Being a Member of the UN Global Compact should not be without responsibility
scores in 2018
than 2017
This is the second blog in the series looking at the private
sector members of the UN Global Compact.
The first appeared in a blog Time for the UN Global Compact to Evolve into the UN
Due Diligence Mechanism? A Real Chance with the 2018 Partnership Resolution on
the 1st of November 2018 and looked at the results from Global Compact
companies that were reviewed in the 2017 Corporate Benchmarking on
Human Rights.
Since then the 2018 Corporate
Benchmarking on Human Rights has come out and there have
been two internal reviews conducted in the UN relating to the private sector
and the UN. The first was an Internal Review Report on Leveraging the UN Global
Compact’s Unique Assets Towards Agenda 2030. The second being the UN Sustainable
Development Groups Partnerships Results Group. Both of these have fed into the
recent UN Secretary General’s Report to ECOSOC.
In the November blog, we suggested that the companies belonging to the
Global Compact raised considerable questions on whether they were greenwashing
their reports and of course underneath this their actual activities. The worry
we had was this potential greenwash, if not addressed effectively, would have
an impact on the reputation of the United Nations itself not to mention a
negative impact on the planet.
There has been some
criticism by some NGOs that the Sustainable
Development Goals (SDGs) agenda is in
danger of being co-opted by companies. These we would say are serious concerns
that should be listened to. There is no question that to fund the SDGs, government
funding alone will not be enough. It has been estimated by the UNCTAD's World Investment Report 2014 and others that the cost of delivering the
Sustainable Development Goals (SDGs) is somewhere between $US3-5 trillion each
year. Overseas Development Assistance (ODA) is roughly $US 171 billion so it has
no ability to address this.
Therefore, there will
need to be funding from the private sector including through Public Private
Partnerships (PPPs) The history of PPPs impact on the environment and social
welfare of people has been terrible. The
need for some sustainability principles was recognized in the Addis Ababa Action Agenda (AAAA):
“48. We
will therefore build capacity to enter into public-private
partnerships, including with regard to planning, contract negotiation,
management, accounting and budgeting for contingent liabilities. We also commit
to holding inclusive, open and transparent discussion when developing and
adopting guidelines and documentation for the use of public-private
partnerships, and to build a knowledge base and share lessons learned through
regional and global forums.” (UN, 2015)
Despite these stakeholders
having addressed this at the Financing
for Development Forum,
member states have so far not shown any willingness to develop global
principles on PPPs nor for that matter on Multi-stakeholder Partnerships’
(MSPs). In this vacuum the United Nations Economic Commission for Europe
(UNECE) has gone ahead and developed a set of Principles for Private Public Partnerships (PPPs) for SDGs at the regional level. It is a shame
that the majority of NGOs have not engaged in the work of defining their Principles
for PPPs for SDGs it has not engaged in this open and transparent process basically
because it isn’t exactly what the Addis agreement called for.
A regional approach might have some very
important benefits.
The first is that it
will focus on a set of principles that are relevant to that region- something
which could be lost in a global agreement. The second is that it enables
national NGOs and even sub-national or local NGOs and community groups a better
chance to participate then at a global level. Third, it focuses on some of the
clear bad practice examples that are relevant in that region and therefore help
mobilize against them. Finally, it doesn’t preclude a global agreement once the
regional ones are in place. As there are companies that are transnational in
nature then there needs to be a clear mechanism developed between the regional
commissions to address this, and eventually move towards a global agreement
that builds a framework convention which the regional agreements would inform about,
so that a bottom-up approach will be adopted (instead of a top-down one).
This approach would
mimic the approach taken on Principle 10 of the Rio Declaration by the European
Commission and the Latin America and Caribbean Commission, ultimately being
brought together to form a global agreement. So as the discussion has started
on other Regional Commissions following the approach of UNECE we should be
asking those global NGOs what do they fear from the involvement of national and
local NGOs in a regional agreement?
