Cleaning up the Global Compact: Dealing with Corporate Free Riders

The executive director of the UN's voluntary sustainability initiative is determined that members adhere to its principles
Mar 26, 2012 9:15 PM ET


Series: Jo Confino meets

Cleaning up the Global Compact: dealing with corporate free riders
The executive director of the UN's voluntary sustainability initiative is determined that members adhere to its principles

Jo Confino for the Guardian Professional Network, 26 March 2012

If you want to know whether greenwash is alive and well, look no further than the thousands of companies being thrown out of the world's largest voluntary corporate sustainability initiative, the UN Global Compact. More than 750 businesses, including major corporations in Europe and America are likely to be kicked out in the next six months alone, with hundreds more to follow. These are on top of the 3,100 businesses already delisted in the past few years.

Executive director Georg Kell is on a mission to clean up the organisation and ensure that members are building sustainability into their core activities and not using the Global Compact for PR purposes. While some companies have been removed because of bankruptcies and mergers, Kell says he is dealing with "free riders who joined but had no intention to stay engaged."

Non-governmental organisations have long criticised the Global Compact, which promotes 10 principles in the areas of human rights, labour, the environment and anti-corruption, because it has no effective monitoring and enforcement provisions.

They also accuse businesses of using it to oppose any binding international regulation on corporate accountability and for benefitting from the Global Compact's logo, a blue globe and a laurel wreath, which is very similar to the UN logo, while continuing to perpetrate human rights and environmental abuses.

Part of the problem, Kell acknowledges, was of the Global Compact's own making. Expectations about engagement a few years ago meant a chief executive statement and "some kind of commitment to implement sustainable principles." Kell says this has been tightened up with the development of several engagement tools and that companies are being clearly marked out if they are at an early or advanced stage of reporting.

In support of Kell's outing of companies which are not meeting minimum reporting requirements, a coalition of global investors from 12 countries managing over $3tn (£1.9tn) of assets, recently wrote to 29 large-scale Global Compact members, with a combined market capitalisation of $136.9bn, to put pressure on them to start producing progress reports.

Kell is anxious to act because he recognises that the corporate sector is moving far too slowly to deal with the enormity of the social and environmental challenges heading this way.

He puts the lack of progress down to company CEOs not liking to change and the fact that many thrive on perverse incentives.

"If the business model is doing fairly well you do not want to rock the boat," says Kell. "In other areas it is true to say the business case has not penetrated down through organisations' subsidiaries yet. It is understood at CEO level and headquarter level but to drive the sustainability agenda through the value chain is a tall order.

"The other barrier is the operating environment. The fact is that in many parts of the world the enabling environment for business is not well developed. It has to do with corruption and violence and the way that power is managed for the benefit of the few."

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