To Corporate Leaders By The Un Global Compact Business Essay

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The United Nations Global Compact is a strategic policy initiative that encourages businesses to support ten universal principles in the areas of human rights, labor standards, the environment and anti-corruption. It is the world's largest voluntary corporate responsibility initiative with thousands of business and non-business participants in more than 100 countries.

The UN Global Compact is an important mechanism for joining the business and citizenship strategies of multinational corporations. The process of turning executive commitment into operational reality remains a great challenge. Many mechanisms are required to effectively implement these commitments. The Compact provides a template against which such commitments can be tested and improved. It also provides a dynamic system for co-operating with others and for learning from a broad range of participants.

In this paper, first I will describe what is the UN Global Compact, its principles and its goals. Also, in the Analysis section will be explained in a critical way the deficiencies, criticisms and challenges that faces the Global Compact in our time, according to different peer reviews and books researched through different available academic sources. And finally, in the Findings section, I will explain the opportunities and recommendations of actions that need to be taken to maintain the Global Compact in a sustainable way for the future generations of corporate leaders.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

THEORETICAL FRAMEWORK

The United Nations Global Compact was created in the year 2000 by the United Nations that establishes 10 principles to help guide corporations behavior and to advance to the goal of reducing poverty. These principles were supposed to establish a fundamental set of values and behaviors for companies. They include all countries, continents, and cultures and establish set minimum absolute standards for creating a just and civil global workplace.

The United Nations Global Compact requests to its participating corporations to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption, and to support the broader United Nations goals, such as the Millennium Development Goals, also known as MDGs.

With these principles defined and the challenge faced by every corporation, it seems right that these businesses today understand what these universal principles are and recognize the complexity of implementing them in businesses that are located in both developed and developing countries.¹

¹ Joanne T. Lawrence and Paul W. Beamish. Globally Responsible Leadership: Managing According to the UN Global Compact, Los Angeles: Sage, 2013. Print. Page 16.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

The 10 principles included in the United Nations Global Compact are:

Principle 1 (Human Rights): Businesses should support and respect the protection of internationally proclaimed human rights.

Principle 2 (Human Rights): Make sure there is not complicit in human rights abuses.

Principle 3 (Labor): Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

Principle 4 (Labor): The elimination of all forms of forced and compulsory labor.

Principle 5 (Labor): The effective abolition of child labor.

Principle 6 (Labor): The elimination of discrimination of employment and occupation.

Principle 7 (Environment): Businesses should support a precautionary approach to environmental challenges.

Principle 8 (Environment): Promote greater environmental responsibility.

Principle 9 (Environment): Develop environmentally friendly technologies.

Principle 10 (Anti-corruption): Business should work against corruption in all its forms, including extortion and bribery.²

² Leisinger, K. M. (2007, Winter). Capitalism with a human face: the UN Global Compact.

The Journal of Corporate Citizenship, (28), 113+. Retrieved from http://go.galegroup.com.ezp-012ro.lirn.net/ps/i.do?id=GALE%7CA175548652&v=2.1&u=lirn16516&it=r&p=GPS&sw =w

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

Also, the United Nations Global Compact includes a series of Millennium Development Goals (MDGs). These 8 goals are universally agreed-on set of goals developed to fight global poverty. They were introduced in 2000 and signed by 191 member countries of the UN.

The signatories set themselves an ambitious target: to eradicate poverty by 2015. To gauge their progress, the eight MDGs break down into 21 quantifiable targets that are measured by 60 indicators. The goals to which they agreed are:

Goal 1: Eradicate extreme poverty and hunger.

Goal 2: Achieve universal primary education.

Goal 3: Promote gender equality and empower women.

Goal 4: Reduce child mortality.

Goal 5: Improve maternal health.

Goal 6: Combat HIV/AIDS, malaria, and other diseases.

Goal 7: Ensure environmental sustainability.

Goal 8: Develop a global partnership for development.3

3 Joanne T. Lawrence and Paul W. Beamish. Globally Responsible Leadership: Managing According to the UN Global Compact, Los Angeles: Sage, 2013. Print. Page xv.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

ANALYSIS

The Global Compact has grown from 50 participants in 2000 to over 9,000 par-ticipants in 2012. While this growth is impressive, it has also created the challenge to balance quantitative and qualitative growth. The annual impact studies show that implementation gaps still exist in a variety of contexts. For instance, the corporate responsibility practices often remain limited to headquarters and are not pushed down to subsidiaries and suppliers.

The Global Compact has also achieved what some other corporate responsibility initiatives lack: a good presence on the local level. The number and reach of Local Networks has grown significantly throughout the last twelve years and Local Networks exist in some of the key emerging economies, such as China and India, and in the developing world.

