de-listing of about 1,000 participants.True,therearegreatvariationsinthequalityof reporting. But already it has helped todeal with free-riders and it has stimulatedmuch social vetting and peer review. Inaddition, educators and financial analystsare increasingly using the information. Thepolicy has also allowed us to team up withthe Global Reporting Initiative and so helpadvance meaningful disclosure by compa-niesonsocialandenvironmentalissuesonaglobal scale.Your concerns about our “grievanceprocedures” also miss the point. Yes, we dohave a range of elaborate integritymeasures, such as a procedure to encouragedialogue between participants and stake-holders on critical issues raised, as well as astrict policy on the use of our logo.Increasingly, our local networks (ofwhich there are more than 70) play astronger role as facilitators in case of aconflict, and we support the existing mech-anisms for dealing with complaints of theOrganisation for Economic Co-operationand Development and the InternationalLabour Organization. Through all theseefforts, we promote transparency and prac-tical solution-finding, and protect the UN brand from abuse. But the Compact is not akangaroo court that passes judgment onissues we have neither the authority nor thedetailed knowledge to address.The Compact works on the assumptionthat public disclosure, leadership commit-ments and market-based incentives driveperformance. Our first implementationassessment has confirmed that muchprogress has been made already in terms of building acceptance for the principles anddriving them into organisations. As ourresearch has also shown, serious implemen-tation gaps still exist, particularly when itcomes to ensuring that companies apply theprinciples to their supply chains andsubsidiaries. Addressing these matters moreeffectively will be a major focus of our work as we move forwards.Regarding your point about the UNNorms on human rights, I would remindyou that the UN book on conventions isalready about 2,000 pages thick! The issue isnot that there is a lack of internationalguidance, but how to implement theexisting guidance more effectively. And Idon’t think it is a secret that this will notimprove as long as governments and soci-eties don’t make it happen. In many areas, business is far ahead, while governments alltoo often lack the political will or thecapacity to ensure that existing regulatoryframeworks are properly applied.Under these circumstances, the Compactoffers a useful guiding value framework forcompanies to organise their activities. Butthe initiative cannot resolve governmentdeficiencies, and it was never conceived as asubstitute for the rule of law. As a voluntaryinitiative, it can broaden understanding andacceptance of universal values and therebyreinforce good governance.Best regards,Georg
Go for compliance
Bart Slob
Dear Georg,The Global Compact maynot pretend to work as acompliance-based system, but I say it should. The argument may beold, but it is persistent and consistent. At theLeadership Summit in July 2007, AmnestyInternational’s current secretary-generalsaid it was “time to scale up on compliance”.Many other civil society organisations,including Greenpeace, Oxfam, Friends ofthe Earth and ActionAid, have voicedsimilar concerns over the past eight years. Itseems I am not the only one who has “fallenvictim to surreal projections”. I believe thatvisions of an improved Compact are notsurreal, but optimistic and forward-looking.The Compact is a very powerful initia-tive because it is backed by the UN. Youhave always said it is not meant to be asubstitute for business regulation. Inpractice, however, its high profile has madeit the only game in town when it comes toUN initiatives dealing with issues ofcorporate responsibility. That is whymany civil society organisations expect somuch of the Compact. It should bepossible to revise the initiative’s purposeand the way it works. Perhaps a differentapproach would enable the UN toeffectively raise standards of corporateresponsibility.It is true that the requirement to reportpublicly on progress has led to the de-listingof “non-communicating” participants. Thismeasure is based largely on technical andprocedural grounds, and it does not dealadequately with the issue of free-riders.Although participants are expected todisclose information about their businesspractices regularly and can be removedfrom the list if they fail to do so, they cannot be de-listed for failing to comply with thetenprinciples.Thesystemdoesnotfilteroutthe real laggards when it comes to corporateresponsibility.Companies such as PetroChina, aChinese state-run oil company, can sign upand continue to do business as usual. WhileDutch pension fund PGGM – a signatory tothe UN Principles on Responsible Invest-ment – and the European Parliament havedecided to divest from PetroChina over itssupport for the Sudanese government,which has committed human rights viola-tions in Darfur, PetroChina boasts about itsentry to the Compact in its 2007 CSR report.The Compact is not raising PetroChina’sstandards of corporate responsibility.Furthermore, the participation of such acompany is detrimental to the reputation ofthe Compact and the UN.Rather than relying on other initiativesandinstitutionssuchastheGRI,OECD,ILO,local Global Compact networks and govern-ments to get companies to improve their behaviour,youneedtotakealeadershiprole.If not, other UN organisations should move beyond the pragmatism that underpins yourstrategy and set up a more ambitious initia-tive for corporate accountability.Kind regards,Bart
We’re a bicycle – not a tank
Georg Kell
Dear Bart,Allow me to frame your call for a compli-ance-based Global Compact in a differentway: the Compact was designed as a smart bicycle to navigate some very uneven terri-
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Debate Ethical Corporation
• May 2008
“The Compact is not a kangaroo court that passes judgment on issues we have neither the authority nor the detailed knowledge to address” – Georg Kell “It should be possible to revise the initiative’s purpose and the way it works” – Bart Slob
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2008-05 - Debate on the Global Compact
Debate between Georg Kell and Bart Slob: Is the Compact raising corporate responsibility standards?
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