United Nations Global Compact The global umbrella of CSR

“‘Proving that principles and profits go hand in hand, I propose that the business leaders and the United Nations initiate a global compact of shared values and principles that will give a human face to the global market.

– Kofi Annan, UN Secretary-General (1997 – 2006)

Origin of Global Compact

The seeds of the Global Compact were sown on 31 January 1999 by the then UN Secretary-General Kofi Annan when he announced the formation of the Global Compact, at the World Economic Forum. It was officially launched at UN headquarters on 26 July 2000. The United Nations Global Compact (UNGC) office works based on a mandate set out by the UN General Assembly (UNGA), as an organization that ‘promotes responsible business practices and UN values among the global business community and the UN system’. UNGC was established as the global level network for CSR, in pursuit of supporting the UN goals – the Millenium Development Goals (MDGs, 2000-2015), and later, the Sustainable Development Goals (SDGs, 2015 – 2030).

United Nations Global Compact is a voluntary initiative of the ‘global business majors’, under a pact with the UN in July 2000. It is based on the commitment of CEOs of companies, who used this as a platform to implement universal sustainability principles. It offers a framework for Businesses to do responsible business and is used as a forum for the United Nations and Global Compact(GC) to work together. Headquartered in New York, UNGC operates as a global agency and through local networks from participating countries. Besides the businesses, labour groups and civil society organizations also command a stake in shaping up responsible business, across both the developed and developing regions.

GC is a non-binding UN Pact to get businesses and firms worldwide to promote sustainable and responsible business practices and socially responsible policies. Its primary task is to evolve frameworks and design mechanisms for making the businesses both sustainable and socially responsible, and to report on their implementation. Endorsed by Chief Executives, the Global Compact is a practical framework for the development implementation, and disclosure of sustainability policies and practices, committing businesses to sustainability, and shared responsibility for achieving a better world.

Ms.Sanda Ojiambo, Assistant Secretary-General, UNGC claims that the UN Global Compact is the world’s largest voluntary Corporate Sustainability initiative in the world. With more than over 16,000 corporate participants and stake holders, and 3,800 non-business signatories, from over 160 countries, engaged through 69 country networks, UNGC is also the largest ever public-private partnership, practiced across the development sectors and geographic regions. It calls for companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.

The declared objective of GC’s participants and stakeholders is to ‘catalyse actions’ in support of broader UN goals (MDGs and SDGs). GC solicits commitments to specific sustainability and social responsibility goals from CEOs and highest-level executives. In turn, it offers training, peer networking, and their functional framework for responsibility – taking a ‘learning model’ for corporate change, rather than a ‘regulatory’ one.

Linkage with the UN

The United Nations General Assembly (UNGA) has recognized the UNGC as a non-entity of the United Nations. In addition, it has also been additionally recognized in several other Inter-government contexts. The UNGA renewed the mandate of the UNGC office and the UN office that supports this initiative, by a resolution (A/Res/73/254). This UN resolution recognized “the vital role the UNGC continues to play in strengthening the capacity of the UN to partner strategically with the private sector”.

GC works with a wide range of UN entities, in its transactions with its partners. The areas of focus, and the concerned UN entity with which Global Compact transacts, are listed below:

Principles of UNGC

Gandhiji believed that ‘means are more important than ends’. On these lines, GC strongly believes in Ten principles as its pillars of operation, which are to be faithfully followed by its business participants, as well as other implementing partners. These principles are derived from the following UN declarations:

– United Nations Universal Declaration of Human Rights (1948)

– ILO’s Declaration on Fundamental Principles and Rights at Work (1998)

– Rio Declaration on Environment and Development (1992), and

– UN Convention Against Corruption (2005).

These Ten principles, pertaining to Four domains – human rights, labour, environment and anti-corruption, are listed below:

1. A. Human Rights: : Businesses should

– Support and respect the protection of internationally proclaimed human rights

– Make sure that they are not complicit in human rights abuses

2. Labour:: Businesses should uphold the

– Freedom of Association and the effective recognition of the right to collective bargaining

– Elimination of all forms of forced and compulsory labour

– Effective abolition of child labour and

– Elimination of discrimination in respect of employment and occupation.

3. C. Environment:: Businesses should support

– A precautionary approach to environmental challenges

– Undertake initiatives to promote greater environmental responsibility,

– Encourage the diffusion of environment-friendly technologies.

4. D. Anti-Corruption: Businesses should work against corruption in all its forms including extortion.

GC incorporates these principles into its strategies, policies and procedures, which fulfil its basic responsibilities to both people and the planet and set the stage for long-term success. The first six of the UN Global Compact’s principles focus on the Social dimension of Corporate sustainability, of which Human rights is the cornerstone.

Themes of work

Global Compact’s major programmes include the following:

Foundation for UNGC

The UNGC is supported by the Foundation for the UNGC, a U.S.-based non-profit, established in 2006, that exists solely to provide vital financial operational and programmatic assistance to the work of the Global Compact. In addition to fundraising activities, the Foundation also provides general support to advancing the development of strategies and programmes and organising Global compact events.). UNGC does not receive funding from the regular budget of the United Nations.

