IMPACT TRANSFORMING BUSINESS, CHANGING THE WORLD The TheUnited UnitedNations NationsGlobal GlobalCompact Compact FOREWORD DNV GL A T I M E F OR BU SI N E S S STAT E SM A N SH I P In 15 years, visionary leaders have changed the way we look at achieve the Global Compact’s vision of a sustainable and in- business. From this foundation, imagine what we can achieve in clusive global economy, we can also create a better, more stable the decades to come. and more prosperous future for all of humankind. From my own career spanning 35 years in global business, Protecting human rights, preserving the environment, con- I firmly believe sustainable, principled business is more im- ducting ethical business: these principles are all considered portant than ever. This in itself is testament to the work of the essential to good business. But this has not always been the Global Compact: it has played a pivotal role in teaching all of case. Many of today’s fundamental corporate principles reflect us in the global business community that infinite growth is not the foresight of leaders who, 15 years ago, dared to challenge possible on a finite planet. ‘the business of business’. As business leaders today, I hope this report inspires you to On the brink of the new millennium, business leaders’ only follow in the footsteps of the Global Compact’s 44 founding aim was to maximise value for their shareholders; there was partners. Let us join together to fight unsustainable world little obligation to look beyond the bottom line. Yet a realisa- views. Let us have the courage to exercise business states- tion was building that global markets were not working as they manship, take risks, invest in new technology and explore should. There was widespread concern over corporate abuse, new business models. Let us work together now to radically corruption, and the failure of governments to ensure a more accelerate the pace of change and ensure a safe and sustainable equal distribution of the benefits of globalisation. This eroded future for all. trust in global business and was threatening the continued Finally, I want to express my deep gratitude to all contrib- openness of markets. utors to this work, and the Global Compact for their strong Then in 1999, former UN Secretary-General Kofi Annan support and collaboration throughout this process. threw down a challenge to the global business world: “I call on you to embrace, support and enact a set of core values in the areas of human rights, labour standards, and environmental practices”. At the time, this seemed nothing short of revolutionary. But 44 visionary business leaders were ready to heed the call. In the face of widespread criticism, they immediately responded and together with the UN developed a new set of corporate prior- ities. The United Nations Global Compact was born. The goal: to underpin the global market with a set of universal values, and to ensure that business practices everywhere contribute to development, human rights and peace. We owe these leaders a debt of gratitude. The formation of the Global Compact marked a turning point in the fundamen- tal understanding of how business can be a force for good. As we celebrate the Global Compact’s 15th anniversary, DNV GL is humbled to have been invited by UN Secretary-General Ban Ki-moon to assess the impact of the initiative since its inception. It is a matter close to our hearts – for more than 150 years, DNV GL has worked to fulfil our vision of a global impact for a safe and sustainable future. In this report, we examine how the global economy has developed over the years, and assess the central role the Global Compact has played in spearheading wide-reaching change. Our conclusion is that we have made great progress. And the Global Compact has indeed had significant impact in many important areas. But we are not moving fast enough. In the fi- nal part of this report we set out pathways to speed up change. In the next 15 years, business must continue to work together with the Global Compact, policy makers, scientists, labour organisations and civil society to scale up actions and achieve real transformative impact. The solutions are within reach, and the opportunities are enormous. If we do, we can not only DR. HENRIK O. MADSEN President and CEO, DNV GL Group FOREWORD UNITED NATIONS GLOBAL COMPACT C OR P OR AT E SU STA I NA B I L I T Y C OM E S OF AG E The idea of “a global compact of shared values and principles, Now, upon the 15th anniversary of the Global Compact, this which will give a human face to the global market” was first report seeks to tell the story of how and why corporate sustain- introduced in a speech to business leaders in 1999 by the UN ability came of age – and look at what role the Global Compact Secretary-General. It was a time of fierce debate around glo- has been able to play in moving business in the right direction. balisation, and we hoped that proposing universal principles in We are deeply appreciative of DNV GL’s expert and compre- the areas of human rights, labour, the environment and, later, hensive review of our work. Our only objective is to learn how anti-corruption would have an impact. We had no idea that we can make faster and more systemic progress in ensuring one speech would spark a global movement. that businesses everywhere are committed to sustainability. Upon our launch in 2000, it was already clear that for a We stand at a threshold. Corporate sustainability is changing business to be truly sustainable, it would need to change how it markets from within and a tipping point is in sight. The chal- operated to ensure responsible practices, take steps to engage lenge is to win over more companies, many more companies. positively with society, and then tell their stakeholders and the As we head into our next 15 years, the Global Compact is up to world what they were doing. These remain the core commit- the task. We are committed to working with business to pro- ments made by our participating companies today. duce the changes necessary to bring about a better future for us Networks of companies at the national level began to all – ultimately aiming for an inclusive and sustainable global emerge quickly. Today, more than 85 Local Networks form the economy that delivers lasting benefits to people, communities backbone of an extensive international community embedding and markets everywhere. the Global Compact’s principles and nurturing collaboration across languages, borders and sectors. During the first years of the Global Compact, we had to learn to walk and talk. We often found ourselves on the de- fensive, having to explain why the UN was in the business of business and deflect criticism that we lacked teeth. Only once an annual reporting requirement was introduced in 2004, and companies were removed for failure to disclose, did the debate begin to shift. There have been many milestones since. With the launch of our sister initiatives, the Principles for Responsible Investment (PRI) and Principles for Responsible Management Education (PRME), important players aligned to help make a strong case for sustainability. Under the leadership of UN Secretary-General Ban Ki-moon since 2007, the Global Compact has experienced important growth and gained depth, especially through the launch of issue platforms and principles – including Caring for Climate, the CEO Water Mandate, the Women’s Empowerment Principles, the Children’s Rights and Business Principles and Business for Peace. In 2012, the Rio+20 Corporate Sustainability Forum was a breakthrough – with 3,000 corporate participants and other stakeholders affirming their commitment to sustainability. After Rio, we were able to move from “making the case”, to working with committed companies to unleash innovation and collaboration in support of societal priorities – recognising that everyone, including business, benefits from a better world. Since Rio, the corporate sustainability movement has contin- ued to take off globally due to three interconnected forces: the power of transparency, an increasing recognition that external- ities must be accounted for, and a growing understanding of the opportunities associated with solving problems. Evidence is mounting that companies that focus on material sustainability issues are outperforming the rest. GEORG KELL Executive Director, UN Global Compact TABLE OF CONTENTS 9 EXECUTIVE SUMMARY INTRODUCTION 16 TOWARDS A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY 22 THE UNITED NATIONS GLOBAL COMPACT – A CALL TO BUSINESS PART I 26 SETTING THE SCENE: THE HISTORY OF THE MODERN CORPORATE SUSTAINABILITY MOVEMENT PART II 44 ASSESSING CHANGE 2000–2015 AND THE ROLE OF THE UN GLOBAL COMPACT 50 BASELINE 58 LEVEL 1: Change in corporate practices - Is business becoming more sustainable? 66 Spotlight on global compact LEAD 78 Spotlight on the CEO Water Mandate 90 Spotlight on Caring for Climate 102 LEVEL 2: Change in the corporate operating environment - Is the pressure on? 110 Spotlight on the Principles for Responsible Investment 118 Spotlight on the Principles for Responsible Management Education 126 Spotlight on Business for Peace 132 LEVEL 3: Change in dominant worldviews - Who’s getting it? 140 Spotlight On The Women’s Empowerment Principles 150 LOCAL NETWORKS - BUILDING A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY FROM THE GROUND UP 164 Spotlight on Collective Action Against Corruption 166 REFLECTIONS ON THE IMPACT OF THE GLOBAL COMPACT PART III 172 PATHWAYS TO A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY 176 TRENDS 180 PATHWAYS 192 A CALL TO ACTION — 195 END NOTES & COMMENTS 196 REFERENCE LIST 201 INTERVIEW LIST 205 ACKNOWLEDGEMENTS 8 L I K E T H I S R E P ORT ? R E A D MOR E : 30 leaders share their insights on the Both publications and more information future of sustainable business. available at globalcompact15.org IMPACT 9 E X E C U T I V E SUM M A RY GLOBAL IMPACT: MAKING SUSTAINABILITY PART OF EVERYTHING WE DO This report marks the 15th anniversary of the launch of the 1. Corporate practices; United Nations Global Compact. 15 years ago, a small group 2. The corporate operating environment; and of leaders from the UN and business came up with a visionary 3. Dominant worldviews. proposal: to align corporate practices with ten universal prin- ciples; to mobilise the global business community to advance To examine how the Global Compact is working to advance UN goals; and to build a sustainable, inclusive global economy business leadership on some of the world’s most pressing in which both business and society can thrive, within the envi- challenges, we present ‘Spotlights’ on key action platforms in- ronmental limits of the planet. cluding Caring for Climate, Business for Peace, the CEO Water This change was never going to be easy. Entrenched business Mandate and the Women’s Empowerment Principles. We also mindsets were not going to shift overnight. Now, 15 years on, explore the effect of the Global Compact Local Networks, 88 it is time to take stock of how far we have come, what we have country networks which work to anchor the Global Compact achieved, and the critical challenges we still face. It is time to at the local level. Finally, we take a step back and reflect upon build on the change we have seen over the past 15 years, and the impact we believe that the Global Compact has had over accelerate the scale of progress. the years. Our analysis begins by explaining how the UN Global We conclude by setting out three pathways for the future – Compact calls on businesses to take action, and its place in the our recommendations for how we can work together to achieve history of the modern corporate sustainability movement. We the vision of a sustainable and inclusive global economy, and then explore the role of the Global Compact in driving change what the Global Compact can do to scale its impact. by setting out 16 findings across three areas: OUR SOURCES To conduct the assessment, we have interviewed 214 Of these, 56 were top executives. In addition, we have representatives from business, academia, civil society, surveyed over 1,500 Global Compact participants, UN labour unions, government and the United Nations. agencies and Global Compact Local Networks. 10 EXECUTIVE SUMMARY PART I companies to become more open and transparent. And business is gradually responding by developing more strategic, systematic, integrated, transparent T H E H I STORY OF T H E and collaborative approaches to sustainability. As our understanding of the complex and systemic challenges humanity cur- MODE R N C OR P OR AT E rently is facing deepens, and that stable and prosperous societies and business go hand in hand, the need for collaboration is increasingly clear. Cross-sector SU STA I NA B I L I T Y collaboration continues to evolve as the realisation of the need for this symbio- sis grows. MOV E M E N T Throughout this section, we demonstrate how corporate practices have changed by outing a spotlight on some of the Global Compact initiatives. These The expectations and attitudes that prevailed in the business world 15 years ago include Caring for Climate, the CEO Water Mandate and LEAD. were vastly different than those of today. The implications of an increasingly globalised world were yet to be fully understood, and business was seen to be LEVEL 2: CHANGE IN THE CORPORATE profiting at the expense of communities and the environment. High-profile OPERATING ENVIRONMENT – IS THE PRESSURE ON? clashes between companies and civil society erupted around the world. It was becoming increasingly clear that the single-minded goal of profit at any cost was fracturing societies and destroying the environment. Essentially, THE CORPORATE OPERATING ENVIRONMENT: business was threatening the very elements that underpinned its own WHAT HAVE WE FOUND? existence. 1. Playing catch-up: Bringing regulation up to speed PART II 2. Voluntary is booming: Business is taking the lead 3. Adding value to society: Investors’ sights set on sustainability A S SE S SI NG C HA NG E 2000-2015 4. From confrontation to collaboration: A new relationship with NGOs 5. Open for business: The UN embraces corporate partnerships A N D T H E R OL E OF T H E U N G L OBA L C OM PAC T Business is not operating in isolation from a rapidly changing world. More informed stakeholders exert pressures from both markets and broader society. LEVEL 1: CHANGE IN CORPORATE PRACTICES In this new paradigm, a corporate licence to operate is increasingly granted by – HAS BUSINESS BECOME MORE SUSTAINABLE? society, not by governments or regulatory bodies. Regulation is the most powerful driver of sustainability, but in some import- ant areas governments lag behind. Conversely, leading companies have begun CORPORATE PRACTICES: WHAT HAVE WE FOUND? to push for smarter regulation. Even where regulation is lacking, there has been a significant increase in the number of businesses signing up to voluntary 1. Taking root: The global spread of sustainability corporate sustainability initiatives. In fact, most multinational companies today 2. Into the fold: Expanding the scope of corporate sustainability are involved in some kind of voluntary scheme. 3. Moving up: Sustainability gaining strategic ground Investors are requesting a higher degree of disclosure and risk management 4. Mind the gap: Actions and intentions are still not aligned from the companies they engage with. Instead of simply divesting, investors to- 5. Chain reaction: Sustainability cascading through the value chain day are more likely to work with their investees to achieve better performance. 6. Nowhere to hide: Transparency is becoming the new norm More and more, environmental, social and governance (ESG) disclosures are 7. Smarter together: New forms of collaboration between business being included in financial evaluations and forecasts. and society In recent years, civil society tactics have evolved from ‘naming and shaming’ to seeking positive dialogues and partnerships. In this context, the Global Com- pact has facilitated the merger of interests that have long been at odds, leading Over the past 15 years, business has significantly increased its focus on sustain- to new and valuable understanding. ability issues. The number of Global Compact signatories is growing with both For the United Nations itself, relations with business in the early 2000s were large influential and small companies coming on board. Corporate sustainabili- limited and marked by a high degree of distrust. The private sector was largely ty has become a broad global movement. A success story, in slow motion. excluded from international deliberations. Now, the UN is open for business, Today, the umbrella of ‘corporate sustainability’ covers a much broader range and partnerships are booming across the system. of social, environmental and governance issues than before. However, compa- Throughout this section, we highlight how changes in the corporate operat- nies have become increasingly sophisticated in their approach, and are focusing ing environment have been influenced by Global Compact activities, in partic- on issues that matter the most – targeting responses to achieve greater impact. ular the Principles for Responsible Investment, the Principles for Responsible Responsibility is also moving upwards in corporate hierarchies. Top execu- Management Education and Business for Peace. tives are gradually taking ownership of developing sustainability strategies, and building them into core business functions. LEVEL 3: CHANGE IN D OMINANT WORLDVIEWS However, there is still a very long way to go before sustainability is fully em- - WHO’S GET TING IT? bedded into the DNA of business globally, but there are clear signs of progress. A much larger proportion of leading companies today show real commitment to embedding their sustainability efforts into the core business strategies and DOMINANT WORLDVIEW: WHAT HAVE WE FOUND? practices, and are doing so in a systematic way. Sustainability is gaining strategic weight and is increasingly understood as a driver of innovation, technology 1. Wrong direction: A deep sense of urgency is emerging development and new business models. 2. More than just buzz: Mainstreaming sustainability in the business Over the past 15 years, the Global Compact has made important strides to sphere encourage companies to improve practices and advance reporting on perfor- 3. A balancing act: Redefining the fundamental purpose of business mance. As the only global voluntary framework with a mandatory reporting 4. Key to the future: Sustainability is critical to business success requirement, the Global Compact has played an important role in challenging IMPACT 11 For real transformation to a sustainable and inclusive economy to happen, it is focusing more on the opportunities associated with sustainability. When the not just corporate practices and operating environments that need to change. A Global Compact was launched, business was largely focusing on generating change in the worldviews which ultimately guide behaviour is essential. As the value for shareholders. Corporate sustainability and stakeholder matters drew social and economic cost of environmental degradation becomes clearer, a deep marginal attention. sense of urgency is emerging around the need to change that path that we are The idea that business can, and should, balance profit with purpose has currently on. started to challenge the long-held view of short-term profit-maximisation. The Today, it would be implausible for any global company to exclude sustainabil- Global Compact has contributed to a cognitive overhaul around the purpose of ity from its agenda. This has been a major shift over the last 15 years. Main- business and its obligations to society, and importantly challenged the view that stream business media have clearly responded, raising aspirations and encour- sustainability is only about risk. aging a more sophisticated discussion around the responsibility of business. In this section, we give concrete examples of how the dominant worldview New and different expectations on the role of business in society are emerging, has changed by turning the spotlight on the Women’s Empowerment Principles. 12 EXECUTIVE SUMMARY LO CAL NET WORKS –A SUSTAINABLE GLOBAL The Global Compact has played an increasingly important role in shaping the ECONOMY FROM THE GROUND AND UP drivers of business conduct, and it’s efforts have a flow-on effect to the wider The Local Networks take the Global Compact beyond boardrooms. Every business community beyond its immediate participant base. nation faces a unique set of challenges and opportunities, and different political, Finally, the Global Compact has had a significant impact on shifting the economic, social and environmental conditions shape the business environ- dominant worldview by driving a change in our perception of the purpose and ment. Local Networks help companies identify the most pressing issues in a responsibility of business, and by inspiring a new narrative around business as a specific country, and seek to offer support particularly to smaller and mid-sized force for good. The outcome: It is almost impossible for a global company today enterprises and to unite local stakeholders to mobilise change. In doing so, they to avoid having sustainability on the agenda. But there is still a long way to go to anchor the Global Compact within individual national, cultural and linguistic achieve the scale of mindset change the world needs. contexts. To realise the full potential of the Networks, a significant effort must be made to strangthen capacity, stable funding and ensure better governance. PART III THE IMPACT OF THE GLOBAL COMPACT PAT H WAYS There are a multitude of events, trends and organisations that together are TO A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY contributing to shape and mainstream sustainable business globally. The Global Compact has been one of these driving forces, and perhaps one of the most im- Tremendous progress has been made over the last 15 years. But the world needs portant ones. Through encouraging all companies – no matter the size, nation- to move much further, much faster to have any hope of achieving the Global ality or starting point - to take the first steps towards sustainability, it has made Compact’s vision. Sustainable business practices must evolve rapidly. Continu- real headway inspreading the idea of principled, sustainable business based on a ing the change that has been started is not enough. It is time to accelerate and set of universal values across the globe. scale up. The Global Compact has impacted corporate practices by drawing more In the final Part of the report, we explore 15 of the trends that will shape the companies into the network, and pushing into markets where corporate sus- global business landscape over the next 15 years. Subsequently, we outline three tainability was not yet on the agenda. However, much more remains to be done pathways of transformation: to drive active engagement, and to bridge the gap between commitment and action. IMPACT 13 To ensure that positive change in a complex environment can be duly en- OUR PATHWAYS TO TRANSFORMATION couraged, Global Compact participants will need to work wisely. They should prioritise efforts on critical sustainability issues and identify where the biggest 1. Sustainability is the ‘business of business’ regulatory gaps lie. The Global Compact Local Networks will be critical in 2. Break down barriers, energise positive drivers driving this action on the ground, provided more effective and harmonised 3. New thinking for a new reality structures are built. The ultimate goal is to inspire new ways of thinking and generate transforma- tive action by incentivising and scaling the new business models, technologies More companies across the world need to engage with the Global Compact, and innovations that hold the potential to solve the challenges we face today, rethink their corporate purpose, and recalibrate their goals. For the Global and radically transform society for the better. There must be a fundamental shift Compact, a smart, targeted strategy to recruit high-impact companies in high in the way we think about growth and prosperity. We expect to see more focus risk regions should be a priority. on sustainability as the next generation of business leaders comes to the fore. Public policy needs to gear up to enable more consistent sustainable practices The new vanguard is not just concerned with profitable business: they want to and to deliver sustainability outcomes. And business must voice their readiness leave a profitable and sustainable legacy. for better regulation. Too often contradictions exist where companies have The Global Compact must inspire the next generation of leaders to step up, progressive corporate sustainability programs, but lobby for outcomes which just as the first signatories did 15 years ago. It is critical to bring on board those conflict with their own sustainability commitments. who have the power and influence to set the agenda, but this should be done Collaboration between business, regulators, investors, academia and civil together with the future leaders - giving them a seat at the table where import- society organisations will be essential as work towards a common vision. Now, ant decisions are made. The only way to get transformative change is if enough with the UN expected to launch a ground-breaking set of global Sustainable people have the courage to step up, take a risk, show leadership and make a Development Goals in 2015, business will have a newly relevant framework to difference. guide their efforts towards society, and is expected to play an important role, working together with other stakeholders, in achieving these goals for our world. 14 EXECUTIVE SUMMARY B R E A K I NG I T D OW N : G R OW T H A N D I N F LU E NC E GET TING BIGGER T H E G R OW T H OF T H E U N G L OBA L C OM PAC T 01 GROW TH IN NUMBERS OF PARTICIPANTS 2000 – 2015 44 Business participants 8041 Business participants 4449 Non business participants 2000 2015 02 WHICH REGIONS HAVE THE MOST GLOBAL COMPACT BUSINESS SIGNATORIES? 2000 2015 Africa 1 Africa 658 Asia 5 Asia 1904 Europe 32 Europe 5947 Latin America & the Caribbean 4 Latin America & the Caribbean 2772 MENA 0 MENA 477 North America 2 North America 617 Oceania 0 Oceania 115 Source: UN Global Compact Participant Database IMPACT 15 GET TING B OLDER HA S T H E G L OBA L C OM PAC T M A DE A N I M PAC T ? 03 HOW SIGNIFICANT HAS THE GLOBAL COMPACT BEEN IN SPREADING WORLDWIDE CORPORATE SUSTAINABILIT Y PRACTICES (BY YEAR OF JOINING THE GLOBAL COMPACT)? Company joins: 2000–2007 Company joins: 2008–2012 Company joins: 2013–2015 No impact 1% 1% 2% Minimal 4% 7% 6% Moderate 31% 37% 36% Significant 49% 45% 40% Essential 15% 10% 15% Source: 2015 Global Compact Implementation survey 04 WHAT KIND OF INFLUENCE HAS THE GLOBAL COMPACT HAD ON YOUR WORK WITHIN THE FOUR PRINCIPLE AREAS? (BY YEAR OF JOINING THE GLOBAL COMPACT) Company joins: 2000–2007 Company joins: 2008–2012 Company joins: 2013–2015 No impact 3% 6% 9% Minimal 16% 20% 19% Moderate 40% 42% 37% Significant 31% 24% 26% Essential 9% 8% 8% Source: 2015 Global Compact Implementation survey 05 TO WHAT EXTENT D O YOU AGREE WITH THE FOLLOWING STATEMENTS: THE GLOBAL COMPACT HAS PLAYED AN IMPORTANT ROLE IN… ‘Agree’ to ‘Strongly agree’ Neutral ‘Strongly disagree’ to ‘disagree’ 9% 31% 60% 8% 26% 65% 8% 26% 66% 16% 36% 48% Motivating our company to advance Guiding our corporate sustainability Driving our implementation of Shaping our company’s vision broader UN goals and issues reporting sustainability policies and practices (e.g., poverty, health, education) Source: 2015 Global Compact Implementation survey 16 INTRODUCTION THE VISION OF THE GLOBAL COMPACT Since its launch, the Global Compact has worked towards the vision of a sustainable and inclusive glob- al economy that delivers lasting benefits to people, communities and markets. To realise this vision, the Global Compact supports companies to: 1. Do business responsibly by aligning their strategies and operations with Ten Principles on human rights, labour, environment and anti-corruption; and 2. Take strategic actions to advance broader societal priorities, with an emphasis on collaboration and innovation. IMPACT 17 I N T R ODU C T ION TOWARDS A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY In business, success depends on a variety of factors: an inno- flourishing. We also see new forms of collaboration – at the in- vative idea, a brave entrepreneur willing to take risks, a good ternational, national and local levels, and across sectors – that business model, capital to realise the idea, the right pool of continually bring new ideas to the table. people to build a strong organisation and a willingness to work These are truly exciting times. If we can make the right with partners. With the right operating environment, a level decisions and work together, we can change the path we are on playing field for competition, good incentives and a bit of luck, and make a leap towards a new sustainable, inclusive, prosper- success should follow. ous future for all. We have the capital, the knowledge and the In the past decades, we have come to realise that prosper- technology to create change – if we make the right choices, and ity – for a country as well as for a company – depends on if we make them now. more than accumulating wealth. We also need to nurture and 2015 is a critical year. In September, world leaders will meet protect the natural environment, to develop the right intellec- to adopt new goals and targets for the sustainable development tual resources, to create a strong and motivated workforce and of the planet. In December, they will meet again aiming to support stable societies. reach a universal climate change agreement that will keep the Yet, the world remains on an unsustainable path. Despite world on a pathway to stay below 2 degrees Celsius – seeking tremendous progress in the past century, challenges are carbon neutrality in the second half of this century. The next mounting. Rapidly deteriorating environmental conditions, decades must be transformative, and business is a vital part of widening income gaps, severe resource constraints, economic this transformation. uncertainty, widespread social upheaval and conflict; a set of difficult, interconnected problems that threaten to seriously undermine our social stability and prosperity. Humanity is on a deeply troubling path. But there is hope: in the midst of all this, we are seeing encouraging signs of change. Human ingenuity and capacity for creativity and innovation is astonishing. Unexpected new CORPORATE SUSTAINABILITY technologies pop up every day. Radical new approaches to is understood as a company’s delivery of long-term val- doing business, such as the circular and sharing models, are ue in financial, environmental, social and ethical terms. 18 INTRODUCTION FROM AN INSPIRATIONAL SPEECH TO THE WORLD’S concerned with non-financial risk? And what were our attitudes towards these LARGEST CORPORATE SUSTAINABILIT Y INITIATIVE: issues? Subsequently we present 16 findings related to changes across three dimen- T H E U N I T E D NAT ION S sions: corporate practices, corporate operating environment and dominant worldviews. For each finding, we describe the broad changes we have seen in G L OBA L C OM PAC T this area in the past 15 years, before we outline the role that the Global Compact has played in driving this change. Throughout, we present ‘Spotlights’ on differ- The United Nations Global Compact was launched at the UN Headquarters in ent activities of the Global Compact ranging from issue engagement focusing 2000. It was the result of a speech by then UN Secretary-General Kofi Annan on pressing societal issues, such as peace, climate, water and gender equality, to at the World Economic Forum in 1999, proposing that business and the UN how the Global Compact works at the local level. jointly initiate a “global compact of shared values and principles, which will give This part concludes by reflecting on the overall impact that the Global Com- a human face to the global market”. The speech resonated with global business pact has had in the past 15 years. leaders in the audience, who were experiencing a crisis of legitimacy and pres- sure from all fronts to spread the benefits of globalisation. And thus from one PART III: PATHWAYS OF TRANSFORMATION phrase, a global movement was born. In the final section of the report, we look 15 years into the future and ask what What began as a small initiative, comprised of just 44 companies, is today the the Global Compact should to do to strengthen impact towards its vision. We world’s largest initiative to advance corporate sustainability – calling on busi- argue that the vision – a sustainable and inclusive economy – is radical, and to ness everywhere to deliver long-term value in financial, social, environmental achieve it, radical transformation is needed. and ethical terms. Over 8,000 companies and 4,000 non-business organisations We start by pointing out 15 trends that will shape the business landscape in in 170 countries are signatories. the next 15 years. This provides the context for our recommendations: What are the pathways and enablers that can deliver more transformational change THE VISION OF THE GLOBAL COMPACT towards the vision in the next 15 years? Leveraging the unparalleled convening power and moral authority of the United Nations, the Global Compact helps companies to meet their sustain­ ability commitment by providing a principle-based framework, guidance and OU R A PPR OAC H best practices, action platforms and networking events, as well as fostering collaboration among participants. THE ASSESSMENT FRAMEWORK By encouraging companies to operate responsibly and take actions that This project sets out to assess whether the Global Compact has catalysed change support society, the initiative works to ensure that business activity adds value towards its vision of a sustainable and inclusive global economy. As the global not just to the bottom-line, but also to people, communities and the planet. The economy is a large and complex system comprising a myriad of actors, institu- goal is to make sure that the benefits we reap today do not come at the expense tions, rules and mindsets, it is assumed systemic change is needed in order to of the environment and to safeguard the well-being and prosperity of future achieve the vision. To guide the assessment, we use a three-dimensional frame- generations. work for assessing how transformation can be catalysed in complex systems. In the next section of this report, we will introduce the Global Compact in The three levels have been selected not only because they make up important greater detail. dimensions of the global economy; they also correspond to the purpose and activities of the Global Compact. T H I S R E P ORT LEVEL 1: CORPORATE PRACTICES We explore how corporate practices have changed in the past 15 years, and This report, launched on the occasion of the 15th anniversary of the Global to what extent companies are today implementing the Global Compact’s Ten Compact, we explore the changes we have since sing the launch of the Global Principles in their strategies, policies and practices. Compact in the year 2000, and the role that it has played in catalysing change. LEVEL 2: CORPORATE OPERATING ENVIRONMENT The objectives of the report are three-fold: We look at changes in the external operating environment that influence corpo- rate conduct. In particular, the report focuses on key drivers such as regulation, 1. To describe the main drivers, events and milestones that have shaped the finance and education, as well as important organisations such as the United emergence of the modern corporate sustainability movement (Part I). Nations. 