Being a Member of the UN Global Compact should not be without responsibility


 42% of UN Global Compact Companies in the survey have lower Human Rights 
scores in 2018 than 2017
 By Felix Dodds and Gaston Ocampo

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:
  1. Agricultural Products (23 companies)
  2. Apparel (30 companies)
  3. 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
(appeal feedback report: here)
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
(Appeal feedback report: here)
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
(Appeal feedback report: here)
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
(Appeal feedback report: here)
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
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.

 This is just the first stage for the UNGC to become the due diligence mechanism to be used for the relationships that the entire UN system has with the private sector.

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.”




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