United Nations Global Compact

ISSUES: Nine principles covering human rights, labour, environment

At the World Economic Forum, Davos, on 31 January 1999, UN Secretary-General Kofi A. Annan challenged world business leaders to "embrace and enact" the Global Compact, both in their individual corporate practices and by supporting appropriate public policies. These principles cover topics in human rights, labour and environment.

GOALS: Overall goals as defined by GC principles: business to "enact the principles"

Individual companies goals: reputation management; alignment of internal / global policy; alignment of global standards regarding human rights, labour relations and the environment; social component: identification of employers

Individual NGOs goals: Working on how to improve transparency and answerability of business activity regarding issues of environment / sustainability to stakeholder networks

PARTICIPATING STAKEHOLDERS: UN; industry; plus environment and human rights NGOs and trade unions

TIME FRAME: started 1999 – open-ended; annual reporting

MSP CONTACT DETAILS; URL: United Nations / Global Compact, 2 UN Plaza, New York, NY 10017, USA, Email obriend@un.org; web-site: www.unglobalcompact.org

Classification:

Type: There are different views regarding what type of process this is – some view the Global Compact (GC) as implementation oriented (through information); others as merely informing. Others say that the GC is an informing process at the moment; process will have implications for future actions; this will lead to concretised objectives.

Level of MSP: International / national (in-country activities)

Procedural Aspects:

Designing the MSP

1999: started with a series of bilateral meetings with business associations, then individual companies, with NGOs, with trade unions – then defined the compact and what to do. After one year: 1^st meeting in May 2000.

UN decided that this is a challenge to business and that business needs to work with labour / trade unions and NGOs. The UN is not only asking business to take action but to work with labour & NGOs; UN is also asking labour and NGOs to work with business.

The compact is not meant for business to just do and include in the compact their own projects but for business to change their practice.

The compact process consists of several areas of work:

The global compact is asking companies to join; the prerequisite for joining is that they agree with the 9 compact principles – plus the UN guidelines on working with the private sector, plus that they provide one good practice example per year to the UN. NGOs and labour have been invited; the prerequisite is that they have accepted to work with the companies. Activities in countries must be lead by business and are not UN-initiated – UN advises, including on NGO & labour involvement.

A company wishing to engage in the Global Compact can do so by sending a letter from the chief executive officer to the Secretary-General, expressing support for the Global Compact and commitment to take the following actions:

1. Issue a clear statement of support for the Global Compact and its nine principles, and to publicly advocate the Global Compact. This may include:

2. Provide, once a year, a concrete example of progress made or a lesson learned in implementing the principles, for posting on the Global Compact website.

In addition, within the framework of the Global Compact, a company may wish to:

Companies have informal contacts with other GC partners; for example, “Local Compacts” might be established, e.g. in Switzerland, composed of Swiss businesses. Within some companies, working groups are being established (for example at Novartis: 1 executive committee member; 1 steering group member; and a working group. It is planned to have a stakeholder advisory group that could have a monitoring function, consisting of various stakeholders.

NGOs have criticized the Global Compact, saying, for example, that: The Compact was designed haphazardly. There is a lack of transparency about how it was designed. The code that affects the lives of people was not prepared by people, but by top elite within business and UN, at a time when business was giving a lot of money for pieces of work to the UN, as a result, they got the imprint of the UN. There is a lack of clarity about the agenda which was not defined from the outset; and that various partners pursue different agendas, not a common one.

Identifying the issues to be addressed in an MSP

The 9 principles came from the UN; from intergovernmental negotiations – they are not to be negotiated with potential partners. Negotiations with partners focus on implementation of the principles.

Within industry partners, there are in some cases 2 levels (or layers) of the Compact: the UN as well as within the company. For example, Novartis has developed a set of parameters that function as a  “vulnerability check”. New issues (like issues of biodiversity / bio-society / health care / work force) are being added to existing ones during the process as some of the GC issues so not seem applicable (rather designed for smaller firms or firms in developing countries).

NGOs criticize the way the Compact issues were identified: That they were identified by a core group that was established before things went underway. Lack of commitment by some partners may reflect how things were defined. Corporations identified the issues where they were under attack for bad practices.

Issues relevant for NGOs are, among others: industry answerability beyond shareholder interests; freshwater, land, air; indices, impacts, indicators; climate; toxics

Identifying relevant stakeholders

UN identified stakeholder through invitations to companies to take up the challenge. NGOs were asked to join.

Some companies are in the process of identifying further stakeholders in a cascading process. There is indirect involvement of others when working through the given agenda.

NGOs criticize that there is a lack of transparency about how stakeholders were identified, and that the most relevant stakeholders were not identified. International NGOs that were identified are not necessarily the most relevant stakeholders; others criticize those NGOs who are involved for lending legitimacy to the process.

