The United Nations Global Compact: Advocating

The Promise
Abstract
The United Nations Global Compact (UNGC) was created in 2000 to bring the
global corporate world under one umbrella. It was induced through the 10
principles, which stand to imbibe the values of environmental sustainability,
better human rights, good labor facilities and wages and elimination of
corruption. Sethi and Schepers in their article UNGC: The Promise
Performance Gap have advocated on regulating the UNGC principles
through hard law. UNGC has been very clear form its existence that the
mission is to educate and urge the corporations to incorporate the principles
in their own values. This article will provide a brief history of the changes in
UNGC from its existence. Then a summary of the criticisms of the initiative
focused on Sethi-Schepers article. Finally, an argument on how UNGC have
been able to live up to the promise and have brought the corporate world
together to at least start thinking towards the greater good apart from the
financial profits and shareholder value creation.

Globalization and The United Nations Global Compact

Globalization, a huge expansion of the global economy and outsourcing into
poor developing countries, created much required attention towards the
working conditions and inhumane practices in the poor developing countries.

A global ethic was the requirement of our new global world. Business had
already learned that the globalization, technology and the internet is
shrinking

the

world

bringing

cultures

and

economies

closer.

The

responsibilities of the business were being redefined as well as the role of

national and global institutions. The corporates learned the requirement of a
global standard for its product and services, and its production facilities. The
UN Global Compact founded in 2000, is intended to increase and diffuse the
benefits of global economic development through voluntary corporate
policies and programs. Before the UNGC there were similar principles set my
specific business industries or specific countries, which had the same
objectives but for a selected audience. UN had the visibility, global reach,
universality, and neutrality and convening power over the world. UNGCs
basic idea was to emphasis the moral purpose of business, with the member
companies setting high moral tone throughout the world.
UNGC website We are a voluntary initiative based on CEO commitments
to implement universal sustainability principles and to take steps to support
UN goals.
UNGC acts as a catalyzing agent, which is transforming the world (work in
progress) through partnerships and collaboration for organizations and
communities anywhere around the globe. UNGC provides a framework, bestpractices, resources and networking events that have revolutionized the
companies to do business responsibly and keep the commitment to the

society. The UN Global Compact was designed as a voluntary initiative. A

company joining UNGC is showing its support towards the ten principles of
UNGC and referencing the progress in either the annual reports or a separate
corporate sustainability report (CSR). As of today UNGC has more than
12000+ signatories (8000 companies and 4000+ non business) in 170
countries. This local network in more than 170 countries is a key for
advancing the learnings, and change projects in the local context and
improving the norms for both corporate and social world ethically as well as
economically.

Critics of the United Nations Global Compact

One set of critics are not convinced that economic globalization is a good
idea. They believe that globalization can bring an authentic development for
the poor, even if the UNGC is implemented in the whole world. They are
enraged that UNGC with its voluntary nature have merely assumed that
globalization is an answer to realize the vision and overcome the plight of the
poor, when no substantial argument can be presented in favor of the
assumption. The critics claim that any realization is only possible if a binding
legal framework, approved and accepted by the global economy, that
includes the human rights, environmental, labor rights and anti-corruption.
A second group of critics believe that the UNGC organizers recognized that
their survival depends on the support of three groups, namely relevant UN
agencies, civil society organizations, and private sector corporations. The
ineffectiveness of achieving its mission is mainly attributed to the historic

development of the UNGC. In the beginning, there was only nominal

involvement of UN agencies and NGOs, leaving the UNGC dominated by
public sector interests. According to the authors, this led to an insular
governance structure that was unable to guarantee compliance with the
UNGC mission. Moreover, inability to generate a broad basis of financial
support by the signatory companies indicates their missing commitment. The
ever changing governance structure of UNGC, which has included 11 out of
12 seats for business or business related areas of interest indicates its cozy
approach towards the private sector. The UNGC had achieved over the last
10 years is just growth in numbers and diversification, which is also due to
inclusion of new domains. Until, the UNGC focuses on quality of the
implementation of the ten principles instead of increasing the quantity of
membership, the authors sees little future for the initiative or potential to
bridge the gap.
Another criticism faced by the UNGC is its voluntary nature and demand
driven initiative. The critics see that the Communication of progress is not
required to have the report certified or audited. The critics want some kind of
independent monitoring and verification process. Sethi in his article The
UNGC provides a venue for opportunistic companies to make grandiose
statements of corporate citizenship without worrying about being called to
account for their actions. Also, the response to this criticism from UNGC
officials states that the role of the checking authority is mainly played by
local NGOs. The NGOs provide the accountability structure. But, the

questions still remains who is accounting for these NGOs, it is very clear that
it is not UNGC. Critics further argue that socially and ecologically
irresponsible companies may be inclined to join the UNGC because of its low
entry barriers, thereby profiting from the moral legitimacy of the UN without
actually upholding the ten principles. In this sense, companies use the UNGC
to Bluewash their poor CSR performance. Sethi-Schepers conclude UNGC
does not offer anything to counter the problems of adverse selection and
free-riding.

