Tag Archives: #GlobalCompact

Accountability, Communication, CSR, Featured, Governance, Issues, Models, News, Partnerships, Reporting

UN Global Compact Silently Expels More than 2,300 Non-Business Participants

By Andreas Rasche.

The UN Global Compact continues to “clean up” its participant base. The initiative reported to have 5,332 non-business participants (e.g., global and local NGOs and associations) in its October Bulletin, while its November Bulletin lists 2,983 active non-business participants. Hence, the Compact seems to have expelled more than 2,300 non-business participants for failure to submit the required “Communication on Engagement” report in the beginning of November. This is almost 43% of all non-business participants.

Non-Business Participants Delisted After Three Years

According to the Compact’s own “Communication on Engagement” policy, all non-business participants must submit a report every two years. The policy came into effect 31 October 2013. If participants do not submit such a report, they are labeled as “non-communicating” participants for another year. In other words, non-business participants that fail to submit a report are delisted after three years.

The Compact understands itself as a business-driven initiative, which, however, has clear links to NGOs, associations and also labor organizations. Non-business participants are vital actors, especially when considering the role of partnerships (SDG 17) and the general need for collaboration between business and society. Expelling more than 2,300 participants significantly undercuts the ability of the Compact to initiate and sustain such partnerships on a broader level.

Delisting as an Opportunity and a Problem

The delisting of non-communicating NGOs is a welcome move. It shows that the Compact takes its own integrity measures seriously and hence strengthens the accountability of the initiative. In the long run, the Compact will only thrive if businesses, NGOs, and, most of all, governments, trust it. And trust, as we all know, is not cheap; it must be earned over time.

However, this massive delisting also points to a significant problem: The Compact seems to rely too much on “growth by numbers.” Simply having over 5,300 non-business participants is useless, if 2,300 of them do not even dare to submit a rather basic report that outlines their activities in support of the initiative. I have said it before, and I will say it again: The Compact is too good of an idea to simply throw away. However, the value proposition of the initiative seems to remain opaque to most participants. The high number of delisted business participants (now reaching 7,500) and the impressive number of 2,300 delisted non-business participants (most of them being NGOs) question the “business model” that underlies the initiative. It may be time to rethink this model.

What Bothers Me Most is…

What bothers me most about all of this is: the Compact itself has not yet mentioned this massive delisting with a single word in its News section (as of 21 November 2016). Is such a massive loss of participants not a newsworthy event? We can read about all sorts of success stories in the News section, but the fact that the initiative expelled more than 2,300 non-business participants is not mentioned with a single word. The Compact itself promotes transparency (e.g. through Principle 10 on anti-corruption) and it should live up to its own ambitions by painting a fair and timely picture of the initiative. There is no reason to be ashamed of having to delist a high number of non-business participants, if the Compact learns the right lessons from this. No initiative is perfect and the Compact has come a long way. It has helped to mainstream corporate responsibility and sustainability, but it may also be in need of rethinking what value it creates for its participants…

Andreas Rasche is Professor at Copenhagen Business School and Director of CBS’s World Class Research Environment Governing Responsible Business. He has collaborated with the UN Global Compact on different projects and served on the initiative’s LEAD Steering Committee from 2012 to 2015. More information on: www.arasche.com

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Concepts, CSR, Development, Governance, Issues, News

The Global Compact – Building Bridges, or Barriers?

By Marianne Prytz and Margrete Eilertsen.

One of the main purposes of the UN Global Compact (GC) is to include the private sector in the development agenda. However, is the initiative truly inclusive, or is it yet another contributing factor dividing the North and the South?

Being stronger together – leveraging local network effects

From its official launch in 2000, the UN Global Compact (GC) has developed to become the world’s largest corporate sustainability initiative, currently comprising of more than 12,000 signatories. Local Networks (LN’s) are clusters of GC participants who voluntarily form country- or region- based groups, with the aim of advancing the GC and its principles in a specific geographic context. Due to the possible positive effects LNs can have on promoting sustainable business practices on a local level, especially in developing countries, we wanted to explore the topic further. In our Master’s thesis, we investigated possible enabling and restricting factors affecting a Local Network’s (LN) operational capacity, using the Uganda LN as our case study.

Based on our research, we found the most important enabling factors for the Uganda LN to be:

  • A strong hosting organization;
  • An effective governance system;
  • Indications that personal trust has developed within the Uganda LN over time.

Sufficient funding is crucial for a local network to develop

Regardless of the enabling factors supporting the Uganda LN, we found that the network is currently struggling. The main reason for these problems was the low level of financial resources within the LN. This severely restricts the operational capacity of the LN in the following ways:

  • Lack of Human Resources;
  • Few events and activities;
  • Lack of LN Uganda webpage;
  • High reliance on the focal point organization, the Federation of Uganda Employers.

These factors limit the networks opportunities to operate effectively and make a lasting impact on the Uganda Business Society.

