How can the UN Global Compact stay relevant at 20?

WASHINGTON — When the UN Global Compact was founded 20 years ago, terms like “corporate sustainability” were far from the mainstream. But as the agency looks to finalize its future strategic plan under new leadership, there are questions about how it can adapt and stay relevant. The UN Global Compact, the world’s largest corporate sustainability initiative, was founded in 2000 — a year after Kofi Annan, then-secretary-general of the United Nations, told the World Economic Forum, “We have to choose between a global market driven only by calculations of short-term profit and one which has a human face.” That message is still as relevant today as it was then, several experts, UN Global Compact board members, and staff members told Devex. But to be effective and play a role in the changing landscape, which now has many more sustainability-oriented organizations and industry groups, they said the compact needs to evolve and change the way it works. “It’s time for a reset of the compact,” said Philip Jennings, a UN Global Compact board member and former general secretary of UNI Global Union. “The business community needs to take the lead of the U.N. guiding principles and apply them in practice. They can’t run to the UN Global Compact for camouflage anymore if their behavior is not up to global standards.” The UN Global Compact has grown from about 44 companies in 2000 to more than 12,000 member companies in about 160 countries today. In the last several years, UN Global Compact was focused on professionalizing the organization, improving its financial stability, and working toward connecting headquarters with local networks through its “One Global Compact” approach, Lise Kingo, who stepped down as CEO in June, told Devex shortly before leaving. Despite that progress, the compact “needs more ambition and more impact,” she told Devex. Questions remain about whether the voluntary nature of corporate commitment to its principles is meaningful, especially in an environment where even businesses themselves are pushing for more robust metrics, measurement, and standardization around sustainability. “It’s quite easy to beat up on the compact. It’s a convenient punching bag in many ways,” a senior policy expert, who requested anonymity to speak freely, told Devex, adding that it is easy to say the agency does not do enough or have enough members and the principles are not binding. While there is some merit to those critiques, “ultimately, as an institution, it has some considerable value,” and it is “very useful for the U.N to have a vehicle to try to champion business practices that align with the U.N. values, ethos, and ultimately the SDGs,” the expert said. Falling short There have been a number of criticisms of the compact over the years, and a need for more accountability from its members has been chief among them. While the organization has successfully expanded and businesses have signed on to the principles, the implementation of them “lags seriously behind,” said Sharan Burrow, general secretary of the International Trade Union Confederation and a member of the UN Global Compact board, in an email. While 80% of companies claim a commitment to human rights, only 18% post human rights reports, she noted. The UN Global Compact needs to require companies to verify the implementation of the 10 principles “through due diligence procedures, and where necessary, remedy any violation against the principles they have signed up to,” Burrow wrote. When a business joins the UN Global Compact, its CEO commits to comply with the compact’s 10 principles, which address human rights, labor, environment, and anti-corruption. After joining, the monitoring of its adherence to that responsibility is largely met by a letter — a communication of progress — that it submits, outlining how it complies with the principles. Companies can be delisted or lose their membership if they fail to communicate their progress. Nearly 13,000 companies have been delisted over the years. The compact needs to make those communications on progress “much more rigorous” and get serious about “accountability, proper transparency,” Jennings said. The organization needs to set stronger benchmarks, provide clearer guidance, and raise the bar, he said. That old model of compliance is “gone, finished, irrelevant,” Jennings said, adding that the board is committed to better reporting, integrity, and human rights due diligence and that changes to reporting and due diligence are under active consideration by the compact. In addition to stronger reporting, the UN Global Compact needs to be stricter when it comes to holding companies accountable if they fall short on environmental, human rights, and labor issues and ensure companies that cause harm be “shown the door,” Jennings said, adding that this accountability has long been a concern for civil society. There have also been questions from outside observers about whether those 10 principles should be updated, especially in light of the adoption of the SDGs. “They do feel and they do look rather outdated. And a question I get asked numerous times by U.N. delegations is how the 10 principles intersect with the SDGs,” the senior policy expert said. “The compact should not necessarily be the gateway to the U.N., but it could be … a gateway to get more companies to join the sustainability movement.” --— A senior policy expert But those involved with the compact say they should not be changed, remain fundamental business principles, and can work alongside the SDGs. “The 10 principles are fundamental, universal values that are timeless,” Georg Kell, founding executive director of the UN Global Compact, told Devex, adding that the principles are a minimum threshold of good ethical behavior that companies should never go below. “The challenge is how to give practical meaning, life to the principles in this environment,” he said. While the SDGs are the goals, the principles are how they are delivered, Mark Moody-Stuart, chairman of the Foundation for the Global Compact, told Devex, adding that while the compact may need to communicate this better, it is