Another, and often neglected, achievement of the Global Compact is its contribution to a silent reform of the UN system. Shortly after its launch, the Compact was lauded for reflecting "the most creative reinvention" of the UN system to date. It is widely known and accepted that the UN reflects a rather hierarchical system following a bureaucratic way of organization. Flexibility and innovation, which are needed in today's swiftly moving political and economic context, are hard to sustain in such an environment. The decentralized network-based governance structure, involving UN agencies, businesses, and

other non-state actors, has already created a space for innovation and experimentation.4

4 Andreas Rasche and George Kell. The United Nations Global Compact: Achievements, Trends and Challenges, Cambridge, New York: Cambridge University Press, 2010. Florida International University Library.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

Prior to the Compact, there was a lack of a strong influential body to promote CSR (Scherer, 2009). Nations have imposed some rules regarding CSR, but there is an absence of significant global governance. In spite of the numerous positive impacts of The Global Compact, also several criticisms have also been made. One over-riding criticism is the methodological weakness of self-reporting by companies in their annual Communication on Progress (COP).

Related to this self-reporting is that the COPs usually emphasize positive results, particularly in discussing specific projects, but rarely identify weaknesses. The Global Policy Forum (2004), which monitors the work of the UN, has argued that The Global Compact has led to small positive changes, but not far-reaching organizational impact. Moreover, more than half of the McKinsey company survey respondents reported that the Compact had no significant impact on their company (McKinsey, 2004).

It is also argued that The Global Compact is marked by inconsistent participation and relatively weak commitment by some companies. Perhaps reflecting this aspect, The Global Compact Office began in January, 2008 to delist companies that failed to meet the Compact's mandatory annual reporting requirement, delisting 394 participants, primarily smaller companies. As of January 2010, the total number of businesses removed stands at 1,840, with 859 companies delisted just between October 2009 and January 2010 (UN, 2010). Past experience has shown that only a handful of delisted companies are likely to sign up to the Compact again.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

In fact, only 9 of the 630 companies that were delisted in June 2008 re-entered the Compact. The lowest compliance levels are companies based in China and the Dominican Republic, followed by the United States and Turkey. Those with high levels of compliance are Germany, the U.K., and South Korea. Based on this history,

Barkemeyer & Napolitano (2009) projected that four out of five small multinational enterprises are expected to fail to comply with the Compact's reporting requirements. These reports indicate that there is a troubling lack of dedication among Compact members and that most of the delisted companies do not believe that the Compact is even worth re-joining.

In addition, because the Compact is a voluntary effort, there is minimal accountability for company members. In a letter to the UN Deputy Secretary-General, Amnesty International raised a concern that seems to be a recurring issue. It stated that the Compact's "accountability mechanisms have weakened over time" and that the Compact should "ensure some form of accountability to the principles" (Amnesty International, 2003).The Compact has no legal sanctions for companies who do not adhere to Compact principles. Barkemeyer & Napolitano (2009) argue that because the UN has limited authority, companies should be accountable to governments.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

The letter written by Amnesty International also brought up the ambiguous criteria that constitute breach of the Compact's principles. There are no clear criteria of what constitutes a violation of rights, nor is there an acceptable evaluation to determine if the principles are being followed. Moreover, non-submission of COP reports has led to a public delisting, while those that were delisted for principles violation were removed quietly. Eligibility requirements for membership are also unclear.

Zammit (2003) revealed that testing for membership "went only as far as ensuring that applicants did not produce landmines or weapons." This absence of clear criteria, coupled with weak commitment and participation, further shows that the Compact can be viewed as a marketing device that companies employ to spruce up their reputations without any significant proof of action.

Perhaps a reason for the weak governance of the Compact is the fact that the UN's resources, especially those allocated to The Global Compact Office, are limited. This was another issue that Amnesty International had with the Compact, saying that "the small secretariat can only do so much," and so it pushes for the "argument that the Global Compact itself may not be the place to enforce compliance" (Amnesty International,

2003).5

5 Joan Bitanga and Larry Bridwell. Corporate Social Responsibility and the United Nations Global Compact, Competition Forum, 2010. Vol. 8. Florida International University Library.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

At the same time, the Global Compact has generated suspicion and in some instances sharp criticism in parts of the NGO (non-governmental organization) community and from various anti-globalization activists. Part of the difference is explained by differing attitudes towards globalization. What the mainstream press views as an innovative practical response to some of its challenges, critics decry as `bluewash': providing an opportunity for the private sector to drape itself in the UN flag without really mending its ways.

