Corporate Responsibility: UN Global Principles! U.S. Business Leadership?

July 20, 2010

Happy Birthday to the United Nation’s Global Compact. We participated in the June 24-25 Leader’s Summit of the UN Global Compact (UNGC) in New York City to celebrate its 10thanniversary and examine how companies, in concert with governments and civil society groups, are embracing and implementing principles of responsible business all over the globe. There was considerable debate as to whether or not business has reached a “tipping point” where sustainability/CSR is embedded in the majority of companies’ strategies and cultures. Key conclusion: progress has been substantial but big gaps remain between rhetoric and reality.

The UN Global Compact!

The UNGC is an international initiative, launched by then-UN Secretary-General Kofi Annan that brings companies together with UN agencies, government, and civil society to support universal principles relevant to business conduct. In July 2000, the Compact promulgated standards for business concerning human rights, labor, environmental responsibility, and anti-corruption. Many of its initial 47 business signatories, and since many more, have keyed their philanthropy and CSR investments to the corollary UN Millennium Development Goals that include, by 2015, laudatory aims such as halving extreme poverty and hunger around the globe, reducing infant mortality by two-thirds, achieving universal primary education, empowering women, and creating global partnerships for development.

As of July 2010, over 6000 businesses worldwide and 2000 government and civil society groups have signed on to the UNGC principles. Annually, companies are expected to file “communications on progress” that detail their application of the principles in their policies and practices. While not legally binding, these COPs give the principles some “teeth.” Over 1500 companies, for example, have been “delisted” from the UNGC for failing to take action on the principles.

The 2010 Summit bubbled with energy from the over 1,200 attendees. Current UN Secretary General Ban Ki-Moon set the tone for “shared responsibility” by calling for a “cartel of good” to counteract the misconduct and self-dealing behind the global financial collapse. Later New York mayor Michael Bloomburg described the host city’s efforts to green itself and pledged his support for the announced New York declaration that set a target for increasing the UNGC signatories to 20,000 by 2020. Breakout sessions on human rights, water use, low carbon leadership, and responsible investing were packed to the walls and highlighted the progress of multisector working groups on these and other social, economic, and environmental initiatives.

U.S. Business Leadership?

UNGC signatories come from 135 countries. Tracking the annual reports of the UNGC, interestingly, shows that participation rates by U.S. companies have lagged those in other nations in absolute (total number of signatories) and especially in relative (signatories versus total number of companies in the nation) terms. Stated simply, U.S. companies area behind the curve in signing up to the UN’s call for corporate responsibility.

What accounts for this? One possible factor is our nation’s historic suspicion of the UN and almost every other global association or initiative. Let’s be frank: we think of ourselves as the big dog and don’t want other countries to fence us in. This has been evident in sustainability in U.S. businesses’ resistance to global climate change pledges.

But how can companies object to embracing ideas like “Businesses should support and respect the protection of internationally proclaimed human rights” (Principle 1) or “Businesses should work against corruption in all its forms, including extortion and bribery” (Principle 10)? Surely these speak respectively to our national character and to the self-interest of law-abiding U.S. firms. OK so far, but it is UNGC Principle 3 that raises a red-flag for business in the USA: “Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.”

Dow Chemical’s Bo Miller, whose company recently signed on to the UNGC, gave us some insight into this one. Company lawyers and HR professionals resisted signing up because they believed Principle 3 would cast Dow as “pro-union” and, in any case, set it up for lawsuits should labor activists feel slighted. Heated conversations convinced them that UNGC principles were not regulatory mechanisms and that Dow’s obligations were, as always, to follow the law of the land where the company does business. Eventually Dow concluded that the ten principles amplified and enriched its own code of conduct and that a principled association with so many other responsible businesses and interests through the UNGC would, so to speak, be good for its business.

General Electric also dragged its feet about adopting the UNGC principles. GE’s Bob Corcoran and Frank Montero reported that one stimulant to action was NGO activists who kept asking for the company’s “human rights” policy and weren’t satisfied with its various “anti-discrimination” pledges. The two CSR leaders, along with key members of the GE financial and legal team, joined the UNGC working group on human rights to better understand the issues. Working with Harvard Professor John Rugge and global experts in this arena, GE and other companies helped to shift the UN position to re-assign responsibilities for human rights to national governments while making business a partner in implementing affirmative principles in commerce. Corcoran and Montero reported that the education gained about human rights abuses (particularly of women and children) were a real eye-opener for GE who has become a strong advocate of human rights in the global community and with its customers and suppliers. GE has joined hands with other U.S. firms, like Manpower, to proactively advance human rights through select business initiatives.

Today there are some signs that U.S. business is catching up to other countries in its commitment to the UNGC principles. The U.S. has the 3th largest number of signatories in 2010 (increasing from 100 companies in 2007 or 6th place to over 320 companies today).  France and Spain have the most signatories with over 600 companies each. U.S. participation splits about 50/50 with equal numbers of larger (having over 250 employees) and small-and-midsize firms (employing fewer than 250). In 2007, the U.S. also formed a “local” UNGC network that took a lead on human rights issues and has grown exponentially among smaller businesses.

Will the UNGC reach its goal of 20,000 signatories in the next decade? Will U.S. business begin to exercise leadership in this cause? Dow, GE, and Manpower point the way for big corporations. Meanwhile the participation rate of small- and mid-size U.S. firms is climbing. On this point, note that there are over 500 business associations today in the UNGC, ranging from Businesses for Social Responsibility to CSR Europe to the Union of Bulgarian Businesses. This list also includes the International Chamber of Commerce, local AmChams in Egypt, Peru and the Ukraine, as well as groups of Hispanic and Chinese business leaders in the U.S.

What do the U.S. Chamber of Commerce, Business Roundtable, Conference Board, and other multi-business groups think about the UNGC principles? What would it take for them to motivate their members to join? To exercise principled leadership in this global forum?