2. To examine the changes that we have seen towards the vision of the Global Compact, and the role that the Global Compact has played in catalysing this LEVEL 3: D OMINANT WORLDVIEW change (Part II). We observe changes in the dominant worldview, including attitudes, values and 3. To look into the future and sketch out pathways for transformation towards beliefs, which shape our understanding of business and the economy. the vision of a more sustainable and inclusive global economy in the next 15 years (Part III). The report consists of three main parts. PART I: THE HISTORICAL CONTEXT In the first part of the report, we outline some of the main political, economic, social, environmental and cultural drivers, events and trends that have shaped the emergence and mainstreaming of corporate sustainability globally. This section provides the historical context behind the birth of the Global Compact. T HA N K YOU TO A L L PART II: ASSESSING CHANGE 2000-2015 AND C ON T R I BU TOR S THE ROLE OF THE UN GLOBAL COMPACT In the second part of the report, we establish a baseline for the analysis by look- This project has relied on the collaboration and support of hundreds of people ing back and describing what the world looked like in the year 2000. To what around the world, and we would like to thank everyone who has contributed extent were companies focused on what we now understand to be sustainabil- valuable insights and reflections. See list of acknowledgements in the back of ity issues? What did the regulatory picture look like? Were financial markets this report. IMPACT 19 C ATA LYSI NG SYST E M C HA NG E 06 Three levels of transformation framework DOMINANT WORLDVIEWS CORPORATE OPERATING ENVIROMENT CORPORATE PRACTICES The framework is developed by DNV GL, inspired by among others Karen O’Brien’s “Three Spheres of Transformation” framework (2013) and Donella Meadows work on leverage points to catalyse systems change (1999). THE ROLE OF THE UN GLOBAL COMPACT AND DNV GL This report is a result of close collaboration between the United 2000 – 2015 represent the impartial and independent views of DNV Nations Global Compact and DNV GL Group. Together, we have GL based on the information we have collected. developed the scope and approach for the assessment. We have also jointly developed Part I: The historical context. The recommendations for the future in Part III have been developed by DNV GL but informed by discussion with the Global Compact DNV GL has been responsible for conducting the assessment. The office. findings presented in Part II: The assessment of change between 20 INTRODUCTION “Change does not happen by itself. It must be pursued with vigour, and by all of society. The sustainable journey that we need to take is in everybody’s best interest. Nobody benefits from catastrophic climate change or rampant unemployment and the social unrest that comes with it. Prosperous, stable societies and a healthy planet are the bedrock of political stability, economic growth and flourishing new markets. Everyone has a role to play. The UN Global Compact has brought business to the table as a key partner. We have seen that responsible business practices combined with innovation and collaboration can bring about powerful change. Now, we need more companies around the world to commit to sustainability, and take shared responsibility for achieving a better world.” H.E. Ban Ki-moon Secretary-General United Nations UN PHOTO / ESKINDER DEBEBE 21 IMPACT 22 ABOUT THE UN GLOBAL COMPACT The United Nations Global Compact is a call to business everywhere to align their operations and strategies with ten universally-accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals. By doing so, business can help ensure that markets advance in ways that benefit all people and the planet. THE UN GLOBAL COMPACT – A CALL TO BUSINESS Launched in 2000, the Global Compact today includes more GLOBAL ENGAGEMENT OPPORTUNITIES than 8,000 business participants from all parts of the world, The Global Compact helps companies meet their commit- working to advance corporate sustainability and environmen- ments to operate responsibly and support society, whether they tal, social and governance (ESG) issues. Participants represent are beginning on their sustainability journey or recognised nearly every industry sector and size, and hail equally from pace-setters. developed and developing countries. With over 85 country net- The initiative undertakes a range of activities at the interna- works convening companies to act on sustainability issues at tional and local levels – from raising awareness and developing the ground level, the Global Compact is truly global and local. resources and best practices (see page 77 for overview of top To be sustainable, the Global Compact asks companies to do 50), to facilitating partnerships and developing action initia- five things: tives on critical issues like climate, water and women’s empow- erment (see Spotlight sections throughout this report). • Operate responsibly in line with ten universal principles Global Compact Local Networks advance corporate sustain- (see opposite page) ability at the grassroots level by helping companies understand • Take strategic actions that support the society around them what responsible business means within their national context. • Commit at the highest level of the organisation Organised and run locally, networks are led by business, but • Report annually on their efforts always bring key stakeholders to the table. Through the 88 • Engage locally where they have a presence networks, both local firms and subsidiaries of foreign corpora- tions can make local connections and receive guidance to put The Global Compact places emphasis on the importance of their sustainability commitments into action. transparency, and asks companies to report annually on their Finally, Global Compact sister initiatives - most notably commitment to advance sustainability. To uphold the integrity the Principles for Responsible Investment, the Principles for of the initiative, the Global Compact does remove companies Responsible Management Education, the Sustainable Stock that do not report. Exchanges initiative and Cities Programme - have been devel- In addition, the Global Compact has over 4,000 non-busi- oped to mobilise key stakeholder groups that have a critical ness signatories, primarily from civil society, labour, business role in the future of corporate sustainability. The Global Com- associations, and academia. They play an important role in pact works with investors, academia and cities in a number of contributing to learning and guidance material, participating ways, ranging from taking part in global policy discussions to in dialogue on critical issues, and engaging in on-the-ground contributing tools and guidance for their day-to-day opera- partnerships. Importantly, they also help to hold companies tions. accountable to their commitments. See Global Compact in a Nutshell the next page. The Global Compact also engages with the drivers of sustainability, including investors, educators, consumers and policymakers. As part of the United Nations, the Global Compact also brings the voice of responsible business to major UN summits and negotiations, and facilitates collaboration between the UN and the private sector. UN PHOTO / JC MCILWAINE IMPACT 23 TEN PRINCIPLES OF THE UNITED NATIONS GLOBAL COMPACT Human Rights Labour Environment Anti-Corruption Principle 1: Principle 3: Principle 7: Principle 10: Businesses should support and respect the Businesses should uphold the freedom of Businesses should support a precautionary Businesses should work against corruption protection of internationally proclaimed association and the effective recognition of approach to environmental challenges; in all its forms, including extortion and human rights; and the right to collective bargaining; bribery. Principle 8: Principle 2: Principle 4: undertake initiatives to promote greater make sure that they are not complicit in the elimination of all forms of forced and environmental responsibility; and human rights abuses. compulsory labour; Principle 9: Principle 5: encourage the development and diffusion the effective abolition of child labour; and of environmentally friendly technologies. Principle 6: the elimination of discrimination in respect of employment and occupation. THE SUSTAINABLE DEVELOPMENT GOALS: GLOBAL ACTION FOR PEOPLE AND PLANET The United Nations is expected to launch a groundbreaking set of ment objectives such as health and education. The SDGs also set out global Sustainable Development Goals (SDGs) in 2015, giving busi- goals towards a more peaceful, better-governed and more inclusive ness a newly-relevant framework to guide their strategic priorities and society. The Global Compact’s work covers most areas expected to efforts towards society. This represents a huge opportunity to drive be addressed by the SDGs, and Global Compact Local Networks will sustainable business. The new framework builds on the Millennium play a key role in facilitating action and partnerships on the ground to Development Goals, broadening the scope to include a range of eco- implement the SDGs. nomic and environmental objectives alongside traditional develop- 24 UNITED NATIONS GLOBAL COMPACT – IN A NUTSHELL Translating UN objectives into business principles and action platforms Social Three main UN objectives § Promote Sustainable Development § Protect Human Rights § Maintain International Peace and Security UN Global Compact Principle Action platform HUMAN RIGHTS GLOBAL COMPACT PRINCIPLE 1 Businesses should support Governance and respect the protection of internationally proclaimed human rights. ANTI-CORRUPTION Business for Rule of Law GLOBAL COMPACT PRINCIPLE 10 Businesses should work against corruption in all its forms, including extortion and bribery. Business Collective for Peace Action Against Corruption Platform When business takes action in the environmental, social and governance realms, it helps to advance broader UN goals. The Global Compact's universal principles in the areas of human rights, labour, the environment and anti-corruption are derived from UN conventions and have inspired the creation of issue-specific action platforms. 25 LABOUR LABOUR GLOBAL COMPACT PRINCIPLE 5 GLOBAL COMPACT LABOUR Businesses should uphold the PRINCIPLE 6 effective abolition of child GLOBAL COMPACT labour. Businesses should uphold the PRINCIPLE 4 elimination of discrimina- tion in respect of Businesses should uphold the employment and elimination of all forms of occupation. forced and compulsory labour. Child Labour Women’s Platform Empowerment Principles HUMAN RIGHTS GLOBAL COMPACT LABOUR PRINCIPLE 2 GLOBAL COMPACT Businesses should make sure that they are not complicit in PRINCIPLE 3 human rights abuses. Children’s Rights Businesses should uphold the and Business freedom of association and Principles the effective recognition of the right to collective bargaining. ENVIRONMENT CEO Water GLOBAL COMPACT Mandate PRINCIPLE 7 Businesses should support a Food & precautionary approach to environmental challenges. Agriculture Business Principles ENVIRONMENT GLOBAL COMPACT PRINCIPLE 8 Businesses should undertake undertake initiatives to promote greater environmental responsibility. Caring for Climate Environmental ENVIRONMENT GLOBAL COMPACT PRINCIPLE 9 Businesses should encourage the development and diffusion of environmentally friendly technologies. 1 SETTING THE SCENE THE HISTORY OF THE MODERN CORPORATE SUSTAINABILITY MOVEMENT 28 I history T H E SH I F T TOWA R D S C OR P OR AT E SU STA I NA B I L I T Y In today’s business landscape, corporate sustainability is becoming mainstream. As much as it feels like the new normal among an increasingly larger population of global business, it is easy to forget the seismic shift that has taken place in business since the turn of the century. The story of how corporate sustainability emerged to shape the business agenda has been told many times. But to better understand why we are where we are today, we offer here a snapshot of the last 15 years – a story of the rise of the modern corporate sustain- ability movement within which the United Nations Global Compact was born. The drivers that have influenced the evolving relationship between business and society are many, but can largely be grouped in two broad categories. First, major events such as the financial crisis or catastrophic industrial accidents, which are hard to predict but have a substantial and sometimes disruptive impact on the environment in which business operates. Second, longer-term global trends, such as population growth and climate change. These progress more gradually, but are no less influential in shaping the world we live in. Against this backdrop, a wide range of organisations and initiatives were launched all over the world at the end of the last millennium, not only playing a part in moving the sustainability agenda forward but also helping to craft a more collaborative atmosphere between business and civil society. Established in 2000, the Global Compact epitomised this new approach, and has come to represent a new paradigm in collaboration between the United Nations and business – playing a fundamental role in the tidal wave of change we have seen in the past decade. IMPACT 29 30 I history H I STOR IC A L T I M E L I N E IMPACT 31 T H E E M E R G E NC E OF T H E MODE R N C OR P OR AT E SU STA I NA B I L I T Y MOV E M E N T H I STOR IC A L T I M E L I N E THE EMERGENCE OF THE MODERN 2011 CONCEPTS ESG EVENTS CORPORATE SOCIOPOLITICAL & TECH 2003 CORPORATE SUSTAINABILIT Y MOVEMENT UN HISTORY & THINKING & TRENDS SCANDALS ECONOMIC EVENTS DEVELOPMENT 1987 2002 2003 Allied invasion The human population 1972 World population reaches 5 billion The Global Reporring Initiative of Iraq 2004 reaches 7 billion “Working for social justice is our (GRI) and the Extractive Industry The social media revolution kicks off, and “Limits to Growth” is published, claiming that major social media platforms like LinkedIn, assessment of the past and our 1988 Transparency Initiative (EITI) are 2011 ‘limitless growth on limited planet is Facebook (2004), YouTube (2005) and Twitter The United Nations Covention 1987 launched mandate for the future.” impossible’. Against Corruption is 2011 (2006) are launched - incresing transparency 1995 and transferring power to the people. adopted. 2011 The Intergovernmental Panel on JUAN SOMAVIA, Climate Change (IPCC) is formed Extremism and radicalism is 2010 DIRECTOR-GENERAL, ILO The World Commission on Environment and on the rise, and ISIS gains to collate and assess scientific “Occupy Wall Street” movement Development (the Brundtland Commission) issues grounds in Syria and Boko evidence for climate change. Brent Spar became an issue of public 1986 the report “Our Common Future” with the most Arab Spring popular revolts erupts protesting corporate greed, concern when the British government Haram in Nigeria commonly accepted definition of sustainability as: illustrates the power of social media continuing high unemployment announced its support for Shell's and the growing gaps between the “Sustainable development is development that BP Deepwater Horizon oil – and how power is increasingly in application for disposal in deep Atlantic haves and have-nots 1972 meets the needs of the present without spill in the gulf of Mexico the hands of the people 1995 The Chernobyl disaster - the worst waters. Greenpeach launches a compromising the ability of future generations to 2002 nuclear power plant accident in history - high-profile global media campaign. releases large quantities of radioactive meet their own needs.” The United Nations Environment 2005 particles in the atmosphere and causes First smart-phone is 1919 “This recovery will take Programme is created 2011 major human and economic costs launched by AT&T 2011 The World Summit on Sustainable The League of Nations is 1974 Development takes place in Johannesburg, and The UN-backed Principles a long time. This recovery established to avoid the World population for Responsible Investment will take years.” (PRI) is launched UN Guiding Principles on devastation from the first reaches 4 billion The UK Bribery Act , an Human Rights endorsed extraterritorial anti-bribery law 1927 world war GEORGE W. BUSH comes into force, going beyond 2012 FORMER PRESIDENT OF THE UNITED STATES the FCPA and prohibiting World population facilitation payments reaches 2 billion 1972 1989 2009 "Rio + 20" conference calls for ensuring “You never change things by 1997 the promotion of an economically, 2001 socially and environmentally fighting the existing reality. 2009 Inequality rises to the OECD defines the 'Polluter Pay Exxon Valdez oil spill causes top of the agenda sustainable future for our planet and The Kyoto Protocol sets 1984 To change something, build a Principle' whereby "the polluter should major environmental and for present and future generations binding targets to greenhouse 1919 bear the expenses of carrying out the human devestation in new model that makes the gas emissions for member 2001 China joins the World Emergence of cleantech stimulus 2005 2012 measures decided by public authorities Alaska Trade Organisation states packages to stimulate the economy to ensure that the environment is in an The Bhopal disaster in India - considered existing model obsolete.” following the financial crisis while 1999 2005 The International Labour Organization acceptable state" the world's worst industrial disaster - Emerging economies are rising, and at the same time deal with (ILO) is created to pursue a vision kills thousands and exposes hundreds Big data technology allows R. BUCKMINSTER FULLER the term "BRIC" is coined for the new The UN “Oil-for-food” decarbonisation based on the premise that universal, of thousands of people to dangerous processing of large volumes crisis erupts 1976 lasting peace can be established only if economic powers Brazil, Russia, chemicals Riots erupt in Seattle as the World Hurricane Katrina hits the of data India and China - signalling a shift in 1999 2009 it is based on social justice Trade Organization (WTO) meets, coastline of the US and becomes economic power to the South and protesting the negative effects of the most expensive natural disaster The Organisation for Economic East Development (OECD) adopts the “We just hadn't been World population globalization on the poor. Backlash in human history, costing 147 billion USD. COP 15 in Copenhagen fails and first guidelines for multinational ready for a spill” reaches 6 billion against globalization is a fact. 2001 2013 corporations causes massive loss of faith in JOHN DEVENS, multilateralism and ability of 2008 MAYOR OF VALDEZ governments to govern “If you put the federal 1994 Whistleblower Edward Snowden leaks The 9/11 terrorist attack on New classified information from the NSA government in charge of the York and the USA shocks the 2013 Youth unemployment rises rapidly in – revealing numerous global world, and a clash of civilisation Sahara Desert, in 5 years 2006 The term "tripple many advanced nations following the surveillance programs and causing thinking is beginning to 1977 bottom line" was coined financial crisis, resulting in massive controversy there'd be a shortage of sand.” by John Elkington. emerges. widespread social upheaval Number of 3G/4G MILTON FRIEDMAN 2006 Fresh water scarcity emerges subscriptions reaches 1.6 1977 A consumer boycott against Nestle billion 1999 as one of the worlds most 1990s over marketing infant formula pressing problems. The Stern Review concludes that climate 2001 over breast-feeding emerging change damage global GDP by up to 20% 2008 economies 1946 The US passes the stringent Foreign if left unchecked, and climate change 1993 A decade of optimism, liberalism and Globalisation is at its height, and Corrupt Practices Act because of the emerges firmly on the global business openness. Blair, Clinton and Lula Foreign Direct Investment (FDI) recognition of the growing problem of agenda. The United Nations is formed to over 1.000.000 MN USD. Corporate fraud and corruption reaches Rapid urbanisation means that for bribery and corruption mark the global political landscape. 2014 prevent atrocities of World War II Transparency International its height with the Enron scandal, the first time in human history Business led-global integration (trade 2007 from ever being repeated is founded resulting in billions of USD in more than 50% of the population and globalization). 1992 shareholder value lost and jail time for lives in urban areas 2014 several of its executives. The European Union issues a new 1970 The World Business Council 2001 The global financial crisis erupts - directive on non-financial reporting, 2006 considered by many economists as the requiring all concerned companies to for Sustainable Develop- greatest since the Great Depression in Oil prices are starting to fall report on policies, risks and outcomes Milton Friedman puts forth his view of ment is established The global number of internet the 1930s leading to a global recession dramatically from over 100 to related to ESG matters. 1948 business and society: “There is one and only Nobel peace prize goes to users reaches 500 million, and the lasting several years and impacting below 50 USD per barrel in only one social responsibility of business – to use Grameen Bank and Muhammad internet is starting to have a national economies. a few months its resources and engage in activities 1991 Yunus - the first time the price The Universal Declaration of designed to increase its profits.” major impact on global culture goes to a bank Human Rights is approved in the and commerce. UN General Assembly 1999 Sweatshop scandals with low-wages and poor working conditions emerge in Asia 1983 1984 (particularly NIKE “Just 1992 1993 don’t do it”) 2007 Former Secretary-General Kofi Annan makes a call to the world business community at the World 2000 2007 Because of drought, the worst famine in 2007 2015 The term “stakeholder”, defined as “any "The Rio Earth Summit" calls for Economic Forum in Davos in January: "I propose human history occurs in Ethiopia - and Human rights activist Ken Saro-Wiwa is group or individual who can affect or commitment to the effort to “protect the that you, the business leaders gathered in Davos, 2015 The global food crisis with 1970 2000 2015 emerges as top 1 deadliest natural The United Nations Global Compact was killed in Nigeria following protests over and we, the United Nations, initiate a global 2000 be affected by the achievement of an integrity of the global environmental and dramatic increases in prices 1960 disaster of the 20th Century with up to launched by Kofi Annan on 26 June at Ban Ki-moon takes over as organisation’s objectives” is coined developmental system, recognising the new Shell pipeline. Shell later agrees to compact of shared values and principles, which The Principles for Responsible pushing millions of people back The Sustainable 1 million deaths the UN General-Assembly, in front of Secretary-General of the United The first Earth Day is integral and interdependent nature of pay $15.5 Mn in settlement. will give a human face to the global market.” First Guidelines on the Management Education into extreme poverty. Development Goals The Millennium Develop- 44 business CEOs and 20 heads of civil Nations and takes steps to support Big corruption scandals in COP 21 takes place in Paris - organised Earth, our home.” Cooperation between the United (PRiME) are launched (SDGs) are adopted World population ment Goals (MDGs) are society organisations. business in the work of the UN major countries the world hopes for a new reaches 3 billion Nations and the Business strong climate agreement Community is issued. adopted 1919 – 1970 1970 – 1990 1990 – 1995 1995 – 2000 2000 – 2005 2005 –2007 2007 – 2011 2011 – 2015 36 I history F R OM OP T I M I SM TO F R AG M E N TAT ION BACKLASH: ANTI-GLOBALISATION AND global openness and cooperation, and the optimism which had ‘ THE BAT TLE IN SEAT TLE’ characterised the 1990s, crumbled. Political support and belief The story of the modern corporate sustainability movement in multilateralism started to deteriorate. begins in the late 1990s. The end of the Cold War and a new After the 9/11 attacks, and the 2003 invasion of Iraq, a new generation of political leaders including Clinton, Blair, Lula language of division emerged, symbolised by expressions such and Chirac had established a sense of optimism and opportu- as ‘axis of evil’ and ‘clash of civilisations’. A growing view was nity in the global political and economic landscape. Business that the world was entering into a new period of polarisation was going global, international trade and investment skyrock- and conflict, this time, not only based on political ideologies eted, and the widely held belief was that economies all over the and economic competition as in previous decades, but on world would prosper as a result. culture and religion. However, the optimism was soon tempered by a growing unease at the social and environmental cost of globalisation. GLOBAL FINANCIAL CRISIS: DISTRUST IN There was a sense that as world trade expanded and prosperity THE ECONOMIC SYSTEM grew, so did the opportunity for exploitation of human and The global financial crisis that swept across the globe from natural resources. 2007 highlighted excessive risk-taking within an inadequate A range of high-profile disasters in the 1980s and early regulatory framework and destroyed the fragile reputation of 1990s, such as Chernobyl, Bhopal and Exxon Valdez, placed the financial sector. It also revealed the precarious state of the environmental and social problems firmly on the public global economic system. Macroeconomic imbalances, fiscal agenda worldwide and caused a growing erosion of trust in crises in developed economies, weak financial markets, and business. massive unfunded social liabilities were all in the spotlight. With increasing concerns over environmental pollution, Initially causing only a handful of high-profile casualties, human rights abuses, corruption and exploitation of people in the immediate aftermath of the crisis was characterised by ‘sweatshop’ factories in less developed markets, commentators corporate bailouts and huge economic stimulus packages. The were beginning to ask, “Is globalisation out of control?” longer-term fallout however, saw economic stagnation, push- Trade unions, environmental and human rights groups ing millions of particularly young people into unemployment, began rallying against global corporations and organisations and a wide range of public austerity measures being introduced governing markets like the World Trade Organisation (WTO). to tackle sovereign debt crises. There was, and still is, a widely Despite the growth and success of globalisation, social, envi- held perception that the main culprits of the crisis were not ronmental and ethical issues were being neglected. A tipping being punished, while ordinary people suffered. point was reached with the protests at the WTO conference in Yet, as the crisis grew, ‘greed remained good’ on Wall Street 1999, dubbed ‘the Battle in Seattle’ (see box). - there was very little sense of the need for ethical integrity in the financial sector, and as a result public trust reached an all- TURNING POINT: 9/11 AND THE WAR time low. Although short-termism within the financial model ON TERROR CHANGES THE MO OD has been challenged, and the repercussions from the crisis can On 11 September 2001, the terrorist attack on the Twin Towers still be felt, the question of whether real change has taken place of the World Trade Centre in New York changed the geo-po- calls for future discussion. litical landscape in an instant. Confidence in the vision of IMPACT 37 FLIC.KR/P/C6KUO | LICENCE AT CREATIVECOMMONS.ORG/LICENSES/BY/2.0. ‘WTO PROTESTS 10’ BY STEVE KAISER FRAGMENTED WORLD: In the face of economic recession and competition from SHIFTING ECONOMIC POWER emerging economies, power has diffused and is now no- In the brave new world after the Cold War, economic and po- where and everywhere. The pendulum in many countries has litical power shifted from an East-West axis to a more complex, swung back towards an unnegotiable prioritisation of national multi-polar order. Starting with the rise of the BRICS, followed aspirations over global challenges and opportunities. Allied by other frontier markets like Nigeria, Indonesia, Mexico and with this is a rising support for old political ideologies. More Turkey, shows that economic power and influence are diffusing inward-looking, extreme right and left wing views have gained and increasingly migrating to the South and the East. This is traction tilting towards extremist, nationalist or xenophobic perhaps most notably illustrated by China’s rise to superpower political narrative. status, joining the WTO in 2001. Within countries, a vertical fragmentation has been hap- pening. Power is shifting away from traditional actors, to a more diffused system. A growing, empowered middle-class “During the cold war, very few people had with access to new sources of information, is questioning the legitimacy of traditional institutions of power, and demanding power but you knew who was in charge. more accountability and transparency, and trust in government Today, many have power but you do is eroding. At the same time, the world has also witnessed an alarm- not know who is in charge.” ing acceleration in religious radicalisation and extremism, as terrorist organisations like ISIS, Boko Haram and Al Shabaab THOMAS FRIEDMAN attract large numbers of alienated, frustrated and unemployed youth, fuelling terror and conflict across the globe. Fragmentation is also happening in civil society, and the The failure to reach an international deal at the Copenhagen ideal of ‘the global citizen’ is being replaced with a new search climate negotiations in 2009 was another turning point causing for identity that is more rooted in nationality, religion, cultural, a massive loss of faith in the ability of governments to address ethnic or other affinities. The byword is starting to shift from global issues. Today, fragmentation remains a dominant “think global, act local”, to “think local, act local”. theme, undermining a multilateral approach to solving world problems. THE BATTLE IN SEATTLE In November 1999, massive anti-globalisation and anti-capitalist awareness of labour issues, environmental and consumer protection protests erupted in Seattle. The target was the World Trade Organisa- concerns, and the negative effects of globalisation on poor and ‘third tion conference where a new round of trade negotiations was taking world’ countries. Despite being marred by rioting and violence, the place. With an estimated 40,000 people on the streets, a demon- battle in Seattle marked a milestone in the rise of the backlash against stration of this scale against any organisation involved with economic globalisation and its visibility to a global audience for the first time. globalisation was unprecedented. The protestors wanted to raise 38 I history BU SI N E S S NO L ONG E R A S U SUA L Global awareness and understanding of some of the complex WEALTH CONCENTRATION AND challenges facing the world has risen vastly since the year WIDENING INCOME GAPS 2000. Since the launch of the Millennium Development Goals in At the heart of this is the recognition that the remarkable 2000 the world has seen a tremendous progress in human de- progress and development seen in the past century have come velopment. Although emerging economies will help to reduce at environmental and social costs, and that human activity is income differences, the OECD predicts that by 2060 living now threatening the future of the planet. standards in these economies will still be only 25-60 per cent of The setting is, however, not all futile. Along with the chal- those enjoyed in the US. lenges come new innovations, technological solutions and op- Inequality within countries is also a major concern. Millions portunities to accelerate a sustainable and inclusive economy. have been lifted out of desperate poverty. But, income distribu- tion has not followed suit. In 2014, the World Economic Forum CLIMATE SCIENCE TOPS THE AGENDA ranked income disparity as the second greatest risk facing In the 25 years since the Intergovernmental Panel on Climate the world, threatening economic and political systems, social Change (IPCC) was established, climate science has commu- stability and security on a global scale. nicated a clear message. Climate change is real and human activity is the dominant cause of the global warming observed GOVERNANCE FAILURES in the last 50 years. This reality and the social and economic In the first decade of the 21st century a range of high profile consequences and costs have driven it to the top of the interna- corporate scandals including Enron, WorldCom and Parma- tional agenda. lat, opened the world’s eyes to greed, corruption and business A series of significant natural disasters through the 2000s fraud. Record fines have been paid in recent years by financial placed climate change firmly on the public agenda. The occur- institutions for criminal behaviour. According to the Financial rence and intensity of extreme weather, from storms and floods Times, the total amount of fines and settlements paid by some to heat waves and drought, has made the threat of climate of the worlds biggest banks, Bank of America, UBS, RBS, JP change more real. Morgan, Citigroup, Barclays and Deutche Bank, reached a The serious impact of climate change has not been lost total of 56,7 billion USD in 20141. With trust in business at an on business. While many companies are taking initiatives all-time low, this reckless behaviour destroys trust in markets, to reduce their emissions, even moving beyond regulatory angers people on the streets, and erodes trust in governments. requirements, leading companies have also started considering Corruption is a way of life in many countries, and the climate impacts on their own operations, products and supply detrimental effects are considerable. According to the World chains. Bank corruption is the greatest obstacle to economic and social development. Besides the huge developmental and economic DWINDLING NATURAL RESOURCES costs (estimated at around 1 trillion USD globally2), corruption The pressure on natural resources is unprecedented, from erodes governance structures and trust, and provides fertile freshwater, land and food production, and from forests to ground for social upheaval and extremism. oceans. Rapid and unsustainable rates of resource use and Concerted action to tackle corruption has been a feature of depletion of air, water and soil have focused attention on how the last decade, with the UN Convention Against Corruption economic development and a growing global population can becoming effective in 2005 and national legislation around be supported in future. the world getting stricter. Despite these efforts, Transparency The economic and social impact of diminishing resources International reports that over 70 countries today suffer from has the potential for huge disruption. systemic corruption, and that levels of corruption around the world are expected to worsen. Environmental and social stress in many forms: Counting the cost The food crisis – Species loss, ecosystem degradation, deforestation The increase in weather-related disas- As early as 1983 the devastating famine – Water scarcity, ocean acidification, fisheries depletion ters comes at a high human and eco- in Ethiopia brought the inefficiency and – Air pollution, build-up of atmospheric carbon nomic cost. The World Meteorological inequality of the global food system – Obesity in developed nations, chronic hunger in the Organisation estimates that between to the world’s attention. In 2007, world developing world 1970 and 2012 catastrophic weather food prices soared creating a major – Diminishing natural resources, increasing waste and events have killed as many as 1.94 food crisis that, according to the World pollution million people and cost US$2.4 trillion Bank, drove an additional 44 million – Wealth concentration and widening inequality in losses. people into poverty. Today around 12% – Rising debt and economic uncertainty of the global population – some 868 million people – remain chronically hungry. UN PHOTO / ERIC KANALSTEIN IMPACT 39 Whereas corruption is now prohibited by law in most coun- and mobilised people around the world, driving transparency tries around the world, there are related grey zones such as and even contributing to political change, exemplified by the tax evasion which are costing governments billions of dollars events of the Arab Spring. in lost revenue. One-sixth of multinational companies are With huge disruptive potential, communication technology currently headquartered in tax havens. Although only a moral has big implications for business. The rise of the ‘social web’ issue as of yet, more governments are stepping up efforts to characterised by user-generated content, citizen journalism, crack down on corporate tax avoidance. and peer-to-peer advocacy, means transparency and authen- ticity are more important than ever. Information is freely TECHNOLO GY: available and in the digital landscape new trends develop at a MORE RADICAL THAN WE CAN IMAGINE lightning pace. In the face of these significant challenges, technological change The fact is that technological solutions already exist to tackle has radically transformed our world in the past 15 years, from many of the world’s sustainability challenges. However, at pres- developments in ICT, nano- and bio-technology to revolutions ent, innovations are not commercialised, scaled and distribut- in energy and engineering. In every aspect of life, technology ed at a quick enough rate. Technological innovation can also has made a difference for those who have access to it can raise challenging ethical dimensions, such as the consequences afford it. of genetic manipulation, stem cell research and the potentially Technology has also changed how societies interact. The unforeseen impacts of nanotechnology. The view that technol- creation of social media platforms around 2004 has connected ogy can solve all of the world’s problems is not shared by all. The escalating water crisis All animals are not equal… The escalating water crisis has only been a focus of attention for little – Almost 50 per cent of the world’s wealth is owned by just 1 per cent more than a decade. Demand for water has quadrupled since the of the population 1950s and is continuing to increase, driven mainly by industry and – The wealth of the top 1 per cent amounts to US$110 trillion, 65 times agriculture. Today, 36 per cent of the world population live in water the total wealth of the bottom half of the world’s population scarce regions. This is expected to rise to 52 per cent by 2050. In 2015, – Seven out of ten people live in countries where economic inequality the water crises topped the World Economic Forum list of global risks has increased in the past 30 years threatening society. 