UN inspectors blast UN Global Compact

Earlier this month the Joint Inspection Unit (JIU), an independent external oversight body of the United Nations, published its long-awaited evaluation report of the UN Global Compact. The report had been ready for quite some time, but insiders say that it was withheld due to intensive lobbying efforts to modify its contents. The JIU inspectors remained steadfast and decided to publish the report without any significant modifications.

For advocates of partnerships between big business and the UN, the findings of the JIU may come as an unpleasant surprise. For critics of the Compact, however, the report reasserts concerns expressed by many since the start of the initiative some ten years ago. In the report, the JIU inspectors say that the Global Compact presents a potential "reputational risk" for the UN and that it pursues a "self-expanded" mandate. The report confirms the existence of the bluewash phenomenon. The inspectors believe that "General Assembly direction is needed [...] in order to prevent a situation whereby any external group or actor(s) may divert attention from the strategic goals agreed to promote interests which may damage the reputation of the United Nations."

The report contains 16 recommendations for improvement. Most of them address issues raised by civil society networks such as Global Compact Critics and the Alliance for a Corporate-Free UN in the past ten years. Here is an overview of the most relevant recommendations:

Mandate and mission

- The General Assembly should set a clear mandate for the Global Compact Office at its 66th session and request the Secretary-General to publish within one year a bulletin outlining its functions in accordance with the mandate entrusted to it. 
- The General Assembly should request the Global Compact Office to prepare and submit a long-term strategic framework for its consideration without delay. Such framework should outline the long-, medium- and short-term objectives of the Global Compact Office, in accordance with the mandate entrusted to it.

Quantity versus quality

- The Global Compact Office should seek to adopt, after consultation with all stakeholders, a policy decision on the composition of participants by category and geographical region, in order to ensure an appropriate balance between the number of Global Compact participants and qualitative representation, and reinforce the universal application and relevance of the ten principles.
- The General Assembly should call for the institution of a selection process in which business and non-business applicants are screened against pre-set entry criteria, so as to mitigate brand management risk and enhance the Office’s accountability for accepting new participants in the Global Compact initiative.
- The Secretary-General, in his capacity as Chairman of the Global Compact Board, should submit to the consideration of the Board concrete measures to reinforce accountability in the implementation of the Integrity Measures, including (a) closer scrutiny of Communications on Progress (COPs) by local networks and civil society; (b) type and frequency of monitoring of COPs by the Global Compact Office; (c) submission of COPs by non-business participants; and (d) more proactive and transparent handling of complaints.

Governance 
- The Secretary-General should encourage local networks to nominate candidates to the Global Compact Board.
- The Secretary-General should propose to the General Assembly the participation of Member States representatives and small and medium enterprises (SMEs) on the Global Compact Board.

Not surprisingly, the Global Compact Office and its Board are doing everything they can to disqualify the report and the research methods used by the inspectors. Last week the Office stated in a press release that the JIU report "is a deeply flawed and inaccurate document which misrepresents both the UN Global Compact's overall work and its long track record of positive impact." On  March 8 it had already published a six-page response to the report, which is available here.

Comfía - CCOO has translated this post into Spanish.

© Photo by Lindsay Beyerstein.

Global Compact rejects independent panel's criticism

By Isolda Agazzi.

GENEVA, Mar 26 (IPS) - An independent UN body has criticized the Global Compact, the largest initiative for corporate social responsibility, for not sufficiently monitoring the human rights and environmental commitments of participating companies.

The Joint Inspection Unit (JIU), an independent external evaluation body of the UN, based in Geneva, echoes a longstanding complaint by NGOs that the Global Compact may just be helping companies to get a positive marketing image.

"On the whole, the Global Compact has been successful in legitimating the progressive and generalized engagement of the United Nations with the private sector, and promoting new partnerships whose effectiveness is yet to be proved. However, it has been less successful in making business participants translate their commitment into real policy change," the JIU says bluntly in a report.

Though the report was published at the beginning of the year, the JIU only drew public attention to it last week, by issuing a press release. The Global Compact reacted with a harsh statement, dated Mar. 24, that rejects the report as "flawed and inaccurate" and asks for corrections.