Also, the Global Compact has explicitly adopted a learning approach to inducing corporate change, as opposed to a regulatory approach; and it comprises a network form of organization, as opposed to the traditional hierarchic/bureaucratic form. These distinctive (and, for the UN, unusual) features lead the Compact's critics to seriously underestimate its potential, while its supporters may hold excessive expectations of what it can deliver.

Because organizational issues of this sort will continue to confront the search for viable global governance mechanisms for many years ahead, it is worth examining the Global Compact more closely as a case of things to come, spelling out both its advantages and its inherent limitations. The major criticism by the anti-globalization front has been for what it is not: a regulatory arrangement, specifically a legally binding code of conduct with

explicit performance criteria and independent monitoring of company compliance.6

6 Ruggie, J. G. (2002, Spring). The theory and practice of learning networks: corporate social responsibility and the Global Compact. The Journal of Corporate Citizenship, 27+. Retrieved from

http://go.galegroup.com.ezp-012ro.lirn.net/ps/i.do?id=GALE%7CA84669000&v=2.1&u=lirn16516&it=r&p=AONE&s w=w

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

Finally, is important to highlight that the Global Compact office neither regulates

nor monitors a company's submissions and initiatives. The Compact's website carries the

names of the companies that have sent letters of support and provides links to relevant

reports. Global Compact network partners facilitate implementation of the nine principles

by submitting business case studies and examples and by offering training and tools.7

7 Kell, G. (2003, Autumn). The global compact: origins, operations, progress, challenges.

The Journal of Corporate Citizenship, (11), 35+. Retrieved from http://go.galegroup.com.ezp-012ro.lirn.net/ps/i.do?id=GALE%7CA107490003&v=2.1&u=lirn16516&it=r&p=GPS&sw =w

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

FINDINGS

The United Nations Global Compact can be viewed as the initial steps of developing an international forum to monitor Corporate Social Responsibility. Civil society organizations, government institutions and corporations now have a venue to develop productive relationships, which prior to the Global Compact existed haphazardly. There is no doubt that globalization has weakened the ability of national governments to regulate corporations. New ongoing public discourses involving corporate social responsibility need to be developed because solutions for societal challenges are no longer limited to the political system but have become embedded in decentralized processes that include non-state actors such as NGOs and corporations.

The Global Compact with more resources could help companies improve Corporate Social Responsibility, especially in developing countries. Currently, the UN has very little money to fund The Global Compact, which affects the ability to actively review adherence to Compact principles. This problematic issue of compliance is accentuated because the United Nations has limited international ability to impose effective sanctions on business members who violate its principles other than delisting from the Compact. As a result, The Global Compact is currently a voluntary effort. Perhaps the major future compliance mechanism will be vigorous monitoring of corporate activities by Civil Society Organizations and the media.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

Over the next several decades, society may demand more Corporate Social Responsibility to help reduce world poverty and to sustain the natural environment. Participation in The Global Compact adds a strong international dimension to Corporate Social Responsibility as well as the opportunity for a wide range of societal stakeholders to participate in developing new multifaceted solutions to address the challenges of the 21st century.

In the future, the Global Compact will need to reconcile two developments: on the one hand, the initiative should not stop growing in terms of participants. On the other hand, the initiative also needs to ensure that more participants do more in support of the ten principles.

The key challenge for the future will be to maintain the nature of networks, while increasing inter-network collaboration and coordination. More coordination and collaboration among networks would increase the Compact's ability to address governance challenges transcending the borders of sovereign nation-states.

The Compact's underlying idea of creating change by empowering actors and creating shared incentives could be an important building block of UN reform. Given that UN core agencies are increasingly cooperating with businesses and civil society organizations, such a reform would be both necessary and timely.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

Looking beyond the Global Compact, one of the biggest challenges will be to start rethinking management itself. There is no doubt that to change present business practices we need both existing business models and align them with the changing economic realities. And we need managers who turn this vision into reality by developing and implementing new business practices.

This, however, requires a different way of thinking and, as a consequence, a new set of leadership skills. Most importantly, managers and corporate leaders worldwide will need to look at the global economy and their business practices from a systems perspective.

The Global Compact is one very practical way to open up an organization for systems thinking. If taken seriously, participation can help firms to better understand and manage how systems work and interrelate. In this sense, we should look at the Compact not only as one among many other corporate responsibility initiatives, but also, and maybe most of all, as a way of learning how to see business differently.

The Global Compact's underlying agreement between the UN system, the global business community, and civil society has emerged significantly ever since it's operational launch. Definitely, for the future generations of corporate leaders and the actors involved in the process of the Global Compact, the main challenge will be to sustain the created dynamics by further strengthening and deepening links among existing and new participants.

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CHALLENGES AND OPPORTUNITIES PRESENTED

TO CORPORATE LEADERS BY THE UN GLOBAL COMPACT

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