UN
Global Compact
As this blog is focusing
on the corporate reporting on human rights of companies that are members of the
UN Global Compact it is worth reflecting on what the UN Global Compact is. The
UNGC was launched at the World Economic Forum as a voluntary challenge based on
CEO commitments to implement universal sustainability principles. These
commitments aimed to support UN goals: promotes ten Principles – now over 9000
companies and 4000 non-business participants. In launching the UN Global
Compact, UN Secretary-General Kofi Annan said he sought:
“a creative partnership
between the United Nations and the private sector. I made the point that the
everyday work of the United Nations -- whether in peacekeeping, setting
technical standards, protecting intellectual property or providing much-needed
assistance to developing countries -- helps to expand opportunities for
business around the world. And I stated quite frankly that, without your
know-how and your resources, many of the objectives of the United Nations would
remain elusive.”
A
Quick Introduction to the UN Global Compact and the Principles
The UN Global Compact
(UNGC) is a voluntary initiative, it seeks wide participation from a diverse
group of businesses.
As a participant in the
Global Compact, a company sets in motion changes to business operations so that
the UNGC and its principles become an integral part of its strategy, culture
and day-to-day operations. Participants are:
- Expected to publicly advocate
the UNGC and its principles via communications vehicles such as press
releases, speeches, etc;
- Required to communicate with
their stakeholders on an annual basis about progress in implementing the
UNGC’s ten principles; and
- Asked to carry out efforts to
support societal priorities. (UNGC, 2018)
The UNGC has a due
diligence mechanism – “companies that fail to report or to meet the criteria
over time may be removed from the initiative.” Over 6000 companies have been
delisted for either failing to report or meet the criteria stated on the UNGC’s
ten principles which companies commit to.
Human
Rights
Principle 1: Businesses
should support and respect the protection of internationally proclaimed human
rights; and
Principle 2: make sure
that they are not complicit in human rights abuses.
Labour
Principle 3: Businesses
should uphold the freedom of association and the effective recognition of the
right to collective bargaining;
Principle 4: the
elimination of all forms of forced and compulsory labour;
Principle 5: the
effective abolition of child labour; and
Principle 6: the
elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: Businesses
should support a precautionary approach to environmental challenges;
Principle 8: undertake
initiatives to promote greater environmental responsibility; and
Principle 9: encourage
the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Principle 10: Businesses
should work against corruption in all its forms, including extortion and
bribery.
In the last blog in
November last year we asked the question that as the UN expands its
relationship with the private sector, could the UNGC become the due diligence
mechanism to support this expansion?
A number of UN bodies
are saying they will only work with private sector companies if they are a UNGC
member or planning to join, and many say they definitely will not work with
companies that have been delisted.
The UNGC has evolved
over time and needs to be able to be ‘fit of purpose’ for the UN system and to
evolve again in the coming year. What could this include?
The
Corporate Human Rights Benchmark
The Corporate Human Rights Benchmark (CHRB) was set up as a collaboration of investors (AVIVA,
VNDO, Nordea, apg) and stakeholder organizations. The Objective is to
create the “first open and public benchmark of corporate human rights
performance.” (CHRB, 2018)
In August, the UN Joint
Inspection Unit completed its report titled “United Nations system: private sector
partnerships arrangements in the context of the 2030 Agenda for Sustainable
Development.” It suggests a role
for the UN in rating companies, saying:
"Organizations also
note there are obvious benefits stemming from external due diligence
assessments, and that the United Nations system should continue to engage
private sector companies that specialize in rating the sustainability of
prospective United Nations partner companies based on their environmental,
corporate and social performance (including on human rights)." (UN,2018)
The 2017 and 2018 CHRB
Report doesn’t benchmark all companies, but it does benchmark the leaders in
three key areas:
- Agricultural Products (23
companies)
- Apparel (30 companies)
- Extractives (41 companies)
Before delving into the
data, it is worth noting that parallel to this is another benchmarking
initiative called the World Benchmarking Alliance to benchmark progress around the SDGs.
This also is a collaboration between investors and stakeholders; while CHRB
does not yet consider UNGC in its benchmarking, the World Benchmarking
Alliance does.
Data
and the companies
“Preventing adverse
impacts on workers, communities and consumers is one of the most
pressing challenges almost every company faces in today’s globalized
marketplace. The CHRB seeks to tap into the competitive nature of the market as
a powerful driver for change in confronting this challenge.” (CHRB, 2018)
The CHRB underlines the
importance of commitment to human rights by companies, saying: “through
due diligence, jobs can be precarious with poverty wages, indigenous peoples
can be dispossessed of their ancestral lands and individuals can be subjected
to modern day slavery, amongst a range of other potential impacts.” (CHRB,
2018)
CHRB believes, and we
support that, having a transparent set of data on a company can catalyze a
powerful driver for change in the company by its investors, employees, and
other stakeholders.