However, the intricacies of UN policies and the ping pong between Geneva and New York will remain a mystery since Papa Louis Fall, the main author of the report, is apparently not allowed to talk to the press.

The Global Compact is the largest initiative for corporate social responsibility. It was launched by former UN secretary general Kofi Annan in 1999 at the World Economic Forum in Davos, Switzerland. Businesses that adhere to this compact commit themselves to ten principles relating to human rights, environmental and labor standards and anti-corruption practices. In exchange, they can make use of the UN Global Compact logo with a blue globe and a laurel wreath, which is very similar to the UN logo.

The world body's independent inspectors see a threat to the credibility of the United Nations if any company can use its logo simply by subscribing to the Compact. It points to the Alliance for a Corporate-Free UN, an NGO initiative that has long criticized the international organization for "blue washing" companies that use its logo just for marketing purposes.

"It is curious that the report makes reference to that coalition, which ended its activities about five years ago, and not to the more recent articles and reports published on our blog," Bart Slob, senior researcher at SOMO, told IPS.

SOMO is a Dutch-based NGO that monitors companies and does research on supply chains. In 2007 it founded Global Compact Critics, an informal network of organizations and people with concerns about the UN Global Compact.

"The general views of the authors that contribute to our blog correspond to the ones of the JIU," he ensures.

The Global Compact is intended to exhort business to "learn and dialogue", but it has become victim of its own success: in ten years, it has gathered 7,450 participants from 135 countries -- mainly businesses, but also NGOs, business organizations and academia. Large companies make up 35 percent of the total and small and medium enterprises another third.

By region, the largest representation is in Europe (43 percent), with U.S. companies making up only 5 percent of the total, Middle East ones 2 percent, Asian 20 percent, Latin American 24 percent and African 6 percent.

But if quantity has steadily increased, quality is lagging behind. The report suggested more stringent criteria for admission. Presently, the CEO of a company only needs to sign a letter pledging to make the ten principles an integral part of its business strategy, without having to give sufficient guarantees that it will spread them throughout its supply chain and subsidiaries.

"The lack of company monitoring is the initiative's Achilles' heel," stresses the report. NGOs like Amnesty International, Greenpeace, ActionAid and the Berne Declaration have long criticized the initiative for lacking teeth, but companies have always resisted any form of monitoring. Companies self-assess themselves and their reports are allegedly not verified.

The Global Compact rejects this criticism by pointing out that it has excluded more than 2,000 enterprises that did not meet the criteria.

But for the inspectors this is not enough. "There is an absence of adequate entry criteria and of an effective monitoring system and the voluntary nature of the commitments is not a guarantee of future good behavior," they write.

Bart Slob agrees with this point and with the criticism of the governance structure: "There are many business representatives on the Compact's Board, but there is very little space for NGOs and UN member states," he notes.

"I am very pleased with this report because it confirms what civil society has been saying since the beginning: lack of clarity, lack of teeth, lack of follow-up proceedings," Andreas Missbach, joint managing director of the Berne Declaration, told IPS.

The Berne Declaration is a Swiss NGO that co-organizes the Public Eye on Davos, an annual award attributed to the least responsible enterprise.

It does not participate in the Global Compact arguing that it "does not have any effect in the real world, since nobody is policing the companies if they don't abide to their commitments. I have looked at the reports of UBS and Credit Suisse, they are extremely poor," he added.

He points to Barrick Gold Corporation, a mining company that is a member of the Compact "despite having constantly run into human rights and environment problems, like in Papua New Guinea".

So, should the Global Compact be reformed or does it have to be closed down?

"There are mixed views on that," Bart Slob replied. "If the UN is unwilling to take rigorous reform measures, it would be better to consider an alternative course of action, like establishing a code of conduct for large companies, as was suggested by the UN in the 1970s. An idea that unfortunately never materialized."

Source: IPS (26/3/2011).

The Global Compact: different from itself

By Antonio Vives, Principal Associate, Cumpetere.
Translated from Spanish to English by Tamara Slowik. 

