Corporate Responsibility: The UN Global Compact, Complexity & Corporations

Malcolm McIntosh

Introduction

Among a number of corporate citizenship initiatives that have evolved in the last decade, the UN Secretary-General\\\\\\\\\\\\\\\'s Global Compact between business and the UN stands out as particularly innovative. Analysis of the limited evidence of its efficacy since its launch in 2000 allows us to ask a number of questions about the corporate responsibility movement.

· Is the corporate responsibility movement at a crossroads?
· How might the results of these initiatives be measured?
· What are the next steps on the road to models of socially responsible capitalism?

This paper examines these questions and maps out the challenges ahead.

Status of the Global Compact & Corporate Social Responsibility

The UN Global Compact was born at the World Economic Forum in Davos on 31 January 1999 . It was subsequently launched the following year in New York when forty-three global corporations pledged their public support for the principle of engagement through partnership with the UN and with the nine principles of the Global Compact on human rights, labour standards and environmental protection. By June 2004 some 1,200 companies had become signatories of the UN Global Compact. This figure can be seen as both a sign of failure and success: Failure, because there are millions of companies globally – but then how would the Global Compact office manage so many participants? Success, in that the figure includes global corporations alongside much smaller players. Indeed some sixty percent of the signatories come from non-OECD countries. At any rate, this number provides a core set of learning stories ripe for examination and assessment.

Former Assistant Secretary-General John Ruggie, now at Harvard University, was one of the architects of the Compact:

\\\\\\\\\\\\\\\'The Global Compact has explicitly adopted a learning approach to inducing corporate change, as opposed to a regulatory approach; and it comprises a network form of organization, as opposed to the traditional hierarchic/bureaucratic form. These distinctive (and, for the UN, unusual) features lead the Compact’s critics seriously to underestimate its potential, while its supporters may hold excessive expectations of what it can deliver.\\\\\\\\\\\\\\\'

Four years on from John Ruggie\\\\\\\\\\\\\\\'s definition, the Compact has confused some commentators and raised various expectations. The Global Compact is not an auditable standard, not a management system, not a certification mechanism and not a code. This distinguishes it from almost all of the other corporate responsibility initiatives born out of multi-stakeholder dialogues that have arisen in recent decades :

OECD Guidelines For Multinational Enterprises;
ILO Conventions on Workplace Practice;
The Global Reporting Initiative (with which is has an agreement);
AA1000S;
IS014001S;
The Global Sullivan Principles;
SA8000.

According to UN Secretary-General Kofi Annan:

\\\\\\\\\\\\\\\'For some, the Compact is primarily a value proposition and an ethical framework. For others, it is a framework for learning how to build alliances with other participants in support of common goals\\\\\\\\\\\\\\\' .

The Global Compact is a mechanism for increasing the level of local and global conversation about human rights, labour standards and environmental protection between the UN and non-state actors. Its real merit is in helping to normalise an understanding of what post-capitalist society, to use Peter Drucker\\\\\\\\\\\\\\\'s term, might look like.

But, as Klaus Leisinger from the Novartis Foundation has observed:

\\\\\\\\\\\\\\\'Few companies had any clear idea before signing up to the UN Global Compact what it meant for them “to support and respect the protection of international human rights within their sphere of influence” as well as “to make sure their own corporations are not complicit in human rights abuses.\\\\\\\\\\\\\\\'

The first and second principles of the UN Global Compact say that companies should support and respect the protection of international human rights within their sphere of influence and make sure that corporations are not complicit in human rights abuses. Not only does this advance thinking about the relationship between business and human rights but it also requires some serious analysis of what the modern corporation\\\\\\\\\\\\\\\'s sphere of influence is; how far do its tentacles reach? How much can it influence public policy and practice?

There is no doubt that crucial to the launch and success of the UN Global Compact has been the personal leadership shown by the UN Secretary-General, Kofi Annan. His vision and mission to provide bridges between states, corporations and civil society will be one of the legacies of his time in office. Annan’s leadership is complimented by the leadership of those progressive companies (and other organisations) that stepped forward to join the Global Compact and make their human and labour rights and environmental practices subject to public scrutiny. This initiative will require new skills that transform the way in which we relate to the world. As one contributor notes:

\\\\\\\\\\\\\\\'The change that the Global Compact implicitly aims to achieve is very profound. A global society that integrates the principles will look very different from the one that we have today.\\\\\\\\\\\\\\\'

Claude Fussler of the World Business Council for Sustainable Development, is among those holding the view that the Global Compact is enormously useful in helping organizations to focus on some essential principles of corporate responsibility:

\\\\\\\\\\\\\\\'In the early discussions around corporate social responsibility we quickly came to the conclusion that ‘one size cannot fit all’. But we must also accept that it is not ‘do as you please’.

