CSR in emerging economies: style still trumps substance

By Hugh Williamson, Financial Times.

A global business summit starting on Thursday in New York will be a showcase for companies from emerging economies looking to highlight their credentials in promoting ethical corporate values. But there are questions about whether there is real substance behind their glossy presentations.

Over a thousand people are expected at the June 24-25 “leaders’ summit” of the United Nations’ Global Compact, the world’s largest corporate social responsibility initiative, including hundreds of executives from emerging economies, where CSR has been catching on in recent years.

The Global Compact promotes good business behaviour based on ten principles concerning human rights, the environment, labour and anti-corruption and has over 6,000 companies as members. Just under half of these are from non-OECD countries, a sharp increase from the Compact’s launch a decade ago, when western multinationals dominated.

Even critics agree that the Compact has helped spread the word on business ethics to countries where conditions are tough, and has helped build the bottom-line case - rather than just the moral or philanthropic one - for better behaviour.

But critics question whether the surge in membership actually means more companies are behaving better, or whether many polluters and abusers see the Compact as an opportunity to polish their image while doing little to fulfil the ten principles.

The Institute for Human Rights and Business, a London-based think tank, notes in a study this week on the Compact that it is too often seen as a “talking shop”. The initiative should “raise the bar” by expecting much more measurable commitment from companies.

The role of Chinese companies highlights the dilemma facing the Compact. Around 160 are now members (similar to the British total) including four big state-owned enterprises - Petrochina, China Development Bank, China Minmetals and China NTG Gas Group - that are among the summit’s main sponsors, together paying $300,000 to buy some good PR.

The Compact argues that it’s better to have such key players “inside the tent” of global efforts to improve standards rather than outside. Yet as the FT’s Beijing correspondent Jamil Anderlini notes: “The explicit role of these companies is to support and extend Chinese state policies and carry out the policies and directives of the ruling Communist Party”. Some of the sponsors are “associated with shocking levels of pollution within the country and numerous environmentally questionable projects abroad” and could not meaningfully implement the principles on trade unions or human rights as they violate Communist policy. He concludes: “CSR has become a hot topic in China in recent years but the debate often centres around the need to introduce this concept for foreign consumption as China’s “national champion” state enterprises expand abroad.”

Georg Kell, the Compact’s executive director, counters that despite Chinese politics, it is possible “within such companies to establish value-based frameworks” compatible with the Compact.

It would be helpful if any commitments such companies made to the Compact could be tested, but they cannot. Companies must submit statements saying how they are complying with the ten principles but there is no system for checking they are doing what they say.

Companies can be “delisted” for not submitting these statements, and over 1,800 have been ejected, many of them from non-OECD countries, suggesting the rate of non-compliance with Compact standards is high.

Yet, oddly, the Compact recently suspended for 12 months the process of delisting non-compliant companies from non-OECD countries, giving breathing space to rule-breakers, because, says Mr Kell, too many were being thrown out.

Irene Khan, until recently the global head of Amnesty International, a Compact supporter, says “the strength of the Compact, in encouraging many companies around the world to join, could become its weakness unless it really has an honest look at what impact it is having on its corporate members’ behaviour”.

This week’s New York jamboree would be a good place to start.

Source: Financial Times (23/6/2010) / © Photo by UN Photo / Eskinder Debebe.

Water corporations use United Nations to bluewash abuses

By Corporate Accountability International.

New York, NY – Corporate Accountability International released a report today, “Water governance: for the people or for the bottom line?” examining how a joint United Nations-corporate initiative threatens the way water resources are managed globally. Its release precedes the tenth anniversary gathering for the United Nations Global Compact this week. The Compact’s CEO Water Mandate is a voluntary initiative addressing the human right to water by partnering with corporations contributing to and profiting from today’s global water crisis.

“The United Nations is in a state of conflict. On the one hand, it tries to promote democratic water governance as the key to solving the global water crisis,” said Kelle Louaillier, Corporate Accountability International executive director. “On the other, it partners with corporations that profit from water scarcity and commodification. It’s a recipe for millions going thirsty to satisfy the thirst for profit of a handful of corporations.”