On February 25th, 2011, the United Nations Global Compact launched the Differentiation Framework, through which, upon submitting their reports to the Global Compact, companies will be categorized as:

- GC Active: companies must report on their chief executive’s commitment to the Compact, as well as on their policies and activities to implement the ten principles and the results obtained in achieving their goals. 
- GC Advanced: in addition, companies must report on the progress made related to 24 advanced criteria (governance, value chain, reporting etc.) and include a statement confirming that their report includes information concerning these criteria as well as a self assessment on how these criteria are covered in
the report. 

Companies that fail to meet the minimum communication requirements (it should be noted that the programme does not refer to “action”) will experience a 12-month trial period in the Learner category in order to reach the GC Active category.
 
The Differentiation Program will enable companies to state that they meet higher requirement levels. It follows GRI’s idea of companies’ self-reporting, by which companies declare a level of compliance with the GRI’s reporting requirements that they believe they meet. However, it should be noted that the GRI not only has three compliance levels (A, B and C) but also allows for the data to be assured by external bodies (which adds a plus “+”) and further verified by the GRI itself (which adds the label “GRI verified”).

The Global Compact’s proposal has only two categories and there is no verification by external bodies or the Global Compact itself. 

It is worth highlighting that the requirements for the “Advanced” level essentially seek that the company takes on responsibility over what it reports, as neither the information nor the actions are verified by anyone, although it will be included in the Global Compact’s website. Thus, the motto is “report, assure us that what you report is what you’re supposed to report and swear that what you report is correct”. Obviously, there is a high degree of distrust in what companies report. 

This reflects that the participation in the Global Compact is not taken very seriously by many companies, and that the Global Compact itself has doubts about the companies’ sincerity. 

The problem is that the Global Compact wishes to be massive and thus sacrifices quality. It does have the capacity to verify the contents of the reports. It merely verifies that a report is submitted every three years. Anyone can be its member; all one has to do is report every three years. Nobody verifies, nor are
any actions required. One can report to have done very little and still meet requirements. No specific levels of action are required, although it is expected that companies that chose the “Advanced” category will take it more seriously and not only commit to voluntary action but actually do it.
 
In fact, the launch of a differentiation programme itself clearly indicates that a mass approach has not led to progress, which creates the need to establish categories to distinguish those who do something from those who do little or nothing at all. It means admitting that the mass approach hasn’t worked.
 
In our article "Global Compact: this is it?", published in July 2008, we said that "…for the Global Compact to add value, it must become a more exclusive club, one that implies a 'membership fee', that is, one that demands responsible conduct from all its members…". 

Companies try to differentiate themselves from competitors. The Global Compact tries to differentiate itself from itself. Isn’t it preferable to include only the “good” group?

As known, companies may adhere to the Global Compact by sending a letter that expresses the wish and commitment to honor its 10 principles, which enables them to declare they are “members”. Members are required to submit, at least once every three years, information about what they do to comply with the
Compact’s principles. Failing to report is punished with expulsion from the Compact. The only thing that is verified is the submission of the report. 

The number of companies already expelled for not even reporting - 2,048 (total members by January 2011: 6,066) – shows us how lightly many companies take their membership. In 2010, the Global Compact even offered a moratorium on expulsions. There is no information on the levels of compliance with the principles by
companies that continue to be members. 

Spain has the greatest number of members, 877, the largest number of reporting - 510 - and non-reporting companies – 208 -, as well as the third largest number of expelled companies: 159 (for other countries’ statistics, see the article Spain is world champion!).
 
All reports are published on the Compact’s website. Civil society organizations and other companies can presumably verify this information and report any mistakes, but this does not happen. There is little interest in seriously analyzing companies’ compliance with the Global Compact’s principles. The Compact is only concerned with the frequency of reporting.
 
Fortunately, there is some progress now: at least some companies will take it more seriously in order to differentiate themselves from the innocuous mass and thus act as examples.
 
We reassert the recommendation made almost three years ago in the above-mentioned article: “...As politically complicated as it may be for a multilateral organization to make a value judgment on a company’s conduct, this step cannot be avoided if the Global Compact wants to preserve its credibility. Someone has to do it. It should at least encourage civil society organizations to monitor themselves the Global Compact’s members and inform on companies’ responsible practices. As currently posed, the Global Compact risks becoming irrelevant in ensuring responsible practices...”.
 
A new Global Compact? Not yet, but at least there is progress. That’s better than nothing.