Participants of UNGC

As of Jan. 18, 2024, a total of 2057 businesses, representing companies, and small or medium-sized enterprises, encompassing over 100 sectors of activities from 105 countries are members of Global Compact. Participants from 18,000 companies, including 3800 business participants, represent every sector and size and come equally from developed and developing countries. (https://unglobalcompact.org/what-is-gc/participants) Caroline Dale observes that the world’s 500 largest companies spend more than $15 billion on Corporate social responsibility, and adds that 93 per cent of CEOs claim that Sustainability is key to the success of business.

Governance of UNGC

The UN Global Compact’s governance framework was adopted by the UN Secretary-General Kofi Annan on 12 August 2005, following a year-long international process, consulting 300 stakeholders including Local Networks and governments. The resulting governance framework distributes governance functions among several entities to engage participants and stakeholders at the global and local levels in making decisions and giving advice on the matters of greatest importance to their role and participation in the UN Global Compact, and to reflect the initiative’s public-private and multi-stakeholder character.Further, refinements  have been made since 2005, including the establishment of the UN Global Compact Government Group to formalize the role of governments.

Contribution from Governments to the UNGC Trust Fund constitutes the primary financial resource to implement the Compact’s programmes and activities.Support by businesses to the Foundation for the UNGC, serve as the second source of support. Both these sources play a crucial role in advancing ‘sustainable business models’. Thirdly, the UNGC “Government Group”(GC), comprising a dozen countries, brings together key government supporters of the Global Compact, which provides first and foremost political support as well as financial contributions and programmatic engagement.

Challenges of UNGC

Despite its concerted efforts to achieve the UN goals and address global issues, it faces some challenges and suffers from certain drawbacks listed below:

– Although more than 90 per cent of GC business participants reported having Human Rights Policy in place, only 18 per cent conducted human rights Impact assessments.

– The 2020 Corporate Human Rights Benchmark shows that 46 per cent of companies assessed failed to score any points under the Benchmark’s Due diligence indicators.

– In the Global Compact’s Annual Survey, 18 per cent highlighted a lack of understanding of these human rights responsibilities.

– Seven firms have attained net-zero emission targets, all of whom are GC participants. The G20’s largest and highest emitting companies must urgently increase climate action to align with 1.5 o C and the G7 needs to lead from the front in driving climate action on science-based net-zero targets.

– The Contemporary industrial houses primarily concentrate on profit and growth, and some of them are not adhering to certain restrictions by the Enforcement Machineries. GC’s power to hold such industries accountable for their aberrations is limited, because GC, by its constitution, is neither mandatory nor regulatory.

– While admitting the Companies as a Member, the absence of a closer scrutiny of an industry’s DNA, and its inherent intent to join the compact, unknowingly allows certain socially non-responsible entities into its fold.

– In view of stiff resistance by the victim communities, and vehement civil society organizations against their anti-people and anti-environmental practices, such companies withdrew later, after they were charged and fined for their illegal operations. The lack of mechanisms for sanctioning non-compliance is an inherent weakness of GC. (https://en.wikipedia.org/wiki/U-N-G-C).

– Industries that caused the death of thousands of workers and people living around such disasters, polluting the environment and poisoning the cattle population are called as ‘irresponsible industries” which need not be enrolled with the Global Compact.

Towards Silver Jubilee

No doubt that the contemporary global business scenario has a tough and challenging road ahead, but the prospects of corporate social responsibility abundantly prove that they will confidently reach their destination, provided that global agencies like Global Compact are supported and strengthened more by the United Nations. UNGC is on the threshold of completing a quarter century by 2025. On this occasion, the United Nations may take the initiative to incorporate this from a ‘non-entity’ into an ‘Entity’ of the UN and can convert its role from ‘non-mandatory’ to ‘mandatory”. Under such a scenario, UN Global Compact will grow further, and faster. António Guterres UN Secretary-General (2017-2026) and Board Chair of the UN Global Compact rightly says that ” More must be done by businesses globally to accelerate corporate sustainability and responsible business practice. Now is the time to scale up the global business community’s contributions to the 2030 Agenda and the implementation of the Paris Agreement on climate change.”

Views of the author are personal and do not necessarily represent the website’s views.

Dr. M.P. Boraian, a retired Professor from Gandhigram University, Tamil Nadu, brings over four decades of expertise in Rural Development. His illustrious career includes serving as the Nodal Officer for National Level Monitoring, extensive consultancy for NGOs, and being honored with a United Nations ILO Fellowship. Recognized for his outstanding contributions, he received the ‘Best Outreach Faculty Award’ from Gandhigram Rural University. A prescribed author by the University Grants Commission, Dr. Boraiyan’s influence extends to post-retirement, engaging in impactful Corporate Social Responsibility programs for ONGC, RAMCO, Azim Premji Foundation, and Sterlite Copper, showcasing his enduring commitment to community development in India.