The United Nations Global Compact was launched in 2000 by Kofi Anan as a platform to promote greater corporate responsibility around the world -- ten guiding principles for corporations covering human rights, the environment and corruption. The Compact now includes over 7,000 companies from 130 countries. U.S. businesses have been slower to get on-board than most countries as many U.S. executives see the UN Global Compact as just another set of sustainability guidelines crafted by governments or activists to induce greater "corporate social responsibility." This view, however, misreads the real significance of the UN Global Compact.
The UN Global Compact is a revolution in global governance. Our modern system of international law began in 17th century Europe with the Treaty of Westphalia, which ended the Thirty Years' War, Europe's bloody conflict between Protestants and Catholics. But beyond quelling a religious war, Westphalia is best known for creating the idea -- and legal reality -- of the sovereign state. With the signing of the treaty, the political geography of Europe changed from the messy "boundaries" of the Holy Roman Empire to the more recognizable "borders" of autonomous European countries.
What's important is that Westphalia created the modern system of international law, which, as the name implies, recognizes the "nation" as the only player in international policy making. Only national governments are invited to nation state confabs like the G20 to set international goals like peace and economic prosperity. However, in the 300 or so years since Westphalia, things have changed a lot. There is a new player on the global scene that rivals the nation state in economic terms, and it is the modern corporation.
The Modern Corporation
The first multinational corporation, the Dutch East India Company, was created around the time of Westphalia, but at the time was completely dependent on the sovereign state to do business. A July 2005 article in Fortune Magazine illustrates how much things have changed since then. When Fortune compiled a list of the 150 biggest economic entities on the planet, only 55 were nation states. Wal-Mart and Shell were bigger than Norway, Saudi Arabia and Indonesia. Beyond economic power, corporations had the added advantage of being able to coordinate enterprises that span the globe, largely unobstructed by national borders.
The UN Global Compact is revolutionary because it recognizes this reality. The Compact's Ten Principles are pulled directly from international laws like the UN Declaration on Human Rights and the UN Convention Against Corruption. These laws were created for nations by nations. But, in effect, the UN Global Compact asks businesses to sign onto international law. It is an implicit recognition that corporations are now major players in globalization and that the international community's common goals cannot be fulfilled without the active participation of global businesses.
This is more than a curiosity for students of international relations. Companies that sign onto the UN Global Compact become peers in the process of creating a peaceful and secure global economy. It evokes a higher purpose to global business. While it is still the responsibility of executives to make a profit, which means creating value in excess of the resources borrowed, it requires doing so in new ways.
Critiques say the Compact is insignificant because it is just words on paper. Diplomatic words on paper never stopped nation states from going to war or exploiting others for economic gain, so why should the UN Global Compact be any different? But corporate commitments are different in that they are watched by activists and bloggers, and also shareholders and customers. This means they are treated with significant respect by executives and may explain the reticence of U.S. companies to sign on. Recent U.S. signatories to the UN Global Compact include Cisco, Coke, DuPont, Ford, Intel, Nike and Starbucks. Their CEOs have made the calculation that succeeding in global business requires becoming a contributor to global governance. That is a pretty substantial outcome for the UN Global Compact to simply be words on paper.
Follow Gregory Unruh on Twitter: www.twitter.com/gregoryunruh
You write that “the UN Global Compact asks businesses to sign onto international law”. I wish that were true. Unfortunately it is not. Since its creation, The UN Global Compact has repeated over and over again that it is a learning network, not a regulatory instrument. “The Compact is about learning, dialogue and partnerships”, says its executive director (see http://vl.am/RiB). All participants in the Compact do is state that they commit to ten universally accepted principles and report on progress. If the Global Compact required companies to promise compliance with legislation in the areas of human rights, labor, environment and anti-corruption, I am sure the initiative would not have so many participants.
Kind regards,
Bart Slob
Senior researcher
SOMO - Center for Research on Multinational Corporations
www.globalcompactcritics.net
I would be more interest, however, in your opinion on the impact of signing on executive leadership. Given the name of your site I suspect you are highly suspect of the UNGC impact. Do you know of any research that can shed light here for us?
Thank you for your reply. Yes, we believe that the UN Global Compact could be much more effective. We also think that the United Nations could do a lot more to address irresponsible corporate behavior globally. In spite of our skepticism, we do engage in constructive dialogues to improve the functioning of the Compact.
In November 2009, we sent a letter to the Global Compact Office with a request to review the Compact's application policy. In the letter, we expressed our concerns about the high number of non‐reporting business participants and about the ease with which a company can be accepted as a participant in the Compact, gain the recognition and positive reputation benefits that come from this association, use the Compact logo in publications, and represent their organization as operating in concert with the Compact principles, all without having proven that their actions are in line with their stated commitment. In the letter, we suggested that it would be preferable for companies to be accepted into the Compact only when they are ready to publish their first Communication on Progress. Disappointingly, almost five months later, we have still not received a reply to our letter. The letter is available here: http://vl.am/Vda.
With regard to research that reflects our suspicion of the Compact’s impact, I suggest you have a look at our list of free alternative sources. It is available at http://vl.am/H5J.
Kind regards,
Bart