40 I history T H E W I N D S OF C HA NG E In the space of a generation, the largely technology-driven transformation of global markets has transformed the climate THE GLOBAL REPORTING INITIATIVE (2002) in which business operates. In addition, regulatory changes Originally formed by the the US based non-profit Ceres (for- and stakeholder expectations and greater public scrutiny have merly the Coalition for Environmentally Responsible Econo- demanded that business act on emerging issues and deliver mies) and the Tellus Institute, the GRI issued its first exposure higher levels of business integrity, conduct and transparency. draft guidelines for sustainability reporting in 1999. The GRI’s When the United Nations proposed a “global compact” with mission is to make sustainability reporting standard practice business in 2000, it resonated with corporate leaders con- by providing guidance and support to organisations. The GRI cerned about the situation they were in and the world around guidelines have developed into the de facto global standard them. for non-financial reporting. By 2015, 7,500 organisations were using the GRI guidelines to create their sustainability reports. T H E E M E R G E NC E THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (2003) OF VOLU N TA RY EITI emerged from the ‘Publish What You Pay’ campaign in 1999 which encouraged companies to report on their pay- I N I T IAT I V E S ments to governments in developing countries. Set up as a tool to counter the ‘resource curse’ where revenues from oil, In response to the anti-globalisation movement and lack gas and mining do not deliver development but contribute to of global governance for environmental and social issues, a poverty, corruption and conflict. EITI consists of 12 principles number of voluntary corporate initiatives emerged during the for increased transparency on payments and revenues in the 1990s. Many of these have been instrumental in shaping what extractive industries. has emerged as corporate sustainability globally. Below, we highlight a selection of initiatives and organisations noted as THE PRINCIPLES FOR RESPONSIBLE important contributors to the global agenda: INVESTMENT (2006) The PRI is a global network of investors working together BUSINESS FOR SO CIAL RESPONSIBILIT Y (1992) to put six principles for responsible investment into practice BSR is a primarily US-based organisation that works with (see p. 110 for more details). The PRI commits signatories to companies to integrate social and environmental consider- incorporate environmental, social and governance issues into ations into their core business. It has expanded into a global investment decision-making and ownership practices. It has organisation working across sectors on cross-cutting issues 1,325 signatories representing 45 trillion USD assets under such as energy, women’s empowerment, climate change and management. water. THE PRINCIPLES FOR RESPONSIBLE TRANSPARENCY INTERNATIONAL (1993) MANAGEMENT EDUCATION (2007) In the early 1990s, corruption as a topic was not widely The PRME is a global initiative which champions responsibility discussed. Companies could still write off bribes as business within business management education. It is a set of six princi- expenses in their tax filings. There was no global convention ples that business schools and academic institutions commit to on corruption, and little in place to gauge corruption globally. in order to advance social responsibility in their curricula and Transparency International was established to fight corruption, research (see p. 118 for more details). The mission of PRME by monitoring and publishing information about corruption is to develop a new generation of business leaders capable of and bribery in the public and private sectors. Their first major managing the complex challenges faced by business and soci- milestone was the publishing of the Corruption Perception ety in the 21st century. Index in 1995 and the Corruption Barometer in 2003. THE INTERNATIONAL INTEGRATED THE WORLD BUSINESS COUNCIL FOR REPORTING COUNCIL (2010) SUSTAINABLE DEVELOPMENT (1995) The IIRC is a global coalition working to promote integrated Originating from the Rio Earth Summit in 1992, the WBCSD thinking and reporting on financial and non-financial value was set up to provide a platform for business to share knowl- creation as the next step in the evolution of corporate report- edge and best practices, and to advocate business positions ing. on sustainability issues. Its global network today comprises around 200 companies working on issues like energy and climate, ecosystems and the role of business in society. IMPACT 41 42 I history IMPACT 43 U N H I STORY – A G IA N T OPE N S U P THE UN AND BUSINESS: as 6 business associations. The announcement proved to be RECOVERING A LOST PARTNERSHIP controversial. A number of organisations in civil society were Most people are unaware that the private sector was a strong extremely critical, accusing the companies of ‘blue-washing’, supporter of the creation of the United Nations and that many and denouncing the UN for collaborating with big business business representatives were present when the Charter was that had been accused of severe human rights abuses in many drawn up in 1945. The role of business is recognised in Article parts of the world. 55 of the Charter as promoting “higher standards of living, full However, the launch firmly established the Global Compact. employment and conditions of economic and social progress A number of UN member states, in particular the UK and and development.” Swiss governments, voiced their support for the initiative from However, with the onset of the Cold War, relations between the outset. They also provided the critical early funding needed the UN and business changed to one of mistrust and suspicion. to get the initiative off the ground. At the launch, the idea of Business viewed the UN as an extended arm of governments Local Networks was born, and the first network was planned whose only objective was to advance more regulation. On the for in India. other hand, the UN distanced itself from business, seeking to The Global Compact was primarily thought of as an instru- remain neutral to the conflicting ideologies of the Cold War. ment to fill the governance voids of the time – the neglect of This largely remained the relationship for several decades. human rights, social and environmental issues relative to eco- As the Cold War ended, the door opened to reconciliation nomic rule making. The fundamental idea was that by embed- of interests. This coincided with business facing a host of new ding universal values in markets, the Global Compact would risks and responsibilities in the areas of human rights, labour help reconnect markets with communities, avoid the emerging conditions, environmental protection, social inclusion, and backlash against globalisation and correct some of the funda- good governance – areas typically associated with the UN. At mental imbalances that were at the root of the problem. Based the same time, the UN needed to involve the private sector to on enlightened self-interest, business – the main drivers and stay relevant, maximise its influence and access the skills and beneficiaries of globalisation – was asked to help by integrating resources of companies. This marked the beginning of a new UN principles in their business strategy and operations. era of collaboration between the UN and business. In many respects, the United Nations Global Compact is as relevant today, as it was then. THE BIRTH OF THE UNITED NATIONS GLOBAL COMPACT: GIVING A HUMAN FACE TO GLOBALISATION The Global Compact was created as a result of a landmark speech made by former Secretary-General Kofi Annan at the World Economic Forum in 1999: “When the initial speech was prepared, we had no plans to build an initiative. Building the UN’s “I propose that you, the business leaders gathered in Davos, first public-private, global-local and network and we, the United Nations, initiate a global compact of shared values and principles, which will give a human face based organisation was hard work. We started to the global market.” with a bold idea without knowing how to act Immediately, informal discussions began between business and upon it. The early days were a struggle - we the UN to explore the possibility of establishing a multi-stake- knew that learning, dialogue, and partnership holder initiative. At historic meeting of 100 representatives was the way to go, but we had no idea how. We from business, civil society and the UN, hosted by Lord Browne, CEO of BP, it was clear that significant labour and could not imagine then that an idea would grow civil society organisations were willing to engage with business into a global movement.” and had the appetite to embark on the initiative. Moreover, it was also decided that learning, dialogue and GEORG KELL partnerships would underpin the way that the initiative would EXECUTIVE DIRECTOR, UN GLOBAL COMPACT operate. The formal launch of the Global Compact was held on 26 July 2000 at the UN, bringing together 44 global com- panies, two labour and 12 civil society organisations, as well 2 ASSESSING CHANGE 2000-2015 AND THE ROLE OF THE UN GLOBAL COMPACT 46 II change I N T R ODU C T ION 15 years ago, the world looked very different. Globalisation had just kicked off and global investment was skyrocketing. NGOs were calling out corporate misconduct and governments were riding a wave of liberalisation. Google was just a baby and the num- ber of Internet users in the entire world was 413 million, not even close to the size of Facebook in 2015 with 1.44 billion active users. In this Chapter, we start by painting a picture of what the world looked like in the year 2000, in the context of corporate sustainability, when the Global Compact was launched. We then proceed to examine the change we have seen through to the present day. Changes are observed across three levels (see model on page 19), towards the overarch- ing goal of achieving the vision of a ‘sustainable and inclusive global economy’: 1. In corporate practices: How have global business practices changed towards deeper integration of sustainability and the Global Compact objectives? 2. In the corporate operating environment: How have conditions and drivers in the corporate operating environment changed so they are more supportive or enabling of sustainable business practices? 3. In the dominant worldviews: How has the dominant worldview, our thinking, attitudes, values and beliefs, over the role and responsibility of business changed? We present in total 16 findings across these three levels, and for each finding we outline the role the Global Compact has played in driving change. To conclude this chapter, we reflection upon the impact that the Global Compact has had since it was launched. Throughout this chapter you will find ‘Spotlight’ sections where we take a deeper look at specific Global Compact initiatives. Some are focusing on critical issues like climate, water and peace; others look at ways that the Global Compact is engaging with its participants, such as through the Local Networks and LEAD. IMPACT 47 GLOBAL COMPACT IN NUMBERS Denmark 269 BUSINESS PARTICIPANTS Germany 281 UK BUSINESS 228 PARTICIPANTS BUSINESS PARTICIPANTS France USA 913 BUSINESS 290 PARTICIPANTS BUSINESS PARTICIPANTS Spain 1148 Mexico BUSINESS 385 PARTICIPANTS BUSINESS PARTICIPANTS Colombia 326 BUSINESS PARTICIPANTS Brazil 398 BUSINESS PARTICIPANTS Argentina 158 BUSINESS PARTICIPANTS 8 041 4 449 88 58 MILL 25% BUSINESS NON-BUSINESS LOCAL PEOPLE WORK OF FORTUNE GLOBAL PARTICIPANTS PARTICIPANTS NETWORKS FOR GLOBAL COMPACT 500 COMPANIES SIGNATORIES Countries with a Local Network Countries with non–business participants Countries with less than 150 business participants Between 150 and 300 business participants More than 300 business participants Top 15 countries by the number of business participants Sweden 177 BUSINESS PARTICIPANTS Japan 216 BUSINESS PARTICIPANTS Republic of Korea 168 BUSINESS PARTICIPANTS China 182 BUSINESS PARTICIPANTS Myanmar 190 BUSINESS PARTICIPANTS 27 646 349 9 171 251 53 568 COMMUNICATION ON MAJOR GLOBAL LOCAL NETWORK TOOLS & RESOURCES VIEWS OF TOOLS & RESOURCES PROGRESS REPORTS EVENTS & SEMINARS EVENTS AND SEMINARS CREATED BY THE SINCE SEPTEMBER 2013 SUBMITTED RECORDED SINCE 2007 GLOBAL COMPACT 50 II change IMPACT 51 E STA B L I SH I NG T H E BA SE L I N E CROSSING THE CHASM OF CORPORATE SUSTAINABILITY IN THE YEAR 2000 At the turn of the millennium, the world was a very different place. Environmental and social responsibilities were not a great concern for the corporate world. ‘Globalisation’ was the keyword; otherwise it was ‘business as usual’. 52 II change The Exxon Valdez oil spill in Alaska in 1989 had a major By the year 2000, employee safety was becoming embedded In 2000, what character- impact on public opinion and led to the first high profile call to more widely in corporate life and many companies included ised company practices? action by business through the ‘Valdez Principles’. Other major environmental management with safety in their organisations. accidents and controversies around sweatshop exposés in Asia The main driver was tougher health, safety and environment – Focus on compliance spawned new regulations in some countries and kicked off a (HSE) regulations, introduced following huge industrial disas- and own operations conversation about corporate reporting in the 1990s. ters like the Bhopal catastrophe in India in 1984, pushing oper- – Ad hoc, reactive and By 2000, the conversation about the role of business in ational safety in operations higher on the corporate agenda. scandal-driven causing environmental pollution, involvement in human rights – Confrontation with abuses and poor labour conditions was building in parts of stakeholders civil society and at the political level, especially in Europe. “It was becoming increasingly clear that the – Few strategies or However, the debate on how companies should respond was management systems still in its infancy. Most boardrooms still lived by Milton Fried- opening of the world economy, the liberalisation, – Philanthropy presented man’s mantra that ‘the business of business is business’ and the the privatisation, the deregulation and so forth as the answer profit imperative was king. in the 1990s vastly expanded the role and influ- A CORPORATE FRAME OF MIND ence of global companies, but neither govern- As the international community started to recognise the grow- ments nor companies were prepared to deal with ing threat of environmental degradation, it had yet to translate this awareness into action. The interdependence of environ- the adverse consequences.” mental and social issues was not yet understood, and issues like pollution and social impact were treated separately. JOHN RUGGIE In 2000, the early movers in the corporate world concentrat- PROFESSOR, HARVARD UNIVERSITY ed on environmental impacts that were under their direct con- trol. Business had not really started engaging in social issues beyond the health and safety of their own employees. Combat- The few dialogues that were happening on social issues were ing bribery and corruption was seen as a government problem yet to be linked to the wider human rights agenda of which and something business could hardly affect. In some countries, most companies were completely unaware. Rapid globalisa- bribes were even tax deductible and simply accepted as how tion and the immense growth in trade and investment across you ‘got the job done’. In truth, ‘going global’ was a challenge. borders increased awareness of how Western companies were Companies with otherwise a good track record at home was operating in countries where legislation on environmental and exposed to a host of new problems abroad, and was struggling social and issues was either weak or not adequately enforced. to understand how to deal with these difficult situations. This resulted in a number of highly public stories on corporate Most companies that responded to early calls for Corporate misconduct and abuse of natural resources and workers. Social Responsibility, or CSR, interpreted this as a local or The breadth of new issues that had previously not been on community endeavour such as investments in sports facilities, the agenda in the boardroom was increasing. Some larger charitable contributions to aid organisations in developing companies were slowly starting to accept a wider responsibility countries and staff volunteering for local events. Contributions for their actions, but few looked outside of their organisations made to good causes were largely ad hoc charity and far from for help. A handful of companies, headed by forward-thinking strategic, long-term collaborations with expectations of posi- business leaders, joined business networks such as the World tive social outcomes. Business Council for Sustainable Development to define the Driven by growing fears of damaged reputations, some business case for corporate sustainability. companies, mostly from Europe and North America, started focusing on internal risks over which they had greater control. REGULATION IS SHAPING UP A focus on the broader value chain was entirely absent. By 2000, a growing number of issue specific protocols and The idea of engaging with stakeholders as a strategic re- international conventions were flowing to national and inter- sponse to managing social and environmental issues was in its national law. Recognising that mankind was damaging the infancy in 2000. Dialogue between business and civil society environment at a global scale, the Montreal Protocol on Ozone was limited, and the interaction that did take place was very Depleting Substances was successfully reversing the ‘hole’ in much confrontational, in the wake of a conflict. Relationships the ozone layer caused by CFCs. In 1992, the UN Earth Summit were characterised by a high degree of disrespect and mis- in Rio de Janerio was the largest-ever gathering of world lead- trust from both sides. When civil society called for greater ers. It resulted in landmark legislation on global climate change involvement and responsibility by the business community, the (leading to the Kyoto Protocol) and biodiversity. The anti-cor- response was reactive and defensive in nature. ruption debate emerged with the OECD Convention Against Very few companies were aware of the concept of collective Corruption (1999), but was still in its infancy. action and few international joint initiatives were established. In September 2000, 189 countries committed to the eight Few had established performance indicators or reported on international Millennium Development Goals (MDGs) for the their social and environmental impact, apart from a small world’s development. However, these goals mainly targeted number of leading companies. national governments, and business was not yet involved in the Moreover, in these early days, there were hardly any tools process. and practical guidance available to help companies better National laws were generally not able to keep up with the understand these growing expectations. globalisation of business, and although some regulations on specific issues were in place, these were fragmented and EARLY EFFORTS scattered, and governments especially in developing countries As the call for greater corporate responsibility grew, many failed to enforce their own legislation. Environmental regula- companies struggled to see what this meant for them. In the tion mainly targeted high-risk sectors like oil, manufacturing absence of a clear view on how to respond, most companies and chemicals. concentrated on compliance and philanthropy. IMPACT 53 “Globalisation is a fact of life, but I believe we have underestimated its fragility. The problem is this. The spread of markets outpaces the ability of societies and their political systems to adjust, let alone to guide the course they take. History teaches us that such an imbalance between the economic, social and political realms can never be sustained for very long.” FORMER UN SECRETARY-GENERAL KOFI ANNAN ADDRESSING THE WORLD ECONOMIC FORUM IN DAVOS, 1999 54 II change IMPACT 55 It was governments that largely saw themselves as the main funds. Where responsible investment did exist, it focused What were we thinking? protectors of the environment and human rights, and there exclusively on negative screening and exclusion of ethically was a widespread notion that the challenges could be ‘fixed’ by questionable investments like tobacco, alcohol and weapons. – Business was seen as punishing business. But some governments were realising that Positive shareholder involvement and the concept of active ‘divorced’ from society, collaboration with business was needed. ownership were mainly present in English speaking coun- and considered part of At the same time, business was largely seen as divorced tries and through leaders in countries like the Netherlands, the problem, not a part from the rest of society, and did not have a seat at the table on Switzerland and the Scandinavian countries. Few investors of the solution discussions of environmental, social and governance issues. As sought disclosure of information on environmental, social and – Sustainability was a ‘the business of business was business’, the need for companies governance action and policies, few exchanges were promoting moral issue, and inter- to get involved in politics was seen as non-existant. This led such disclosure, and few brokers included these factors in their preted as charitable to the widespread notion that business was the cause of the analyses. contributions problem, and not likely to be part of the solution. – Maximising sharehold- BUSINESS ETHICS EMERGING IN SCHO OLS er value was still the CIVIL SO CIET Y AS THE Several accounting scandals around 2000 led to the introduc- dominant mindset in CORPORATE WATCHD O G tion of ethics and responsibility in only a few business schools’ most businesses and Although civil society organisations was targeting company curricula, typically available as elective classes rather than business schools behavoiur, their main approach was to lobby for stricter reg- within the core course content. The Aspen Institute was an ex- ulations on business rather than voluntary and market-based ample of an early adopter with its Business in Society program, approaches. Some NGOs successfully used ‘naming and sham- and later joined efforts with the World Resources Institute in ing’ as a tool for raising awareness on the role of business in developing the Beyond Grey Pinstripes ranking of business environmental and social issues. Confrontation was mirrored schools incorporating sustainability into their MBA programs. by a defensive corporate world, and the atmosphere was one of mutual suspicion and mistrust. Some of the most success- FEAR OF ‘BLUE-WASHING’AT ful NGO campagins set out to expose corporate misconduct THE UNITED NATIONS revolved around high profile issues like deforestation and Although some UN agencies were working with the private environmental pollution. sector, business was largely seen as a source of funds rather Few platforms for dialogue between business and oth- than an active and strategic partner. There was initially signif- er stakeholders existed, and campaigners like Greenpeace, icant resistance to the Global Compact within some agencies, Friends of the Earth, Human Rights Watch and Amnesty were due to fears of ‘blue-washing’. The concern was that companies reluctant to engage in direct dialogue with business. In this might exploit the UN brand, without being held to account for period just before the rise of the internet and social media, civil the quality of their actions. society organisations enjoyed massive media attention for their Few parts of the UN family were dedicated to working with activism efforts, and were very important channels for forming the private sector, and as a result staff had limited experience public opinion. or capacity to deal with business. This resulted in random partnerships with fragmented approaches and methodologies THE DAWN OF SO CIALLY for interaction. Due to this disparate management of business RESPONSIBLE INVESTMENT partnerships, doubts were raised whether partnering with busi- Responsible investment was yet to be acknowledged as a con- ness could develop successfully without giving up the neutral cept, and in 2000, only a few investors in developed economies position of the UN, and whether these partnerships were even invested in socially and environmentally conscious, niche within the mandate of the UN agencies. Key facts from 2000 6.12 BILLION 34% 16% World population 1,751 billion people, or 34 % of world pop- 245 500 000 children, 16% of all children ulation, live in absolute poverty in the world, are forced to work 35% 44 35% of the G250 companies 44 sustainability reports in (88 companies) publish an HSE report the GRI database The Global Compact in the year 2000 44 0 0 Business participants Non-Business participants local networks 56 II change IMPACT 57 “The mindset of the day was still very much a combination of compliance on the one hand and philanthropy on the other.” Jane Nelson Director of the CSR Initiative Harvard University WHAT WERE THE LEADERS WRITING ABOUT? “My colleagues and I are totally “CSR encompasses a broad range of “It is essential for any enterprise with committed to a business strategy that interactions with society. It means aspirations for the future that economic generates profit while contributing to responsibly managing a multiplicity of progress, environmental attitudes, the well-being of the planet and its relationships every day with employees, awareness and social responsibility people. We see no alternative.” consumers, shareholders, suppliers, are balanced. Our challenge is to governments, local communities and identify the opportunities present in the SIR MARK MOODY-STUART FORMER CHAIRMAN OF THE COMMITTEE OF many others in wider society.” market’s dawning awareness of these MANAGING DIRECTORS OF ROYAL DUTCH SHELL GROUP OF COMPANIES questions, and to develop sustain­ability ANTONY BURGMANS AND NIALL FITZGERALD THE SHELL REPORT 2000 CHAIRMEN OF UNILEVER as a competitive advantage for UNILEVER SOCIAL REPORT 2000 our company.” EGIL MYKLEBUST PRESIDENT AND CEO OF NORSK HYDRO NORSK HYDRO’S ANNUAL REPORT 2000 58 II change LEVEL 1 C HA NG E I N C OR P OR AT E PR AC T IC E S Is business becoming more sustainable? In the past 15 years, to what extent have global business strategies, models and systems changed towards becoming more sustainable? Are Boards of Directors and top executives more involved than before? How has management of sustainability changed? Have companies’ footprints on key issues like water improved? And are companies reporting and collaborating more than they used to? In what follows, we present our seven key findings with regard to how business has changed since 2000. Our conclusion is that we are not yet there – there is a long way to go before the global business community has adopted a principled, sustainable approach. But promising progress has been made. See the next pages for a summary of what we have found: 1. Taking root: The global spread of sustainability 2. Into the fold: Expanding the scope of corporate sustainability 3. Moving up: Sustainability gaining strategic ground 4. Mind the gap: Actions and intentions are still not aligned 5. Chain reaction: Sustainability cascading through the value chain 6. Nowhere to hide: Transparency is becoming the new norm 7. Smarter together: New forms of collaboration between business and society IMPACT 59 60 II change Level 1 - Finding 1 TAKING ROOT: THE GLOBAL SPREAD OF SUSTAINABILITY In the past 15 years, sustainability has penetrated deeper into markets and sectors all over the world. This is shown by the growth in the number of Global Compact signatories, as well as their relative economic size and coverage of the global workforce. Corporate sustainability has grown to become a broad global movement. Key facts 80% 25% 1.8% Of all countries have Global Compact of the Fortune Global 500 companies are of global GDP is represented by the business participants signatories to the Global Compact Global Compact signatories on the Fortune Global 500 list 3.7% 2% Of people working in the private sector, Of the world’s listed work for a Global Compact signatory companies participate in the Global company (as of 2013). Compact (as of 2012). Growth and participation joined the Global Compact. These companies represent 32 per cent of the total The Global Compact works to mainstream the ten principles in business strate- revenue of Fortune Global 500 companies. Forty per cent of the Financial Times gy and operations around the world. That entails having both a global presence, 500 companies are also Global Compact participants. and penetrating all sectors. Comparing the profit2 (including wages paid out)3 of Global Compact par- Since the launch of the Global Compact in 2000, business participation has ticipants on the Fortune Global 500 list for 2014 with the current global gross grown from 44 to more than 8,300, and from a representation of 13 countries to domestic product of around 77 trillion USD4 shows that the economic footprint as many as 156.1 Business presence in the Global Compact remains strongest in of Global Compact signatories in the Fortune Global 500 has grown to become Europe, which has both the highest number of participants (52 per cent of total) 1.8 per cent of the global economy. and countries represented. The largest increase in the number of countries with Global Compact participants has been in Africa (from 1 to 32) and the largest Percentage of the global workforce increase in the number of participants has been in Latin America. The number of people employed by Global Compact business participants had Figure 08 shows the growth in business participants per sector. While there grown from 3.3 million in 2000 to 58 million as of March 2015 - a significant has been growth across the board, the industrial sector has grown the most, growth. To put this in global perspective, the percentage of the global private including Construction & Materials and Industrial Goods & Services. Telecom- sector workforce employed by Global Compact participants increased from munication is the industry in which the Global Compact has seen the lowest almost zero in 2000 to around 3.7 per cent in 2013.5 increase in participants. Small share of publicly listed companies Significant economic players are mobilising There has been a more limited rise when it comes to membership of the Global Penetration into different geographies and sectors is important for global Compact among the world’s publicly listed companies. Out of a total of 46,737 adoption of the principles. However, equally important is engagement with in- publicly listed companies in 20126, only two per cent were Global Compact fluential companies of a significant size which can inspire other businesses. An signatories7. Since 2012 the number of publicly listed companies in the Global overview of participants in the Global Compact shows an increasing number Compact had grown from 935 to 1,101 as of May 2015. of influential companies are taking part. Figure 09 illustrates Global Compact In 2014, 18,000 companies with a total of USD 35 billion in market capitalisa- presence in the Fortune Global 500 list, the world’s largest 500 companies. tion were traded on 16 Partner Exchanges to the Sustainable Stock Exchanges By the end of 2014, 25 per cent of the 2014 Fortune Global 500 companies had initiative – a sister initiative of the Global Compact. IMPACT 61 07 World reach: Business participants by geographic region 2000 2015 Africa 1 262 Asia 5 1191 Europe 32 4186 Latin America & the Caribbean 4 1658 MENA 0 327 North America 2 346 Oceania 0 71 2000 Total: 44 As of March 2015 2015 Total: 8041 08 Into industry: Growth in business participation by sector Utilities 9000 Telecommunications Technology Oil & gas Not applicable 7000 Industrials Health care Financials 5000 Consumer services Consumer goods Basic materials 3000 1000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 the role of the un global compact MOBILISING BUSINESS FOR SUSTAINABILIT Y As sustainability is increasingly penetrating markets globally, what has been the Considering that the objective is to mainstream the principles in business role of the Global Compact in catalysing change? practices everywhere, there is still a long way to go. Although the number of participants is gradually increasing, it still represents a marginal fraction of In the past 15 years, the Global Compact has undoubtedly played a significant global economic activity. The vast majority of companies worldwide has yet to role in spreading the practices of corporate sustainability around the world. commit to the principles of the Global Compact. Since its inception, the focus on outreach, knowledge-sharing and dialogue, as well as the launch of Local Networks, has encouraged companies and other Going global by going local stakeholders to join the initiative. Importantly, through the launch of more than 85 Local Networks around the world (see page 151) the Global Compact has played a key role in spreading Widening the reach of sustainability responsible business practices around the world. A unique feature of the Global Today, the Global Compact is the world’s largest corporate sustainability initia- Compact, the Local Networks play an important role in rooting the initiative tive, and the only one which is truly global in nature. It has become a successful within different national, cultural and linguistic contexts, and supporting vehicle for mobilising businesses of all sizes, sectors and geographies, and for companies in tackling local sustainability challenges. In some cases, the Global encouraging companies to undertake a sustainability journey. As a result, the Compact has been a first mover bringing the corporate sustainability movement number of participants and the number of influential players across different to life, most notably in countries like China and India. markets and sectors has grown steadily. In 2008, the Global Compact strengthened its accountability mechanism and began removing participants that had not fulfilled reporting commitments. Since then, 5,579 companies have been ‘delisted’. In addition, 798 companies have requested withdrawal. 62 Level 1 – Finding 1 II change “This is only the beginning. Today, some companies are new to the game, but they are still eager to advance. In the transition to a low carbon economy and sustainable society, this is what’s going to happen; not everybody will go at the same pace. The Global Compact has been a good vehicle for companies to advance at their own speed.” JUAN RAMON SILVA FERRADA SUSTAINABILITY SENIOR EXECUTIVE DIRECTOR, ACCIONA 09 Big money: Percentage of total Fortune Global 500 revenue that belongs to Global Compact signatories - in total and by region Total 32% Asia & Oceania 8% Europe 55% Latin America & the Caribbean 72% North America 34% Asia & Oceania Latin America & the Caribbean Europe Total North America 10 World workforce: Percentage of the global private sector workforce employed by Global Compact business participants 1.9% 3.7% 2005 2013 IMPACT 63 64 II change Level 1 - Finding 2 INTO THE FOLD: EXPANDING THE SCOPE OF CORPORATE SUSTAINABILITY A broader range of social, environmental and governance issues fall under the umbrella of corporate sustainability today than 15 years ago. Leading companies recognise this diversity and are responding by becoming more sophisticated, targeting their efforts and resources where they matter most. 11 Big issues: When did the Global Compact start working on broader range of issues Social enterprise and impact investing Environment Reporting Millenium Development Goals 2012 2000 2000 2000 Women and Management education gender equality (includes education) Childrens rights Post-2015 Agenda 2007 2007 2012 2012 Business and peace Anti-corruption Suply chain sustainability 2002 2004 2010 Local Networks Financial markets Human trafficking Biodiversity 2001 2005 2008 2011 Human rights 2000 Climate Change Water Energy Sustainable (includes finance, sustainability 2012 agriculture mitigation, adaptation) 2007 2012 Labour (includes 2007 child labour and forced labour) Indigenous people 2000 2013 Widening the circle of responsibility Focusing on what matters most In 2000, corporate sustainability had yet to emerge as a priority for business. As what falls within the scope of their responsibilities has broadened, more Most manufacturing and heavy industry companies were actively managing companies have begun to appreciate that not all issues present an equal risk to health, safety and environmental issues in their own operations, and this trend their operations. Emerging issues, and a better understanding of the impact that was already widening to other sectors. Some leaders were exploring their social companies have on society beyond their direct operations, have created a risk impact and in exposed sectors, such as sports apparel, efforts were being made landscape that is more complex than ever. to understand and manage supplier labour standards. As they consider what their key risks and impacts are, companies are starting Reflecting a growing understanding of expectations and responsibilities, to focus on what they perceive to be the most important or ‘material issues’. By companies today address a much broader range of environmental, social and concentrating on the issues that matter most to their business and its stakehold- governance issues, both within and beyond their operations along their whole ers, companies are able to focus their resources on maximising benefit while value chain. delivering efficiency. Human rights issues have emerged as an area of risk that business should Accepted practices have emerged for using stakeholder engagement to sup- consider and seek to manage. Driven in part by the UN Guiding Principles port materiality assessments, such as the approach recognised in the latest G4 on Business and Human Rights, the understanding of operational and reputa- version of the GRI Guidelines for Sustainability Reporting. The integrated re- tion risks has grown considerably. This has strengthened the business case for porting debate has directed the question towards what information is the most managing human rights, especially for companies with extensive supply chains important for investors to understand future business performance, addressing and those working in close proximity to local communities. There has also been a wider range of ‘capitals’ than financial capital. a significant change in the understanding of anti-corruption. While bribery was until not long ago legally accepted and even tax-deductible in certain countries, corruption is now recognised as an important business risk. IMPACT 65 12 Impact areas: To what extent has the Global Compact influenced your work to address...? Human rights 50% Labour Environment Anti-corruption Source: 2015 Global Compact Implementation survey 38% 25% 13% 0% No impact Minimal Moderate Significant Essential “The ten principles of the Global Compact have been helpful to all companies. When DuPont joined the Global Compact we already did a good job on three of the principles, but the other principles made us think; how can we be more proactive in managing these issues?” CHAD HOLLIDAY CHAIRMAN OF ROYAL DUTCH SHELL FORMER CEO OF DUPONT the role of the un global compact WHAT SUSTAINABILIT Y IS AB OUT As companies focus on a more diverse range of issues relating to sustainability, By establishing a variety of ‘issue engagement platforms’, such as the Women’s what has been the role of the Global Compact in catalysing this change? Empowerment Principles, Caring for Climate and the CEO Water Mandate, the Global Compact provides signatories with the opportunity to engage more Since its launch in 2000, the Global Compact has directly contributed to the substantially on individual sustainability issues. Through these platforms the broadening of both companies’ awareness and responsibility, as well as their Global Compact has often set the agenda for some of the most pressing issues understanding of materiality. facing business. The ten principles: Defining what corporate sustainability is Introducing reporting requirements The ten principles have helped to expand the scope of issues that companies In 2004, the Global Compact introduced mandatory reporting requirements should be managing as part of their responsibilities. By developing a rounded for its participants as part of an effort to strengthen the accountability of the framework which covers environmental, social and governance issues, the initiative. Today, all participants are required to report on all issues, and failure Global Compact calls on business to “embrace, support and enact, within their to do so can result in removal or “delisting” from the Global Compact database. sphere of influence, a set of core values in the areas of human rights, labour stan- As a voluntary initiative, the introduction of mandatory reporting requirements dards, the environment and anti-corruption.” has contributed greatly to pressing companies to consider the impact of their As seen in Figure 12, more than one third of the companies surveyed in the operations and activities. The reporting requirement drives companies to report 2015 Implementation Survey state that the Global Compact has had a signifi- more comprehensively and assess management and performance on a broad cant to essential influence on the work done in implementing the principles. range of issues. The human rights issue stands out as the area where the Global Compact has had the greatest impact, with 40% stating it has been ‘significant’ or ‘essential’. Encouraging action where it matters the most Companies joining the Global Compact are expected to consider their impact Supporting implementation on all of the issue areas. However, participants are encouraged to focus their Through organising hundreds of events around the world, and by publishing efforts on where they have the greatest impact. Important partnerships with the tools and guidance covering all of the principles, the Global Compact has raised Global Reporting Initiative and International Integrated Reporting Council that awareness around the understanding that being sustainable today means work- have materiality at their core have further underscored this. ing holistically on all of the ten principles and the issues to which they relate. Recently, some have begun to question the ‘materiality versus morality’ They have helped companies as they identify responsibilities and work out what question and wonder whether the focus on what is ‘most important’ is placing issues they need to consider in being sustainable companies. sufficient corporate attention on the big sustainability questions surrounding global systems and planetary boundaries. 