Identifying MSP participants

Within the GC partners and participating NGOs and trade unions, various people are identified, depending on the issues being addressed (e.g. coordinating and sectoral approach), and to be the GC focal point (usually high level). 

Some NGOs say that companies who were under attack identified participants. More ethical companies were not involved.

Setting the goals of an MSP

The UN set the overarching goal of the compact: companies to internalise the 9 principles. Specific goals are set by Compact partners.

Agreed and joint activities develop over time through consultation with partners. The GC is designed as a flexible, evolutionary process. The overall process is starting from the set 9 principles, then through consultations.

When changes / developments of goals occur, stakeholders can check with their constituencies, e.g. companies consult within. Regarding the annual issue dialogues, there is consultation and consensus decision-making to identify the issues.

It is a very decentralised process. One approach, for example, would be to proceed as follows: If a Novartis supplier employs children, the supplier would have to explain to Novartis. Novartis would have to communicate contentious issues, e.g. the issue of child labour (including, for example, issues of education provided for the children) on its website (and the progress report), as some kind of model case.

However, some NGOs criticize that legitimisation was given first, anything that happens afterwards is an add-on. Ideally, it should be the other way around. Membership should not imply that company has achieved a standard just by having signed on to it (similar to Amnesty’s business principles which contain no requirements that company verify, report etc.).

NGOs also criticize that the GC only has general goals (not time-specific, no clear objectives, no indicators, no monitoring mechanisms) which are not measurable as goals, but rather pure intentions. Possible consultations upon issues and goals will finish with only a number of stakeholder agreeing to something.

Setting the agenda

For the issue dialogues, the one for 2002 has been identified (role of the private sector in zones of conflict), for 2002 issues are not identified yet. Identification of issues via surveys & consultation.

Some companies state that they are committed to involve stakeholders to prove their credibility. Stakeholders can make suggestions, look into the process etc.

Some NGOs are under the impression that industry is the driving force, and that NGOs and Trade Unions have little say in identifying issues.

Setting the time-table

There are: 

Some companies have set up an annual implementation process. Some NGOs say they haven't seen a time-table

Preparatory process

E.g. issues dialogues: The 1^st meeting on conflict zones will be to plan the process for the year 2001). There was a series of meetings to agree the issue, and a survey by the UN what issues would come into question. UN then developed a package of material which went to all participants; asking them what the key issues & challenges are; then a ping-pong-process to prepare to agree the agenda at 1^st meeting.

There is a checklist given to Compact partners by the UN for orientation purposes. It is perceived by some partners as a top-down approach, but they feel new aspects can be integrated. There are no position papers etc. prepared for meetings.

Some NGOs perceive this not to be a dynamic dialogue, and that Southern NGOs have not been contacted.

Communication process

Communication between UN and partners: official political communication (face-to-face and in written format). Within companies: internally: meetings, follow-up by email; externally: website (Novartis Global Compact site to be established), press releases. Other stakeholders: meetings, email list server.

Companies tend not to perceive power gaps between UN and themselves Novartis; rather, they perceive having different kinds of power: UN holds political, companies hold economic power). Novartis, for example, characterized the GC as a “good faith process”.

There are, however, power gaps between companies and their suppliers (which can be used to create pressure). There are also power gaps between companies and NGOs. One way of dealing with that is to focus on potential win-win situations and on common objectives.

Involved international NGOs are not obliged to work with their Southern partners.

NGOs perceive that there are power (and aspiration!) gaps; there is no discussion to identify power gaps clearly, and no agenda to take account of power gaps.

There are no formal mechanisms of meta-communication during the process. This is rather happening in the media / internet. Interest of media generates meta-communication.

Decision-making process: procedures of agreement

To identify issues for the issue dialogues, there is a consensus-building process – partners are not to just say "no".

Experience has shown that involving professional facilitators can work but an experienced, well known and respected chair is better (charismatic etc.), the individual personalities are very important, more than professional background. 

Companies can make decisions within their range of power. They can negotiate with suppliers, define the process with suppliers on an ad hoc basis.

Some NGOs say that it is hard to define the decision-making process and feel too distant from the process. Others say that given that there is no specific objective, there is no decision-making involved.

Implementation process

Compact partners say that implementation falls within the standard framework of decision-making of the individual corporation. Some NGOs say that the GC is merely an informing / consultative process and not about implementation.

Closing the MSP

GC has no time limit. The issues dialogues are time-bound (annual). Companies have to submit one case study per year.

Some NGOs feel that the process timing is undefined, and that it needs renewal, or should be driven toward conclusion within next months.

Structural Aspects:

Structures / institutions of the MSP

UN Secretariat / Global Compact Unit

Within companies, there are steering or working groups (e.g. Novartis: GC steering group (Executive committee member), GC working group (for planning and implementation) and stakeholder “sounding” board (“Challenging group”).