Jim Baker from the International Confederation of Free Trade Unions, not without strong criticism on the Global Compact’s form and process, is nonetheless overall similarly supportive of the Global Compact:

\\\\\\\\\\\\\\\'The Global Compact is not a ‘magic bullet’ that can cure the ills of the world. However, it is a process that is indispensable if globalisation is to better serve the interests of the people. And it can and must be used by the global social actors to move the world forward.\\\\\\\\\\\\\\\'


The Global Compact in Context

How does the Global Compact fit in with the grand scheme of things? In 2003 some 62 countries were considered to be democracies. Is this state of evolution ‘the end of history’, the ‘triumph of liberal democracy’ around the world or is it simply one more piece in a long-term and ongoing development of global social democracy with all that this grand vision encompasses? According to UN Secretary-General Kofi Annan, speaking at the World Economic Forum in January 1999:

\\\\\\\\\\\\\\\'Our challenge today is to devise a similar compact on the global scale, to underpin the new global economy. If we succeed in that, we would lay the foundation for an age of global prosperity, comparable to that enjoyed by the industrialised countries in the decades after the Second World War.\\\\\\\\\\\\\\\'

In 1835 Alexis de Tocqueville, having visited the USA, declared that ‘a great democratic revolution is going on among us’. It was, he said, ‘an irresistible revolution’ Almost 170 years later, in a world comprised of democracies and dictatorships, with all manner of governance structures in between, it is less clear whether the progress that the fundamental principles of the Global Compact represent are equally ‘irresistible’.
Just as business tends towards monopoly, so even the best of democratic societies tend towards cliques and established interest-groups, with a balance between the institutions of participation, the rule of law and individual and collective human rights; they have an open and freely participative process and a balance of power among the judiciary, the legislature and the executive. Learning how to participate, building democratic institutions and establishing civil, political and economic rights take time, patience, forbearance and mistakes, as well as successes. That these processes take time is as true for companies, non-governmental organisations (NGOs) and other social actors as it is for governments. None of these actors by itself can establish freedom, justice and compassion. The holding of fair elections does not make a democracy; it is only a beginning. The construction of a university does not in itself create academic learning. The liberalisation of markets does not establish a good society; it must be accompanied by good laws. Just so, this compact between the UN and business is just the beginning of what is necessarily a long-term process.
The Global Compact is but one strand in the tapestry that is being woven in the expansion of the grand social vision—the global human experiment. It is derivative in that it cannot be understood in its own right, but only by reference to agreements, conventions and declarations of the nations of the world through the UN. It is a mechanism by which the UN Secretary-General can advance human rights, labour standards and environmental protection with the willing co-operation of businesses. The human rights elements of the Global Compact apply to business, but are essentially inviolable; the labour standards have been negotiated and are subject to general agreement among states, labour organisations and employers; and the environmental protection principles of the Global Compact are aspirations, neither rights nor agreed standards. Like many a corporate mission statement, the Global Compact contains mixed messages of determinism, operating practice and aspiration.

Measuring the success (and failure) of the Global Compact

The Global Compact will prove its worth only through good actions that are seen to have happened because of it, and such actions can be observed in many ways. First, they can be seen through the Global Compact’s power to convene meetings, to bring protagonists and antagonists together and generally to raise the level of global conversation around its principles. Second, they are demonstrated by its ability to build new social partnerships that help to bring about the Millennium Development Goals. Third, they are found in its ability to put pressure on companies and other actors in society to improve their social and environmental performance. Fourth, they are shown by its capacity to provide forums in which the ‘undiscussable’ can be discussed: human and labour rights in business, as well as issues of sustainability.
For all these reasons, as Steve Waddell notes, it is important for the Global Compact to have

\\\\\\\\\\\\\\\'a good understanding of ‘the system’ that it is trying to organise, the relationships between stakeholders in the system and their core competencies with respect to the nine principles.\\\\\\\\\\\\\\\'

Further, he comments that without such an understanding the Global Compact will become ‘overwhelmed by the scale of its challenge’. With just some half a dozen full-time staff in the Global Compact Office in New York, development of a systemic understanding of network interrelationships will be of critical importance. This is the task of the Global Compact Research Network —to map the systems that are the Global Compact as well as the linkages that the Global Compact makes between companies and other institutions in the multiple national contexts of the planet. This difficult task will require a new language and new analytical tools that cross cultural contexts and system levels because the complexity of many global systems means that they cannot be completely understood at any one level of representation, so that neither a totally holistic nor a totally reductionist approach to modelling will suffice. We need a model that will describe systems over a range of levels of complexity.

The Next Steps

People have an intuitive understanding of complex systems, but at the moment they do not trust the forces of nationalism, tribalism, religiosity and markets that play around them. It is going to be difficult to move beyond the current paradigm with its political and managerialist view of the world to embrace the complexity of global systems at different levels, but it is exactly this shift of perspective that the Global Compact is taking on.

\\\\\\\\\\\\\\\'This means vertical system integration, from every local shop floor employee up to the top of the corporation, from all citizens, from intergovernmental agencies and from individual members up to international civil society associations. It means horizontal system integration, including business, government and civil society and whole supply chains.\\\\\\\\\\\\\\\' (Waddell)

This necessarily requires commitment to change that may challenge the way we all see and interact with the world.