important that companies delivering on the SDGs also adhere to human rights, labor, environmental and anti-corruption principles. Business model The UN Global Compact has made some changes to its business model in recent years, but some questions still remain about its sustainability and functionality. It is not funded by the U.N. but by donations to a trust fund from a number of countries and through fees it collects from businesses. A couple of years ago, the compact reevaluated its business model and made fees mandatory for signatories, in part to solve financial challenges but also to limit the number of companies that might sign up and not participate fully, Moody-Stuart said. The changes also brought together global and local financing, so the UN Global Compact had better oversight over all its finances. In the new model, 10% of the income to compact goes to the local network development fund, which helps fund the growth of new networks, he said. The change in financing is a “huge step forward” that has resulted in “more consistent funding,” he said. But a question that remains about its business and revenue model is whether the way it is funded determines its strategic choices, the senior policy expert said. In recent years, much of its funding has come from big multinational corporations and foundation grants. “If you are running a membership model of that kind, you ultimately become to a degree at least influenced — or at worst, controlled — by the people who are providing the money,” the senior policy expert said. New leadership and a new plan This summer, Sanda Ojiambo became CEO and executive director of the UN Global Compact, as the organization works on its next strategic plan. “The challenge facing the new executive director is what is the fundamental mission of the compact and how to define that and how to structure and operate a business or financial model to enable you to do that,” the senior policy expert said. “The compact should not necessarily be the gateway to the U.N., but it could be, if configured correctly and focused in the right way, a gateway to get more companies to join the sustainability movement.” “I often say the entire future of the Global Compact depends on local networks.” --— Mark Moody-Stuart, chairman, Foundation for the Global Compact Many of those involved have recommendations for what it should focus on, including Kell, who thinks the compact needs to do more thought leadership and look at institutional innovation. The organization needs to be willing to “move to uncharted waters, which is hard in this political landscape,” he told Devex. The UN Global Compact should work to get a series of platforms or projects going in which companies and CEOs can come together to actively solve specific challenges, Moody-Stuart said. The compact “needs to look at mechanisms of stimulating that to reach out to wider groups of members to get people engaged at a higher level,” he said. The new strategy that will launch next year is focused on three areas: continuing to grow membership, particularly in underrepresented areas globally; being more inclusive of small and medium enterprises; and helping companies integrate the SDGs into business in a more practical way, Ojiambo told Devex. As it looks to expand its reach, the compact is asking the leading companies to look at their supply chains, value chains, and sales chains to engage the small and medium companies they work with about adhering to the principles and working toward the SDGs. “For me, taking a supply-chain/value-chain approach to what we do is critical,” she said. Local networks Expanding its reach and engagement with smaller companies will rely on the compact’s local networks, but that will take some work, as historically the quality and abilities of the networks have varied significantly. There are about 68 local networks today, which vary in size and operational capacity. While some local networks have had strong governance and been well resourced, others have not, so the UN Global Compact is helping strengthen the local networks through projects focused on good governance, management, and setting minimum standards. It is also supporting capacity building on a variety of issues, including human rights, climate, building strong teams, and avoiding conflicts of interest. The compact also set up a new funding model about three years ago in which global contributions are shared between headquarters and the local networks, which has helped increase core funding, Ole Lund Hansen, chief of global operations at the UN Global Compact, told Devex. “We have come to realize over a few years that actually the networks, rather the opportunity to organize events, activities, projects at the local level, is really key for the Global Compact and other initiatives bringing deeper engagement to companies,” Hansen said. Ojiambo served as a member of the Kenyan local network before taking the job at the compact, so she is familiar with the challenges the networks face, particularly in raising resources and staffing, she told Devex. Her goal is to build on that experience as the compact works to further support its networks, she said. “I often say the entire future of the Global Compact depends on local networks,” Moody-Stuart said, adding that their growth and visibility at major meetings is fundamental. Jennings and Moody-Stuart both said that the local networks need to be more inclusive of multiple stakeholders, including civil society and labor, so that they can be a more effective local coalition. The local networks can also be an important vehicle for businesses to engage governments, which must play a role in “big, scalable system change,” Kell said. The UN Global Compact, as part of U.N. reform efforts, is also more closely linking the networks to the broader U.N. development system in each country, with the goal of having the U.N. resident coordinator sit on the board of the local network. That has happened or is in the process of happening in about 30 countries, Hansen said. The goal is to ensure that the local network is aligned with U.N. priorities in each country and can more closely collaborate, he said.