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The State of Global Corporate Sustainability

Tags: CSR , Corporation , Private Sector , Development , Governance

Kell, Georg

January 23, 2015

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The United Nations Global Compact was launched in 2000 based on the proposal that business and the UN jointly initiate a “global compact of shared values and principles, to give a human face to the global market.” Georg Kell, Executive Director of the UN Global Compact, traces the history of the corporate sustainability movement and the challenges of a globalized world that the United Nations is increasingly partnering with the business community to solve.

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The United Nations–Corporate Sustainability Link

Corporate sustainability has always been defined by and evolved within the broader context of politics, power and technological change—the supreme driver of productivity and wealth creation. And it has always responded to the call for the “common good” and the betterment of all societies. In our globalized world, no single actor or institution can solve our complex and pressing challenges. Therefore, it follows that the United Nations has increasingly turned to the business community as a key partner in finding solutions.

What few know is that in fact business provided strong support for the United Nations at its founding. With the end of the Second World War, a spirit of hopeful pragmatism prevailed in 1945. Business understood peace and prosperity as two sides of the same coin. International cooperation based on fairness and nondiscrimination was seen as essential for societies to flourish and businesses to grow.

leafstory.jpgThe private sector’s alignment with the United Nations foundered later due to Cold War hostilities and ideological rivalry. But with the end of the Cold War, and the re-emergence of global consensus on the important role of accessible markets, interaction between the business world and the world organization resumed.

By the late 1990s, the need for action was unmistakable. The gap between commercial advances and the relative neglect of human rights and social and environmental issues had provoked a backlash. Companies were increasingly under fire for substandard conduct—often in relation to labor abuses, environmental degradation, and corruption instances. In developed countries, job fears and national security concerns fed a rising discontent and call for protectionism. And in many ways, it appeared the rest of the world did not figure in the growth and opportunity associated with massive increases in international investment and trade.

It was in this context that the UN Global Compact was launched in 2000 based on the proposal that business and the UN jointly initiate a “global compact of shared values and principles, to give a human face to the global market.” At the same time, the corporate sustainability movement began to lift off.

Since then, several troubling trends that could hinder our progress have emerged.

We are dependent, yet divided. People and countries are ever more dependent on one another in our globalized world, yet our willingness and ability to cooperate is diminishing. Technology and the free flow of ideas, trade, and investment have improved the lives of people around the world on a scale never seen before.

However, the very system that has been supporting global integration and cooperation is under stress and shows serious cracks. Crisis management, short-termism, and populism characterize much of our fragmenting world. Walls are going back up, and so is the prospect of nationalism and protectionism—all leading to an inability to cope with global threats.

The multilateral system is eroding. Narrowly defined national interests are gaining the upper hand. The institutions and ideas that have supported interdependence no longer have the required political endowment. The vision of the postwar architects that durable peace and prosperity can only be built on the foundations of interdependence no longer enjoys universal support. A vision of trade, investment, entrepreneurship to create and spread wealth and a vision of political freedom and social fairness is being eroded.

Our systems are not set up for the long-term. Most politicians are focused on delivering within election cycles. Markets remain obsessed with short-term returns, meaning that corporate sustainability is not properly valued. In a world driven by urgency, there simply is not enough appetite by politicians, the private sector, and people to look beyond their own interests—to uphold the common good.

Thus, the case for collective solutions to shared challenges in a globalized world seems obvious. Yet, despite plain evidence, agreement and solutions have not proven easy to find. Our problems have not only moved ahead at rapid pace but also become more connected and complex due to globalization.

The writing is on the wall: Over 1 billion people lack access to food, electricity, or safe drinking water; most of the world’s ecosystems are in decline; inequality and widening gaps between rich and poor are global phenomena; and climate change and population growth are expected to make these challenges even worse. The negative implications for natural resources, health, and security fundamentally threaten the prosperity and productivity of economies.

A Clear Case for Corporate Sustainability

The ability of business to innovate and grow depends critically on the collective system to support prosperity, equity, freedom, dignity and peace. What is good for business is also good for society. The business case for sustainability has strengthened substantially. And the notion and practice of corporate sustainability has evolved significantly in the past decade.