This is demonstrated by Pfizer who exemplify the strategic approach that business takes when it comes to engagement with the fundamentals of global governance. Nancy Nielsen points out that:

\\\\\\\\\\\\\\\'Critics of the Global Compact may not understand the power of positive incentives. If the Global Compact had been a list of rules and regulations, Pfizer would not have joined. Although regulatory bodies are necessary for society to function, the Global Compact fills a crucial gap in fostering dialogue, best practice and public–private relationships.\\\\\\\\\\\\\\\'

In similar vein Klaus Leisinger from the Norvatis Foundation calls for a more sophisticated understanding of the interrelationship of business and society:

\\\\\\\\\\\\\\\'Modern societies are complex, multilayered and non-linear and non-deterministic. They are not merely complicated and mechanical but made up of various subsystems each independent on each other. Business has tended to make the assumption that it is merely part of a discrete economic system it is in reality totally dependent on social and natural systems for its effective operation. It is our inability to recognise this synergy between different subsystems that has led to the dislocation of business from society and caused the eruption of the corporate social responsibility debate\\\\\\\\\\\\\\\'.

Learning, learning and more learning are at the heart of the Global Compact, and no more so than in companies understanding the implications of the principles to which they are lending their support. As Leisinger notes, few companies had a clear idea of what would be involved in supporting the nine principles of the Global Compact. However, he also points out that:

\\\\\\\\\\\\\\\'Good managers realize that it will be very difficult to be a world-class company with a second-class human rights record—and they act upon this.\\\\\\\\\\\\\\\'

How many such ‘good managers’ are there in companies? How many managers could, without benefit of the Global Compact’s auspices, put issues of human rights, labour standards or ecological sustainability in front of their boards and top management teams? How many could make demands of their suppliers without the moral authority provided by the Global Compact’s global consensus?
So, with this amount of learning deemed to be necessary and the level of change required it is not surprising that, as Tom Donaldson from Wharton says:

\\\\\\\\\\\\\\\'By announcing the Global Compact, Secretary-General Kofi Anan has set the world a tall, tall task. Indeed, the remarkable ambitiousness of the Compact project is matched only by the remarkable stakes it holds for all of us.\\\\\\\\\\\\\\\'

The Global Compact requires changes at all levels. It forces all involved—individuals, governments, NGOs, civil society organisations and all other stakeholders—to confront the idea that it is no longer possible to shift the blame to others, that all must now work together to address the issues.
Therefore, the Global Compact must both deepen our understanding of issue definition and the design processes that will lead to implementation (i.e. to making the Global Compact’s principles reality, not just rhetoric) One example of issue definition is the relationship between market activity and human rights; the nexus of these two supremely important topics is very much under discussion. Not only is there a search for dialogue between states, corporations and civil society but also the Global Compact allows for a means whereby the UN can reinvent itself as a mature global body, linked to all of society’s important institutions and providing an important values-based underpinning of standards of practice within those institutions. Learning is critical for all of us to grow as human beings, as well as for organisations and societies to prosper. In many ways, it is reflective practice, the unlearning of old patterns of behaviour, that will be most important as the principles become reality. For Gill Coleman, this requires working between theory and practice. It requires institutional change and therefore change by the individuals who make up those institutions. Let us quote Mahatma Gandhi:

\\\\\\\\\\\\\\\'You must be the change you wish to see.\\\\\\\\\\\\\\\'

[Where do these steps come from? There is a big jump in your argument]
If we wish to see in corporate practice what adoption of the UNGC principles looks like then the next steps for companies that have adopted the Global Compact are:

· To comprehensively map their ‘spheres of influence’ as envisaged by Principle 1 of the Global Compact
· To further extend the promotion of human rights, labour standards and environmental protection upstream and downstream
· To encourage suppliers to extend the endorsement of the Global Compact principles with their suppliers.

In other words we all, including corporates, need to learn as we walk, to reflect on practise while moving a new direction. Its how children learn to walk and talk. They fall down, they get up. Eventually they can walk, talk and think at the same time – but only after they have internalised the principles and they become intuitive.

This will not be possible unless we learn to talk – and learn to listen. There is much work to be done on understanding how we can create a sustainable future. This is humanity\\\\\\\\\\\\\\\'s next great project.

Dr Malcolm McIntosh has been an independent consultant, commentator, writer, broadcaster and teacher on corporate citizenship, accountability, governance and sustainability since 1983. He is an expert advisor to companies, governments and other organisations on managing the complexities of corporate social responsibility. He has managed multistakeholder partnerships and been involved in the development of corporate citizenship initiatives around the world.

He is a Special Advisor to the UN Global Compact in the Secretary-General\\\\\\\\\\\\\\\'s Office and a Visiting Professor at the Universities of Bath, Nottingham and Waikato (NZ). He is also a Member of the Conference Board\\\\\\\\\\\\\\\'s European Working Group on Corporate Citizenship, a Trustee of Envolve – Partnerships For Sustainability, and a Fellow of the Royal Society of Arts, Manufacture and Commerce, and a Member of the Frascati Group in Italy. He was Founding-Editor of the Journal of Corporate Citizenship and is now a European Editorial Board Member.