The Global Compact at 10: Review and Outlook

Looking back at the past 10 years, the United Nations Global Compact has left its mark in a variety of ways, helping shape the conversation about corporate responsibility and diffusing the concept of a principle-based approach to doing business across the globe.

Numbers only tell one side of the story, impressive as they may be. Since its humble start with 44 companies, the Global Compact has mobilized nearly 6,000 businesses in over 135 countries – of all sizes and from all sectors – to align their strategies and operations with its 10 universal Principles.

Yet, much remains to be done: Globally, there are some 77,000 transnational corporations, with millions of suppliers. The world is far from the universal adoption of corporate responsibility as a strategic and operational management paradigm. Nevertheless, there has been a marked shift in the ways in which multinational corporations and small and medium-size enterprises alike are looking at environmental, social, and governance issues.

With this shift, there has also been a recalibration of the larger debate over the role and responsibility of business. When the Global Compact was introduced – in the wake of vigorous anti-globalization protests, fueled by highly publicized corporate scandals of the 1990s – corporate responsibility was often treated as a purely moral issue, largely driven by NGOs, activist groups, and the media. Ten years on, the ethical case for acting responsibly remains as solid as it was then, but it has been complemented by an increasingly compelling business case. This business case is bolstered by investors and asset managers that look at environmental and social risks through the lens of fiduciary responsibility; by national regulators who are increasingly demanding non-financial performance information and seek to strengthen good corporate governance; and by an emerging global movement of conscious consumers who are placing a premium on more sustainable products and services.

Moreover, the business case is not just about minimizing risks – and thus the potentially hefty price to pay when things go wrong. It is also about discovering new opportunities, developing innovative business models, and opening new markets. Success stories of hybrid technology, organic agriculture, microfinance, or pro-poor products and services, to name a few, are valid indicators that the focus of business has shifted from morality to materiality. In many ways, corporate responsibility today is about the tangible value of values.

The Global Compact has often been among the first to spot these trends, and we have spent much effort on creating the proper engagement platforms to advance the debate, identify good practice, foster collective action, or inform and shape sensible public policy. The Growing Sustainable Business initiative, the Principles for Responsible Investment, Caring for Climate, or The CEO Water Mandate – all inspired by or launched with the Global Compact – are clear expressions of the initiative’s important position at the nexus of public and private spheres, global advocacy and local implementation, individual leadership and true scale.

On a related note, the Global Compact has played a critical role in easing some of the often serious tensions between civil society organizations and business. Under the roof of the United Nations, in a non-threatening space for constructive dialogue and learning, both sides have discovered that there is more common ground than previously thought and that there is room to move from confrontation to cooperation. In quite a few remarkable cases, this has not, as many thought, forced NGOs to compromise their missions, and it has not come at an added cost for business.

Throughout the Global Compact’s evolution, the United Nations itself has learned to reevaluate and restructure its relationship with business. Most member states now encourage private-sector engagement by UN agencies, funds, and programs. This is a sea change.

Only a decade ago, bringing business to the United Nations raised much suspicion. As an inter-governmental body, the UN was at times ill-prepared or even reluctant to involve the private sector in a meaningful way in its mission – despite the fact that much of the organization’s founding philosophy had stressed the vital role of commerce and trade as pillars of stability, development, and peace.

Now, there is a common understanding and consensus that global challenges require concerted, collective efforts involving business as an indispensable partner. It is for this reason that the General Assembly has, in successive resolutions, stressed the contribution that the Global Compact can make to bring about more inclusive markets and advance sustainable development.

As an initiative engaging some of the world’s largest corporations, the Global Compact naturally has had to face some opposition and criticism. And admittedly, it took some time to find a proper modus operandi that would safeguard the initiative’s integrity, while ensuring accountability and transparency of the corporate commitment. It also required frequent clarification of what the Global Compact is and what it is not. Nevertheless, we have remained true to our original mandate and mission: The Global Compact is, first and foremost, a platform for dialogue, learning, and partnership. Participation does not imply perfection. It simply means that an organization is willing to align with UN values and engage in activities that advance UN goals. As such, the Global Compact does not pass judgment or regulate corporate behavior. Of course, this has at times caused misunderstandings or even frustration, but it has always been an intentional policy to keep the entry barrier low, so that those that face serious challenges can join the conversation, learn from others, and improve. And we stand by this approach, as long as a sincere commitment to constructive dialogue and disclosure can be ascertained. It is for this purpose that the Global Compact introduced a mandatory reporting policy in 2005, requiring all participating businesses to issue an annual public Communication on Progress. The fact that nearly 1,800 companies have been publicly expelled from the initiative for repeated failure to disclose their practices has not been a detriment to the Global Compact’s mission, but rather strengthened its credibility.

As the Global Compact enters into its second decade, the big question is what lies ahead. Today, the world economy is still reeling from a financial and economic crisis of momentous proportions. Global challenges, from climate change to natural resource constraints and widespread, abject poverty, are not likely to be resolved in the near future. Consequently, there is much uncertainty over the fate of the global market and the prospect for sustainable growth and prosperity. Are we entering a new era of protectionism and narrow-minded national policies that threaten to roll back the advances in global integration made in the past two decades? Or will we be able to chart a course to sustainability where responsible business is a critical catalyst? What does it take and how can we best support efforts to make this happen? Where will leadership come from and what pathways should we follow?

While much of the answer depends on political will and capacity, the Global Compact is committed to doing its part. If its first 10 years were about raising awareness and stimulating positive organizational change, the next decade will be about turning principles into practice; mobilizing tangible – individual and collective – action; cultivating issue leadership and local networks to bring good efforts to true scale; and further intensifying public-private collaboration, so that effective business solutions can stimulate positive policy responses, which, in turn, will help improve the enabling environment for responsible practices to grow. As business leaders meet in New York this June for the Global Compact Leaders Summit 2010, the Summit’s motto becomes our shared mission: The time is now to build a new era of sustainability.