66 II change IMPACT 67 SP OT L IG H T ON : G L OBA L C OM PAC T L E A D THE GLOBAL COMPACT’S SUSTAINABLITY VANGUARD There is more to being a business leader today than 15 years ago. Just like we have come to appreciate the subtle difference between being in charge and being a leader, expectations on today´s executives have evolved from considering traditional bottom-line performance to delivering on a broader set of ‘capitals’, such as social, human and natural. Companies on the forefront have integrated sustain­ability into their business model and strategy across the entire organisation, and understand that sustainability is a driver of future success. Genuine forward-thinking leaders also raise the bar by helping to improve market conditions, push for smarter regulation, and actively spread leadership practices to the wider business community. 68 Spotlight II change At the time of the Global Compact’s launch, the companies LEAD IN PRACTICE that first committed to engage were by definition corporate LEAD was designed to challenge companies already on the sustainability leaders. Although some were subject to attacks forefront of corporate sustainability performance to reach even by NGOs for alleged human rights abuses and reckless envi- higher levels - to experiment, to innovate and to share knowl- ronmental performance they were, by the same token, the very edge. Comparable to a sustainability think-tank for corporate same companies that others looked to for examples of good high achievers, LEAD seeks to set new boundaries by bringing practice. the practitioners to the table to tackle sustain­ability leadership In the mid-2000s, the Global Compact began to go to scale, across various issues and geographies. attracting thousands of companies globally. To meet the needs of these new participants, many of whom were just beginning LEAD advances leadership within a company in multiple ways: their journey towards more sustainable business practices, the initiative focused on building Local Networks, providing • Rather than focusing on specific issues, LEAD targets the opportunities for learning and support among companies and integration of sustainability across corporate functions developing good practice guides to meet their commitment to and operations, and at the highest levels within companies the Global Compact and its principles. including C-suite and members of the Board. By 2010 however, it became clear that in order to remain • Priority focus areas are raised by the participants, who work relevant, the initiative would need to support higher levels of together to produce guidance which is first piloted by LEAD corporate sustainability performance, ideally with the most companies, and then shared through best practice examples progressive companies as co-drivers. In 2010, the Global to all Global Compact participants including through Local Compact released the ‘Blueprint for Corporate Sustainability Networks. Leadership’ – a framework for advanced performance within • It leverages the unique position of the Global Compact to the initiative. The Blueprint was, and continues to be, at the provide responsible business leaders with the opportunity to heart of Global Compact LEAD when it was launched by UN shape the ever-evolving expectations of corporate sustain- Secretary-General Bank Ki-moon at the World Economic ability. Forum in January 2011. • It looks beyond improving corporate practices – LEAD The C-suite and senior executive peer-to-peer program that actively engages with stakeholders such as investors, busi- LEAD provides paves the way for learning and collaboration ness schools, governments and NGOs, providing a joint among leaders of sustainable business. voice for leading companies striving to bring business into the post-2015 agenda. THE LEADERS Today, there are 46 companies participating in LEAD, of which Although LEAD is still a fairly new initiative, it is clear that it 46 per cent have more than 50.000 employees. Almost half has provided a vehicle which re-examines the meaning of lead- of the LEAD companies are European, and nearly a third are ership. Given the scale of the challenge in achieving the vision headquartered in Asia. Participation is spread across sectors of the Global Compact significant questions remain. Sharing ranging from basic materials, consumer goods and oil and gas, the experiences of a selected number of companies may not be with 65 per cent being publicly-listed companies. Seven of the sufficient to transform the performance of the corporate sector LEAD members belong to the original 44 participants of the at large, but it is an effective start. The next step for the Global Global Compact in 2000, with the majority joining at the 2011 Compact will be to raise the bar generally for all participants, launch. not least amongst the largest multinationals and businesses with a substantial impact. LEADERSHIP – IN CONSTANT RESPONSE TO MOVING TARGETS Constantly changing expectations combined Leadership in 2000 Leadership today with unprecedented challenges puts the onus on companies to demonstrate a willing- Focus on shareholders and transactions Focus on stakeholders and relationships ness to work with partners and stakeholders in ways never imagined. Today, the notion Focus on risk-management and philanthropy Focus on opportunity and value creation of leadership has evolved dramatically from where it was 15 years ago, and leaders Tactical and issue specific Integrated into business strategies and realise that they need to step into the role across all business functions of architects of a better world and work with governments and others to jointly shape the Reactive response to emerging events Taking responsibility for driving systems future. change Going at it alone Multi-stakeholder collaboration Narrow scope focused on own operations Value chain focus, investing in leading others both in and beyond sector Prioritising technical environmental issues over Broad understanding of material and more poorly understood social priorities strategic issues for the company IMPACT 69 Key facts and figures 46 7 65% 46% Companies participate of the founding companies of LEAD companies are of LEAD companies have in LEAD of the Global Compact are publicly listed over 50 000 employees signatories of LEAD today 70 Spotlight II change IMPACT 71 BRINGING THE B OARD ON B OARD SHAPING THE SUSTAINABLE DEVELOPMENT Lack of board involvement on corporate sustainability was GOALS FOR THE FUTURE identified as a gap by LEAD participants at the first Annual In September 2015, the UN General Assembly will agree on the LEAD Symposium in 2011. As a result, the Global Compact Sustainable Development Goals, which will succeed the MDGs Board Program was developed and eventually launched in 2014 that governments around the world signed up to in 2000. as the the first global Board training program on sustainability. LEAD has been integral in bringing the voice of the private In 2013 and 2014, five LEAD companies piloted the program sector to the development of the agenda, and for fostering which received positive feedback. Following the program, par- more effective collaboration between the UN and business ticipants reported increased awareness within their respective in general. LEAD together with the Global Compact ensures organisations, renewed engagement, more focus on sustain- that the private sector is recognised as a key partner in the ability issues and a strengthened business case for integrating implementation and achievement of the SDGs, through core sustainability into core business and operations. business activities as well as private-public partnerships. Using high-level experts and former chief executives as Beyond communicating the voice of business during the mentors, the program aims to 1) support Boards of Directors process of shaping the SDGs, LEAD companies are supporting in fully integrating sustainability into their businesses by the development of guidance and tools to encourage wide- providing high-level knowledge and practical solutions, and 2) spread alignment of business goals with sustainable develop- help Boards realise the decisive role they have in overseeing, ment objectives. Already, one valuable outcome has been the incentivising and driving corporate sustainability. opportunity to build stronger connections between companies and Local Networks, and to explore how companies’ corporate sustainability objectives fit with the SDGs and how they could become more aligned. Going forward, LEAD is also expected to help shape tools and standards that can guide business action to advance the SDGs over the next fifteen years. The Global Compact and LEAD ensures that the private sector is included in, and has an important role in, development. LEAD is a good force in driving that. Bente Slaatten Chief Communication and Branding Officer Yara 72 II change Level 1 - Finding 3 MOVING UP: SUSTAINABILITY GAINING STRATEGIC GROUND Decision-making related to sustainability strategy and performance is increasingly being handled at the top executive level. It is more embedded in strategies and core business functions than ever before. However, sustainability is still not systematically integrated into the DNA of most companies. 13 Mixed management: Sustainablity is increasingly a top executive issue, but boards are lagging behind 71% 39% 63% of the survey respondents report that policies of the survey respondents indicate that their Board of companies reporting that sustainability is and strategies are being evaluated at CEO level, of Directors (or equivalent) addresses corporate addressed at the Board level say that the Board a 6 percentage point increase since 2008. responsibility issues as part of the regular agenda. is also responsible for approving the company’s sustainability report. This is a 14 point per cent increase since 2010. Source: 2008-2015 Global Compact Implementation surveys From being tackled on an ad hoc basis 15 years ago, our findings show that As such issues grow in importance, companies are investing more resources to sustainability is increasingly approached in a more strategic manner, with improve performance, and there as been widespread growth in sustainability more explicit and formalised commitment from chief executive and boards. departments. Mature organisations are working to embed responsibility for Oversight of sustainability performance is moving up the corporate ladder. performance into relevant corporate functions such as procurement, marketing, A few mature companies are leading the way, with the vast majority of others R&D, and product development. following suit. Interestingly, nearly 50 per cent of respondents to the Survey state that they Yet nearly 60 per cent of respondents to the Implementation Survey8 indicate integrate sustainability into relevant corporate functions, business unit strat- that their board of directors does not address corporate responsibility as part of egies and operations, indicating that sustainability is increasingly treated as a their regular agenda. There is a sense that boardrooms are lagging behind. strategic issue. Whereas ‘tone at the top’ remains a key driver of performance, an emerging issue is how the ‘tone at the middle’ and lack of senior management involve- ment represents a barrier to organisational change. Integration into strategy and core functions An increasing understanding of the link between sustainability and business performance has led to a gradual integration of sustainability issues into core business strategies. This is particularly the case for environmental issues like climate and water management, which are high on the global agenda and repre- sent areas in which companies increasingly face legal, operational and financial risks and opportunities. IMPACT 73 “You have to start at the top. If the head of the fish is rotten, you don’t want to eat the fish. If a CEO is not ethical, the company isn’t ethical. So, the tone from the top is very, very important.” PAUL POLMAN CEO, UNILEVER 14 Clear vision: Almost 50 per cent of respondents state that the Global Compact has played an important role in shaping the company’s vision. Strongly disagree 5% Disagree 11% Neutral 36% Agree 39% Strongly agree 9% Source: 2015 Global Compact Implementation survey the role of the un global compact ALL AB OUT COMMITMENT FROM THE TOP As sustainability is increasingly being handled at the strategic level, what has been Making it core the Global Compact’s role in catalysing change? In recent years, the Global Compact has stepped up its focus on the importance of integrating sustainability issues into core corporate functions, and has started A personal promise organising events which target specific functions such as general counsels and The Global Compact has pushed commitment and responsibility up the cor- compliance officers. In December 2014, as many as 300 compliance officers porate ladder in a number of ways. Perhaps the most important is the require- attended an event marking the tenth anniversary for the anti-corruption ment that the CEO personally signs a Letter of Commitment addressed to the principle. Secretary-General of the United Nations to join the initiative. Every year, CEOs Another example is LEAD, the Global Compact leadership initiative, which are required to reconfirm their commitment in the company’s Communica- has a specific focus on what sustainability leadership means for core corporate tion on Progress, ensuring that the focus from top management is maintained. functions. The model is to identify good practice among leading companies, Caring for Climate, the CEO Water Mandate and the Women’s Empowerment and then spread this to other Global Compact participants – ensuring that Principles all follow the same model, and require additional commitments from leading companies can inspire improved performance throughout the rest of the CEO. the business community. Moreover, through organising events and conferences exclusively for CEOs and Board Members, such as the Global Compact Leaders Summit and UN Shaping vision and strategy Private Sector Forum, the Global Compact helps keep issues at the top of exec- Notably, almost half of surveyed participants state that the Global Compact has utives’ minds. played an important role in shaping their company’s vision (an equal number of small and large companies). 74 II change Level 1 - Finding 4 MIND THE GAP: ACTIONS AND INTENTIONS ARE STILL NOT ALIGNED Companies are becoming increasingly systematic and proactive about integrating sustainability into their operations. However, implementation varies significantly between companies, progress is slow, and a large gap remains between talk and action. Key facts and figures 251 349 9 171 Tools and resources issued Major events organised at the local level events recorded since 2007 global level “We have screened all our 60,000 product applications to understand the impact on sustainability and the environment. Are we really best in class, or is it possible to improve our environmental footprint? A crucial part of this was evaluating whether to temporarily or permanently phase out perfectly legal products, because other alternatives were less harmful to the environment.” KURT BOCK CHAIRMAN OF THE BOARD OF EXECUTIVE DIRECTORS, BASF More systematic governance from the survey show only a marginal increase in recent years. However, the A clear trend is that an increasing number of businesses globally are integrat- difference is significant between issues. ing sustainability issues into formal governing documents. An overwhelming A higher percentage of Global Compact companies surveyed state that they majority of Global Compact participants surveyed9 – 90 per cent - say they perform risk assessments on labour and environmental issues, while a much now have policies and practices in place encompassing all the Global Compact lower percentage conduct a similar exercise on human rights and anti-corrup- principle areas. tion. The most significant increase has been in the area of anti-corruption, with In general, larger companies tend to have advanced further in integrating a notable rise of 18 percentage points in only four years. sustainability issues into their governance structures and related documen- Results show that while smaller companies have policies and practices in tation. This is most true when it comes to governance of environmental and place, they are lagging behind in terms of proactive management of issues. labour risks, mainly related to health and safety of their own employees. The most significant change is seen in the area of anti-corruption – an increase from A stronger emphasis on performance monitoring 81 per cent in 2008 to 91 per cent in 2015. Whereas risk assessment relates to how proactively a company is managing im- Sustainability policies are also becoming more specific. The percentage of pacts, monitoring performance is key for enabling continuous improvement - a surveyed companies that establish specific policies on issues such as corruption fundamental underlying principle for participation in the Global Compact. or forced labour is growing, albeit at a slow pace. Around half of all survey respondents evaluate performance related to envi- However, survey results relating to the degree to which companies are ronment and labour, while less than a third do the same for human rights and conducting activities such as risk and impact assessments, foot-printing and anti-corruption. This is despite the fact 90 per cent of respondents have policies training suggest that policies are still not yet being translated into action. For in- or practices for these areas. stance, only 22 per cent of respondents conduct human rights risks assessments, Results from the survey show a substantial difference between the practices despite 94 per cent saying they have policies and practices in place. of large and small companies. In the area of human rights where business prac- tices are generally considered less mature, there is very little difference between Risk assessments: a mixed picture large and small companies. There seems to be a general tendency towards a greater use of risk assessments to enable proactive management of companies’ sustainability risks, yet results IMPACT 75 15 Already acting: Percentage of respondents with policies or practices in place 2008 2015 100 % Human rights 88% 94% Labour 94% 96% Environment 92% 96% Anti-corruption 81% 91% 95 % Source: 2008 – 2015 Global Compact Implementation surveys 90 % 85 % 80 % 75 % 2008 2009 2010 2011 2012 2013 2014 2015 16 What’s the risk: Percentage of companies using risk assessment as a tool to implement the principles 2008 2015 100 % Human rights 30% 22% Labour 74% 79% Environment 52% 56% Anti-corruption 37% 80 % Source: 2008 – 2015 Global Compact Implementation surveys, Anti-corruption not included until 2011 60 % 40 % 20 % 0% 2008 2009 2010 2011 2012 2013 2015 17 Every business counts: Percentage of large and small- and medium-sized enterprises (SMEs) that monitor and evaluate performance to implement the principles Human rights Source: 2015 Global Compact 70% Implementation survey Labour Environment Anti-corruption LARGE COMPANIES SMES 53% 35% 18% 0% 76 Level 1 - Finding 4 II change the role of the un global compact KICK-STARTING THE JOURNEY OF CHANGE As business is gradually starting to integrate sustainability into operations, what forms – both globally and at the national level – for multi-stakeholder dialogue has been the role of the Global Compact in catalysing this change? and knowledge-exchange on challenges as well as approaches for how business can improve its positive impact. Progress on integrating sustainability into operations has been slow overall. However, the Global Compact together with its partners has over the years Deepening engagement delivered a significant amount of work which inspires, encourages and supports Since mid-2000, the Global Compact has launched a number of specific issue companies on their journey to sustainability. engage­­ment platforms which offer opportunities for companies to be more ac- tive and take a stronger leadership position on issues of particular importance. Advancing action Caring for Climate, the CEO Water Mandate and the Women’s Empowerment In the early days, the Global Compact focused primarily on facilitating Principles are examples of these platforms (see separate Spotlight sections). multi-stakeholder discussions on good practice related to difficult sustainabil- They primarily do two things: the framework defines what is good practice ity risks. Over the years, the initiative has moved to producing an increasing related to an issue, and they also enable like-minded participants to collaborate amount of guidance on how to manage and disclose sustainability performance. through local actions, initiatives and projects. A remarkable total of 251 tools and guidance resources have been produced over the past 15 years, helping to clarify good corporate practice on a wide range Driving the drivers of change of environmental, social and governance issues, such as operating in zones of Possibly the most significant impact of the Global Compact in this area con- conflict or handling child labour risk in the supply chain. The Global Compact cerns its activities to influence the external operating environment. It has played has also produced several practical frameworks and specific tools for companies a critical role in mobilising the financial and educational sectors, as well as to conduct risk and other types of assessments, for instance to measure and through advancing sustainable business practices through inspiring regulation report on performance. and advancing responsible policy engagement (see finding on Level 2 for more In addition, a total of 349 global and 9,171 local events have been recorded by details). the Global Compact and its Local Networks. These constitute important plat- “If we had to pay consultants to deliver all of the guides, resources and tools that the Global Compact provides, it would be very expensive. The Global Compact is a goldmine. To get the most out of it, companies must not only sign on to the initiative; they must understand that being a proactive participant is crucial.” FEDERICO BERNALDO DE QUIRÓS CEO, RESTAURANTES TOKS 18 Driving action: 66% of companies believe the Global Compact has played an important role in driving implementation of policies and practices Strongly disagree 2% Disagree 6% Neutral 26% Agree 52% Strongly agree 14% Source: 2015 Global Compact Implementation survey IMPACT 77 19 TOP 50 TOOLS AND RESOURCES 2005 2006 2007 Who Cares Wins Series The Labour Principles of UN Global Compact Annual the UN Global Compact Review Series – A Guide for Business Embedding Human Rights General in Business Practice Series Human Rights Labour 2009 Annual Local Network Environment After the Signature Report Series Anti-corruption – A Guide to Engagement in the Financial Markets 2004 Global Compact Local Network Business and peace Human Rights and Business Making the Connection - Using Dilemmas Forum GRI’s Guide to Corporate Guidelines to Create a COP 2008 2003 Reporting Guidance on the 10th Principle Against Corruption 2002 2001 2000 2010 A Guide to Traceability: A Practical Approach to Advance Sustainability Children’s Rights and 2012 Guide for Responsible Business in Global Supply Chains Business Principles Engagement with Water Policy Business Leadership Catalyzing Transformational Criteria on Carbon Pricing Food and Agriculture A New Agenda for the Board of Partnerships between the Doing Business While Advancing Business Principles Directors: Adoption and Oversight United Nations and Business Development and Peace of Corporate Sustainability Are you Aligning your Emissions Reduction Targets Value Driver Model A Global Compact for with Climate Science? Scaling Up Global Food Security and Fighting Corruption In Sustainable Energy: A Sustainable Agriculture Framework for Business Action the Supply Chain 2014 Rio+20 Corporate Sustainability Adapting for a Green Economy: The Fight Against Corruption: 2015 Forum Overview and Outcomes Companies, Communities E-Learning Tool and Climate Change Fighting Corruption in Sport Sponsor- ship and Sport Related Hospitality A Global Compact for Development 2013 Guide on How to Develop a Human Rights Policy Guide to Corporate Sustainability The Business Reference Supply Chain Sustainability Guide to the UN – A Practical Guide Declaration on the Rights Business for the of Indigenous Peoples UN Global Compact Business Partnership Hub 2011 Rule of Law Framework Sustainable Supply Chains Online Portal The Guide for Responsible Corporate Engagement in UN-Business Partnerships: Climate Policy A Handbook Environmental Advancing Responsible Stewardship Strategy Business in Land, Construction, Blueprint for Corporate Sustainability Real Estate Use and Investment Leadership within the Global Compact Guide to Water-Related Global Corporate Collective Action Sustainability Report Responsible Business in Conflict-Affected UN Global Compact-Accenture CEO & High-Risk Areas Study: A New Era of Sustainability UN Global Compact-Accenture CEO The Smartest Investment: Study: Architects of a Better World A Framework for Business Engagement in Education Transformative Solutions for a Low-Carbon Future UN Global Compact Management Model Architects of a Better World: Building the Post-2015 Business A Guide for Anti-Corruption Engagement Architecture Risk Assessment 78 II change SP OT L IG H T ON : T H E C E O WAT E R M A N DAT E THE FLOW-ON EFFECTS OF GOOD LEADERSHIP The world is in the midst of a serious water crisis. From the farmlands of California, the mountains of Iraq, to vast areas in the Middle East and Africa – a growing number of countries are suffering from extreme water stress. According to the WHO, over 780 million people lack enough water to meet basic needs. Worryingly, if current rates of consumption continue, global water demand will vastly exceed supply by 2050. IMPACT 79 80 Spotlight II change This year, the water crisis was in the limelight of the World Consumer Goods. Participants include leading industry figures Economic Forum’s global risk report when it was listed for the who are often subject to public scrutiny, and who might benefit first time as the top societal risk facing business10.This speaks from a proactive and transparent approach to water manage- volumes about how water scarcity has shifted from being a ment. non-existent issue to being recognised as one of the most important sustainability challenges of our time. FROM TALK TO ACTION Over the coming decades, the water crisis will continue to Water was already on the agenda of leading businesses when worsen. It will threaten the ability of people to survive, ecosys- the CEO Water Mandate was launched. But as one of the first tems to flourish, food production to meet growing needs and global business initiatives on the topic, it has helped raise the stability of societies as competition over scarce resources awareness and attract attention to water issues at the global ramps up. It will also threaten our ability to develop strong and level. stable economies where businesses can thrive. Today, there is much higher awareness in the global business community of water risks. This is particularly the case in THE CEO WATER MANDATE: sectors and countries where water shortages have become a BRINGING IN BUSINESS material risk to operations. We have seen a clear trend towards In 2007, understanding of the water crisis was growing, but companies becoming more proactive in identifying, manag- companies lacked clear guidance and platforms to work ing and reporting on water risks and opportunities. This is together. In this context, the Global Compact and the Pacific also true for firms outside the Mandate’s endorser base. More Institute took steps to mobilise the business community and companies are developing programs on water stewardship, effi- established the CEO Water Mandate. This constituted a volun- ciency and supply chains. In addition, they are requesting more tary set of principles designed to improve companies’ manage- practical tools and guidance for water footprinting, reporting ment and disclosure of water practices and impacts. and accounting. A CEO-led initiative, the Mandate currently seeks to ca- However, water management cannot yet be described as talyse change in four main areas: responsible policy engage- mainstream (Figure 21). Basic Materials, Agriculture and ment and collective action, water and human rights, corporate Beverage Industries are leading the way, but awareness and water disclosure and water stewardship in the supply chain. engagement in other sectors vary. It has responded by developing numerous practical tools and With the launch of the CEO Water Mandate, there has been resources to help companies improve water management a focus on developing practical guidance for companies to practices and impacts in their direct operations and in supply ensure better water management and disclosure. The Mandate chains. has also convened numerous events where companies and As of May 2015, 137 companies from a variety of sectors had other organisations have been able to discuss challenges, share endorsed the Mandate, with a majority belonging to highly experiences and find new solutions. Many respondents point water intensive sectors such as Basic Materials, Industrials and out that the collaborative tone and inspiration from peers has helped catalyse action within their own company. Key facts and figures11 40% 52% 45% 90% How much water demand Of the global population Of the global economy Of direct water withdrawals will exceed supply in 2030 is threatened by water will be threatened by are from agriculture and scarcity in 2015 water scarcity in 2050 power-generating industries 20 Participants in the CEO Water Mandate – by sector Basic Materials 26 20% Consumer Goods 38 29% Consumer Services 6 5% Financials 8 6% Health Care 4 3% Industrials 23 17% Oil & Gas 2 1% Technology 6 5% Telecommunications 0 0% Utilities 15 11% Not Applicable 4 3% IMPACT 81 21 Percentage of Global Compact companies responding to the Global Compact Implementation survey that state water is fully integrated into company strategy and operations Basic Materials 44% 45% 41% 54% 53% Consumer Goods 37% 39% 35% 39% 46% Consumer Services 21% 29% 27% 30% 28% Financials 19% 16% 17% 18% 25% Health Care 31% 36% 36% 33% 50% Industrials 24% 31% 29% 29% 34% Oil & Gas 30% 39% 38% 31% 40% Tecnhology 15% 11% 20% 15% 25% Telecommunications 19% 7% 10% 26% 17% Utilities 46% 35% 37% 36% 45% Not Applicable 28% 21% 26% 21% 31% Source: 2008 – 2015 Global Compact Implementation surveys 2010 2011 2012 2013 2015 82 Spotlight II change MEASURING THE IMPACT OF THE CEO WATER MANDATE IS WATER SAVED IN AREAS OF HIGH WATER STRESS? DNV GL has analysed data from 124 endorsing companies going back to 2007. 46 per cent of the CEO Water Mandate companies are headquartered in areas of Data was collected from publicly available annual or sustainability reports high to extremely high levels of water stress. However, to measure water used in which were analysed for a variety of metrics, including water use and water production, especially for water intensive industries like textiles, the operating saving.12 site is of most value to the analysis. 60 per cent of endorsing companies report comparable data on water use. 80 53 per cent of CEO Water Mandate companies report that they address water per cent of companies disclosing data on their water withdrawals are from three scarcity issues around the locations of their operations. key sectors: Basic Materials, Industrial and Consumer Goods. The evidence shows that companies participating in the CEO Water Mandate have saved water usage during the time they have been participating in the HOW MUCH WATER HAS BEEN SAVED? initiative. Although it is difficult to conclude from our findings that freshwater is saved where it is most needed, the reports indicate that water intensive indus- tries are aware of local freshwater issues and many combat these issues locally. 