For companies that are
public, refusing to face the truths outlined by these reporting mechanisms can
have a huge impact on the brand they have built up over many years but can tank
overnight in today’s deeply interconnected world. The best companies seek to
secure the next generation’s top talent. Who wants to work for a company today
that has a bad human rights record, is guilty of gender discrimination, or is
indifferent in the face of global climate change?
One of the arguments put
forward from those who support benchmarking, and we include ourselves in that
group, is that it causes a race to the top. The CHRB have surveyed 38 UN Global
Compact companies out of over 10,000 who are members of the UNGC. It is
therefore not good to see 16 of these companies fall back further in the
survey. This is terrible for human rights and also terrible for the Global
Compact as a due diligence mechanism in the UN system. We will come back to
some recommendations at the end, but let’s first look at the published results.
We have marked in red the companies’ 2018 score if it is lower than the 2017
score.
Name of company
|
Is it a member of the UN Global Compact
|
What was its % rating in the 2017 assessment
|
What was its % rating in the 2018 assessment
|
Have responded to the CHRB 2018
|
Any other information you think is ok 20018
|
|
zAGRICULTURE
|
Yes
|
38%
|
21.3%
|
YES
|
Scored 2/2 in commitment to respect the human rights of workers
|
|
Yes
|
37%
|
30.9%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
32%
|
37.2%
|
*engaged
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
28%
|
37.3%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
27%
|
29.8%
|
*engaged
|
Scored 0.5/2 in commitment to respect the human rights of
workers
|
||
Yes
|
27%
|
8.9%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
27%
|
22.5%
|
*engaged
|
Scored 1.5/2 in commitment to respect the human rights of
workers
|
||
Yes
|
26%
|
14.7%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
25%
|
8.5%
|
NO
|
Scored 0.5/2 in commitment to respect the human rights of workers
|
||
Yes
|
25%
|
40.7%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
23%
|
43.3%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
64%
|
69.8%
|
YES
|
|||
Yes
|
22%
|
16.7%
|
Scored 0/2 in commitment to respect the human rights of workers
|
|||
Yes
|
55.9
|
67.3
|
Yes
|
|||
Yes
|
21%
|
25.1%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
21%
|
7.6%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
20%
|
0.0%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
APPAREL
|
Yes
|
36%
|
52.9%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
|
Yes
|
28%
|
28.6%
|
NO
|
Scored 1.5/2 in commitment to respect the human rights of
workers
|
||
Yes
|
44%
|
51.6%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
EXTRACTIVE
|
Yes
|
37%
|
55.1%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
|
Yes
|
36%
|
25.0%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
32%
|
Suspended as of January 2019
|
||||
Yes
|
32%
|
39.1%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
30%
|
18.6%
|
NO
|
Scored 2/2 in commitment to respect the human rights of workers
|
||
Yes
|
28%
|
17.5%
|
*engaged
|
Scored 0.5/2 in commitment to respect the human rights of
workers
|
||
Yes
|
27%
|
24.8%
|
NO
|
Scored 1.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
N/A
|
9.2%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
25%
|
14.6%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
23%
|
24.6%
|
*engaged
|
Scored 2/2 in
commitment to respect the human rights of workers
|
||
Yes
|
21%
|
45.8%
|
NO
|
Scored 1.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
21%
|
3.6%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
21%
|
61.8%
|
NO
|
Scored 2/2 in
commitment to respect the human rights of workers
|
||
Yes
|
20%
|
21.7%
|
*engaged
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
19%
|
41.0%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
9.00%
|
4.8%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
||
Yes
|
7.00%
|
6.9%
|
NO
|
Scored 0/2 in commitment
to respect the human rights of workers
|
||
Yes
|
5.00%
|
16.9%
|
NO
|
Scored 0.5/2 in
commitment to respect the human rights of workers
|
Agriculture
Products
UK firm Marks and Spencer has the highest rating from CHRB with 69.8 up
from 64.4% in 2017 and is a UNGC member. On the CHRB website, you will find the
spreadsheets for each company and you can delve into the scores. On average,
the score that Global Compact companies had on Human Rights diligence was 26.6%,
DOWN from 28.8%, a terrible indictment of the state of major corporations and perhaps UNGC members
in 2018?