Advocating The Promise of United Nation Global Compact

Globalization, an economic practice brings the world together on the
business forefront and this is the main objective of globalization. But, UN
Global compact has been able to successfully add a second idea to
understand the moral purpose of business, i.e. not only wealth creation but
also wealth distribution. UNGC with the help of the local networks (i.e. NGOs
and other social organization) was able to highlight the working conditions in
the developing world. This has led to a change in which, the labor facilities
and human rights are always considered. The companies are bound to
adhere to the laws as the NGOs direct connectivity to the UN can create
negative publicity for the company.
Sethi and Schepers are correct in identifying that in 2000, UNGC did not had
any support from any UN agency and there was a profound group in the UN
body, which disagreed with UNGCs objective of bringing UN and businesses

together. But, over the past 15 years, there has been a significant change in
the support coming from different UN agencies as the idea was accepted in
the real world. The change in leadership in 2006 has confirmed the future of
UN-business partnership. The question still remain is to ensure that the ten
principles of UNGC are embedded in the UN itself. The article critics on the
increased representation of business in the UNGC board, which is required for
a partnership to flourish and also UNGC official do not business expertise.
UNGC can provide guideline, but a better implementation plan can only be
devised with the help of business representative. There have been significant
example, where an organization has prepared an implementation plan using
UNGC guidelines and later shared it with UNGC partner members (Shell
shared Safe Driving practices and Accommodation and Welfare Guide with
Abbott and Unilever).
On the point to regulate UNGC has a legal obligation, its important to define
the most basic concepts of soft and hard law at the outset. Hard law has
been defined as norms creating precise legal rights and obligations. Soft
law, by contrast, consists of rules which are not legally binding, but which
still intend to produce changes in behavior from those it regulates. The
practical impossibility of employing hard law at an international level has
meant that softer codes of conduct have stepped in to fill the void. Many
critics leap to the easy and intellectually lazy assumption that hard law
trumps soft law in every conceivable context. One of the biggest benefits of

joining UNGC, is an increase in reputation by showing a positive intent

towards UNGCs goal, a conversion to hard law removes this benefit and can
lead to a scenario in which organization will do CSR just to suffice the law,
which will not improve the global economy in any way. The one or two
sentence principles of UNGC have been criticized for their vagueness. But, the low
precision score of the UNGCs ten principles encourages widespread corporate
participation in the initiative. By allowing partner organizations to retain

autonomy over how they choose to incorporate the ten principles into their
everyday practices, the UNGC does not alienate potential participants. The
major criticism has been the checking or auditing body for the CSR activities
and the COP reports. Naming and shaming function, advocacy networks
such as NGOs and the media have been delegated a role of monitoring and
publicity to ensure corporate compliance with the Compacts ten principles.
As the Compact has developed, its mechanisms for inflicting reputational
sanctions on its non-complying participants have become progressively more
onerous. In this digital era, it is practically impossible for company to
Bluewash all its actions and not come in the eye of the world. The companies
are concerned about their reputation, which if lost will discredit any positive
action taken by the organization and will be tagged as an attempt to regain
its lost reputation.

The UNGCs early day refusal to publicly shame those failing to file annual
progress reports was seen as a major weakness, but now that it has
attracted a plethora of participants, the initiative has toughened its stance.

Now, any company failing to report its progress annually will be labeled publicly
as non-communicating on the UNGCs website. A company will be de-listed from
the initiative if this failure is repeated the following year. In early October total 355
companies were delisted from the UN Global compact, tarnishing the companies
image and reputation on oblivious attitude towards the basic requirements of UNGC.

Conclusion
To be sure, UNGC may not be the final answer. But, till the time we find
a better one, UN Global Compact is the best one to bring businesses
together on this journey to understand the moral purpose of the
business and create sustainable value not only for the shareholders but
also for the communities and stakeholders. We need to agree that the
job of UNGC is not yet over, it is work-in-progress. UNGC has been very
successful in bringing together most of the big organizations on a
same platform, where they agree on the sustainable development of
the world. But, the task is far from over, UNGC will have to partner with
the organization in the implementation of the UNGC principles in the
global economy.