Corporate sustainability has shifted from a moral imperative to a material one. Corporate leaders increasingly see that responsible conduct, sustainable development, and long-term business success are mutually reinforcing. Global environmental, social, and economic challenges can, and do, affect the bottom-line. Market disturbances, social unrest or ecological devastation—no matter how near or far away—are having real impacts on the supply chain, capital flows, public opinion, and employee productivity.

As a result, companies are increasingly putting corporate sustainability on their agendas. This means delivering long-term value in four realms: financial, social, environmental, and ethical—what the UN Global Compact has coined “the quadruple bottom-line for business.”

Business has emerged among a growing number of new actors in the international arena. While many traditional donor countries are facing fiscal austerity, we are seeing dynamic growth in the East and South and the emergence of potential new partners that can help us shape a new development paradigm. Business-led development, through foreign direct investment is now seen as a promising way forward.

Transparency is on the rise. Modern communications technology combined with growing demands for transparency make it harder for companies to flout laws or ignore public opinion. Companies have little choice but to better manage their supply chains. Years ago, it was a challenge for companies to simply explain the connection between principles and business, now thousands are communicating annually in public reports on tangible efforts to address sustainability issues.

Where We Stand Today

A vanguard of companies has already understood that public and private interests are ever more interwoven—and decided to take action. Today, the Global Compact counts over 8,000 corporate signatories from more than 140 countries—representing approximately 50 million employees, nearly every industry sector and size, and hailing equally from developed and developing countries. Each has committed to embed human rights, labor, environment, and anticorruption principles into their operations and disclose progress. In order to uphold the initiative’s integrity, thousands of companies have been removed from the Global Compact for failing to meet the annual disclosure requirement.

Deeply connected to the UN Global Compact are the Principles for Responsible Investment (PRI)—with more than 1,000 investors managing assets over US$30 trillion—and the Principles for Responsible Management Education (PRME)—with over 500 academic institutions from nearly 80 countries. These sister initiatives are bringing mainstream investors and business schools into the fold of corporate sustainability.

All of this is a great start, but too many companies are doing nothing. It is time for business to step up efforts. A new level of corporate performance is needed. Corporate sustainability as practiced is insufficient. Universal values have not penetrated business strategy and leadership, nor have we seen the depth of action needed. With an estimated 80,000 multinationals and millions of smaller enterprises, much remains to be done to reach critical mass.

The new development is that companies are looking beyond their own walls and seeing the urgency of addressing society’s most pressing challenges. They are beginning to put forward innovations and enter into collaborations that can have transformative impacts on some of the toughest issues we face.

For example, a number of UN Global Compact issue platforms, sets of principles, and global working groups have been developed to spur action by companies and lead the way to new solutions and actions. Many of these platforms have methodologies for engagement, following the “commit, act, report” model. The UN Global Compact has a wide menu of issue platforms, each of which offers enormous potential to drive collective, widespread and specific actions.

  • Through Caring for Climate, more than 300 companies are working individually and together on critical innovations on energy efficiency, renewable energy, adaptation and finance;
  • The CEO Water Mandate provides a platform for companies to advance the principles of “corporate water stewardship”;
  • Our new Business for Peace initiative will expand and deepen private-sector action in support of peace by promoting transparency and accountability and by adopting conflict sensitive practices;
  • Our new Rule of Law and Business initiative is mobilizing companies to take concrete action to strengthen the rule of law, with emphasis on human rights and good governance;
  • The Women's Empowerment Principles help business to promote gender equality and women's empowerment in the workplace, marketplace, and community. The WEPs have over 600 CEO signatories, signaling the importance of this issue to business;
  • Finally, the Children's Rights and Business Principles have been launched in more than 30 countries around the world. I am proud to note the immense support provided by Sweden for the children’s principles.

In addition, Global Compact Local Networks in more than 100 countries are convening committed companies and acting on sustainability issues at the ground level. Networks serve an essential role in rooting global norms, issue platforms, and campaigns within a national context. Our experience has shown that most business partnerships are formed at the country level and our networks are well-positioned to facilitate these connections. The UN Global Compact supports and builds the capacity of networks and facilitates knowledge sharing among them.

