Who Sustains the Standards for Sustainability Standards?

As sustainability becomes a widespread corporate mantra there are a number of choices available for companies seeking international responsibility codes and standards to guide their reporting and well, to brag about in CSRs.

Since 2000 the United Nations Global Compact has been one of the leading such initiatives for businesses “that are aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption.”

Other organizations in the sustainability arena include the Global Reporting Initiative, AA1000 Series, OECD Guidelines for Multinational Enterprises and Social Accountability 8000.

At the end of January the Global Compact included more than 6,000 business participants and some 2,500 non-business participants. The Global Compact requires participating businesses to communicate every year with stakeholders on their progress in integrating principles and standards into their strategies and operations. Companies that do not issue a Communication on Progress (COP) for two consecutive years face expulsion and must reapply for participation in the initiative.

Since 2008 more than 2,000 businesses have been delisted for failure to submit their COPs. That number was reached following the recent expulsion of more than 200 companies at the end of a 2010 moratorium on expulsions in less developed countries. The moratorium was a “short-term measure to explore solutions to a systemic lack of disclosure in certain markets,” according to a Global Compact statement.

“We are moving forward on transparency and disclosure through a dual, complementary approach,” said Jerome Lavigne-Delville, Head of Communication on Progress (or head COP). “On the one hand, we are driving a strict enforcement of our integrity measures to ensure that every business participant disclose information on its progress, every year. On the other, we are introducing a platform that provides incentives and recognition for businesses at all levels to make meaningful progress towards a comprehensive implementation of the principles in strategy and operations.”

In conjunction with an effort at stronger enforcement of COP policy, the Global Compact has introduced a “differentiation framework” designed to motivate companies at all levels to strive for greater integration of the principles. The framework, launched this month, categorizes business participants based on levels of progress disclosure.

As a long-term solution following the moratorium, the differentiation framework is a new phase of in the Global Compact transparency and disclosure policy, designed to improve transparency among smaller and less experienced participants, and also to stimulate continuous progress and performance improvement among the more advanced companies.

The differentiation framework “will provide deeper incentives at both ends of the performance spectrum, and help stakeholders critically assess the performance and progress of our companies,” says Georg Kell, executive director of the Global Compact. He adds that differentiation will be critical to support investors and other stakeholders in the assessment of companies’ progress, using the COP as a platform to benchmark management systems against global best practices.

While it sounds fairly bureaucratic, this is the UN we are talking about. The Global Compact has a number of easily accessible learning tools and resources for companies. It also gets high marks because it can operate at many levels through its 80 regional and national sub-networks. It benefits from other UN agencies, including the International Labor Organization (ILO), The UN Development Program (UNDP), the UN Environment Program (UNEP), the Office of the High Commissioner for Human Rights and the UN Industrial Development Organization (UNIDO).

No other corporate responsibility initiative has the moral authority and weight of the UN secretary general behind it, and it has a large database of corporate responsibility activities.

But it is also voluntary and non-specialized, as opposed to other reporting initiatives, and the intent is to complement rather than supplant regulatory initiatives. In addition it does not have the teeth or resources to monitor company activity.