© Painting by René Magritte.

Global Compact still receives donations from tobacco industry

In April 2010, Global Compact Critics published an article on the donations of tobacco companies to the UN Global Compact. We pointed out that - contrary to the Compact’s policies - the Foundation for the Global Compact had accepted a donation from the Mansour Group. Philip Morris has a licensing agreement with the Mansour Group to produce, market, and distribute its tobacco products in Eastern Europe, the Middle East and Africa. The Foundation also received an amount between US$ 5,000 and US$ 10,000 from Industria de Tabaco Leon Jimenes, a subsidiary of Philip Morris in the Dominican Republic.

This year the Foundation has again accepted money from the tobacco industry. ITC Limited, India's market leader in cigarettes, has contributed US$ 10,000. According to ITC's website, it has a leadership position in every segment of the market. Its portfolio of brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake.

In 2008, the World Health Organization (WHO) criticized the Compact for allowing tobacco companies to become members. A 19-page report faulted the UN initiative for harboring tobacco companies under its umbrella. "The tobacco industry and corporate social responsibility are an inherent contradiction. It is unfortunate that some tobacco companies have been able to join the Global Compact, which is an important corporate citizenship initiative," the study said.

Another tobacco company that participates in the Compact is Souza Cruz, a Brazilian subsidiary of British American Tobacco. The CEO of Souza Cruz signed a CEO statement on the occasion of the 60th anniversary of the Universal Declaration of Human Rights, even though the Global Compact Office does not permit tobacco companies to make presentations at any of its global events or to use the Global Compact brand in any other way to raise their profile.

Leading PR firm Edelman is expelled from the Global Compact – and reinstated, just like that

Yesterday the UN Global Compact expelled leading PR firm Edelman for failure to communicate on progress (screenshot available). Remarkably, after an exchange of tweets on the subject, today Edelman was reinstated as a participant in the Compact.

Earlier today, Judy Kuszewski wrote an excellent blog post on the expulsion, based on information provided by Global Compact Critics:

"[…] Yesterday's second news item was a bit of embarrassment for PR giant Edelman – they of the much-vaunted and influential annual Trust Barometer, not to mention the myriad CR initiatives they have built for blue-chip clients. It seems they were expelled from the UN Global Compact for failure to submit their regular Communication on Progress, which was due a year ago. Today, it transpires (via a tweet, mind you, I don't have anything more substantial) that Edelman didn't get UNGC's emails reminding them to update their COP, so weren't aware they were in breach of the requirement until hearing about their expulsion yesterday. So apparently they'll be rectifying the situation post haste.

Let's just have a look at this in more detail:

1. They didn’t know they were in breach. This means nobody at Edelman pays any attention to the UNGC. It also means they aren't monitoring their own reputation, since the Global Compact Critics blog was already flagging their missing COP two months ago.

2. If this sort of thing had happened at IBM, Wal-Mart or ExxonMobil, Edelman would rightly point out it's up to the company to ensure their actions and communications provide a reliable basis for trust, and such mistakes speak to a deeper problem with the underlying issues. As the most recent Trust Barometer highlights, today's trust landscape is: "different and conditional, premised on what a company does and how it communicates… Trust is no longer a commodity that is acquired, but rather a benefit that is bestowed." Physician, heal thyself.

3. Edelman has no excuse. When I looked for further information on this story yesterday, I came upon the rather astonishing fact that the company experienced very nearly the same fate in 2008, when they had also run afoul of the COP requirement, again apparently unawares. Richard Edelman's blog post at the time turns lemons into lemonade by advising companies not to take their "friends in civil society for granted"; to "deal with a problem at the source"; and to "do all of this with speed". Looks to me like they have yet to take their own advice to heart.

Critics will contend that the real issue is with the Global Compact itself and the "fig leaf" factor it provides for companies not genuinely interested in responsible, accountable behavior; I'm not going to address that here. But I am quite dumbfounded that an organization of such expertise in corporate reputation could misunderstand so fully what's at stake with such a program, could manage its affairs so sloppily, and could do it all not once but repeatedly. And I'm afraid it does increase the critics' concern that the whole thing is a hollow exercise."

Judy’s blog post is available here.