Finally, a new class of technology-powered action hubs has been introduced to connect players at the global and local levels. The UN Global Compact Business Partnership Hub will further action on climate, water, social enterprise, anticorruption, and UN-business partnerships.

The Post-2015 Development Agenda

This year, we stand at the threshold of an enormous global opportunity. As the Millennium Development Goals 2015 deadline approaches, governments are undertaking a process to define a post-2015 global development agenda.

The post-2015 agenda—as we refer to it at the United Nations—can open the door to a new era of business contribution and engagement. A set of global and ambitious sustainable development goals will inspire business action. And a concise set of goals and targets will translate into a framework for businesses to measure progress and establish corporate goals aligned with global priorities. This opportunity is enormous to create value for business as well as the public good.

To help business advance global priorities at a new level, the UN secretary-general launched the Post-2015 Business Engagement Architecture at the UN Global Compact Leaders Summit in September 2013. Our new Architecture is the roadmap for scale and transformative impact. It is an open invitation to co-invest in partnerships, to collaborate to advance UN goals, and to build overall societal trust that allows markets to work for the benefit of all.

The Post-2015 Business Engagement Architecture

 

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Source: UN Global Compact

 

Leveraging the Architecture, companies everywhere are called on to do more of what is sustainable and put an end to what is not. It is time for chief executives everywhere to show leadership and actively orient their business towards corporate sustainability.

  1. Lead. Ensure that corporate governance systems recognize environmental and social issues as critical to long-term business success, for example strengthening directors’ ability to understand and oversee social components. This helps cascade sustainability practices throughout the value chain.
  2. Integrate. Take a sophisticated and comprehensive approach to integrating sustainability issues across the organization—from the board down through the organization and subsidiaries and out into the supply chain. Work to connect sustainability issues and move beyond silos. Join Global Compact issue platforms—on climate, water, gender, and children’s rights—to drive performance and impact.
  3. Make. Goods and services that respond to the growing demand for more sustainable solutions should be encouraged and rewarded. Consumers and markets are ready for them, but incentive structures have not kept pace with shifting values and preferences.
  4. Commit. Make a commitment to action—individually or in partnership—on a sustainable development issue with clear targets and accountability measures in place. Transformative public-private partnerships can have lasting positive impacts on policy, market structure, and social norms.
  5. Collaborate. Turn to civil society, local communities, employees, and academia, for example, for input and feedback on practices and plans. Collaborate with governments, other companies, and civil society in partnership that address collective challenges—where combined efforts are more powerful than going it alone.
  6. Report. Heed the call of a new generation of investors by publicly reporting on sustainability performance.
  7. Lobby responsibly. Ensure that lobbying actions are not in conflict with your company’s stated values and take a lowest-common-denominator approach, rather than pursuing long-term interests. Call on governments to adopt smart regulatory frameworks and incentives so business is rewarded for environmental and social performance.
  8. Advocate. Spread this message to your peers, partners, and customers that have yet to act—those sitting on the fence or even actively opposing change. It is time for us all to wake up to the urgency of sustainability, scale up our actions, and speed up the delivery of collaborative solutions.

When companies take a principled approach to doing business, this can help restore balance in economies and boost confidence in the social legitimacy of the global marketplace. Of course, none of this can happen without strong political leadership. Voluntary initiatives like the UN Global Compact can help bridge the gap while regulation is being developed and raise the bar when regulation is either insufficient or improperly enforced. As a growing number of companies are embracing the sustainability challenge, it is hoped that political leaders will be encouraged and inspired to do their part to transition to a sustainable future.

For more than a decade, through corporate sustainability we have been able to make real advances to build environmental, social, and governance pillars into globalization. But today, corporate sustainability still serves as a stop-gap for the shortfalls in global governance. We must work to ensure that the global marketplace will induce all nations to fully incorporate universal values into their societies. Until that day comes, responsible business will remain a vital solution.

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