As of today, each GCLN is supposed to be self-sufficient in terms of financial resources, and mainly source these resources locally. Thus, the LNs do not receive any direct funding from the GC Office or Foundation in New York. This in itself is not a problem. However, where both governments and MNCs in developed countries have been more willing to fund their LNs, companies and governments in developing countries have not been able to support their LNs to the same extent. This is what we are witnessing in the Uganda LN.

Is the Global Compact’s bottom-up strategy only working in theory?

Based on the GC’s 2014 Africa Strategy report called“ Partners in Change”, we found that several of the African LNs are struggling with similar issues as we experienced in Uganda. If it is so that LNs from developing countries in general have less financial resources compared to their Western counterparts, this might arguably increase the existing financial divide between Northern and Southern countries.

The GC emphasizes that their approach is bottom up, and builds on locally adopted strategies, which in theory is a refreshing and original approach in comparison to traditional development and sustainability practices. However, what we have noticed exemplified in the case of the Uganda LN, is that unless the status quo is challenged, the GC might develop into a new forum for separating developed and developing countries.

As we believe the GC has an important role to play in today’s globalized society, we hope the initiative chooses to focus on evening out this divide, in order to fully reach its potential in developing countries.

Marianne Prytz and Margrete Eilertsen have just graduated from the Department of Business, language and culture at CBS. They are now proud holders of the Degree Cand. merc. Int. in business and development studies. In their Master thesis on the UN Global Compact, they researched sustainable business practices.

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Concepts, Ethics, Issues, Technology

The Responsibility to Disrupt?

By Glen Whelan.

Project Breakthrough: A New Initiative from the United Nations Global Compact

Through its Global Compact, John Ruggie’s special representative work on human rights and multinational corporations, and a whole host of other initiatives, the United Nations (UN) has long been a leader in corporate responsibility and sustainability matters. With the relatively new Project Breakthrough, it appears that the Global Compact in particular, is looking to maintain the UN’s leading role, and leverage its prominent position, in business and society relations. A collaboration with the ‘market catalyst’ Volans – whose co-founder and Chief Pollinator (no kidding) is John Elkington (a champion of triple bottom line thinking in prior times) – Project Breakthrough seeks to translate the United Nation’s “new 2030 Sustainable Development Goals into business action” by challenging and stretching “prevailing business mindsets into new opportunity spaces”.

Project Breakthrough has three specific areas of focus.

  1. It seeks to foster “exponential mindsets” by asking: “what does the future look like and what can leaders in all spheres learn from the ‘anything-is-possible’ approach that is common among successful innovators?”
  2. It emphasizes the importance of “disruptive technologies” such as artificial intelligence and synthetic biology, by asking: how can they “transform what’s possible in terms of sustainable performance and longer-term system change?” and
  3. It looks towards “tomorrow’s business models” by asking: how “new disruptive technologies” can enable “more sustainable, collaborative and circular business models?

Project Breakthrough’s Techno-Utopian Context

For those who know of Google’s current Director of Engineering Ray Kurzweil – and his sidekick Peter Diamandis, who, further to his very pronounced self-promotion skills, co-founded Singularity University with Kurzweil around 2007 – the basic ideas of Project Breakthrough will be familiar. They can also be readily lampooned, as Seth Rogen is reportedly soon to do. Whilst some might find such commentary cynical, the Global Compact’s willingness to embrace techno-utopian ideas that broadly align with those of “Trump delegate, Facebook board member, billionaire PayPal cofounder” and Singularity University supporter, Peter Thiel, does raise questions as to the role of trends and fashion in corporate responsibility and sustainability policy and practice.

The Risks of Disruption

Whilst none of the above mentioned parties are a priori wrong to think that technology and innovation can help address many of the world’s most pressing problems, Project Breakthough’s implicit suggestion that business has a responsibility to disrupt markets (and societies) is facile. Companies like Uber, for example, are clearly new and disruptive. As ongoing disputes with its partner and not employee drivers indicate, however, Uber’s emphasis on technological disruption and new business models seems far removed from both the concern to end poverty (2030 Sustainable Development Goal No. 1), and the UN Global Compact’s concern with labour rights.

In short, the current emphasis on exponential mindsets, disruptive technologies, and tomorrow’s business models, is not risk free. Indeed, without significant qualification, it is not clear how Project Breakthrough’s recent championing of disruptive change is to be rendered consistent with George Kell’s 2003 suggestion that the Global Compact “can only effectively serve as a learning platform that facilitates gradual, incremental change”. So perhaps the Global Compact should adopt a more precautionary approach to the disruptive possibilities of technology for society and the environment. Alternatively, it might further investigate how such ideas as the universal basic income much loved by Silicon Valley could hedge against them.

Glen Whelan is Marie Curie Research Fellow at Copenhagen Business School. He researches Business Ethics, Politics and Corporate Social Responsibility, Internet Studies and Organization Theory. He’s on Twitter.

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Accountability, Communication, CSR, Issues, Models, Partnerships, Reporting

UN Global Compact Expels More Participants than New Participants Join

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By Andreas Rasche.