12,690 million m3 of water has been saved by CEO Water Mandate signatory companies since they joined the initiative. This is equivalent to the water supply needs of the world’s ten largest cities for 7.6 years. IMPACT 83 22 CEO Water Mandate signatories reporting on water use 23 CEO Water Mandate signatories reporting on water scarcity Have reported data on water use 60% Report on water scarcity Have not reported data on water use 32% Do not report on water scarcity Does not produce / report not available* 8% Do not produce / report not available *Current relevant report/data unavailable: either have not yet published report after becoming Mandate signatory; not able to locate report; or report in local language only. Africa Asia Europe Latin America & the Carribean MENA North America Oceania 40% 30% 20% 10% 0% THE WATER ACTION HUB The Water Action Hub was developed with the Pacific Institute, GIZ, the areas to come up with mutual solutions for water efficiency. The Hub International Business Leaders Forum and Deloitte in 2012 to encour- involves 350 organisations in 178 projects over 357 project locations age business collaboration in areas of high water stress. The digital around the world. platform connects companies with other stakeholders in water-stressed 2 3 23 1 8 34 30 5 49 21 3 23 23 79 3 12 37 1 change II Spotlight 84 UN PHOTO/MARTINE PERRET IMPACT 85 HOW ARE FRAMEWORKS RESPONDING? Governments have come to realise that water issues cannot be HIGHLIGHTED WORKS addressed by national and regional policies alone, and a key COLLECTIVE ACTION change has been the increase in cooperation and collaboration ‘Guide to Water-Related on these issues. More engaged governments have begun to re- Collective Action’ form water policies and reassess their water-related priorities. POLICY ENGAGEMENT Collaborations between international organisations and ‘Guide to Responsible Business business have played an important role in helping NGOs Engagement with Water Policy’ understand business mentality and develop tools for water management. The CEO Water Mandate cannot be said to have played a central role in shaping regulatory or institutional frameworks. However, through advocacy of water issues and facilitating dia- logue, it has helped ‘raise the bar’ for performance and enabled business to engage in policy development and implementation. CHANGING PERCEPTIONS In the last two decades, attitudes relating to water have changed dramatically. Water has gone from being perceived as a ‘public commodity’ to a ‘limited resource’. Around 2008, there was a significant increase in media, public and business recognition of the importance of water from social, economic and ecological perspectives. This was due in part to a greater understanding of the pressures and risks associated with the world’s freshwater resources. Awareness of the links between water and other sustainabil- ity issues is also growing, and the topic of ‘water as a human right’ has emerged. This has highlighted the crucial connection between company and state policy on water issues. The CEO Water Mandate can certainly be said to have contributed to changing attitudes in terms of the risks water can pose to business and what responsibility and role business can and should take. Our findings show a clear change in perception and the fact that 50 per cent of endorsing compa- nies have joined since 2013 represents a clear growth in general awareness. “For us in WWF, it has been a great opportunity to be part of the UN Global Compact, especially in the CEO Water Mandate; to learn from others and bring our expertise into the discussion with business and civil society groups.” YOLANDA KAKABADSE PRESIDENT, WWF INTERNATIONAL 86 II change Level 1 - Finding 5 CHAIN REACTION: SUSTAINABILITY CASCADING THROUGH THE VALUE CHAIN Companies have extended their focus beyond own operations to include impacts in their wider value chains. Scaling supply chain sustainability will mobilise a vast number of small firms in communities across the globe. Key facts and figures Source: 2015 Global Compact Implementation survey 67% 17% of Global Compact companies surveyed consider of Global Compact companies require suppliers to adherence to sustainability principles in the supply adhere to the Global Compact to be selected as a chain. partner. In 2000, the boundary of responsibility for companies was largely limited The number of survey respondents reporting they have policies and practices to what they could directly control and manage internally, and often did not applying to suppliers has risen considerably. The most notable change has been include upholding human and labour rights, environmental performance and a 23 percentage point increase in those reporting that their labour policies and anti-corruption issues in the value chain. practices apply to suppliers, from 37 percent in 2008 to 64 per cent today. How- Corporate supply chain programs have evolved since then as a result of ever, according to the survey only 31 per cent of respondents consider labour efforts to open up and bring greater transparency to global supply chains. This issues in their supply and subcontracting agreements. development is also a result of efforts to better understand the complexities around what is being sourced from where, and by whom. Challenges remain Sophisticated supply chain programs are developing as many large companies Most companies are yet to examine their value chains and issues relating to recognise that the risks they are exposed to in the supply chain, whether relat- them. No single multinational company operating in today’s global market- ing to labour conditions, GHG emissions or risk of corruption, in many cases place can confidently state that they are fully aware of every potential supplier, exceed the risk stemming from their own operations. More advanced approach- contractor or sub-contractor. es are moving beyond issuing requirements and demands to suppliers, towards Businesses still also grapple with understanding and identifying boundaries collaboration and engagement. of control, influence, and responsibility when it comes to value chains. For example, limited progress has been made by business in implementing systems Integration into supply chain management that ensure respect for human rights is upheld, both across operations and the A clear trend in the past 15 years is the increasing number of supplier codes value chain. of conduct covering all issue areas, and there is more monitoring of supplier performance and engagement with suppliers. IMPACT 87 “One of our main focus areas is to align our supply chain with the ten principles of the Global Compact. Polarisation in economic development is very unsustainable. We work with small communities around Mexico to help them develop and produce products in a better manner, so that we can source directly from them. In that way, we’ll help build up local economies and lift people out of poverty.” FEDERICO BERNALDO DE QUIRÓS CEO, RESTAURANTES TOKS 24 Wider action: Percentage of large companies (more than 250 employees) with policies and practices that apply to suppliers. 2008 2015 80 % Human rights 51% 67% Labour 37% 64% Environment 59% 72% 70 % Anti-corruption 55% 74% 60 % 50 % 40 % 30 % 2008 2009 2010 2011 2012 2013 2015 Source: 2008 – 2015 Global Compact Implementation surveys the role of the un global compact EXPANDING BUSINESS SPHERE OF INFLUENCE As companies are expanding their sustainability responsibility to the broader value To assist companies in better managing supply chain risks and opportunities, chain, what has been the Global Compact’s role in catalysing change? the Global Compact launched a separate work stream on supply chain sus- tainability in 2010. The program aims to explore critical issues, and practically A key contribution of the Global Compact has been the introduction of the develop tools and guidance clarifying good practices in identifying, monitoring term ‘sphere of influence’ in the preamble to the ten principles, stating that and improving performance in supply chains. Notable examples include the companies have ‘a responsibility to embrace, support and enact a set of core guide on fighting corruption within the supply chain, and the self-assessment values in their sphere of influence’, and thereby signalling from the outset that and learning online tool. business responsibility goes beyond direct or immediate operations. Moreover, Global Compact engagement platforms like the CEO Water Man- date, the Caring for Climate initiative and the Food and Agriculture Principles Advancing best practices all include a specific focus on supply chain management as a key element of Companies participating in the Global Compact are encouraged to engage with how companies shall demonstrate stewardship and leadership on the different their suppliers around the ten principles, and thereby to develop more sustain- issues. able sourcing practices. HIGHLIGHTED WORKS FIGHTING CORRUPTION IN TRACEABILITY AND THE SUSTAINABLE SUPPLY CHAINS: THE SUPPLY CHAIN: SUPPLY CHAIN: RESOURCES AND PRACTICES ‘Stand Together Against Corruption: ‘A Guide to Traceability: A Practical A website for business seeking information A Practical Guide to Help Prevent Approach to Advance Sustainability in about supply chain sustainability. Corruption in the Supply Chain’ (2013) Global Supply Chains’ (2014) supply-chain.unglobalcompact.org 88 II change Level 1 - Finding 6 NOWHERE TO HIDE: TRANSPARENCY IS BECOMING THE NEW NORM Huge progress has been made to improve corporate disclosure; companies today are far more open about their sustainability impact. Standardising reporting will help benchmark perfor- mance, letting transparency serve its purpose and dodging the risk of reporting into the void. Key facts 27 646 399 Communication on Global Compact business “There’s no place to hide anymore in the Progress reports in the participants submitted an world. That’s very, very powerful. I like to Global Compact database, “advanced” COP report in 2014. as of December 2014. say transparency is not an act, it’s a condition. Let’s face it, when people are watching us, we behave differently.” 4 490 74% ARON CRAMER Reports submitted Of the Fortune PRESIDENT & CEO, BSR according to the Global Global 500 companies Reporting Initiative published a sustainability framework in 2014. report in 2014.13 Since 2000, there has been a monumental shift in disclosure by companies on The evolution of sustainability reporting their sustainability performance. For example, while 646 Communications on As the volume of sustainability reports has increased, so has the sophistication Progress13 reports (COPs) were submitted to the Global Compact in 2005, 5,404 and maturity of reporting practices: COPs were submitted during 2014. This increase is also seen in the number of Global Reporting Initiative reports submitted, from 44 in 2000 to close to 4,500 • Shifting focus: From EHS and CSR reports to sustainability and, more recent- in 2014.15 ly, integrated reports This shift reflects the growing recognition of the materiality of sustainability • Materiality: Reports reflect issues with the greatest importance to an organi- issues to business, as well as the enhanced stakeholder expectations of how sation and its stakeholders companies are addressing sustainability. The resulting transparency and engage- • Assurance: Independent validation of sustainability reports has grown, par- ment has also helped to improve companies’ understanding of good practice ticularly for larger companies and shape their sustainability progress. • Evolving standards: Global Reporting Initiative (GRI) remains the dominant Evidence of the shift over the last 15 years is provided by the dramatic standard, targeting a broad range of stakeholders. The International Inte- increase in sustainability reporting, to the point that it is now considered the grated Reporting Council (IIRC) and Sustainability Accounting Standards norm for most large or multi-national companies. Reporting is also gaining Board (SASB) are gaining traction particularly amongst investors traction within SMEs, often in response to top-down requirements from large • Issue-specific reporting: Growing maturity and understanding of material companies for their suppliers to know and disclose their sustainability perfor- issues has led to more sophisticated issue-specific reporting (on GHG emis- mance. sions, human rights, supply chain) For Global Compact participants there has been significant progress in the • Reporting systems: Significant rise in the number of sustainability software disclosure in all principle areas, either through sustainability reports, Commu- systems to automate data collection and reporting nication on Progress reports or other channels like company websites. For ex- • Reporting fatigue: Some reporters showing ‘reporting fatigue’ caused by ample the survey shows that there has been an average increase of 9 percentage ever-greater information requirements from rating agencies, investors and points in the number of respondents that publicly disclose policies and practices disclosure initiatives related to the principle areas. Heading in the right direction Disclosure is becoming mandatory Disclosure levels on human rights, anti-corruption and supply chain have There is a clear trend going toward regulation of non-financial disclosure from increased over the last 15 years. However, many companies remain hesitant to large companies. Most notable is the recent EU Directive (2014) on disclosure report openly on sensitive issues like human rights violations and corruption. of non-financial and diversity information by certain large undertakings and This is perhaps due to difficulties in identifying risks and impact within their groups’. This amendment will require some 6,000 large businesses across Eu- own operations, as well as concerns that transparent disclosure might backfire, rope to publicly report on social, environmental, and human rights. generate negative publicity or result in legal issues. Mandatory reporting requirements have been introduced in South Africa, For human rights, a recent study suggests current disclosure is mainly limited where 450 companies on the Johannesburg Stock Exchange are required to pro- to general statements on human rights policies and processes with little report- duce an integrated report. There are also reporting requirements in Denmark, ing on specific risks or impacts and companies’ responses to them.16 Norway, Brazil, India and in the United States. IMPACT 89 25 Nothing to hide: Percentage of companies publicly disclosing policies and practices related to each principle area 2010 2015 60 % Human rights 25% 36% Labour 39% 48% Environment 49% 54% 50 % Anti-corruption 27% 37% 40 % Source: 2010 – 2015 Global Compact Implementation surveys 30 % 20 % 2010 2011 2012 2013 2015 26 Good guidance: Participants agree that the Global Compact has played a significant role in guiding their sustainability reporting Strongly disagree 2% Disagree 6% Neutral 26% Agree 47% Strongly agree 18% Source: 2015 Global Compact Implementation survey the role of the un global compact ADVANCING OPENNESS ON SENSITIVE ISSUES As transparency is increasingly becoming the norm, what has the Global Compact As of 2013, non-business participants to the Global Compact are required to done to catalyse change? disclose specific activities in support of the initiative and the results of these activities every two years - a Communication on Engagement. In the spirit Although not a reporting initiative, the Global Compact has transparency at of continuous improvement and engagement, this is designed to be a tool for its core. Not only does it promote transparency through its annual Commu- non-business participants to express their commitment through transparency, nication on Progress reporting requirement for participants, it is also a strong and to communicate the ways they advance the Global Compact. supporting voice for other sustainability reporting and disclosure initiative like the GRI, IIRC and the Carbon Disclosure Project (CDP). Improving reporting practices By issuing reporting tools and guidance on a variety of topics for different Requiring disclosure audiences, the Global Compact, together with partners such as the GRI, has In fact, a notable 65 per cent of business participants surveyed in the 2015 Im- helped improve company reporting on the different principle areas. In doing so, plementation Survey state that they agree that the Global Compact has played it has enhanced transparency. In some areas, the Global Compact has been the an important role in guiding their sustainability reporting. This points to the first mover, in particular the reporting guides on anti-corruption, human rights, fact that the Global Compact is no longer only a driver of sustainability perfor- gender equality and water. mance but very much also a driver of reporting. To strengthen the accountability of the initiative, the Global Compact intro- Harmonising expectations duced the reporting requirement for business participants in 2004, making it a By deepening collaboration with other reporting initiatives, the Global Com- requirement to report on progress in implementing the principles every year. pact has helped to harmonise expectations on reporting. Examples include Today, the Global Compact has the world’s largest database of publicly available the Memorandum of Understanding signed with the GRI, the collaboration sustainability disclosures, containing close to 28,000 Communication on Prog- with the IIRC, and the encouragement to use the CDP to report on carbon ress reports. emissions. The most notable outcome from this has been the drive to encourage compa- nies to talk openly about the impacts and opportunities that they face in these areas, in particular on challenging issues like corruption and human rights. 90 II change SP OT L IG H T ON : C A R I NG F OR C L I M AT E MOBILISING BUSINESS TO COMBAT CLIMATE CHANGE Climate change is one of the greatest challenges facing humankind. Every day, millions of investment decisions are made that will affect the health of our planet for decades to come. Changing the way businesses think about climate change will not only be the key to limiting global warming; it will also be the first step towards a future of sustainable economic growth. IMPACT 91 92 Spotlight II change Since the launch of the Global Compact, global CO2 emis- energy and technology. They are focusing on becoming more sions have increased by 46 per cent17 and global atmospheric transparent and more consistent with regard to lobbying, and CO2 levels are up 8 per cent18. At present, the reality is that on setting carbon pricing and their own targets to meet the 2 the world is not on target for a global temperature rise of only degree climate change target. 2 degrees Celsius - and it will be impossible to change course without the active involvement of business. GREEN MARKET GROW TH While the international climate negotiations under the CARING FOR CLIMATE: SET TING THE PATH UNFCCC are progressing, the talks have not yet reached a FOR LOW-CARB ON GROW TH much-needed international agreement on climate change. Caring for Climate was launched by UN Secretary-General At a national level, climate legislation is rapidly developing Ban Ki-moon in 2007. It is an initiative by the Global Compact, (climate legislation has doubled since 200921) and is increas­ UNEP and the UNFCCC secretariat, and is committed to ingly incentivising business to take action. But while we are advancing the role of business in addressing climate change. It closer to a consensus on what is required, much change is provides a framework for business leaders to advance practical needed before regulation effectively supports a transition to solutions and help shape public policy and attitudes. The initia- a low carbon economy. tive has two goals: There have been positive signs with regard to the aware- ness of climate risks among financial markets. Investors are 1) inform the global climate change policy agenda through beginning to see the link between climate and financial risk, sharing successful practices; and and increasingly require companies to disclose strategies for 2) mobilise business to develop a strategy for energy efficiency managing climate risks and costs. Recently, investors have and the transition to a low carbon economy. started to fear the effect of stranded assets - investments that will become unusable if laws to curb emissions tighten even Today, Caring for Climate is supported by over 400 companies further. The recent fall in the share price of coal companies and has become the world’s largest initiative for business lead- reflects this issue. ership on climate change. Many of the most carbon intensive industries participate, but some sectors like Oil and Gas, Basic RESPONSIBLE ENGAGEMENT ON CLIMATE Materials and Transport remain underrepresented. Fifteen years ago there were few channels for constructive engagement between private sector companies and other FROM DEFENCE TO OFFENCE stakeholders. This has changed as private sector companies In the early 2000s, businesses regarded climate and environ- seek to engage stakeholder groups more actively. Caring for mental issues as purely regulatory questions. Today, businesses Climate has played a significant role in this regard. Since 2013, play a more active part in dealing with climate change, often the Caring for Climate Business Forum has been the official moving faster than environmental standards and regulations. business–focused event at the international COP negotiations, Since its launch, Caring for Climate has responded by sup- allowing business, policy-makers and civil society to exchange porting companies in improving practices on a range of issues. good practice and discuss climate policy. Recent examples of guidance include ‘Adapting for a Green The initiative has also developed pioneering resources on Economy: Companies, Communities and Climate Change’ responsible engagement in climate policy, designed to help (2011), and ‘Are you aligning your emissions reduction targets businesses follow transparent guidelines when approaching with climate science?’ (2014). government and elected bodies to discuss climate policy. Caring for Climate has also helped with the streamlining of reporting. In the period between 2009 and 2014, the percent- GREENER THOUGHTS AND MINDS age of signatories that responded to the Carbon Disclosure General awareness of climate issues was rising as early as 2000. Project rose from 28 per cent to 48 per cent. This illustrated However, there was a high level of disagreement concerning the increased willingness of climate leaders to participate in a the most effective actions that should be taken to overcome the robust disclosure system19. momentous challenges ahead. Part of the objective is to incentivise signatories to under- Today, climate is on the minds of most international busi- take emission reduction efforts. A study by Deloitte20 shows ness leaders, and companies are looking more for win-win that 33 large signatories have achieved a decrease in emissions solutions on the climate and the economy as a whole. More of approximately 13 per cent from 2013, compared to 2007. than ever before, business is seen as the source of innovation Their emissions are also at their lowest level since 2007. and solutions, as well as an advocate for climate policy. A new Leading companies are shifting gear and are now more generation of climate-conscious managers are stepping into proactively developing solutions to climate change. There is a boardrooms, ready to strike a blow for the environment and to clear trend of companies increasing investment in renewable find meaningful solutions to combat climate change. Caring for Climate has, through its various initiatives, been instrumental in shaping beliefs that companies can be a force for good. The initiative is gaining global recognition from other institutional and organisational frameworks, and is a significant driver of business engagement on climate globally. 2015 – THE MAKE OR BREAK YEAR? CEOs supporting Caring for Climate commit to: In December 2015, world leaders will meet for the 21st round of COP negotiations and hopefully reach a global agreement on – Reduce emissions, set targets, and report annual performance climate change. The outcome will greatly change the operating – Devise a business strategy to approach climate risks and opportunities environment for companies, and their inclusion in the process – Engage with policymakers to encourage scaled-up climate action is important for delivering results. Committing to the Caring – Work collaboratively with other enterprises to tackle climate change for Climate initiative is the best way for business to participate – Become a climate-friendly business champion with stakeholders in this process, and declare itself a provider of solutions rather than part of the problem. IMPACT 93 Key Facts 400 125 85% 81% CEOs are committed to million tonnes of CO2 of C4C signatories are of global compact CEOs back Caring for Climate (C4C) emissions could be reduced reporting on progress on the development of legislation if 126 C4C signatories meet climate change pubically23 to support a green economy24 targets they set in 201422 27 Signatories by sector 28 Company progress Basic Materials 38 9% 2007 Consumer Goods 53 13% 2008 Consumer Services 44 11% 2009 Financials 41 10% 2010 Health Care 11 3% 2011 Industrials 104 26% 2012 Oil & Gas 32 8% 2013 Technology 26 6% 400 600 800 1000 1200 Telecommunications 12 3% Utilities 39 10% Not Applicable 2 1% Total Scope 1 & 2 (MtCO2e) Source: Caring for Climate progress report 2014 LEADERSHIP BUSINESS IS CALLING: PUT A PRICE ON CARBON cate on progress, Caring for Climate has developed the Business Leadership Criteria on Carbon Pricing (BLC). Setting a price on carbon that reflects the toll fossil Around 40 companies and investors have aligned with fuels are taking on the planet has been a target area the criteria so far. Caring for Climate plans to mobilise for Caring for Climate, as it is a key step to limiting at least 100 companies by the end of 2015. greenhouse gas emissions and getting ahead of the climate curve. In May 2015, 6 major oil and gas companies - BG Group plc, BP plc, ENi S.p.A., Royal Dutch Shell plc, To challenge companies to integrate carbon pricing Statoil ASA and Total SA - issued a joint call to world into long-term corporate strategies and investment de- governments and the UNFCCC to introduce carbon cisions, plus advocate for carbon pricing and communi- pricing systems. UN PHOTO / UNICEF / MARCO DORMINO 94 Spotlight II change IMPACT 95 96 Spotlight II change “Climate change is the defining challenge of our time. I also believe it is the most potent game-changer for business...It is an opportunity we must seize. I want to challenge you. I want to see you in the vanguard of an un­ precedented effort to retool the global economy into one that is cleaner, greener and more sustainable.” H.E. Ban Ki-moon Secretary-General United Nations IMPACT 97 98 II change Level 1 - Finding 7 SMARTER TOGETHER: NEW FORMS OF COLLABORATION BETWEEN BUSINESS AND SOCIETY The more we understand the complex challenges the world now faces, the more we see the overlapping interests of economic and societal actors. New forms of cross-sector collaboration are emerging to deliver smarter, more long-term solutions 29 Coming together: Sustainability collaborations on the rise - How many sustainability- related collaborations has your organisation been involved in over time? Number of sustainability related collaborations Before 2000 In future 0 sustainability collaborations 40% 0% 1 to 25 sustainability collaborations 28% 50% More than 25 sustainability collaborations 4% 26% “Initially, corporate responsibility was just about awareness. Now it has changed the way 80 % we actually do business. Business is realising 60 % that they cannot work alone. You need to work together with your stakeholders to find the best 40 % practices and standards. This is becoming part of daily business.” 20 % MÓNICA DE GREIFF PRESIDENT, BOGOTA CHAMBER OF COMMERCE 0% Before 2000 2005 – 2005 2006 – 2010 2011 – present In future Source: BCG-MIT SMR-UN GC 2014 Sustainability Survey (based on company data-set with 749 responses); BCG analysis At the turn of the millennium, few companies engaged actively with their Consultation is more formalised stakeholders. Different sectors were kept apart by a deep sense of mistrust and Stakeholder engagement is also becoming more formalised, and there is a in some cases outright antagonism, as well as the view that governments alone growing tendency for consultations to be more integrated in regular business were responsible for managing societal issues. processes. Since then, a deeper sense of the complexity of global challenges has It is interesting to note that there has been only a marginal increase in stake- emerged. So too has the understanding that by pooling the resources, compe- holder engagement levels among Global Compact participants over the years tence and insights from different stakeholders together, new approaches and (this does not seem to reflect trends in the broader business community). Inter- opportunities can be brought to light and efforts to transform existing struc- estingly, there is a considerable difference between labour issues, where more tures and practices scaled. than 60 per cent of respondents conduct regular engagement and activities, than in the other principle areas (in particular anti-corruption). This could be Partnerships are proliferating due to more frequent dialogue between companies and labour unions. Today, collaboration is thriving across sectors and geographies, from policy dialogues, stakeholder consultations and collective actions to concrete, on-the- More sector and issue-specific ground local partnerships. Efforts include developing joint standards, levelling There has been a clear positive trend of higher participation in industry or the playing field and developing new models and solutions. A recent survey25 issue-specific initiatives over the last few years. But again, there is a considerable shows that the number of sustainability related collaborations has increased difference between the principle areas, with companies engaging to a much less- dramatically since 2000. er degree in collective and joint action on anti-corruption (see Figure 31). Less participation in anti-corruption and human rights initiatives may reflect the More strategic and transformative sensitivity of these issues. This also varies significantly across regions. Around In 2000, ‘collaboration’ was often interpreted as charity for a good cause or an 40% of respondents in Africa take part in industry or issue-specific initiatives ad hoc partnership driven by the main office. Today, collaboration is becoming on anti-corruption. more targeted, long-term and focused on transformative and scalable models. However, research shows that realising synergies and multiplier effects are often difficult in practice, and more effective models are needed to leverage the unique competence and expertise of different partners. IMPACT 99 30 Let’s talk: Percentage of companies using stakeholder dialogue to implement the principles 2008 2015 70 % Human rights 28% 23% Labour 63% 63% Environment 36% 30% Anti-corruption 18% Source: 2008 – 2010 Global Compact Implementation surveys. 35 % Anti-corruption not included until 2009. 0% 2008 2009 2010 2011 2012 2013 2015 31 Deeper engagement: Percentage of Global Compact respondents stating that their company participates in industry or issue-specific initiatives to implement the principles 2008 2015 50 % Human rights 22% 26% Labour 40% 34% Environment 42% Anti-corruption 21% Source: 2008 – 2010 Global Compact Implementation surveys. 25 % Environment and anti-corruption not included until 2012. 0% 2008 2009 2010 2011 2012 2013 2015 the role of the un global compact A PLATFORM FOR COLLAB ORATION As companies increasingly collaborate on sustainability issues, what has been the Improving partnership value Global Compact’s role in catalysing change? The Global Compact and its partners have also provided operational guidance for business, the UN system and civil society to improve the effectiveness, The Global Compact was formed as a multi-stakeholder initiative and was one value and impact of collaboration. A large number of practical tools have been of the first global platforms where business could engage in dialogue with its produced to improve the performance and impact of partnerships. In fact, 60 stakeholders. per cent of companies surveyed agree or strongly agree that the Global Com- Today, multi-stakeholder collaboration is thoroughly embedded through- pact has played an important role in motivating the company to take action to out the Global Compact network. The Board itself, chaired by the UN Secre- advance broader UN goals. tary-General, comprises representatives from business, international labour and civil society. Many work areas of the Global Compact are governed by Facilitating partnerships and collective action multi-stakeholder working groups, and the vast majority of resources produced In 2013, the Global Compact launched the UN Global Compact Business in the past 15 years have involved widespread consultation and collaboration Partnership Hub, an interactive platform to connect businesses with partners with government, civil society and academic partners. Also, most of the Global in support of UN goals and issues. Action hub areas include water, anti-corrup- Compact’s 88 Local Networks are multi-stakeholder in nature. tion, climate & energy, social enterprise and UN-business partnerships. To date, as many as 2,391 organisations have registered 268 projects across Convening multi-stakeholder dialogues all of the Global Compact Partnership Hubs. Although the number of regis- From its inception, the Global Compact’s model of engagement has been to tered organisations grew by 194 per cent in the last year, the amount of projects bring stakeholders together in the form of ‘policy dialogues’ to discuss challeng- grew by only 37. This could indicate that an emerging interest has not yet been ing issues, such as business operating in zones of conflict. A large number of translated into significant action on the ground. However, there are promising events have been held at the global, regional and local level since then. As such, developments underway especially in the area of water. the Global Compact has played a critical role in facilitating structured engage- At the local level, a total of 775 Local Network partnership activities have ment between governments, civil society and the business community at large. been recorded since 2007. It has brought unique sets of skills, experiences and knowledge of different actors together to bring about new solutions. 100 Level 1 - Finding 7 II change Global Compact Cities Programme The Global Compact Cities Programme is dedicat- ed to the promotion and adoption of the Global Compact’s ten principles by cities, and provides a “The very first signatories got together and looked at framework for translating the principles into day- mutual problems, and how business, civil society and labour to-day urban governance and management. In the spirit of the UN Global Compact, the Cities Pro- unions could learn from each other. This model has run through the gramme focuses on collaboration between all levels development of the Global Compact. We identify problems and sit down of government, business and civil society in order to enhance sustainability, resilience, diversity and together with civil society – who may have a completely different view, adaptation within cities and in the face of complex but share the common objective to find practical solutions. These solutions urban challenges. Administered by an International are in turn more widely accepted because ofthis range of input.” Secretariat based at the Global Cities Institute at RMIT University in Melbourne, Australia, the Global SIR MARK MOODY-STUART Compact Cities Programme provides unique exper- CHAIR OF THE FOUNDATION FOR THE GLOBAL COMPACT tise and guidance to participating cities. FORMER CHAIRMAN OF ROYAL DUTCH SHELL 32 Let’s go: Participants say that the Global Compact has played an important role in motivating the company to advance broader UN goals and issues Strongly disagree 2% Disagree 6% Neutral 31% Agree 45% Strongly agree 15% Source: 2015 Global Compact Implementation survey HIGHLIGHTED WORKS THE UN-BUSINESS PARTNERSHIP HUB PARTNERSHIP FUNDAMENTALS An online platform enabling the public and A 10-Step Guide for Creating Effective UN-Business Partnerships: A Handbook private sectors to propose projects related UN-Business Partnerships (Sept 2011) (2013) to UN goals. businesspartnershiphub.org IMPACT 101 Barcelona, one of the cities in the Global Compact Cities Programme. 