But for now, we want to
focus on some of the household names that have been active in the UNGC for
many years, and have taken leadership roles. These are PepsiCo Inc which in 2017 was at 23% and has improved considerably to 43.3%
in 2018 and Starbucks, both of which have not engaged in a dialogue with the
CHRB on the data and how they will address these situations, making their delivery
against the CHRB to be so low.
In its last report filed
with the UNGC, PepsiCo Inc claimed that its complex value chain allows them to ensure
positive human rights impact through direct operations while using their
leverage to encourage its indirect chain of operations. Many times, we have
seen arguments like this one being used as ways to entail alleged efficiency in
the diligence of SDG goals. Due to its multinational operations, PepsiCo
claims that whenever issues arise, they seek to follow the higher standard – no
matter whether that standard is based on local or international laws. When
talking about Due Diligence, this company asserted that programs in place to
assess adverse human rights impacts, implement remedies when deemed necessary,
and carry out external consultation to ensure effectiveness towards a
“well-grounded respect for the human rights of [their] 300,000+ employees.”
The second US company to
look at is Starbucks, again a community-facing company which, at 25% in 2017, is
only a little better than Pepsi and far behind Marks and Spencer (64%). Nonetheless,
the big story here is that the 2018 data shows it dropping to only 8.5%
This stark contrast with
the leading scorer, added to the widely known racial discrimination issue in
the past year, led to major concerns about Starbucks´ commitment to human rights. Again, we can see a major
multinational corporation that claims to be abiding by the standards laid out
in the UNGC, but that it is actually failing to uphold such standards at every
level of its corporate structure. This is not different from several other cases
in which companies are accused of “Green Washing” their reports in order to
fulfill the commitments made with the UNGC.
In its last report to
the UNGC, Starbucks claimed that it considers these Principles to be a “natural
extension” of its Mission Statement – showcasing their commitment to social and
environmental responsibility. The report continues by saying that the UNGC is
“helping the company to strengthen existing or develop new internal practices
and policies.” Nonetheless, Starbucks’ report to the UNGC left much to be desired in a matter of
detail and specificity, which could be considered as a deliberate effort to
avoid controversial matters. Furthermore, this Seattle-based company claims to
be “focused on galvanizing [its] partners;” which consists of empowering its
employees to take initiative in local community programs,
pursue education or provide jobs for those in need (immigrants, veterans,
and youth). Lastly, one ought to acknowledge that this report solely focuses on
Starbucks´ successes and blatantly circumvents its weaknesses. Negative
qualities have, however, been reported by the UNGC and other consultations,
therefore bringing up to light issues such as those that have been widely known
throughout the past months.
In both cases, neither PepsiCo
or Starbucks engage with the CHRB in order to discuss how to improve nor have
they actually presented a report addressing what is actually going on within
each company. The UNGC should be concerned about the deliberate
misrepresentations present in UNGC signatories reports and also in consequence,
and most importantly, seemingly futile role that the compact seems to have
developed (or should we say underdeveloped) into since its establishment in the
year 2000. Other companies that should give the UNGC concern who have dropped
over the last year are AEON Co,
Ltd. From 22% to 16.7%. Falabella from 22% to 7.6% and Kweichow Moutai from 20% to zero. The consequences to these drops in performance
are non-existent. The absence of a more individualized (regional) mechanism of control/checks
and balances gives leeway for companies to get away with performance flaws. The
solution for these problems? A regional approach that would focus on adapting
the expectations from the bottom to the upper levels.
Apparel
The focus of the assessment
was on the 30 largest apparel companies in the world assessed against the
CHRB’s Apparel criteria. In this area again, Marks and Spencer is the leader at 69.8% up from 64% - while the average in
the industry was again down this time to 26.6% from 27.3%. Among the UNGC
associated companies, Kering did worst at 28.6% just a little up from its
2017 score of 28%. Surprisingly, GAP, such a strong consumer-facing brand, attained a score of 51.6%
up from 44%. All things considered, none of these companies engaged in a
discussion with the CHRB about their score and what could be done to improve
it. This is detrimental for the CHRB as being a member of the UNGC should not
be without responsibility.