In October 2015, the UN Global Compact, the UN’s flagship initiative for corporate responsibility and sustainability, has expelled 130 firms for failure to report on implementation progress. During this month only 116 new businesses joined the initiative. This is third month in 2015 that the initiative had to expel more participants than new participants joined (after January and September). Participation in the Global Compact is voluntary and firms commit to ten broad principles in the areas of human and labor rights, the environment, and anti-corruption. Every participant has to report annually on progress made against these ten principles. Non-communicating participants are expelled from the initiative.

The Global Compact seems to grow much slower than anticipated. From January until October 2015, 1,072 new participants joined the initiative, while 984 companies were expelled for failure to meet the basic reporting requirement. This suggests that the total number of business participants may stagnate soon (or even decline). Some years back, UN Secretary-General, Mr. Ban Ki-moon, set the ambitious target of 20,000 participants by 2020. This vision seems to be out of reach.

The high number of expelled companies also calls into the question the current “business model” of the Compact. How useful is it to have around 100 new business participants each month, while, at the same time, having to delist an almost equal number of companies? The mandatory reporting requirement is a basic commitment that firms enter into once they join the initiative. Many firms do not seem to be able (or willing) to even meet this requirement. Since it inception, the Compact had to expel more than 5,800 businesses from the initiative!

One reason for the high turnover of participants is the Compact’s low entry barrier. Companies willing to join just need to write a letter stating their intention to work towards the ten principles and other UN Goals (such as the recently launched Sustainable Development Goals). As we all know, letters are written quickly, while substantive actions usually require significant resource commitments. Higher entry barriers would attract fewer companies. But isn’t it more desirable to have a small pool of a few highly committed firms, than a large pool of businesses with rather low ambitions, or no ambitions at all?

Without doubt, the Global Compact includes some of the world’s sustainability champions, and we should not lump together all participants. Some firms are highly committed leaders; others are in the process of integrating relevant practices into their operations and strategies; and yet others have just started their journey. There is nothing wrong with having such a diverse participant base and to offer guidance to those who want to ratchet up their commitment. But a voluntary initiative that has to expel around 1,000 participants each year, while at the same time accepting 1,000 new companies, may miss the point.

To delist those firms that do not play by the rules is not a bad thing per se. One could argue that the Global Compact is being “cleaned up.” However, delisting turns into a problem when it is not a temporary development but a constant state of affairs. There are many things that could be done to restructure the Compact. However, I believe three issues are particularly important:

  1. Higher Entry Barriers: Reporting should not be an outcome of participation in the Compact but a precondition for entering the initiative. Instead of allowing all interested businesses to join, it would make sense to require new participants to submit a report that outlines how the ten principles are currently addressed in the organization and what plans exist for the future. Such a policy change would ensure that new participants have some experience with reporting before entering the initiative (e.g. become aware of resources that are necessary to issue a report).
  1. Strengthen Value Proposition for SMEs: The vast majority of delisted firms are small or medium-sized enterprises (SMEs) – i.e. firms with less than 250 employees. Either these companies do not have sufficient resources to launch relevant activities and then report on them, or they do not see enough value in the initiative and hence do not assign relevant resources in the first place. Contrary to larger firms, SMEs do not profit much from “legitimacy gains” that are created by being associated with a UN-driven initiative. SMEs are usually strongly embedded in the local communities that surround them. The Compact’s numerous Local Networks should explicitly engage SMEs into smaller regional clusters. Such clusters are more likely to be of value to SMEs than larger, “nation-wide”, networks in which sustainability issues are discussed at a quite general level. This would require more resources to Local Networks, also to directly assist SMEs in writing sustainability reports instead of just sending them reminders.
  1. Reform Governance: The Compact’s governance framework consists of several entities (e.g. the Local Networks and the tri-annual Leaders Summit). In practice, however, the Board of Directors plays the most significant role, as it needs to endorse all major changes to the initiative. Although the Compact takes much pride in being a multi-stakeholder initiative, the current structure of the Board does not necessarily reflect this: there are 17 business representatives, 4 representatives from civil society organizations, 2 representatives from business associations, and 2 representatives from labor organizations. A more balanced representation of stakeholder groups is needed, especially as the Compact works under the umbrella of the United Nations, an organization that promotes inclusiveness. Without changes to the Compact’s governance framework, it will be hard to reform the initiative (e.g. to install higher entry barriers). As a UN entity, the Global Compact is ultimately accountable to the General Assembly (GA). The GA could take the lead in strengthening the Compact’s mandate, while, at the same time, calling for a more balanced representation of stakeholders.

So, what is the bottom line? The Global Compact needs to find ways to balance quantitative growth with qualitative commitment to the ten principles. The current turnover rate of new participants and delisted participants is not sustainable, and this seems to be an important lesson for an initiative focused on sustainability…

The Compact is too good of an idea to give up on. But, it won’t be this version of the Global Compact that changes the practice of corporate sustainability.

Andreas Rasche is Professor at Copenhagen Business School and Director of CBS’s World Class Research Environment Governing Responsible Business. He has collaborated with the UN Global Compact on different projects and served on the initiative’s LEAD Steering Committee from 2012 to 2015. More information on: www.arasche.com

Comments byMathias Lund Larsen

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