102 II change LEVEL 2 C OR P OR AT E OPE R AT I NG E N V I R ON M E N T Is the pressure on? Companies operate in a complex web of rules and regulations, institutional frameworks, incentive systems and different societal, economic and political contexts. This section examines change in the corporate operating environment – at the global, regional and national level – that shape corporate conduct. Factors in the external operating environment may hinder or block, or enable and catalyse, change in the right direction. In this assessment, we consider four important drivers of change: regulation, finance, education, and the institutions and frameworks such as international organisations, government institutions and civil society organisations. In what follows, we present our five key findings with regard to how the corporate operating environment has changed since 2000. As you can see from the following pages, promising change has occurred in many areas. Here are the findings we present: 1. Playing catch-up: Bringing regulation up to speed 2. Voluntary is booming: Business is taking the lead 3. Exercising power: Investors’ sights set on sustainability 4. From confrontation to collaboration: A new relationship with NGOs 5. Open for business: The UN embraces corporate partnerships IMPACT 103 104 II change Level 2 - Finding 1 PLAYING CATCH-UP: BRINGING REGULATION UP TO SPEED Regulation is more geared towards driving sustainable corporate behaviour than ever before, but enforcement remains a challenge. In some areas regulation is lagging behind, and progressive companies are leading the push for better governance. At the turn of the millennium, many international conventions and treaties It is difficult for multinational companies to operate while regulations remain existed on issues relevant to the Global Compact principles. Some gaps existed inconsistent across markets. There is a risk of companies exploiting these differ- which have since largely been addressed, for instance corruption through the ences. Sharp practice by multinational companies continues to attract criticism, UN Convention Against Corruption (2003). However, for many areas of global and attention remains focused on corporate tax transparency and the offshoring importance, governance gaps remain, and uniform and effective implementa- of environmental and social responsibilities to less regulated markets. tion at the national level continues to be a challenge. Enforcement – a deal-breaker National regulators are stepping up Whilst more stringent laws and regulations have come into force since 2000, There is a clear trend towards more national regulation across most markets on there remains a challenge around inconsistent implementation of laws and all issue areas of the Global Compact. Yet where international rules have been regulations. Judicial corruption remains widespread in many countries and agreed, the pace of local implementation has been slow. standards of governance and the rule of law are likely to become major sustain- Where strong national environmental, equality and labour laws exist, they ability goals in their own right. continue to positively influence corporate behaviour. Regulation in the area of business and human rights remains in its infancy. But following the new UN Business raises the bar Guiding Principles on Business and Human Rights, many governments are Prior to 2000, few channels existed for constructive engagement between busi- in the process of developing national action plans which could result in more ness and government with regard to sustainability. Business struggled to take business regulation. part in environmental initiatives. Today, leading companies are often ahead of Globally, there remains a need for greater coordination and consistency in regulation and drive the debate to improve regulation and make it smarter. Yet regulatory development to create a more level playing field. With regard to progressive companies do not form the majority, and there are still considerable mandatory reporting, the new EU Directive on disclosure of non-financial and challenges with less progressive companies blocking positive change. diversity information is a positive development. This will require some 6,000 large companies to disclose information about their environmental, social and governance performance from the Financial Year 2017. IMPACT 105 “If there is enough clinical mass of business “Businesses can make decisions much more that say ‘We want it’, you de-risk a political prosess. quickly than the political process. Companies have It’s also our task as businesses because it’s very difficult the potential to make a very powerful positive impact nowadays to be a politician. In order to give the by joining together and renouncing corruption. politicans more courage, we as businesses need That would deal with the supply side of to help de-risk the political process.” corruption very substantially.” PAUL POLMAN JERMYN BROOKS CEO, UNILEVER CHAIR OF BUSINESS ADVISORY BOARD, TRANSPARENCY INTERNATIONAL the role of the un global compact BRINGING THE VOICE OF BUSINESS TO THE TABLE What has been the role of the Global Compact in catalysing change as regulatory Guidance on responsible policy engagement regimes respond to responsible business needs? The Global Compact has developed ground-breaking guidance in the area of responsible policy engagement with government. There has been a wide recog- By providing a platform for business to interact with governments and the UN, nition that business should align its public policy engagement with sustainabil- the Global Compact has enabled a clearer role and more structured way for ity principles. There have been notable examples of companies taking lobbying companies to engage constructively at an international governmental level. actions that are in direct conflict with their stated values, either individually or Examples of this include the Global Compact’s Caring for Climate initiative, through trade associations. which is the main interface between business and the political negotiations Progressive companies see the value in urging governments to enact policies around a new international agreement on climate change. The Global Com- that support sustainable business. Where businesses advocate for key goals, pact convenes the Caring for Climate Business Forums in association with the there is huge potential for transformative impact. On carbon pricing, a call by UN climate change conferences. Another example is how the Global Compact business for an effective, well-functioning carbon market and to put a true value is consulting with business for the development of the post-2015 Sustainable on the cost of carbon would provide powerful momentum. Development Goals. Through the Global Compact and partners, business is calling Inspiring legislation on governments to: The Global Compact enjoys the support of the UN General Assembly and has been recognised in a number of other inter-governmental contexts. The G826 • Set a global price on carbon. For example, six major oil and gas companies has regularly referenced the Global Compact in its declarations and commu- have now called for governments to introduce carbon pricing systems. niques over the last 15 years. This is now accompanied by similar recognition • Address corruption and foster good governance from the G20, as in the Action Plan for Development set out at the G20 Seoul Summit of 2010. On 6 December 2013, the UN General Assembly renewed the mandate of the Global Compact Office in its resolution, Towards global partnerships: A principle-based approach to enhanced cooperation between the United Nations RULE OF LAW and all relevant partners (A/RES/68/234). The Global Compact has also been explicitly referenced in national regula- Business for the Rule of Law (B4ROL) is an initiative that was an- tion on mandatory reporting requirements. This has been seen in Denmark and nounced by the UN Secretary-General in September 2013 to engage Norway, and some Global Compact Local Networks are actively contributing to companies on this important topic. By having a strong rule of law, the public debate around new policies and regulatory developments. governments give business and society the stability of knowing that all rights are respected and protected. Where the rule of law is weak, it is harder for responsible businesses to function. Through B4ROL, the Global Compact has developed a framework to help companies HIGHLIGHTED The Guide for Responsible Guide to Responsible Business WORKS Corporate Engagement in Engagement with Water Policy understand how they can support the building and strengthening of Climate Policy (2013) (2010) legal frameworks and accountable institutions. 106 II change Level 2 - Finding 2 SIGNING UP: VOLUNTARY ACTION IS BOOMING The last 15 years have seen a boom in voluntary corporate sustainability initiatives across markets and sectors. Today, most multinational companies worldwide take part in some kind of voluntary scheme. “We need partners to succeed. The key partners for success, of course, need to be the UN and the governments. We can arrange it, we can lead it, but we cannot do it by ourselves. This needs to be a joint effort between the public and private sector, working together.” RAN MAIDAN CEO, NETAFIM Voluntary standards and initiatives fill governance gaps and allow businesses ties have failed to agree on regulating some of the world’s most pressing issues to progress beyond legal minimum requirements. Initiatives involve voluntary like GHG emissions and natural resource management, voluntary approaches codes of conducts, standards of performance and disclosure, principles of are seen as having played an important role in supporting leading business to conduct and other types of practice requirements over a wide range of environ- improve performance. mental, social and governance issues. One promising development is the increasing extent to which companies set voluntary goals for carbon and water neutral operations, and work to remove or From generic to specific replace the use of limited natural resources in their products. Many are invest- Voluntary initiatives are moving from generic schemes, such as the Global ing heavily to develop and shift to more environmentally friendly technologies Reporting Initiative, ISO 26000 and the UN Global Compact itself, to more (global investments in green energy increased with almost 17 percent in 201427). issue-specific schemes such as the Sustainable Soy and Palm Oil initiatives and For business, this is no longer only a matter of responding to stakeholder pres- sector-specific schemes like the Extractive Industries Transparency Initiative sure, it is increasingly about cost saving, gaining a competitive advantage and (EITI), the Electronic Industry Citizenship Coalition (EICC) and the Sustain- pre-empting future legislation. able Shipping Initiative. The development of the UN Guiding Principles on Business and Human Calling for more regulation Rights (2011) is a milestone in its field. Today this is the most widely recognised An increasing number of forward-thinking companies are voicing their framework for businesses aiming to operate and invest in a way that respects readiness for smarter and more responsible regulation of natural resources. An human rights. example of this is the Call to Action on Sustainability in the Water-Energy-Food Our findings show that many leading companies are increasingly turning to Nexus issued by WBCSD in 2014. issue and sector-specific schemes for practical support and guidance in terms of Voluntary schemes are good supplements to regulation, and at the moment establishing good practice. they are playing a partial, arguably crucial, role in influencing and inspiring Evidently, wide variations between regions exist, as well as variations between corporate behaviour. the requirements that different schemes ask of their participants. Business takes the lead The past decades have seen continuing and often intense discussions around the merits of voluntary versus regulatory approaches, and whether voluntary initia- tives undermine attempts for stricter regulatory controls. However, as authori- IMPACT 107 the role of the un global compact CHANGING THE PACE OF CHANGE As voluntary initiatives have gone global and increasingly filled important gover- Deeper engagement on issues nance gaps, what has been the role of the Global Compact in catalysing change? Since 2007, the Global Compact has moved towards more voluntary issue-spe- cific engagement for companies who seek to take a leading role on critical The Global Compact has grown to become the world’s largest voluntary corpo- issues. Examples include the Caring for Climate platform on climate leadership, rate citizenship initiative, with increasingly deeper penetration in markets and the CEO Water Mandate on water management and the Women’s Empower- sectors everywhere. Its most significant contribution lies in the ten principles ment Principles advancing non-discrimination and gender equality. In many themselves. Covering a broad range of human and labour rights, environment cases, these initiatives have grown to become the largest initiatives of their kind and anti-corruption issues, the principles define the meaning of corporate globally. sustainability and clarify the range of actions needed for companies to call themselves sustainable. Moreover, by encouraging business to take action to Advancing the work of others positively impact broader societal and environmental goals, and by mobilising As a result of its collaborative nature, the Global Compact has in many instanc- leading businesses around policy and broader systems change, the Global Com- es acted as a platform for other voluntary initiatives. It has become a mega- pact is raising the bar for how the corporate sector can play an important role in phone for other organisations such as Transparency International in the area of catalysing positive change. anti-corruption, the ILO in the area of labour standards, and Business for Social Responsibility in the area of supply chains. While aiming to avoid parallel ef- Mandatory disclosure forts, the Global Compact is contributing to making the landscape of voluntary A unique aspect of the Global Compact is the mandatory requirement to report initiatives easier to navigate for business. This is particularly exemplified by the on performance every year. This accountability mechanism seeks not only to Memorandum of Understanding with the Global Reporting Initiative (GRI) and strengthen the legitimacy of the initiative itself but also to function as a catalyst the International Standards Organisation (ISO). for improving business performance. As such, the Global Compact has been widely accepted as a hybrid voluntary organisation with some mandatory requirements. 108 II change Level 2 - Finding 3 EXERCISING POWER: INVESTORS’ SIGHTS SET ON SUSTAINABILITY Investors are slowly realising that sustainability issues can impact returns. While the volume of assets under sustainable management is growing, implementation is slow and money is not shifting in the right direction fast enough. “The problem with focusing only on risk is that it can be seen by investors as window-dressing or box-ticking, rather than focusing on the future of the company. Focusing on the future means looking for an aspirational opportunity to align a corporation with its shareholders, based first on the outlook for profitability, and then ultimately global economic growth.” ERIKA KARP FOUNDER & CEO, CORNERSTONE CAPITAL GROUP Global capital markets have made significant progress on responsible invest- Driving better disclosure ment since 2000. The volume of assets under responsible management has in- Disclosure of companies’ material non-financial performance currently creased dramatically, and the sophistication of responsible investment practices represents a significant challenge for investors. With no standardised met- has developed markedly. Driven by an emerging appreciation of how sustain- rics adequately translating the language of sustainability into the language of ability and governance affects long-term profitability, there is greater awareness finance, the quality of the data investors use to make projections and forecasts, amongst investors of their responsibility to manage these risks for their clients. and compare company performance, is weak. Investors are increasingly pushing companies to be more transparent on ESG risks, and to a lesser extent oppor- Responsible investment: A whole new ballgame tunities, especially if these are material to asset value. They are also increasingly In the early 2000s, the recognition that sustainability issues were potentially demanding reporting based on recognised standards for assurance and trust, material to returns started to emerge. Around 2004, investors began adopting and some groups are actively engaging in initiatives to develop standardised the term ‘ESG integration’ to denote the systematic inclusion of environmen- metrics. tal, social and governance factors into traditional financial analysis. However, negative screening and ‘blacklisting’ of high risk sectors continues to be the A new era - from risk management to impact? dominant approach, and there have been claims the financial sector is lagging While some investors have started to incorporate ESG factors into traditional 5-6 years behind business in terms of understanding the materiality of sustain- financial analysis, many investors have also become interested in ‘impact’ in- ability. vesting - investing in companies or funds with the aim of generating social and Over the past 15 years, responsible investment has gradually moved from environmental benefit in addition to financial return. being solely linked to listed equities to being considered in a whole range of as- Impact investing has grown to a market of around €20bn. With a growth set classes, including fixed income, private equity, property and infrastructure. rate of 132% from 2011 to 2013, it was the fastest growing responsible investment However, the maturity of approaches varies significantly between asset classes. strategy in Europe28. The findings compiled for this report suggest that more In terms of policy, there has been an increase in measures requiring investors investors will shift from risk-based approaches to more proactive strategies in to exercise their rights and responsibilities as owners. One prominent exam- the coming years. ple is the UK Stewardship Code of 2010, which aims to enhance the quality of engagement between asset managers and companies to help improve long-term risk-adjusted returns. IMPACT 109 CASE EXAMPLE: THE GLOBAL COMPACT 100 INDEX A sustainable bottom line: The Global Compact 100 Index - Cumulative Total Return (in US dollars) since inception The Global Compact 100 is made up of 30% a representative group of Global Com- pact companies. The index does not look at performance solely in terms of basic financial health, but combines corporate performance on environmental, social and governance issues with a requirement of 23% consistent base-line profitability. Unveiled in 2013, it showed a total investment return of 21.8% by the end of its first year. 15% 8% 0% 9/2/13 9/26/13 10/22/13 11/15/13 12/11/13 1/6/14 1/30/14 2/25/14 3/21/14 4/16/14 5/12/14 6/5/14 7/1/14 7/25/14 8/20/14 9/15/14 10/9/14 11/4/14 11/28/14 12/24/14 1/19/15 2/12/15 3/10/15 4/3/15 4/29/15 the role of the un global compact BRINGING IN MAINSTREAM INVESTORS The Global Compact started involving the investor community in the dialogue around corporate sustainability performance very early, and was among the first to recognise the importance of capital markets in fostering sustainable business. WEDNESDAY 24 MARCH 2004 As such, it can be seen as instrumental in helping change mainstream investor attitudes on ESG issues. In 2004, the Global Compact brought investors and businesses together in the initiative ‘Who Cares Wins’ which sought to embed environmental, social Stock focused in how investment companies could better integrate and governance issues in capital markets. At the same time, the UNEP Finance Initiative launched ‘The Materiality of Social, Environmental, and Corpo- exchanges CSR into their risk analyses. Georg Kell, head of the UN rate Governance Issues to Equity Pricing‘, outlining how ESG issues could be integrated into mainstream investment analysis. Together, these two initiatives join UN Global Compacr, a voluntary alliance of companies and social helped shift the approach away from negative-screening and blacklisting to- wards integration. They also helped catalyse thinking in the mainstream invest- forum actors promoting nine basic standards, said: “The potential is ment world, that better management of ESG risks can enhance competitiveness By Mark Turner that we send a signal to publicly at the United Nations and generate longer-term value. traded companies that having These developments laid the grounds for the creation of the Principles for The United Nations has a pro-active policy on social Responsible Investment (PRI), which was launched at the New York Stock inaugurated the first ever meeting and environmental issues is Exchange in April 2006. Through the PRI, the Global Compact has exercised of corporate social responsibility increasingly expected by those influence on companies far beyond their signatory base (see Spotlight on PRI (CSR) experts and national stock who facilitate trading and those for more details). exchanges. The move is part of a who analyse market actors.” push to convince companies that Mr. Kell added that taking Sustainable Stock Exchanges: Changing the heartbeat of finance social and environmental strategies a pro-active policy equipped The Global Compact is also one of the four UN organisers of the Sustainable are central to managing risk. companies better to deal Stock Exchanges initiative, a peer-to-peer learning platform for exploring The first meeting, which took with the unexpected risks of how exchanges can encourage sustainable investment and enhance corporate place last week, was not publicised environmental litigation and transparency. Stock exchanges can join the initiative by making a voluntary because of sensitivites at some social upheaval. public commitment to promote ESG disclosure and performance among listed exchanges about discussing an The UN Global Compact companies. area not traditionally viewed as insists it is not aiming to establish Today, 31 per cent of all publicly listed companies are traded on a Partner within their remit. Offical said the prespective rules. The meeting Exchange to the Sustainable Stock Exchanges initiative. This covers 18,000 out meeting was exploratory. did not aim to establish new of the world’s 45,000 listed companies. The discussion followed a listing criteria. The alliance’s Forbes has named the Sustainable Stock Exchanges initiative one of the meeting in Zurich between the approach contrasts with past “World’s Best Sustainability Ideas”. UN and financial analysts from efforts to promote detailed norms 40 leading companies including for companies, focusing instead Goldman Sachs, UBS ans BNP of in broad objective driven Paribas. The Zurich meeting companies. 110 II change SP OT L IG H T ON : T H E PR I NC I PL E S F OR R E SP ON SI B L E I N V E STM E N T TAKING MATERIALITY TO A NEW LEVEL The Principles for Responsible Investment (PRI), a collaborative initiative of the UNEP Finance Initiative and the Global Compact, has been a key driver in getting sustainability on the agenda of the global finance community. IMPACT 111 112 Spotlight II change From its launch by then UN Secretary-General Kofi Annan IMPROVING REGULATION in 2006 at the New York Stock Exchange, the PRI has grown In recent times, the external operating environment has be- to become the world’s largest network of responsible investors come more conducive to responsible investment. Regulations with 1,325 signatories representing US$45 trillion of assets have increasingly guided asset owners to consider ESG issues under management. in their investment decisions. There are many actors in this The PRI supports asset owners and managers in incorpo- space working in parallel with the PRI. However, the PRI has rating ESG issues into their investment analysis and deci- played an indirect role in the development of some regulations sion-making practices based on recognition that ESG issues related to responsible investment such as the Code for Re- can be material to investment returns. The ultimate goal is to sponsible Investment in South Africa (CRISA). Moreover, the create a sustainable global financial system and support the initiation of the Sustainable Stock Exchanges (SSE) initiative Global Compact’s vision of an inclusive and sustainable global together with the Global Compact, UNCTAD and UNEP FI is economy. a considerable contribution to the environment in which the finance industry and companies operate. HOW D OES IT WORK? The PRI constitutes, in essence, a set of six aspirational princi- IS CAPITAL SHIFTING IN THE ples that signatories incorporate in their investment practices. RIGHT DIRECTION? It is a collaborative platform through which asset owners, asset Although RI is now an accepted part of the investment land- managers and financial service providers work together to im- scape, the question of short-term versus long-term investment plement the principles, foster good governance, integrity and is still a considerable issue. The majority of investors are still accountability, and remove structural and regulatory obstacles looking at companies’ quarterly performance, and in response to a sustainable financial system. companies are still operating with this timescale in mind. The PRI itself has played a significant role in directing inves- SUSTAINABLE INVESTING GOING MAINSTREAM tor and company attention towards longer-term value creation. Responsible investment29 (RI) was in many respects in its Globally there has been a shift in the conversation on responsi- infancy 15 years ago. As shown on the next page, the significant ble investment from the fringe to the relative mainstream. The progress made since 2000 can broadly be seen in two main PRI has advanced thinking and dialogue in this area, in par- areas: ticular on fiduciary duty and the consideration of ESG issues in investment analysis and decision-making. Overall, the PRI • The number of investors engaged in responsible investment can be seen to have facilitated and globalised the conversation and volume of assets under management have both grown on responsible investment and put it on the agenda of many considerably. financial institutions. • The practice of responsible investing has evolved consider- Despite this progress, it is worth asking if the allocation of ably in both approach and sophistication. capital is shifting in the right direction, onto a more sustain- able footing. Here, it is clear that the transformation of the Another sign that responsible investment is becoming main- investment industry has a long way to go. The majority of the stream is the involvement of large institutional investors. Many investment universe is not switched on to responsible invest- of these are now signatories to the PRI, and view responsible ment yet and the short-term perspective remains an ingrained investment as a notable part of their business. On the other way of thinking. The PRI and the Global Compact, along with hand, the small percentage of funds managed according to the SSE initiative, are likely to have a valuable role to play in responsible investment criteria shows there is a long way to go this process through their ability to provide a platform for en- before responsible investment is comparable with traditional gagement and capacity-building among companies, investors, investment approaches. policymakers and other key stakeholders. The direct contribution of the PRI Initiative to change in responsible investment practices depends on the particular market and size of the asset owner or investment manager. Re- search suggests that the PRI has been more influential in shap- ing the practices of signatories at the start of their responsible investment journey than in shaping those of larger investors with sophisticated RI programs already in place before joining. Beyond its influence on individual signatories, the PRI also makes important contributions through clarifying what responsible investment means in different asset classes; clar- ifying what active ownership practices responsible investors can exercise; supporting collaborative initiatives through the Clearinghouse30; and promoting transparency on responsible investment practices through its Reporting Framework. PRI MISSION “We believe that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term, responsible investment and benefit the environment and society as a whole.” IMPACT 113 33 Growth of the PRI Initiative Asset owners’ Assets Under Management Assets under management Number of (US$ trillion) signatories Total Assets Under Management Number of Signatories Number of Asset Owners 50 1400 45 1200 40 35 1000 30 800 25 20 600 15 400 10 200 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 CASE EXAMPLE USING INVESTOR POWER TO DRIVE THE GLOBAL – Numerous collaborative engagements on topics COMPACT relating to the Global Compact principles, such as human rights in the extractive sector, labour stan- One of the core ideas behind the PRI is to mobilise dards in the agricultural supply chain, water risks and investors to advance UN values, such as those rep- anti-corruption resented by the Global Compact. It aims to do this by encouraging the incorporation of ESG issues into – The annual ’Communication on Progress: Leaders investment analysis and thus making corporate sustain- and Laggards’ campaign. This ran for over five years ability performance a part of decisions whether or not and asked non-reporting Global Compact compa- to invest. The PRI also aims to do this through share- nies to submit their Communication on Progress to holder engagement as a means to improve corporate regain active status or welcomed advanced-level performance on ESG issues. reporting Examples of this approach that can be found through – Direct collaboration between PRI signatories and the PRI Clearinghouse, with activities including the Global Compact participants on topics such as re- coordination of: sponsible business in conflict-affected and high-risk areas. This project created a common language and understanding of a specific issue between investors and companies 114 Spotlight II change IMPACT 115 “The systemic problems that the PRI was established to address persist: financial markets function in ways that do not always service investors or society over the longer term; interests and incentives are misaligned; capital is allocated to businesses that may prove unsustainable. There has been a general loss of trust in financial institutions.” Martin Skancke Chair Principles for Responsible Investment The six Principles for Responsible Investment PRINCIPLE 1 PRINCIPLE 2 PRINCIPLE 3 We will incorporate ESG issues We will be active owners and We will seek appropriate into investment analysis and incorporate ESG issues into our disclosure on ESG issues by the decision-making processes. ownership policies and practices. entities in which we invest. PRINCIPLE 4 PRINCIPLE 5 PRINCIPLE 6 We will promote acceptance We will work together We will each report on our and implementation of the Principles to enhance our effectiveness in activities and progress towards within the investment industry. implementing the Principles. implementing the Principles. 116 II change Level 2 - Finding 4 FROM CONFRONTATION TO COLLABORATION: A NEW RELATIONSHIP WITH NGOS From a state of mutual distrust and hostility, the relationship between civil society and business has radically changed to one of collaboration towards common goals. UN PHOTO / MARK GARTEN Secretary-General Ban Ki-moon (right) at the People’s Climate March held in New York City In 2000, there was a high degree of suspicion between civil society and com- Are NGOs losing their ‘teeth’? panies, and NGO activism mostly focused on exposing corporate misconduct Many organisations have shifted strategy away from the traditional ‘watchdog’ and abuse. A small, vocal and effective cohort of anti-globalisation, anti-trade function towards collaboration, and are increasingly relying on private sources and anti-big business organisations drove these efforts, pushing towards stricter of funding to exist. This can effect their traditional role of holding companies regulation as the only solution. Although relations have changed, civil society to account. In some cases a more nuanced approach is emerging, where an continues to play a critical role in holding companies to account. organisation may work with a company on one issue and campaign against it on another. Another trend is that many NGOs are themselves becoming hybrid Breaking barriers: Alliances arise in nature, as some become part-consultancies providing advisory services to Driven by a recognition that many of the challenges currently facing the world companies on social and environmental challenges. are too complex for any one actor or sector to handle alone, closer alliances between civil society and business began to emerge. From seeing companies Bottom up movements are rising primarily as a source of funding, business is increasingly viewed as a source of New technology has in the past decade changed the nature of activism. Social knowledge, technology and networks – vital to bring about positive changes in media campaigns and citizens’ movements such as Occupy Wall Street provide a society. greater voice for grassroots movements in civil society. In some cases these have Today, a broad range of initiatives unite civil society and business, from poli- been vastly more successful in terms of mobilising engagement (most notably cy dialogues around developing standards and best practices, to more sophisti- the 2,646 simultaneous ‘People’s Climate Marches’ around the time of the UN cated partnerships based on sharing of knowledge and expertise on more equal Summit on Climate Change in New York in 2014). terms. However, there has been a surge in campaigning against business following the financial crisis, focusing on tax transparency and wider aspects of account- ability. Some NGOs have retained a strong degree of activism in their strategies, such as Oxfam’s ‘Behind the Brands’ initiative and Greenpeace. IMPACT 117 34 Community collaboration: The growing number of NGOs in the Global Compact 2002 2015 3000 NGO Global 0 487 NGO Local 5 1602 2500 2000 1500 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 “When people have the chance to talk to each other, sitting side by side solving common problems, very soon they realise that they all care about some of the major issues in our world.” HUGUETTE LABELLE FORMER CHAIRMAN, TRANSPARENCY INTERNATIONAL the role of the un global compact BUILDING THE INFRASTRUCTURE As closer alliances have emerged between business and civil society, what has been resources and participate in events, working groups and steering committees the Global Compact’s role in catalysing this change? globally and locally. Nearly all governing bodies of the Global Compact and its Local Networks comprise members of civil society. A neutral platform for dialogue and collaboration The legitimacy and neutral convening power of the UN has enabled the Global Growth in numbers but lack of engagement Compact, perhaps more than any other initiative, to bring different parties, The number of global and local NGOs participating in the Global Compact has from civil society, labour, governments, the UN and business, to the table all grown significantly in the past 15 years – from a baseline of zero to more than over the world. This space has allowed and enabled dialogue between institu- 2,100 in total today (see figure 34). Civil society organisations play an important tions that were previously not ready, willing or able to cooperate. As such, the role in sharing knowledge and perspective that complements and supports busi- Global Compact has helped build trust in relationships between sectors both at ness, contributing to the development of tools and practices, as well as vetting the global and the local level. corporate reporting. The multi-stakeholder model which sits at the heart of the Global Compact However, the fact that only a small fraction of the participating organi- has played a key role in advancing dialogue and understanding. It has provided sations contribute actively remains a challenge. To counter this, the Global a place where business and non-business organisations can interact, bridging Compact introduced a Communication on Engagement (CoE) requirement gaps while deepening engagement and collaboration. for non-business participants in 2013. Failure to communicate will, similar to At the local level, most Global Compact Local Networks are multi-stake- the COP requirement, result in delisting from the Global Compact database. holder in nature, and play a similarly important role as a platform for knowl- The expectation is that this may significantly reduce the number of civil society edge-sharing and learning at the national level. organisations participating in the next year. Civil society organisations are actively involved in developing tools and 118 II change IMPACT 119 SP OT L IG H T ON : T H E PR I NC I PL E S F OR R E SP ON SI B L E M A NAG E M E N T E DU C AT ION EDUCATING THE BUSINESS LEADERS OF TOMORROW Business schools play a key role in shaping the skills of future business leaders and can be pow- erful drivers of corporate sustainability. The Principles for Responsible Management Education initiative provides a platform to raise the profile of sustainability in business schools around the world and equip today’s business students with the understanding and ability to deliver change tomorrow. 120 Spotlight II change IMPACT 121 In the mid-2000s the Global Compact and its academic However, many business schools face the challenge of estab- community recognised that the business leaders of tomorrow lishing responsible management teaching across their whole would need to play a critical role in tackling the sustainability organisation. There tends to be a committed core and ensuring challenges of the next century. that all faculty members are aware of and respond to PRME The response was the Principles for Responsible Manage- remains an important goal. ment Education (PRME), launched in 2007 by UN Secretary- General Ban Ki-moon with a mission “to inspire and champ­ A PUSH FROM ACCREDITATION B ODIES ion responsible management education, research and thought Business schools have always focused on accreditation and leadership globally.” Working through six voluntary principles, rankings by external bodies because of their direct link to PRME engages business schools to ensure they provide future attracting students. While rankings have not changed substan- business leaders with the skills needed to balance economic tially over the past 15 years, accreditation bodies are becoming and sustainability goals. increasingly more supportive of responsible business manage- ment teaching. HOW D OES IT WORK? In recent years, all of the three largest accreditation bodies PRME encourages business schools to become advocates for have incorporated criteria on sustainability, ethics or the role an inclusive and sustainable global economy by incorporating of business in society in their standards. One standard makes values of business responsibility and sustainability into their an explicit reference to PRME. Although these new criteria activities and teaching. In summary, PRME: are broad-ranging and provide considerable flexibility to meet their requirements, they also send a positive signal to business • Provides a platform for dialogue and learning on responsible schools on the growing importance of responsible manage- management education ment education. • Develops and publishes tools and resources to help increase responsible management education A VAST POTENTIAL • Identifies and develops thought and action leadership on Our research shows that since the turn of the century, un- responsible management education derstanding of the importance of responsible management education has grown. Many business schools now refer to the INCORPORATING SUSTAINABILIT Y wider responsibility business managers have to stakeholders in IN BUSINESS SCHO OLS their mission statements. At the same time, they are starting to In the year 2000, only a few forward-thinking business schools accept and explore the role of ‘business in society’. But it can be were covering topics relating to responsible business, business argued that the general approach is a few years behind leading ethics or the role of business in society. Since the mid-2000s, corporations with regard to business sustainability, and while however, there has been a fundamental shift in the apprecia- many schools present a commitment to responsible manage- tion, coverage and delivery of responsible management edu- ment education, many are yet to meet their commitments. cation. While there is limited research in this area, a review of Although the direct impact of PRME is hard to quantify, it is business school practices today shows a groundswell of change. clear the initiative has catalysed a wider debate and acceptance With almost 600 signatories, PRME has now been accepted of responsible management education. As with other Global among business schools worldwide, signalling an emerging Compact initiatives, it provides a platform for discussion and commitment to change. A significant area of progress has learning at a global level. been incorporating responsible management education into Many see the opportunity of PRME to be a powerful driver business school curricula and courses, and ensuring closer of corporate sustainability considering the ‘long-term effect’ of integration among different disciplines. Although corporate education. Students educated at PRME schools today will not sustainability and business ethics are still primarily electives be business leaders for another few years. However, over time rather than core options or systematically integrated into busi- they have the potential to be generators of sustainable value for ness courses, progress in this area is clear. business and society. KEY STATISTICS THE STUDENT REVIEW – Over 600 signatories worldwide (June 2015) In a survey of 1,250 MBA students at 48 PRME signatory – In 81 countries schools, students were found to demonstrate positive – 40% in Europe attitudes towards CSR and responsible management – The USA leads the way (91 signatories, 16% of total) education. – Almost half of UK business schools are signatories – One third of the Financial Times’ top 100 business schools are signatories CASE EXAMPLE COLLABORATION IN ACTION Leaders (SFBL) project will work to bridge this gap. - SHAPING FUTURE BUSINESS LEADERS It will do so by continuing to promote sustainability topics in management education, and by getting There is often a gap between the sustainability skills companies to recognise and recruit graduates with that leading companies say they need and the reality of sustainability skills. SFBL is a collaboration between graduate recruitment campaigns in business schools, PRME Champions, a group of the most engaged PRME where demand for students with sustainability skills is signatories, and LEAD, the Global Compact’s program low. Set to launch in 2015, the Shaping Future Business for leading companies. 