Critics of the UN Global Compact Sound Off
As we noticed in the Great Twitter Debate on the United Nations Global Compact, the UNGC is not without its controversies. Some view the Compact as a great first step on a global platform for companies to engage in corporate sustainability. Other people have concerns about the low-level of monitoring and enforcement of the UNGC’s 10 principles.
To find out more about the concerns of some of these critics and how they would suggest reform, we reached out to Bart Slob who is a Senior Researcher at the Center for Research on Multinational Corporations based in Amsterdam. He is also the editor of the Twitter account @UNGCcritics, an informal network of organizations that have concerns about the Compact.
Q: Thanks for agreeing to meet with us. First, can you give some background on your organization? How long has SOMO been around? What is the organization’s research focus?
The Center for Research on Multinational Corporations (SOMO) was founded in 1973 in The Netherlands. SOMO’s aim is to enhance the capacity of civil society organizations worldwide to influence corporate behavior and business regulations in the interest of sustainable development and poverty eradication. We strive to achieve sustainable economic, social and ecological development, the improvement of workers’ lives and the eradication of exploitation, poverty and inequality.
Our research activities tend to focus on the policies and practices of multinational enterprises. The main challenge in my work is to find out how to close the global governance gap in the field of corporate social responsibility and corporate accountability. In my day-to-day work, I help governments and public authorities to promote and ensure responsible corporate behavior.
Q: Some people see the UNGC as a first step, as a good place to start. Is there anything wrong with that?
Becoming a participant in the UNGC can be first step for small and medium-sized enterprises that are unfamiliar with the concept of corporate social responsibility (CSR). However, we are concerned that large companies – mainly multinationals – are interested in the UNGC because it enables them to make use of the image of the United Nations for public relations purposes. Most of these multinationals already have comprehensive CSR programs. For them, adherence to the principles of the UNGC does not imply any changes in the way they operate. In other words, these large companies can continue to do business as usual.
Q: So if you could reform the UNGC overnight – what would be your top three priorities?
- Focus on providing practical tools to ambitious small and medium-sized enterprises in developed and developing countries, rather than offering a public relations platform for big business.
- Become more demanding. For example, companies that aspire to join the UNGC should be required to submit an initial report on environmental, social and governance (ESG) aspects to the Global Compact Office. After receiving this initial report, a company could be allowed to become a participant in the UNGC. Now new business participants are given one year from the date of joining to prepare and submit their first Communication on Progress (COP).
- Set up a sound and reliable grievance system under the UNGC’s Integrity Measures. Civil society organizations should be able to submit complaints about business participants that do not follow the 10 principles.
Q: As you reported on your blog, the UNGC and the OECD have recently agreed to collaborate in some form. Do you think this will help, hurt, or maintain the current strength / weaknesses of the UNGC?
It really depends on what the nature of this collaboration will be. We are rather skeptical about the idea of forwarding complaints received by the UNGC Office to the OECD’s national contact points (NCPs). Research undertaken by OECD Watch (www.oecdwatch.org) has shown that many NCPs do not deal with complaints in an adequate and effective manner. Collaboration will be positive if the UNGC and the OECD reach an agreement on the sort of business activities they want to address. Considering the fact that the Investment Committee of the OECD focuses on multinational enterprises, we do not think there is a point in the UNGC also trying to cover these companies.
Q: How do you see the strength of implementation of the UNGC in developed vs. less-developed countries? Is there a disparity in support / implementation?
In some parts of the developing world, notably in conflict areas and fragile states, it is nearly impossible to implement the principles of the UNGC. A question we must ask ourselves is whether it is useful and effective to have business participants in these countries. In some countries, be it developing or developed countries, the level of reporting on progress is extremely low. In other countries many companies report, for instance Malaysia. I suspect this depends on the strength of the local network in the country. In Moldova, for example, I have seen that many small and medium-sized companies participate actively in the UNGC. The local network there is led by very enthusiastic and knowledgeable people, who really want Moldovan SMEs to succeed in doing business in a sustainable way. However, we must realize that “participating actively” is usually limited to reporting on a regular basis and participating in events. It says very little about the actual implementation of the UNGC’s principles.
Q: You’ve noted the number of companies becoming delisted and that this seems to be a recent development in the UNGC. Why do you think the UNGC is now started to delist companies?
The UNGC started to delist companies about two years ago. We believe it was a response to demands for increased accountability from civil society organizations and some progressive companies. We support the delisting of companies, even though there are still a lot of free riders in the UNGC. In Mexico, there are currently 203 inactive and 26 non-communicating participants. There are only 76 active Mexican participants. Another champion of idleness is the Dominican Republic. There are 5 active business participants in the Dominican Republic, versus 88 inactive and 12 non-communicating companies. It is only natural that even supporters of the UNGC have serious doubts about the quality and the effectiveness of the local networks’ leadership in these countries.
Q: On a different, but related note, what’s your view on whether governments should require triple bottom line reporting?
It is only a matter of time before governments start to require reporting on ESG aspects. Some governments already do this. Traditionally, reporting has only been mandatory for the financial aspects of doing business. We live in different times now. Issues like climate change and the water crisis have become a priority for public policymaking. The question is not whether governments will require reporting on ESG aspects, but how they will do it. We believe that reporting is not enough – governments should also make sure companies practice what they preach.
Q: On a more philosophical level, how do you view a company’s responsibility to society and the environment? In other words, at what point does society begin to expect more from companies than it should? When would we cross the line?
I would be extremely happy if all companies would do was complying with existing laws and regulations. Unfortunately this is not the case. In part, governments are to blame for this. They have signed an enormous amount of international treaties, agreements and declaration, and have failed to convert these documents in effective and applicable public policy instruments. I believe governments should make an effort to provide clearer guidance on the responsibilities and rights of companies and create an ambitious level playing field for companies committed to real corporate social responsibility.