Compact opts for new tiered reporting regime

Signatories to the United Nations Global Compact will in future have to comply with one of three levels of reporting on how they are observing its ten principles.

A new ‘differentiation framework’ offering basic, intermediate and advanced levels of reporting has been introduced by the Compact board in response to concerns that too many companies are failing to report properly on their adherence.

Last year the UN, worried that so many companies were falling short, felt compelled to impose a one-year moratorium on the de-listing of developing world businesses that had not fulfilled the Compact’s reporting requirements (EP12, issue 1, p1). The moratorium, affecting 347 companies, ended on 31 December.
 
The framework was developed after a review of the Compact’s requirement on signatories to produce annual communications on progress (COPs) outlining what they have done to fulfil its aims.

At the new basic level of reporting, for companies that ‘are beginning their sustainability journey’, signatories will use a standard COP template drawn up by the Compact office.

Those at the intermediate level will produce a COP they have written from scratch themselves, and at the advanced level companies will complete an online questionnaire covering the content of their COP and assessing their implementation of the principles.

Companies will be free to choose the level at which they want to participate.

The UN said the framework ‘seeks to give recognition to the unique contributions of companies of different sizes and experience’. Its overall objective will be to ‘improve transparency and disclosure’.

Jerome Lavigne-Delville, head of communication on progress at the Compact office, said a two-pronged approach would now be adopted, with ‘strict enforcement’ of de-listing for companies failing to report at their required level, and use of the framework to motivate businesses to improve disclosure.

He said: ‘The differentiation framework represents a new phase in the Compact’s transparency and disclosure policy, designed not only to improve transparency among smaller and less experienced participants, but also to stimulate continuous progress and performance improvement among the more advanced companies.’

Companies failing to issue a COP at their required level will face expulsion. De-listed companies are removed from the Compact’s database, but the door is kept open for those willing to return.

By January the number of companies expelled from the Compact passed 2000 for the first time since its inception ten years ago, all for repeated failure to produce a COP.

Most of these have been small companies from developing nations.

The total number of active business participants in the Compact now stands at 6066 companies from a total of 132 countries.