The Gap UNGC report on its human rights work introduced the
Sustainability Assessment Manual, which was established in 1994 to “outline the
protocols that [GAP´s] team uses to assess and remediate issues related
to labor or working conditions.” Nonetheless, despite having implemented this
manual and allegedly refining their approach to improve the working
conditions of their employees, this company still scores poorly in
their human rights work- aspect which perhaps again reflects a lack of influence
that the Compact has on the practices of its member companies. Taking this into
consideration, and in the light of increasing allegations of poor working
conditions in countries with lax worker legislation, GAP made
a deliberate effort to ensure their global facilities respect principles of:
- Promoting
the freedom of association,
- Fighting
human trafficking,
- Abolishing
forced labor/child labor,
- Protecting
fair contracts,
- Paying
fair wages, and
- Ensuring
humane treatment
These principles amount
to the overarching effort under the framework of an initiative known as “Supply
Chain Sustainability.” This initiative seeks to “improve efficiency and partner
with local and international NGOs on innovative programs that benefit the facility
managers and workers.” Ultimately, GAP´s report highlights that
“some regions suffer from a lack of infrastructure or rule of law” as an apparent
justification to their low-scoring UNGC reports. It is therefore evident
that GAP is using the lax labor legislation in the countries
where they produce their products in order to get away with poor working
conditions that amount to higher profit margins; the company does this while
claiming to be making an effort to change the situation, while at the same time
not actually doing anything substantial to reverse the situation.
Extractive
Industries
The final area, and
perhaps one that has historically been the most contentious, is the extractive
industry. Here the CHRB reviewed 41 of the largest extractive companies in the
world. The top two both Global Compact members, who have been at the forefront
of campaigns on human rights over many years, are BHP Billiton up from 69% to 72% and Rio Tinto who have overtaken them now at 76.8% up from 63%. The extractive
industry average like the other two is down this time from 29.4% in 2017 to 26.44%.in
2018
There are some
absolutely terrible UNGC members such as Grupo Azor Mexico which despite having improved from 5% to
16.9%, still perform poorly. Moreover, other companies such as Oil and Natural Gas Corporation India came down from 7.2% to 6.9% and China Petroleum and Chemical from 9% to 4.8%. It is still unclear how they
got through the UNGC reporting process, but we can consider their lackluster
performances as the result of continual needs to strengthen the due diligence
infrastructure. Here are a couple of comments on their human rights reports.
“Improvement of the work
environment through the implementation of practices that encourage coexistence
and interrelation of all employees.” Grupo Azor
México (UNGC Report)
Grupo Azor México is one of UNGC´s lowest scoring members,
nonetheless, its leadership maintains that they have achieved substantial
advancements in matter of Human Rights work. This is a hypocritical
stance given the challenges lying ahead for this company, which reflect the
poor conditions that currently exist within the organization. For example,
their report highlights the need for “employees to have the confidence to
express their opinions and contribute ideas for the benefit of the company”; not
only is this implicitly addressing a fear of employees not feeling comfortable
voicing their concerns, but it is also- as per the poor 2018 results- not being
put into practice.
On the other hand, in
its latest report, Oil and Natural Gas Corporation India claimed that “the rights of the employees
are protected through compliance with the labor laws of the land and adhering
to global best practices like the 10 Principles of the UN Global Compact.” But,
in the light of last year’s results, it is evident that such principles are not
being carried through, despite of the structural stipulations to
reverse dire conditions. Once again, we see a case of a company claiming to be
socially responsible by joining the UNGC, but not actually carrying through
with their promises of improving human rights conditions and overall UNGC
stipulations.
Finally, another poor performing UNGC member is China Petroleum and Chemical. Under the tagline “Putting People First,” this
company´s report showcases alleged advances in matter of sustainable
development and quality reforms in the workplace. Despite being honored with
the Pioneer Enterprise of SDGs Realization at the Lighting a Better
Future - 2016 China Summit, this company is being outperformed by most of
the other extractive industry UNGC signatories. How is this possible? This is
an example of results yielding from the usage of unclear measuring tools and
systems of recognition that contradict each other, subsequently undermining the
process that the UNGC seeks to make its signatories carry out.
But, these are not the
only companies with bad performance. Even Royal Dutch Shell, who have had
such a long engagement on the issue of human rights, is only scoring 37%.