122 Spotlight II change THE PRINCIPLES FOR RESPONSIBLE MANAGEMENT EDUCATION PRINCIPLE 1 – PURPOSE PRINCIPLE 2 – VALUES PRINCIPLE 3 – METHOD We will develop the capabilities We will incorporate into our We will create educational of students to be future generators academic activities and curricula the frameworks, materials, processes of sustainable value for business and values of global social responsibility and environments that enable society at large and to work for as portrayed in international effective learning experiences an inclusive and sustainable initiatives such as the United for responsible leadership. global economy. Nations Global Compact. IMPACT 123 PRINCIPLE 4 – RESEARCH PRINCIPLE 5 – PARTNERSHIP PRINCIPLE 6 – DIALO GUE We will engage in conceptual We will interact with managers We will facilitate and support and empirical research that advances of business corporations to extend dialog and debate among educators, our understanding about the role, our knowledge of their challenges students, business, government, dynamics, and impact of corporations in meeting social and environmental consumers, media, civil society in the creation of sustainable social, responsibilities and to explore organisations and other interested environmental and economic value. jointly effective approaches to groups and stakeholders on critical meeting these challenges. issues related to global social responsibility and sustainability. 124 II change Level 2 - Finding 5 OPEN FOR BUSINESS: THE UN EMBRACES CORPORATE PARTNERSHIPS In the early 2000s, relations between the United Nations and business were limited and largely characterised by mistrust. This has changed fundamentally, and most UN agencies today engage with business towards the objectives of the UN. “From a broad global governance perspective, the most important development is that there isn’t a single UN meeting to my knowledge that doesn’t have business representation. The Global Compact has brought business to the table and included its voice in UN deliberations.” JANE NELSON, DIRECTOR OF THE CSR INITIATIVE, HARVARD UNIVERSITY The relationship between the United Nations and the private sector has gone While the level and effectiveness of partnerships still varies greatly across the through a paradigm shift since the turn of millennium. When the Global Com- UN, many agencies have become more sophisticated in their approach. Fund- pact was launched, few agencies had any interaction with private companies raising remains an important objective, and a growing number of partnerships and the UN and business viewed each other with scepticism. The UN largely are also mobilising core business competencies and fostering private sector considered private sector profit-seeking at the expense of societal goals, while development. business viewed the UN as bureaucratic and ineffective. A recent survey on how the UN partners with business shows that 47 per cent of UN agencies now hire staff with private sector experience, signalling The system opens up that the gap between the UN and corporate culture is closing31. The first Guidelines on UN-Business Cooperation established in 2000 were a milestone in the efforts to modernise the organisation, and encouraged all UN Alignment within entities to develop strategies to partner with the corporate sector. Government Over time, a culture of sharing between UN agencies has emerged. Regular perceptions have also radically changed. Since 2001, the biannual General As- meetings enable best practices on due diligence, internal policies, experiences sembly resolutions ‘Towards Global Partnerships’ have recognised the impor- and learning. All significant UN summits now include business representation. tance of business involvement as a prerequisite to achieving the goals of the UN; The Global Compact helps companies find strategic partners, working with from economic development, poverty reduction, and sustainable job creation to over 20 UN entities. This is now a key entry point for matching companies with peace and stability. United Nations entities. Whereas some organisations have sophisticated programs in place, more re- Towards strategic and transformative partnerships cently-established agencies can lack the same capabilities to deal with business. Over the last 15 years, many UN agencies have realised that there is more to The ways in which different UN agencies interact with the corporate sector still working with business than ad hoc engagement on donations or sponsorship vary significantly. deals, and more sophisticated approaches to partnering have emerged. With higher levels of awareness, competence and more dedicated resources, many UN agencies have established processes for seeking and screening potential partners. UN PHOTO / MARK GARTEN IMPACT 125 the role of the un global compact A NEW STAGE OF COLLAB ORATION As the UN is opening up for collaboration with business, what has been the role of Building capacity and competence the Global Compact in catalysing this change? Together with UN partners, the Global Compact has played an important role in cultivating the architecture required for the UN to more effectively partner Former UN Secretary-General Kofi Annan’s speech at the World Economic with business, whilst at the same time, safeguarding the UN brand. Forum in 1999 paved the way for institutional change in the UN, and when the Almost 400 business participants have reported that they have partnerships Global Compact was launched a year later, the door for UN-private sector en- with the UN. Through the annual UN System Private Sector Focal Point meet- gagement was opened. Since then, the Global Compact has been instrumental ings, a learning platform for interaction between UN staff and business, and the in nurturing understanding, trust and collaboration between the Organisation monthly UN-business focal point newsletter, the Global Compact has largely and business. contributed to bringing about institutional change. Working particularly through its Local Networks, the Global Compact’s wide Accepting the value of voluntary range of practical resources and events have provided the basis for improving Today, the UN has largely accepted that business engagement can complement partnership effectiveness and expanded collaboration across sectors and geogra- rather than pre-empt regulation, and that business competencies and resources phies. They have also responded to government requests for more training and can be harnessed to meet the objectives of the Organisation. Through conven- institutional capacity-building to drive partnership effectiveness. ing numerous platforms for engagement, the Global Compact has enabled this shift in perception, and it is also increasingly working as an entry point for UN Sharpening due diligence agencies and business seeking collaboration. A significant change has been the system-wide creation of internal due diligence processes based upon the ten principles and other tools developed by the Global Bringing business to the table Compact. However, many UN entities are still partnering with companies with- Over the years, the Global Compact has strengthened the voice of business at out conducting a proper ESG assessment, and there seems to be a significant international negotiations previously only attended by governments. One of the opportunity for the UN to enforce stricter measures to ensure that prospective most significant institutional innovations of the Secretary-General was to bring partners are aligned with UN values. This includes introducing participation in CEOs to the UN for the “UN Private Sector Forum”. Organised by the Global the Global Compact as a requirement for partnerships. Compact in collaboration with other UN partners, it was one of the first oppor- tunities CEOs had to engage directly with governments on priority issues. 126 II change SP OT L IG H T ON : BU SI N E S S F OR PE AC E BUSINESS AS A STABILISING FORCE We live in turbulent times. Although political unrest has been an intrinsic part of global development since the dawn of time, recent years have seen global security issues rise to the top of the political agenda. Conflict and instability hamper economic and social development and discourage investment. Business presence in fragile societies is not only key to economic growth and development, it can also play an important stabilising role – before, during and after conflict. It is in turbulent times that business leadership is needed most. IMPACT 127 128 II change Companies make a critical contribution to economic develop- Over the years, the Global Compact has held a series of policy ment, peace and stability by providing employment oppor- dialogues and initiatives on these issues, and some of the tunities, expanding markets and providing revenue to local highlights include: economies. They can set an example of sustainable business practice. And they can provide direct financial help for various Responsible business in Sudan programs through strategic social investments. Following two years of raising awareness locally in Sudan, a While the primary responsibility for peace lies with govern- Global Compact Local Network was launched in 2008. The ments, business has an important role to play in conflict-af- launch brought together more than 150 senior representatives fected areas. The decisions a company makes - including from business, the United Nations, government and civil investment and employment, relations with local communities, society organisations. Among the participants were companies protection for local environments, or security arrangements – that had been under massive public scrutiny for their local can either help a country to overcome conflict, or exacerbate activities. the tensions that fuelled violence in the first place. To explore what “responsible” business in Sudan meant, Many post-conflict areas have great potential for growth as and how companies could support peace, the Global Compact they re-establish the rule of law and take other steps to boost and the PRI set up a dialogue between stakeholder groups. business confidence, and are therefore promising investment Investors were invited to engage with companies operating in destinations. It is important that investors do not simply avoid Sudan. investing in challenging regions, but seek to invest responsibly An interesting outcome was that the investors’ perspectives in ways that promote stability, peace, protection of human shifted from simply considering divestments, to thinking about rights and long-term security in line with universal principles. how they could use their leverage to promote responsible Operating in conflict-affected areas is clearly challenging business. Getting directly involved with companies operating and the stakes are high. Done the wrong way, business can in conflict-affected and high-risk areas gives investors access to cause conflict and instability even where they set out with the information on operations and raises their awareness of how best of intentions. But when companies take steps to under- complex the local issues really are. In turn, this could contrib- stand the complex issues associated with such contexts, they ute to developing mitigating policies and risk strategies. can minimise the potential for negative impact, ensure long- term sustainability of their business and play an important role Guidance on Responsible Business in supporting development and peace. The work in Sudan grew into a larger project, and since 2009, the Global Compact together with the PRI has convened regu- EXPLORING THE ROLE OF BUSINESS lar conversations between business, civil society and academia Perhaps the most promising development in the last 15 years to develop the “Guidance on Responsible Business in Con- lies with the ever stronger engagement of local actors on the flict-Affected and High-Risk Areas” (2010). ground, and their strengthened connection and collaboration. Notably, this was one of the first times companies from all Global Compact Local Networks are increasingly becoming over the world, including China and India, worked together powerful hubs where companies and others can share expe- with other stakeholders to find a common reference for “re- riences and focus on the critical factors for each particular sponsible” business practices in high-risk areas. country. “The emphasis of conflict zones has been one of the most important areas of focus for the Global Compact. I recall the learning forum that the Global Compact put together beginning in 2002 or 2003 was very important in getting corporations to understand the particular challenges of operating in conflict zones. The Business for Peace Initiative is a very commendable outgrowth of that focused on conflict zones.” BENNETT FREEMAN FORMER SVP FOR SUSTAINABILITY RESEARCH AND POLICY, CALVERT INVESTMENTS CONFLICT-AFFECTED AND HIGH-RISK AREAS Conflict-affected and high-risk areas are often plagued by: human rights violations; presence of an illegitimate or unrepresentative government; lack of equal eco- nomic and social opportunity; systematic discrimina- tion; lack of political participation; and poor manage- ment of revenue, including from natural resources. 129 IMPACT UN PHOTO / ALBERT GONZÁLEZ FARRAN 130 II change FROM THEORY TO PRACTICE Perhaps the most promising development is the fact that Through a two-year pilot project, a group of companies and businesses are increasingly asking for more concrete tools from investors committed to test the practical relevance of the Guid- B4P and efforts are underway to develop improved metrics so ance in several of the high-risk countries where they operated. companies can better measure their impact on peace. This in- The publication “Responsible Business Advancing Peace” crease in demand from both multinationals and local business describes the outcomes of the project, and lays out a number of is a testament to the impact of B4P, and shows how corporate concrete examples of how companies, Global Compact Local attitudes towards local social issues are indeed changing. Networks and investors have worked together to advance their positive impact. MAKING A DIFFERENCE LO CALLY Investors are increasingly realising that there are other options THE BUSINESS FOR PEACE PLATFORM than simply divesting from companies in difficult operating Business for Peace (B4P) was launched in 2013, elevating the environments. Today, more investors use their leverage to pos- work of the Global Compact in this area and building on over itively contribute to company conduct and reward companies 15 years of experience and consultations with Local Networks, that adopt best practices in the protection of human rights, companies, investors, UN bodies and civil society organi- social development and governance. sations. It is a forum where companies can learn, identify Stronger engagement of local actors on the ground is actions, discuss and share best practices with other companies evident, and Global Compact Local Networks are becoming in similar situations. Using the tools provided by B4P, corpo- important centres for companies and other stakeholders to rations can better understand how they can take action to sup- interact and share experiences within a specific country’s con- port peace in the areas of the world where they have existing text. Some Local Networks have convened multi-stakeholder operations, and before investing in high-risk areas. dialogues to come up with better and more concrete solutions 130 participants ranging from large multinationals to small to local challenges that involve business as a partner. companies from 38 countries and all regions of the world have B4P has spearheaded countless local and global initiatives, joined the platform so far. and the issue of business’ role in peace is identified as one of Sources of instability vary significantly according to the the top five areas where corporate sustainability can really local context and need to be handled in different ways. Local make a difference, according to Forbes Magazine. By learning Networks in B4P are able to tailor to diverse needs, including from each other, companies and investors alike are becoming for example, training programs to increase human capital, more aware of their role in providing local communities with a especially for ex-combatants and youth, providing basic needs safer, more stable future. like water, shelter and food, encouraging entrepreneurship and job creation, or supporting intercultural and inter-religious understanding – all of which can help to support peace. The publication named ‘Guidance on Responsible Business in Conflict affected and High-Risk areas: A resource for companies and investors’ was a very relevant publication for Colombia, so we adopted it and shared it with the companies we have been working with on these issues. That is a powerful example of how these resources really matter and how the Global Compact helps others to act.” MÓNICA DE GREIFF PRESIDENT, BOGOTA CHAMBER OF COMMERCE BUSINESS FOR PEACE IN PRACTICE The Colombian Local Network works with government agencies like the Colombian Agency for Reintegration and others to increase business leaders’ sensitivity to and engagement with ex-FARC combatants in Colom- bia’s insurgency. Ex-combatants are encouraged to find productive civilian roles through workshops and visits to business centres. When these efforts result in job placements, it provides them with a solid foundation to lead normal lives. The initiative is coordinated with the overall national development strategy of Colombia. IMPACT 131 35 Companies responding that they operate in conflict zones, by sector. Basic Materials 24% 15% 16% 23% Consumer Goods 22% 15% 22% 17% Consumer Services 13% 22% 7% 16% Financials 14% 14% 15% 21% Health Care 28% 21% 13% 21% Industrials 21% 18% 23% 23% Oil & Gas 44% 46% 46% 33% Other 17% 15% 19% 19% Technology 10% 16% 17% 17% Telecommunications 31% 19% 42% 23% Utilities 21% 22% 19% 25% Results from the Global Compact 2011 2012 2013 2015 Implementation survey 2011-2015 36 Companies responding that they operate in conflict zones, by region. Africa 29% 46% 32% 22% Asia 22% 19% 23% 26% Europe 17% 16% 17% 18% Latin America and the Caribbean 19% 14% 17% 18% MENA 25% 31% 47% 38% North America 30% 18% 22% 33% Oceania 18% 18% 33% 13% Results from the Global Compact 2011 2012 2013 2015 Implementation survey 2011-2015 Key Facts 130+ 18 business participants from 38 countries Local Networks have signed on: Canada, Colombia, Egypt, Germany, India, Indonesia, Iraq, Israel, Mexico, Nigeria, Pakistan, Republic of Korea, Sri Lanka, Sudan, Turkey, Uganda, United Kingdom and Ukraine. 132 II change LEVEL 3 D OM I NA N T WOR L DV I E WS Who’s getting it? At a basic level, true commitment to sustainability is the product not of cumulative practices and regulations, but rather of a fundamental change in perception. This section examines the change in dominant worldviews which guide and influence our attitudes, thinking, values and behaviour. It focuses specifically on perceptions around the role of business and the economy, and how this has evolved over the past 15 years. In the following section, we present our four key findings related to how worldviews and mindsets have changed since 2000. As you can see from the following pages, promising change has occurred in many areas. Here are the findings we present: 1. Wrong direction: A deep sense of urgency is emerging 2. More than just buzz: Mainstreaming sustainability in the business sphere 3. A balancing act: Redefining the fundamental purpose of business 4. Key to the future: Sustainability is critical to business success IMPACT 133 134 II change Level 3 - Finding 1 WRONG DIRECTION: A DEEP SENSE OF URGENCY IS EMERGING Just 15 years ago, most of us did not understand the sustainability cost of economic progress. Leading companies now recognise they are a part of the problem, and must do more to take the lead in securing a sustainable future before it is too late. Key facts and figures32 97% 1.6 BILLION “If we are truly to experience a Of scientists agree that People at risk from human activity is the main natural disasters transition to a more sustainable and cause of climate change. by 2050. inclusive economy, we need to create a shift in mindset. We want corporate leaders 200 MILLION 6.6 TRILLION to carry out a sustianable change Climate refugees The estimated annual hidden because they want to – and not by 2050. costs, in usd, of global economic because they are forced to.” activity, through pollution damage, climate change and ROBERT COLLYMORE other externalities CEO, SAFARICOM (11% of global GDP) ‘Eco justice’, ‘climate refugees’, ‘resource wars’, the ‘food-water-energy nexus’ thought to be distant problems long into the future, we are increasingly realising – these terms have emerged in recent years, signalling a much greater under- that climate change and resource scarcity are already happening, and will hit us standing today about how economic, social, environmental and governance hard within just a few decades. issues are closely intertwined. Scientists as activist Connecting the dots The scientific community has played a central role in building this sense of There has been a significant development in our understanding over the past urgency through more active communication and targeted outreach. One 15 years of how issues impact each other. From a high degree of silo-thinking, example is how the Planetary Boundaries Science Collaboratory has targeted resulting in often very separate and disconnected approaches to deal with key business networks with more business-friendly messages relating to how challenges, we are increasingly connecting the dots between the economy and the planetary changes witnessed today affect long-term development and society and the environment. We now understand that the consequences of prosperity. social and environmental pressures will affect vulnerable populations the most. As such, the ‘responsibility’ of the scientific community has changed. From a neutral messenger of facts and knowledge for others to act upon, scientists Sceptics are converting today play a much more active role in informing decision-makers in all sectors Today, the linkages between human production and consumption patterns, cli- about adequate and necessary solutions. matic changes and environmental deterioration, and social and economic costs are undeniable. Ninety-seven per cent of scientists agree that human activity is Action at a slow pace the main cause of climate change. In the last couple of years, there also appears Despite the unquestionable science, and a growing push from people around to have been a palpable shift among sceptics towards accepting climate change the world, leaders have yet to agree on mechanisms to effectively deal with is real and humans have an impact. the challenges we face. The new Sustainable Development Goals (SDGs) to be adopted in September and the 21st round of climate negotiations in Paris Predicting the future in December offer some hope. Translating knowledge into long-term targets Our methods to predict the implications of climate change and resource stress is an important element to steering society towards a new kind of growth and for humanity in the decades to come have become more robust. Unfortunately, development. the picture is dire. Science tells us that if we continue on the current trajecto- There are some bright lights on the horizon. Investors are gradually shifting ry, human suffering will increase, political instability and social unrest will be their thinking around risk. There is a growing ‘moral movement’ to convince in- widespread, we will see mass-migration from increasingly uninhabitable areas, stitutional investors (in particular church, university and private endowments) economic costs will rise, and conflicts will erupt. to pull out of old business models (like coal and fossil fuels) that at their essence threaten our survival. For example, several investors have now decided to divest A deep sense of urgency from fossil fuels. There is a growing sense of urgency that if we do not change course soon, we Increased collaborations between a wide range of sectors is now seen as the are headed for a world that will be much more difficult to live in. Previously only way to solve these complex issues, with the business sector increasingly viewed as a critical part of the solution. IMPACT 135 the role of the un global compact RAISING AWARENESS OF WHAT IT MEANS TO BE SUSTAINABLE As we gain a deeper understanding of the interconnectedness of problems and the The first is that global markets must be underpinned by universal values to urgency to address them grows, what has been the role of the Global Compact in counter the negative impacts of business activity, and to preserve the legitima- catalysing change? cy of markets and trust in business. The second is that in a globalised world, changes will affect you no matter where you are located. As Georg Kell said in In his speech at the World Economic Forum in Davos in 1999, proposing the 2000: idea of a global compact between the UN and business, then Secretary-General Kofi Annan said: “Either we reconnect markets with society by building the pillars that markets need to be sustainable, or we risk a rollback -- if not a crushing end to globalisa- “I call on you -- individually through your firms, and collectively through your tion”.34 business associations -- to embrace, support and enact a set of core values in the areas of human rights, labour standards, and environmental practices. Our findings also strongly support that the ten principles themselves, collecting Why those three? […] because they are all areas where you, as businessmen a broad set of issues under one umbrella, have helped business to understand and women, can make a real difference [and] because they are ones where I the broader scope of its responsibility. Recent resources provided by the Global fear that, if we do not act, there may be a threat to the open global market, and Compact office are making the connections between different challenging especially to the multilateral trade regime.” 33 issues, such as climate and social justice (see some notable examples below). At its core, the Global Compact was built upon a recognition of the intercon- nectedness of world problems. Through speeches and publications over the years, Global Compact leaders have spent a considerable amount of time com- municating two key messages. HIGHLIGHTED WORKS RIGHT TO WATER AND SANITATION CONFLICT AND WATER CLIMATE RISK ‘Guidance for Companies on Respecting ‘Water as a Casualty of Conflict: Threats to ‘Connecting the Dots: How Climate Change the Human Rights to Water and Sanitation: Business and Society in High Risk Areas’ Transforms Market Risks and Opportunities’ Bringing a Human Rights Lens to Corporate (2012) (2009) Water Stewardship’ (2015) 136 II change Level 3 - Finding 2 MORE THAN JUST BUZZ: MAINSTREAMING SUSTAINABILITY IN THE BUSINESS SPHERE As a global company it is almost impossible to ignore sustainability today; a major shift from 15 years ago. Major business media has changed their stance, and sustainability is talked about more often, at a higher level, and in more mainstream business forums all around the world. “Even The Economist magazine writes: ‘the question is not whether, but how we go forward on corporate responsibility’. That I think is a big development.” JOHN RUGGIE PROFESSOR, HARVARD UNIVERSITY. In 2000, sustainability was on the agenda of only a few pioneering business After 2008 this trend was briefly reversed, probably due to the fall-out from the leaders, mostly motivated by their personal convictions, and often without the financial crisis which took up column inches in the business sections. Although backing of the companies they led. robust press interest resumed in 2011, it has still not reached pre-crisis levels. This picture has now changed dramatically, with an increasing number of A key symbolic turning point was when the influential newspaper The Econo- business leaders talking publicly about sustainability. According to the PwC mist, previously dismissive of CSR as a business cost, acknowledged that it was a Global CEO survey, three out of four CEOs believe satisfying societal needs and central part of business activity in 2008: protecting the interests of future generations is important.35 A recent survey36 of 2,000 companies found that two-thirds of business persons think social and “Done well, though, it is not some separate activity that companies do on the environmental matters are “significant” or “very significant”.37 And 93 per cent side, a corner of corporate life reserved for virtue: it is just good business.” of CEOs of Global Compact signatories say that sustainability is key to future business success, however only 33 per cent believe that companies are doing Coverage in Brazil enough to address global sustainability challenges.38 As early as 2000, the business magazine Revista EXAME launched an award for Talk is translating into commitment. Not only has the total number of Global “good corporate citizenship”, helping to shed light on corporate sustainability Compact signatories increased in the past 15 years, perhaps most notable is the in Brazil. This later evolved to become the major corporate sustainability award number of the world’s most influential economic players that are now also on in the country. However, other than this, we find scarce corporate sustainability board (see finding 1). coverage in Brazilian media in the early 2000s. Generally, we also see increasing participation in a growing number of In 2004-2005 however, the issue started gaining relevance, primarily due to sustainability events, attended by higher-level company representatives. Nota- the events like the launch of the BOVESPA Sustainability Index. In 2007, another bly, the UN Private Sector Forum in 2014 was the largest gathering in history important milestone was reached when the publishing house Editora Abril bringing together heads of state and governments, and chief executives from launched Planeta Sustentável - one of the most important news platforms on business, on the issue of climate change. sustainability issues today. A milestone was reached at the Rio +20 conference in 2012, where more than The Global Compact was first mentioned in Brazilian media in 2001, in a short 3,000 business people convened for a full three day conference, firmly establish- article by Valor Economico. ing that corporate sustainability has become a global movement. Whereas traditionally conservative trade and industry associations have been Coverage in China slower to act, there are signs that an increasing number are launching initiatives In China, there has also been a significant increase in mainstream coverage. to advance sustainability. One notable example is the International Council on Media coverage started with coverage on pollution control in 1999, when the Metals and Mining Sustainable Development Framework. government initiated a campaign to shut down polluting factories around the Huai River area. Mainstream business media covered Global Compact’s second annual summit in Shanghai in 2005. Shanghai Oriental Morning explained then the notion that CORPORATE SUSTAINABILIT Y REACHES sustainability can be of business values rather than being “a luxury“. MAINSTREAM BUSINESS MEDIA The same year, the China Business Times had a ground breaking article on a private company’s program to support the social development in rural areas in western China, linking the initiative to SA 8000 standards and UNDC’s princi- At the turn of the century, ‘corporate sustainability’ had not yet made the jump ples. from niche news reporting to the wide public consciousness. Tracking mentions Larger scale media coverage followed from 2006, when State Owned Enter- of the term in the international press gives an indication of when this transition prises was encouraged by the state to issue social responsibility reports annually. occurred. More recently, media coverage has also started to include issues such as recycling The English-language press led the way with a sudden spike in mentions and the circulate economy. between 2001 and 2002, followed by steady growth until 2007. IMPACT 137 Key facts and figures 75% 93% 93% of CEOs in the PwC global CEO of the world’s 250 largest of CEOs committed to the survey believe meeting societal companies published a Global Compact say that sustainability needs is important39 sustainability report in 201340 is key to future business success41 349 9 171 53 568 major Global Compact Events Global Compact Events Views of tools and resources on at the global level42 at the local level the Global Compact website since recorded since 200743 September 201344 37 Good news: Corporate social responsibility and corporate sustainability mentions in the English-speaking Tier 1 media45 600 450 300 150 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 the role of the un global compact DRIVING UP THE AGENDA As sustainability becomes more embedded on the world business agenda, what has now seen as a real business risk. been the role of the Global Compact in catalysing change? The process to bring business voices into the post-2015 sustainable development debate has also been noteworthy. Through the Global Compact and Local Net- There are, of course, many players that have contributed to infusing sustainabil- works, thousands of companies have been consulted in the post-2015 Sustain- ity into the minds of the global business community. A deeper understanding able Development Goal development process. Through this process business of issues and interdependencies, civil society pressure, high-level corporate have been able to shape these critical goals for the future. scandals, the emergence of social media with real time reporting of events, greater demands for transparency and platforms such as WikiLeaks, of course Diffusing ideas all contribute to move issues up the corporate ladder. Although the impact is difficult to attribute definitively, there is no doubt that the 349 major global and 9,171 local Global Compact events organised over the Paving the way course of the past 15 years have contributed to the advancement of the corporate However, the Global Compact has in our view played a significant role in sustainability agenda globally. driving sustainability up the business agenda globally. By acting as a first mover, Since 2009 the number of media mentions of the Global Compact has a convenor and a reliable and trusted source of expert guidance, the Global risen dramatically, indicating that the general public’s awareness of the Global Compact helped pave the way for the sustainability agenda to grow. In fact, the Compact is on the rise. In many countries, the Global Compact has been a key majority of the surveyed Global Compact signatories, 57 per cent, state that the driver in introducing the idea and practice of corporate sustainability through Global Compact has played a “significant” or “essential” role in spreading the its many Local Networks, launches and summits. A notable example is the 2005 practice of corporate sustainability worldwide (See figure on the next page).46 summit in China, ‘Building Alliances for a Sustainable Economy’. Particularly in the area of human rights, the Global Compact has been It is difficult to estimate the full impact, but it is clear that the hundreds of instrumental in shaping business interest in and understanding of the topic. tools and resources produced have