Facilitation

UN Secretariat / Global Compact Unit; plus the participation of the UN Agencies involved (UNEP, HCR, ILO). They facilitate between UN and partners, between partners, NGO and labour, and between the UN agencies, and thus includes secretariat services. The full staff at the GC Unit will be about 6 people (not all exclusively working on the compact); plus staff in the agencies; e.g. UNEP has created a new post for this.

Within Novartis, for example, there is a working group to facilitate the process (head of working group is head of Novartis Foundation); its role is that of a central coordinating and implementation planning group. Some internal audits are in place and will be used for the Global Compact (e.g. “Health, Safety, Environment Audits”).

Documentation

For the issues dialogues, this is to be decided at the 1^st meeting (March 2001). It is planned to start afresh on the issues dialogues every year, not to work with a firm model.

GC partners publish information on a variety of corporate communication channels.

Within GC partners, meetings are minuted; some plan to publish as soon as an implementation plan is developed and agreed upon. For example, Novartis are planning a “Vulnerability check list” (including problem solutions). Stakeholder contributions could be published independently.

There is a lack of transparency as to how process developments are being published, other than the reports and statements on the GC website. Flow of information is by some NGOs perceived as too low.

Relating to not-participating stakeholders

Example India: GC partners work on HIV and cities and basic education (on their own) – they created these focus areas and on these they work with other stakeholders.

GC partners publish their involvement and activities through their means relating to the general public (or plan to do so).

Some NGOs criticize that information comes through the media and that that is the wrong place to find out about these processes and how they affect people’s lives. It is not clear if other stakeholders could feed into the process. 

Relating to the general public

UN website; web-pages on compact partners websites. Folders; flyers; digi-card. Interested journalists produce features for radio and newspapers (UN regularly being approached). 

GC partners use various channels – websites, journals, press releases. For example, members of a “stakeholder sounding board” will be invited to write (unedited) feature articles and publish them on Novartis GC website. The website shall be interactive and provide feedback opportunities.

Some NGOs criticise that there is very little information available – or in "UN Speak" which is not accessible to the general public. Stakeholders could go out to businesses to challenge them more, but the dynamic of the process does not seem to lead to specific goals. There is no formalised way for criticism. On the other hand: there is too much emphasis on publicity but no tangible outcomes – which can only lead to cynicism.

Linkage into official decision-making process

From a UN perspective, the process is linked to official decision-making, this is the ultimate objective. The GC is aiming to create " OLAF" (Open Learning Action Forum) instead of bureaucracy; this will not be easy.

The process is not institutionalised but creative; the compact staff are looking at the linkage question; e.g. through making compact meetings part of UN Agencies events (e.g. UNEP Nairobi meeting); e.g. conference at Earth Summit 2002; e.g. dialogues on zones of conflict in 2001: the recommendations into go into second committee (upon request).

On the UN side, there is hope that the GC will link into 2002 process; there is a potential to link into CSD multi-stakeholder dialogues; that would make GC liable to organisations of the CSD process.

Some GC partners and NGOs say that the GC is not a political decision-making process but that it supports global progress by providing good practice and creating transparency. Transparency depends on effectiveness of media and communication. Impact of stakeholders not pre-defined, depends on dynamics of the process. Branding of the term “Global Compact” would support an increasing influence / impact.

Increasing level of compliance with the Global Compact creates need within other companies to imitate efforts. Those who lag behind / do not comply will eventually be sanctioned by their stockholders. Increasing compliance will create a more critical mass (e.g. awards in Forbes magazine).

There seems to be a lack of clarity with regard to the linkages into official decision-making. The GC might contribute to Earth Summit 2002.

Some NGOs perceive that stakeholder can impact mechanisms, and that industry finds it very difficult to join UN and Dialogue process with NGOs, and to have a balanced dialogue, less accustomed to frustration, have less patience (used to top-down decision-making process).

Funding

UN budget: GC is funded by governments and foundations; there is no funding from companies.

Decentralised funding process: companies fund their own projects; little incremental costs for the time being, costs for removal of problem situations cannot be calculated in advance.

Some perceive the process as driven by the funder.

Additional Information

Some NGOs feel that overall, process is not going well; that the objectives are not specific enough for people to raise the energy to engage; that it lacks accountability; that the outcome is ephemeral.

Some NGO GC members have joined the process halfway through; due to that they did not feel really part of it.

Some NGOs say that the companies that they campaigned against now use the GC as a source of legitimisation. There is no mechanism to verify their practices.

Some NGOs generally say that voluntary initiatives like the GC will not lead anywhere. Governments need to be involved, and governments need to regulate. Otherwise free riders can go ahead and won’t be caught by the public eye if they are not one of the leading companies. The ethos of voluntary initiatives is useful in terms of making companies aware of the issues. Strategically, "if companies are serious about the issues, there needs to be regulation" (a statement by Nike).

Contact Minu Hemmati and Felix Dodds for further information.