For the last three years, civil society has called on Secretary-General Ban Ki-moon to withdraw United Nations support from the Mandate. This week a “transparency framework” will be released in an attempt to placate the Mandate’s critics. But as Corporate Accountability International’s report points out, the problem with the Mandate is rooted in its very structure.

“The core problem is that the Mandate’s presence within the United Nations is itself a fundamental conflict of interest,” said Louaillier. “The United Nations’ sponsorship trades accountability for ‘partnership,’ blurring the lines between the private and public sector. This institutionalizes – rather than guards against – relationships with corporations that pose real and potential conflicts of interest, which is particularly dangerous when it comes to water.”

“Water governance: for the people or for the bottom line?” draws attention to recently adopted, strong guidelines protecting against such corporate conflicts of interest in the global tobacco treaty—one of the most quickly and widely embraced treaties in United Nations’ history. Corporate Accountability International is calling on the United Nations to establish clear and enforceable standards across U.N. agencies that protect the public interest from corporate conflicts of interest.

“Issues like the global water crisis are too important to be shaped by the corporate bottom line – the world’s people, not the world’s largest corporations should be in the driver’s seat,” said Louaillier.

Key recommendations

Governments must safeguard against conflicts of interest, including avoiding situations when voluntary initiatives or partnerships undermine governments’ effectiveness, objectivity and credibility.

The United Nations should have stronger standards and safeguards throughout the institution as a whole to prevent and address corporate conflicts of interest. The U.N. should not be the institutional home for initiatives that are conceived of and driven by corporations.

Swift and concrete action by the U.N. is needed to address the concerns raised in this paper. Our recommendations for such action are as follows:

- Have the United Nations establish clear and enforceable standards preventing corporate conflict of interest, based on the principles set forth in Article 5.3 of the Framework Convention on Tobacco Control that guard against conflicts of interest and preserve and protect the primacy of human rights over commercial enterprise.
- Have the United Nations withdraw its institutional support from the CEO Water Mandate.

Contact

Christina Rossi
crossi (a) stopcorporateabuse.org

What if we are failing? - towards a post-crisis Compact for systemic change

By Dr. Jem Bendell, Griffith Business School, Lifeworth and the Journal of Corporate Citizenship.

Has the UN Global Compact failed? This question deserves as much attention as the search for evidence of success, if we are to be rigorous in our evaluation. Success or failure depends on what one seeks to achieve. There are multiple aims for the UN, its member organizations, the corporate participants, and the individuals involved, but the stated objectives of the UNGC are:

1. Mainstream the UNGC principles in business activities around the world

2. Catalyze actions in support of broader UN goals, including the Millennium Development Goals (MDGs)

The UNGC has become the largest and most international of voluntary responsible business and finance initiatives, with over 5000 members. It is normal for people involved in innovative and well-intentioned activities to gather information to demonstrate the worth of what is being done and recruit more people to the cause. Yet growth should not be confused with success. And growth brings with it the need for more critical introspection. In this essay I argue that experience of the Western financial crisis makes it even more imperative that economic governance issues, hitherto peripheral to the focus of the Compact, must now become central to its future.

Considering the first goal, we remain far from the Compact's principles on the environment, labor, rights and corruption becoming mainstream in the operations of any business sector, in any nation. Global indicators on the state of the environment, labor practices, human rights and corruption are heading in the wrong direction. Statistics about increasing carbon emissions, rates of deforestation, and forced labor, for instance, are also statistics about the effects of irresponsible or unsustainable enterprises.

Considering the second goal of the Compact, it is sad to note that poverty still persists. Apart from a few successes, including Rwanda, Mozambique and Bangladesh, progress towards the Millennium Development Goals is slow, or even in the wrong direction. At the current rate, sub-Saharan Africa will probably not meet the sanitation portion of the MDGs until 2105. Beyond the MDGs, the role of UN in other world affairs has been shaken in the past decade. On security issues, controversy surrounded the invasion and occupation of Iraq.