According to their UNGC report, Shell said:
“We have embedded human
rights into our policies, business systems and processes. We believe
this integrated approach allows us to efficiently and effectively manage human
rights within our existing ways of working.” In order to do this, Shell focuses
on four areas:
- Labor
Rights,
- Communities,
- Supply
Chains, and
- Security
All of which amount to
Shell´s alleged commitment to provide better working conditions and
access to remedy whenever it is needed. After having been engaged with the UNGC
for such a long time, Shell should be performing better. As it has been
mentioned in the introduction of this blog, companies should be delisted as
UNGC members when this happens. What is the point of having 6,000+ signatories
if most of them do not perform as they should and are not working towards
improving their Human Rights impact?
Other companies that are
UNGC members who have fallen in the CBHR and which should give the UNGC concern
are:
Sasol
Ltd down from 36% to 25%
Suncor
Energy Inc down from 30% to 18.6%
PTT
Public Company down from 28% to 17.5%
Goldcorp down from 27% to 24.8%
Norilsk
Nickel (Nornickel) down from 25% to 14.6%
All in all, when
contrasting the reports of the aforementioned companies with their poor UNGC
outcomes, it is evident that no matter how ideal their initiatives might seem,
the results rely on how these initiatives are implemented and whether they
serve the purpose they were originally created for. Whenever companies receive
bad performance scores, they ought to consider whether their initiatives were
flawed in the first place or if they simply need to modify their implementation
process. By having a transparent set of data and a sincere response to the
UNGC reports, not only in writing but also through actions, the private sector
could be a powerful driver for change.
The Challenge for the UN
Global Compact
“Organizations [of the
UN system] recognize the ability of the private sector to adjust quickly to
evolving development demands and needs and note how the United Nations system
is increasingly expected to look at new ways of partnering with the private
sector to create shared value and achieve impact as measured against the
Sustainable Development Goals.” (UNGA -Towards Global Partnerships – Joint
Inspection Unit, 19th July 2018)
Although this is
accurate, we ought to acknowledge that while companies can “adjust to quickly
evolve development demands and needs,” they can also fail to address these
demands and needs over the long-term. Companies carry out activities that
provide them with public recognition or yield higher margins of profit, and
ideas come and go with changes in leadership and direction.
All in all, in the light
of the analysis of the results showcased in this blog post, it is evident that
many times, companies associated with the UNGC establish good intent/structures
‘in theory’ but fail to put them into practice.
The UNGC is starting to
be seen as the due diligence mechanism for parts of the UN system. The latest
draft of the UNECE Principles for PPPs for SDGs states that:
“Many UN agencies work with the private sector in support of the SDGs. UNEP and UNDP
“Many UN agencies work with the private sector in support of the SDGs. UNEP and UNDP
have prominent programme
with undivided companies. The signing up to the UN Global
Compact 10 Principles
should be mandatory for companies engaging in PPPs. Delisting of
any company should be
then flagged to ensure they are not a SDG supporting company.
There are also
associations which also work with for SDGs, CEO etc. The challenge is to
mobiles private sector
to assist in capacity building:” (UNECE, 2018)
On the broader point of
CSR performance Ecovadis' recent study "commitment vs practice", which found that UNGC participation does typically translate into a better CSR
performance ….in the longer term. As an example of due diligence UNEP are using
the services of RepRisk and Sustainalytics to back up their due
diligence system. These two companies have their own methodology to score
companies. They provide assessments on companies related to the 10 principles
of the UNGC.
UNEP does promote
increased adherence and membership to global compact by making membership of
global compact a key criterion in the review of any given partnership, however,
they claim not to base their decision entirely on this. This may be because as
I have pointed out some members that are of high risk according to our
criteria. UNGC facilitates the contract for UN-wide access to these service
providers, and 18 different UN entities are also using them through this
arrangement.
An important issue is that
the UNGC has moved from voluntary financial contributions to mandatory
financial contribution – members are paying members. Payment is identified
according to the revenue of the company. Reporting is an annual requirement – mandatory not voluntary – for all UNGC
participants, which basically means you submit a report related to the 10
principles – but there has been a lack of clarity on what happens to these
reports – who checks them, and who recommends on actions if any.
