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Expanding the Global Compact: the World’s Largest Corporate Citizenship Initiative

Tori Okner | Friday October 31st, 2008 | 0 Comments

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A group of 52 high profile investors announced the beginning of a massive letter writing campaign to urge businesses to sign on to the UN’s Global Compact. “Amid the current financial crisis, this underscores the importance of universal principles and the long-term management of environmental, social and governance issues,” said Executive Director of the UN Global Compact, Georg Kell, “We applaud this effort, which represents the largest recruitment drive ever undertaken with respect to the UN Global Compact.”
The investor group manages approximately $4.4 trillion in assets and they’re using that leverage to assert the relevance of the Global Compact to 9,000 CEO’s worldwide. Target companies are in the MSCI World, FTSE All-World and IFC Emerging Markets Indices. A sample of U.S. target companies runs the gamut from 1-800 Flowers and Abbot Labs to Marathon Oil and the Zale Corporation.
All of investors are signatories to the Principles for Responsible Investment, a framework for corporate citizenship launched at the second Global Compact Leaders Summit in 2007, in partnership with the UN Global Compact and the UNEP Finance Initiative. Chair of the PRI initiative and Trustee of the BT Pension Scheme, Donald MacDonald, explained the impetus behind the letter writing initiative from the shareholder perspective, saying, “We believe investee companies that take account of environmental, social and governance issues are more likely to offer… [good, long-term] returns.”


Yet, similar to the Global Compact, there are no sanctions for signatory non-compliance to the PRI nor does it detail portfolio requirements. The investor-advocates emphasize these commitments evidence corporate awareness and positive engagement.
Eight years after its implementation, the Global Compact continues to be criticized as a paper tiger, or worse, an exercise in corporate self-congratulation. Lax signatories are subject to accusations of bluewashing.
In response to the charges raised by skeptics, the participation requirements now include mandatory reporting. Signatories are responsible for annual communication with stakeholders and the Global Compact website.
However, a corporation’s continued participation is not dependent on demonstrated progress. Furthermore, the Global Compact has admitted companies with dubious humanitarian and environmental records, records in contrast to the guiding principles, leading to denouncements from several watchdogs, including Amnesty International and Greenpeace International.
The blog GlobalCompactCritics, run by the Centre for Research on Multinational Corporation (SOMO), is a forum for civic critique of the Global Compact. They’re highlighting a recent article by a consulting professor at Stanford University, Antonio Vives, who argues, essentially, less is more. A translation of his work, (originally in Spanish) suggests that, “for the Global Compact to add value, it must become a more exclusive club, one that implies a “membership fee”, that is, one that demands responsible conduct from all its members… Perhaps there are too many members for a club like the one proposed, which admits anyone, and therefore devalues its membership.”
The recruitment effort by this group of investors continues the growth trend. Their outreach is grounded in the idea that companies must recognize non-financial risk and make public their commitment to address them. Without an enforcement mechanism, perhaps the integrity of the Global Compact depends on such promotion and the shame of public outcry when corporations fail to implement change.


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