This downbeat summary reminds us that the overarching objectives of the UN Global Compact, to mainstream the principles and galvanize business to support UN goals, currently appear unmet. Clearly these are aspirational goals, and it would be impossible to reach them in one decade alone. If we consider them unachievable, we could recall Sir Winston Churchill's comment that "success is the ability to go from one failure to another with no loss of enthusiasm." Yet let us for a moment believe these goals are indeed achievable. For if we do that we can assess how current activities are likely to achieve those goals, or what else could be done. That invites us to reflect on and discuss our strategies for creating the scale of change embodied in the goals. For instance, is the strategy for the Compact to do much more of the same, with 5,000 companies growing to 5 million companies? On current rates of recruitment the Compact would have that many members in 10,000 years. But even if the rate of membership increases exponentially, that would not necessarily translate into achievement of the goals. Other change-strategies are required, ones that address the systemic causes of why enterprise and finance does not always embody the goals of the UNGC.

To read the whole essay, click here (PDF).

© Greenleaf Publishing Ltd 2010 | Photo by Tracey.

Global Compact on BP: "Big accidents happen all the time"

Yesterday Georg Kell, the executive director of the UN Global Compact, presented the 2009 Global Compact Annual Review, at a press briefing at the UN headquarters in New York.

Journalist Matthew Lee from Inner City Press used the occasion to ask Mr. Kell several critical questions about the functioning of the Compact. Mr. Kell's most remarkable answers were related to BP's participation in the Global Compact. In response to one of Mr. Lee's questions, Mr. Kell said: "BP hasn't been active in the Compact for the past two years. That is a fact. They haven't been active. I think their current status is non-communicating. They have not done a communication on progress.”

The executive director of the Compact got it wrong here. BP has in fact always been an exemplary Global Compact participant. It was one of the first multinationals to join the Compact in 2000 and has ever since complied with all of the (loose) requirements of the initiative.

Later during the press briefing, when Mr. Lee further inquired about BP's participation in the Compact, Mr. Kell tried to minimize the impact of corporate wrongdoing: "Generally speaking  - and that sounds a bit initiative-selfish - big accidents and things happen all the time. It's the nature of modern life. Whenever things happen and whenever human beings are involved, the key is to learn from it and to make the right lessons. We have a whole history now of major corporations which at some point in time claimed: 'we are best in class', and the next month or so they are confronted with a major, major debacle. Then they go back to the drawing board and discover that indeed, in the first phase, they were not as serious as they thought they were in being prepared. Our contribution as a voluntary initiative is always to learn from these examples."

More information about the press briefing is available here and here. 

Update (June 17, 2010):  In response to this blog post, the UN Global Compact Office sent us a clarifying statement in which it expresses its "great concern over the environmental, ecological and economic crisis occurring in the Gulf of Mexico". In the statement, the Office also corrects the record and notes that BP is, in fact, a communicating participant in the Compact. According to the statement, BP's engagement in the Compact has been "lagging in recent years". BP is therefore asked to "re-commit to the Global Compact principles and strengthen its engagement in the initiative". The statement is available here.

© Illustration by Lyon Burke.

Global Compact and Prof. John Ruggie try to explain relationship

The UN Global Compact and the special representative on Business and Human Rights, Prof. John Ruggie, have issued a memo to explain the relationship between the Compact and the policy framework for business and human rights developed by the special representative of the UN secretary-general.

Mr. Ruggie's framework is organized around three foundational principles of “protect, respect and remedy”: the state duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights; and the need for more effective access to remedies.

The authors of the memo explain that the policy framework for business and human rights "provides further operational clarity" for the human rights principles of the UN Global Compact. Principle 1 calls upon companies to respect and support the protection of internationally proclaimed human rights; and principle 2 calls upon them to ensure that they are not complicit in human rights abuses.

Curiously, the memo introduces a distinction between respecting and supporting human rights, as if the latter were not equally important as the former. According to the memo, companies have a "responsibility to respect" human rights, while the "commitment to support" them is voluntary. Hence, in theory, a company that respects human rights could either support or not support them.

Making such a distinction is not helpful to most businesses. In the guidance on principle 1, the UN Global Compact Office acknowledges that "in practice, respect and support for human rights are often closely interlinked in terms of the management steps that can be taken to enable and ensure respect and support for human rights."

Why should “respect” for human rights be required and “support” be optional?

© Photo by UN Photo / Eskinder Debebe.