The UNGC is now about to
start implementing a recognition scheme for member companies who demonstrate
“leadership on sustainability” – it will be called LEAD. Again, you can only be
recognized if you are a paying member. In addition, one of the criteria for
this will also be to actively participate in one of UNGC action platforms
(these are also based on payment fee). A question that is worth the UNGC
considering is how they could allow reporting and publication on its principles
by companies that are not necessarily paying members. There have been over the
last ten years more and more green and sustainable startups which are not
members but maybe could be in the future but could report on what they are
doing.
If the UN Global Compact
is to become the due diligence mechanism, then (1) should it be based on them
having to pay to be a member? (2) companies need to be challenged on their
reports – particularly when outside evidence is that they are not telling the
whole truth.
It is very good news
that the UNGC is a member of the World Benchmarking Alliance however it is not
yet a member of the Corporate Human Rights Benchmark. They should join the CHRB
and start challenging the relatively small but significant companies that are
being reviewed in order to find out what they are planning to do to address their
CHRB scores. Furthermore, they should ask the companies that haven’t engaged
with the CHRB why they have not done so. Depending on this response the UNGC
should consider delisting a company that is not addressing their CHRB score.
Second, the UN system –
through the CEB - should instruct its staff not to work with any company
delisted from the UNGC.
Third, clearly the UNGC
does not have the staff to check over 10000 companies but it could at least
introduce a random sampling system to review a smaller number of companies.
This would put all signatories on notice that they might be reviewed and could
eventually be delisted or at least challenged in case their scores are not
meeting the expected standards.
The UNGC, governments,
foundations, and stakeholder need to support the expanding of the number of
companies being benchmarked by CHRB.
Soon the World
Benchmarking Alliance will be producing their reports on SDG benchmarking of
companies.
They will be focusing
on:
Food and Agriculture Industries
covering: Food Retail, Food
Service, Food & Beverage, Agricultural Commodity Traders, Livestock, Dairy,
Commodity Crops, and Input Suppliers
Gender Equality and Empowerment covering: Apparel, Food & Beverage, Finance,
Information Technology and Communication Services
Digital Inclusion covering: Telecommunication Services, Media &
Entertainment and Information Technology
Climate and Energy – the Corporate
Climate Action Benchmark (In partnership with CDP (formerly the Carbon
Disclosure Project) covering: Oil and Gas, Electric Utilities and Automotive
Seafood
Stewardship Index covering SDGs 1, 2, 5, 8, 12, 14 and 15 with a
direct link to 27 targets
Conclusion
As we wait for the UN
Secretary General's recommendations on due diligence and the UNGC we have a few
remarks to make.
The UN should only work
with companies that are members of the UNGC – if they will not commit to the 10
Principles then why is the UN working with them? If they are not UNGC members
but are adhering with the ten principles then is it just the cost of UNGC the membership fee that is stopping them from joining or are there any other
reasons?
The UN as a whole need’s
clear guidelines on what level/threshold of participation would disqualify a
company. Clearly, companies that are high risk should be avoided - I would
include fossil fuel companies in those categories, as far as any partnership is
concerned.
What will the UNGC do if
companies score bad or even as some have done get worse instead of better?
The UN has to have a strong
due diligence policy as we move forward, and it needs to be able to show that
the UNGC can be an effective part of this. It can not afford to be seen as a
greenwash- time is not on our side and companies that are not part of the
solution should not be part of a UNGC as we move forward. Of course, each UN
Agency or Programme is free and encouraged to identify its own champions.
The companies that are
members of the UNGC will need to be prepared to seriously review what they are
doing to help deliver around the SDGs. The UNGC, the WBCSD and others
have produced the SDG Compass to help companies to align their strategies with
the SDGs and in measuring their contribution.
By the midterm review of
the SDGs in 2023 we should be able to show what the contribution of UNGC
companies have been towards helping to deliver the SDGs.
Finally, we must
remember that we no longer have time on our side. We are moving towards a 3 to
4 ºC degree increase in temperature. This will impact on our delivery of all
the SDGs and so the UNGC should be a place for companies committed to helping
us ensure we are going to challenge that prediction. Companies falling back on
their UNGC Principles are not part seriously part of the solution. We are
reminded of Dr Martin Luther King’s warning:
“Over bleached bones of
numerous civilizations are written the pathetic words. Too late.”
I suggest UN Global Compact promote a day, perhaps during the UNGA in September 2019 when all companies supporting the UN Global Compact distribute a 1-page flyer about their 'success stories'...
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