also significantly shaped the debate over the By putting human rights firmly into the first two principles and systematically years. Today, the Global Compact website contains the largest public knowledge focusing on human rights over the years, the Global Compact has contribut- base with practical information about sustainable business. Some resources ed to a change in the understanding of the role of business in respecting and have been ground-breaking and raised the bar for what companies should do, supporting human rights. The Global Compact has also contributed to putting such as ‘Fighting Corruption in the Supply Chain’. anti-corruption on the business agenda, particularly in developing countries. The Global Compact has also played an important role in the area of climate, influencing the UN’s climate change narrative at a leadership level and the pri- orities of key stakeholders in the process, as well as in the area of water which is 138 Level 3 - Finding 2 II change “I can see significant changes in the Japanese business communities’ management mindsets, and their conduct relative to their social responsibility.” TOSHIO ARIMA FORMER CHAIRMAN, FUJI XEROX 38 Grabbing headlines: Occurrence of media mentions The number of instances where Global Compact 6000 was mentioned in a media source The number of instances where Global Compact was used in the title or first paragraph of a media source 4500 3000 1500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 39 Global impact: How significant has the Global Compact been in spreading the practice of corporate sustainability worldwide? No impact 1% Minimal 6% Moderate 36% Significant 44% Essential 13% Source: 2015 Global Compact Implementation survey IMPACT 139 140 II change SP OT L IG H T ON : T H E WOM E N’S E M P OW E R M E N T PR I NC I PL E S CRACKING THE CEILING, RAISING THE FLOOR 15 years ago, gender equality was not a primary concern for most businesses or governments but this has steadily emerged on the agenda. Today it is widely acknowledged that there is a strong business case for gender equality and that women’s empowerment contributes significantly to sustainable development. IMPACT 141 142 Spotlight II change Research in various countries indicates that greater gender The WEPs initiative supports businesses by providing a com- diversity has a positive impact on business. For example, com- prehensive framework for addressing gender equality in the panies with a higher representation of women at the most workplace, marketplace and community. By ensuring that the senior levels deliver stronger organisational and financial CEO of signatories signs a Statement of Support, the issue of performance and better corporate governance than companies gender equality is also raised to the highest level in the signa- run solely by men. Meanwhile, governments are coming to the tory organisation. The WEPs initiative has helped build a com- realisation that gender equality plays a significant part in both munity of best practice for business by providing a platform to economic growth and sustainable development. However, the discuss challenging issues and share experiences and learnings challenge remains that as many as 860 million women do not with peers and relevant stakeholders. partake in the global economy47. Some countries still fail to en- Mainstreaming gender in sustainability reporting and gage half of their available resources in the formal workforce; encouraging greater transparency and reporting on gender and where women are engaged in the workforce, few make it equality is another role that the WEPs initiative plays. As of to the top. 2014 the Global Compact signatories to the WEPs are required to report their progress on these issues as part of their overall THE WOMEN’S EMPOWERMENT PRINCIPLES: Communication on Progress reporting. EQUALIT Y MEANS BUSINESS The Women’s Empowerment Principles (WEPs) are a joint A CLEAR SET OF EXPECTATIONS initiative of UN Women and the Global Compact, and was The external environment is becoming more favourable for launched on International Women’s Day in 2010. The WEPs companies that are working on implementing the WEPs. comprise seven principles for business on how to empow- Gender equality legislation has strengthened in a number of er women and achieve gender equality in the workplace, countries. For instance, we have seen the introduction of strict- marketplace and community. The WEPs are comprehensive, er penalties for sexual harassment, and some countries have setting out all the actions that business should and can take to established quotas for women on boards of directors of public- achieve their gender equality goals, and they urge a systematic ly listed companies. Still, the gap remains between legislation approach to embedding gender equality. and practice, and some legal and institutional frameworks also The initiative aims to raise business’ awareness of what they limit or prevent women’s participation in the economy49. There can do to respect and support women’s rights and the business is recognition that governments have a role to play in creating case for doing so. It involves a leadership commitment to add an enabling environment for the private sector to advance the greater impetus to the business’ own efforts towards gender WEPs including by addressing discriminatory laws. equality, supports companies with tools and resources to assist Even though the initiative is still relatively new, governments with implementation, and through global and local activities have expressed strong interest in the WEPs. Among other helps to build coalitions of organisations working together to things, heads of state and governments of G7 countries stated achieve gender equality for all. their support for the WEPs and called on companies world- Thus far, nearly 1,000 companies have signed the CEO wide to integrate them into their activities in the G7 Leaders’ Statement of Support for the WEPs, and 40 per cent of these Declaration, the outcome document of the 2015 Summit. The companies are also Global Compact participants. This is a Global Compact working with UN Women has through an ex- rapid increase from its launch in 2010, when 39 companies ini- tensive consultation process developed the recognised, global tially signed on. The majority of current signatories are based framework for business and gender equality, and has presented in Europe (38%) and Asia (34%). a clear set of expectations for what companies should be doing to reach gender equality in their organisations. FROM TALK TO ACTION AT THE CORPORATE LEVEL RADICAL CHANGE IN AT TITUDES The issue of gender equality has steadily risen on the busi- Corporate mindsets related to gender equality have shifted ness agenda, and an increasing number of companies address radically in recent years. In addition to acknowledging that gender equality in a more systematic way. Communication there is a strong business case for gender equality, businesses on Progress reports submitted by WEPs signatories indicate are also realising that they can positively influence women’s that the most significant progress with regard to policies and lives through their own operations, by supporting women in practices related to supporting women’s empowerment and the marketplace and the local communities in which they live; advancing gender equality is in the workplace48. This includes not only by empowering their own female employees. policies and practices related to access to child and dependent There is also increased awareness of how social norms and care, and gender equality in senior management and board institutions systematically discriminate against women - in positions. Data from the 2015 Implementation Survey supports many cases rendering their chances of success impossible. this, showing that 84% of respondents have a non-discrimi- Programs aimed at boosting women as well as programs to nation policy in place, a 7% increase in the last seven years. A tackle institutional challenges are needed. smaller percentage of companies have policies and practices in place related to gender equality in the marketplace and community. Key facts and figures 1 BILLION 5% 19% 25% women around the world of the CEOs of the of board seats globally of economic growth in OECD could enter the global economy world’s largest companies are held by women52 countries over the past 50 years in the coming decade50 are women51 is due to girls having had access to higher levels of education53 IMPACT 143 40 Women’s Empowernment Principles signatories by country New Zealand 3% South Africa 5% Australia 3% Japan 22% Other 27% Spain 10% France 4% Turkey 5% Serbia 8% Brazil 6% India 4% USA 3% THE WOMEN’S EMPOWERMENT PRINCIPLES ANNUAL EVENT The event provides a stock taking opportunity, highlighting how AND CEO LEADERSHIP AWARDS companies are working to implement the seven Principles, the chal- lenges encountered and innovative solutions identified. The Women’s The Global Compact and UN Women bring leaders from business, Empowerment Principles CEO Leadership Awards were introduced to government, civil society and academia each year for the flagship provide further insight into how business leaders are using the WEPs Women’s Empowerment Principles Annual Event. Growing from 150 framework and championing gender equality around the world. The participants in 2010 to over 600 in 2015, the WEPs Annual Event is awards recognise five CEOs for their support for the WEPs and actions now the premier UN event focused on gender equality and business. they have taken to advance gender equality in the workplace, market- place and community. change II Spotlight 144 UN PHOTO / LOEY FELIPE IMPACT 145 This is the area where the WEPs initiative has likely achieved Principles were only launched in 2010; moving from aware- the greatest influence to date. Most of the initiative’s activities ness-raising to strengthening implementation is in line with have focused on raising awareness of business’ role in gender the initiative’s strategy. equality and promoting the role of leadership and the WEPs While the Principles provide guidance on policies and roadmap to take progress to the next level. programs, the WEPs can help generate important discussions around the need to address stereotypes and unconscious bias, GOING FORWARD which are seen as key barriers to successful implementation of The WEPs are considered by many signatories and stakehold- the Principles by companies. ers as a valuable framework for companies to structure their As the initiative grows, the WEPs have the potential to make work towards achieving gender equality. a more significant impact on corporate practices and mindsets Thus far, a limited number of companies have systemically than it has to date, and perhaps even setting the global norm implemented the Principles, and the companies that are doing for expectations on business and gender equality. so are at different levels of maturity. This is natural as the “I salute the Global Compact and UN Women for understanding how important it was to forge this relationship. The adoption of the Women’s Empowerment Principles is the best step forward that the Global Compact has taken in the last 15 years.” Mary Robinson Chair & President of Mary Robinson Foundation Keynote speech at Former President of Ireland 2015 WEPs Annual Event 146 II change Level 3 - Finding 3 A BALANCING ACT: REDEFINING THE FUNDAMENTAL PURPOSE OF BUSINESS Changing expectations around the role of business in society reflect a significant shift in mindsets over the last 15 years. The idea that business can, and should, balance profit with purpose is challenging the long-held view that the role of business is purely about maximising short-term profit. “My initial attitude was, ‘Look, we’re a heavy industry. Child labour has nothing to do with us.’ But when you start to look at it in terms of supply chain, it does becomes an issue. We’re putting ethanol in gasoline, which comes from sugar cane in Brazil, and the sugar cane industry has a big problem with child labour. So nowadays we would say, ‘Of course it does.’ I think the Global Compact played a part in increasing concentration on the supply chain.” SIR MARK MOODY-STUART CHAIR OF THE FOUNDATION FOR THE GLOBAL COMPACT FORMER CHAIRMAN OF ROYAL DUTCH SHELL Not long ago, “the business of business is business” was the accepted mantra. Towards broader value creation Few companies saw sustainable development as part of their mission. Howev- At the same time, leading corporations are looking beyond models that simply er, a number of converging factors have led to a growing discussion about the minimise negative impacts to those that focus on maximising the positive. purpose and role of business in society. Taken together, these have started to Delivering profit does not need to conflict with addressing environmental and reframe our understanding of what business is and should be, supporting the social concerns. On the contrary, it is now generally agreed that these factors emerging view that business needs to play a role that is more than just mon- are essential for delivering long-term sustainability and growth. ey-making. There is a vibrant discussion about the purpose of business and the econ- omy. We need to broaden the concept of ‘value’ beyond the purely financial, Business is part of society and incorporate this new understanding in business performance metrics. Growing concerns over the negative impacts of economic activity have prompt- Today, some business leaders are starting to take a more long-term view, and ed discussion on the fundamental role and responsibility of business in society. to develop visions, goals and targets which implicitly take broader societal and From being viewed as ‘the root of societal problems’, business is increasingly environmental changes into account. seen as having the scale, skills and resources to deliver solutions and social change. Leaders are paving the way This is closely linked to the early perception that business was somehow au- More companies are now positioning themselves as a driving force for sustain- tonomous from society at large. Today, more business leaders realise that their ability, going beyond mere compliance with minimum standards. Achieving ability to thrive depends on well-functioning and stable societies and a healthy more equitable, greener outcomes becomes a factor in decision-making. New environment. Contributing to this must be part of the business objective. This, innovations, technologies, and business models build social and environmental in part, means incorporating scientific knowledge into corporate policy-making considerations into products and services. and business projections. It is no longer only a matter of succeeding or growing, Some companies have adopted the language of “net zero footprint”, looking it is a matter of surviving. to achieve zero carbon, water or waste, and setting ambitious social targets to ensure, for example, gender balance. Leaders have established concrete goals for zero footprint levels within a fixed timeline. This stance sends strong signals from the business community to governments that they are ready for better regulatory regimes, accommodating the sustainability needs of the new mill- ennium. IMPACT 147 the role of the un global compact A FORCE FOR GO OD With evolving expectations of business impact, what has been the role Creating partnerships of the Global Compact in catalysing this change? The wide range of issue platforms created under the umbrella of the Global Compact has worked to make connections between companies, governments Principled business NGOs and society. Through these networks, the Global Compact has been able Possibly the greatest contribution of the Global Compact in the past 15 years has to promote the understanding and sharing of ideas on the issues, opening the been in changing the perceptions and understanding of the role of business in floor for a wide range of opinions, and influencing the mindsets of a range of society, spreading the idea that business has a shared responsibility for the de- stakeholders. velopment of society. The ‘principled business’ approach conveys that business must be based on shared values which support society, and contribute positively Doing good to solve global challenges. This is a paradigm shift from the view that business An important element of the Global Compact has also been to encourage by default is essentially unsustainable. companies to go beyond minimum requirements, and engage in activities that The Global Compact has raised the profile of sustainability issues and their contribute positively to sustainability goals. The new Sustainable Development relevance to business, in particular with regard to the scale of the issues and the Goals will be an important framework for aligning business priorities with extent of inequalities in the world. As an advocate and educator on the issues, societal goals going forward. the Global Compact has raised awareness of what can be expected of business, which has in turn helped to raise expectations on corporate responsibility. 148 II change Level 3 - Finding 4 KEY TO THE FUTURE: SUSTAINABILITY IS CRITICAL TO BUSINESS SUCCESS Clarity around how sustainability impacts the bottom line is gaining ground. Sustainability is no longer seen as only as a risk, but also as a driver of innovation and opportunity. The task now remains to communicate this in the language of business and capitalise on sustainable market opportunities. Key facts and figures54 2.15 TRILLION USD 32 TRILLION USD 28.6 TRILLION USD The estimated cost of the externalities Worth of property is at risk due to The projected external cost of of the top 3000 listed companies coastal flooding in 2070 economic activity relative to global GDP, equivalent to 18 per cent of GDP in 2050 “The most prominent development is the fact that corporate sustainability has progressed from being a moral obligation or argument, to making business sense: the ability for a business to grow and perform well in the long-term depends on the collective well-being of the society in which it operates.” PAUL BULCKE CEO, NESTLÉ Morality and materialty technologies and products that generate business value, whilst at the same time At the turn of the millennium, the efforts of most companies to address social address social and environmental challenges. and environmental issues largely followed two models. The first was essentially For key resource issues like access to water or energy, large and small com- a ‘do no harm’ compliance-driven risk management approach, often developed panies alike are actively engaged in developing new strategies to reduce their in the wake of big corporate scandals. The second approach was philanthropy, needs and optimise performance. driven primarily by a sense of a moral responsibility to give back to society, New business models are zero-footprint, sharing, circulate and Companies often motivated by a marketing or brand perspective. which recognise that meeting the needs of the 21st century differs from the past Today, a growing number of leading companies realise that sustainability will emerge as the winners in the future. issues impact business value in many ways, positively and negatively, and both short and long-term. Speaking the language of business and finance On an issue like climate change, many companies see that long-term success Although mindsets are clearly shifting across the globe, a challenge remains to can only be achieved with new and less carbon intensive technologies. Howev- translate the language of sustainability into concrete goals, actions and business er, in the case of some social issues and human rights in particular, the clarity metrics. around the significance for business performance is only now starting to This has been particularly true in the social space, where identifying the emerge. right language has been a complex process. The introduction of the phrase ‘due diligence’ in the UN Guiding Principles on Business and Human Rights was a From risk to opportunity – meeting the needs of the 21st Century significant step forward in enabling human rights to be communicated in the As an increasing number of companies recognise sustainability as critical for language of business. long-term success, business mindsets are shifting towards seeing the opportu- nity-side of the equation. More investment is challenged towards new models, IMPACT 149 The role of the UN Global Compact MAKING THE BUSINESS CASE As the global business community increasingly start to see the relevance of sustain- the shared responsibility of business to safeguard societal and environmental ability for business performance, what has been the role of the Global Compact in needs. catalysing change? A call to action and innovation to ‘do good’ is inherent to the initiative, as exemplified with Principle 1 on supporting the protection of human rights Since its launch, the Global Compact has been active in clarifying and devel- and Principle 7 on developing environmentally friendly technologies. The oping the business case for sustainability. It has developed and disseminated Global Compact also asks companies to ‘take action’ to support broader UN numerous tools and resources that have raised awareness on the business case goals, opening up for innovation and collaboration to find new solutions, new for corporate sustainability. business models that at the same time meets societal needs and contribute to long-term value creation for business. Working on the drivers The Global Compact initiative to launch the Principles for Responsible In- vestment together with UNEP Finance Initiative in particular has helped shift mindsets in both business and finance towards increasingly focusing on how HIGHLIGHTED INVOLVING STAKEHOLDERS ADAPTATION WORKS environmental, social and governance performance impacts financial value. ‘Indigenous Peoples’ Rights ‘Adapting for a Green Econo- and the Role of Free, Prior and my: Companies, Communities From ‘do no harm’ to ‘do more good’ Informed Consent’ explains and Climate Change’ presents the business case for obtaining the business case for private At its core, the ten principles of the Global Compact set a minimum require- consent from indigenous sector adaptation to climate ment for how companies should operate in order to be sustainable, outlining groups. change. 150 II change IMPACT 151 DE E P DI V E ON : L O C A L N ET WOR K S BUILDING A SUSTAINABLE AND INCLUSIVE GLOBAL ECON- OMY FROM THE GROUND UP “I would say that one of the key contributions of the Global Compact is that it has brought broad local dialogue amongst all stakeholders. It has uniquely been able to drive dialogue forward in a way that other institutions really could not do to the same degree.” ARON CRAMER CEO, BUSINESS FOR SOCIAL RESPONSIBILITY 152 II change As the world’s largest voluntary corporate sustainability initia- es. They can take overarching Global Compact initiatives like tive, it’s easy to think of the Global Compact as a community the WEPs, the CEO Water Mandate or B4P, and make them solely connecting boardrooms across continents. But it is the relevant at a local level. In this way, important campaigns interconnections that have spread and blossomed at the local trickle down throughout the entire network. Local Networks level that make the Global Compact a truly global network. also collaborate with neighbouring networks, sharing ideas and Today, 88 of the 193 UN member states have an active Local solutions around regional issues. Network. The graph below charts the consistent growth of Local Net- These networks bring local communities together to carry work activities over the past decade. There has been a strong out meaningful change, whether that’s improving access to increase in the learning category, and also in efforts to recruit clean water in India, enshrining human rights in Argentinian new companies to join the Global Compact. work practices, stamping out corruption in Nigeria, or creating online tools to help small business owners in Spain. A GROWING NET WORK OF NET WORKS In this way, the universal principles that the Global Compact India was the birthplace of the very first Local Network champions across human rights, labour, the environment and back in 2003. Today, the initiative has grown to encompass 88 anti-corruption are supported by every facet of society. countries across the world. The Global Compact encourages its member companies to engage with Local Networks in the BEING GLOBAL MEANS GOING LO CAL countries where they operate, helping to spread the initiative. Every country faces a unique set of challenges and opportuni- But this spread has been uneven: while there are active Local ties. Cultural, political, economic and linguistic contexts vary Networks in most European counties, the take-up has been across the world, creating vastly different environments which slower in other regions. Africa has the fewest Local Networks. businesses must navigate. Networks are based on a bottom-up approach. Each has a The Global Compact Local Networks act as both a compass large degree of freedom to act when it comes to deciding how and an anchor for local participants. They help guide busi- the network should be run, choosing the most pressing local nesses through country-specific pitfalls, such as substandard issues to tackle, and sourcing funding. working conditions or high levels of corruption. At the same This level of autonomy and the staggered establishment of time the Local Networks help unite companies with communi- Local Networks over the past 15 years mean different networks ties and authorities, so they can work together to address these problems at the source. In this way the networks anchor the Global Compact’s universal principles at a local level. This is what makes the Local Networks so critical: they have LOCAL NETWORKS UNDER THE LENS the local insight needed to bring about genuine change from the ground up. We’ve taken an in-depth look at four Local Networks: India, Argentina, Nigeria and Spain. We spoke with ACTION ON THE GROUND Local Network representatives, as well as stakeholders At the most basic level, Local Networks help local communities from business, finance, civil society, government and bring the Global Compact principles to life. They help get sus- academia. tainability initiatives up and running, then teach communities how to monitor and report on programs to make sure they’re We’ve also interviewed Local Network representatives having the right impact. in Bangladesh, Germany, Turkey and South Korea. Most networks are geared towards helping smaller and mid- The insights they shared form part of the overall Local sized enterprises, meeting their needs in a myriad of ways. This Network study. could include providing workshops for education and training, building partnerships, or giving a voice to small stakeholders Here we present the highlights from the assessment. in policy debates. More information can be found on the project website. Local Networks also localise global campaigns and resourc- 41 A significant growth in Local Network activities (cumulated, by category) Tool Provision, Publication or Translation 14 000 Policy Dialogue Partnership Outreach Other 10 000 Learning COP Related Activity 7 000 3 500 0 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 IMPACT 153 are at very different stages of maturity. Some are well-es- Local Networks can make. The relationships between busi- tablished in their communities, very active, and can provide ness and society and the responsibilities companies have are sophisticated support. Others are much more informal and are regarded very differently around the world. Likewise, the issues not as effective yet. Regardless of their structure, each Local themselves carry different meanings: in some countries for Network checks in with the Global Compact Office every year, example, human rights largely centres around non-discrimi- renewing their Memorandum of Understanding. nation. In other regions, the key human rights issue could be freedom of speech. A PATCHWORK OF PRO GRESS Some of the most advanced Local Networks and companies The progress is encouraging: our review of the Local Networks are found in Europe, the first region to really focus on corpo- shows corporate sustainability has gained a stronger foothold rate sustainability. In North America however corporate sus- across the globe over the past 15 years. But given the diversity tainability has developed more slowly, with the focus instead of the Local Networks and their freedom to prioritise issues, on corporate philanthropy and regulatory compliance. it is not surprising that we see very different rates of change In the following section, we turn the spotlight on four Local across the different areas. Networks across the world. These insights show how networks On top of the internal differences, we also need to factor in are anchoring the Global Compact in their communities, join- the external context in which each Local Network operates. ing the groundswell of sustainable economic change. Different political and economic systems affect the progress 42 Number of Global Compact signatories that are participating in a Local Network Non-business 5 000 Business 4 000 3 000 2 000 1 000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 154 NOTA B L E L O C A L N ET WOR K AC T I V I T I E S Supporting reporting Managing supply chains Multi-stakeholder dialogue The Post-2015 agenda A focus on human rights – – – – – Global Compact Network Spain Global Compact Network UK Global Compact Network Serbia, The Local Network in Turkey or- Global Compact Network Russia launched a new tool, based and partners organised an in collaboration with the Business ganised a consultation in Ankara hosted a roundtable focusing on on GRI indicators, supporting event to promote peer-to-peer Leaders Forum, organised a promoting inclusive dialogue the experience and complexity participants to produce better knowledge exchange on the sub- cross-sector dialogue on CSR on the Post-2015 Development of applying the UN Guiding Prin- sustainability reports. ject of managing supply chain and the role of business. Agenda. ciples on Business and Human sustainability. Rights in Moscow. • Year of event: 2015 • Year of event: 2014 • Year of event: 2014 • COP Related Activity • Year of event: 2014 • Outreach • Policy Dialogue • Year of event: 2014 • 40 participants • Learning • 25 participants • 96 participants • Outreach • 27 participants • 35 participants Russia UK Serbia Spain Turkey Mexico Nigeria Ghana Kenya Chile South Africa Broad Post-2015 consultations Best practices in reporting Involving CEOs to Training government officials Responsible procurement in – – improve governance – construction Global Compact Network Mex- Global Compact Network Chile – Global Compact Network Nige- – ico, together with its partners, published a report highlighting Global Compact Network Ghana ria, together with its partners, Global Compact Network South conducted post-2015 develop- best practices in sustainability organised a CEO roundtable organised a training course on Africa organised a roundtable ment agenda consultations. The reporting among Chilean com- focusing on the challenges corruption risk assessment for meeting to bring construction consultations engaged more panies. companies face in improving government representatives. It sector leaders together to dis- than 60 organisations in five governance, and the types of was the first course of its kind cuss Integrity Pacts in the sector’s roundtables. • Year of event: 2014 regulation needed to ensure that under the Global Compact. procurement processes. • COP Related Activity investment inflows support inclu- • Year of event: 2014 • 70 participants sive and sustainable growth. • Year of event: 2015 • Year of event: 2014 • Policy Dialogue • Learning • Policy Dialogue • 60 participants • Year of event: 2014 • 84 participants • 8 participants • Learning • 60 participants 155 Greening the Addressing climate change A focus on Collective action hospitality industry – Children’s rights for recovery and – The Global Compact Network – rehabilitation Global Compact Network China hosts an annual China The Local Network in Vietnam – Mongolia and partners organ- Summit on Caring for Climate for and partners jointly conducted The Local Network in Japan ised a green hotels initiative to companies, local governments an event focusing on Children’s organised a collective action promote greater environmental and other stakeholders address- Rights and Business Principles in program at Watari-cho to help responsibility among Mongolian ing areas ranging from carbon Hanoi and Ho Chi Minh city. with recovery following the Great businesses. pricing, water, green technology, East Japan Earthquake disaster green finance and low-carbon • Year of event: 2015 in 2011. • Year of event: 2015 development in specific industri- • Outreach • Partnership al sectors. • 120 participants • Year of event: 2014 • 10 participants • Partnership • 46 participants Mongolia China Japan Bangladesh Vietnam Indonesia Australia Promoting inter-religious Anti-corruption guidance Focusing on a better future understanding Advancing human rights – – – in the supply chain The Local Network in Kenya The Local Network in Bangla- Global Compact Network Indo- – launched a practical anti- desh, in collaboration with the nesia convened a private sector Global Compact Network corruption compliance guide- CSR Centre, officially launched leaders roundtable on the role of Australia organised a forum book to help executives, legal a report on CSR in Bangladesh business in promoting inter-cul- on human rights in the supply counsels, and managers design titled “Sustainability for a Better tural and inter-religious peace chain, focusing on learning and and maintain effective compli- Future”. and harmony and works closely capacity-building, providing ance programs. with the Global Compact’s insights from Australia’s leading • Year of event: 2014 Business for Peace platform on companies. • Year of event: 2014 • Outreach this issue. • Tool Provision, Publication or • 50 participants • Year of event: 2014 Translation • Year of event: 2014 • Learning • 44 participants • Policy Dialogue • 30 participants • 73 participants 156 II change SP OT L IG H T ON : I N DIA CORPORATE SUSTAINABILIT Y IN INDIA • Establishment of the India CEO Forum on Business and Corporate sustainability in India remains largely philanthrop- Human Rights. ic in nature. Most initiatives focus on education, healthcare, • Launch of the Asia-Pacific Resource Centre on Responsible community livelihood and infrastructure development. The Business Practices. Indian Government’s Ministry of Corporate Affairs (MCA) has • Formation of the Sustainability Alliance Partners group. developed Voluntary Guidelines on Corporate Social Re- sponsibility. These are based on insights garnered through the THE ROLE OF THE LO CAL NET WORK Global Compact, GRI and OECD Guidelines on Multinational IN CATALYSING CHANGE Enterprises. These guidelines were drafted with the aim of The Global Compact Network India provides opportunities for encouraging sustainability disclosures by Indian companies on networking while facilitating peer learning and the sharing of environmental, social and governance parameters. The Indian good practices among key stakeholders. The Local Network’s government was perhaps the first in the world to have formally greatest impacts to date have been: mandated CSR through legal requirements in 2013. For-profit companies are required to invest a percentage of their profits in • Launch of the Collective Action Project (CAP) in 2011 with development projects identified by the Indian government. the objective of fostering collective-action platforms on anti-corruption by facilitating ongoing dialogue between the THE LAUNCH OF THE NET WORK private and public sectors. In the early 2000s, participants in the Global Compact move- • Raising awareness on the issues of water scarcity and poor ment in India met in informal networking meetings in both access to sanitation through organising a number of events Mumbai and New Delhi. On 24 November 2003 Global Com- together with the CEO Water Mandate. This includes the pact Network India (GCNI) became the first Local Network to event ‘India Collaboration Lab: New Alliances for Water be registered with full legal recognition. and Sanitation’ and the 11th working conference of the CEO Water Mandate in Mumbai in 2013. Amongst other things, KEY HIGHLIGHTS these events promoted partnerships among stakeholders The Network has engaged in a variety of activities since its that advanced innovative projects in water access, sanitation launch, including networking, awareness-raising and capacity- and hygiene (WASH) and water risk management. building. Highlights include: • The India CEO Forum was established with the aim of advancing human rights in a business context among Indian • Launch of the network website in 2004. industry. GCNI has been raising awareness on what actions • Monthly knowledge-sharing and networking meetings. businesses can take to support and respect human rights in • Launch of the Children’s Rights and Business Principles in different industries. 2012, the WEPs in 2013 and B4P in 2014. CASE: CENTRE FOR EXCELLENCE FOR TRANSPARENCY & ETHICS IN BUSINESS The need for a Centre of Excellence emerged from the Collec- KEY FACTS AND FIGURES tive Action Project (CAP) of 2011 – 2015, which concluded that Network launch 2003 corruption must be combatted through private-public sector dialogue. The CAP project educated business executives, gov- Number of business participants 118 ernment officials and the general public about how corruption Number of non-business participants 82 can be prevented through collective action. It also offered them examples of strategies to help them meet their goals. Total number Global Compact 312 Drawing on the conclusions of the project, the Centre for signatories in India Excellence opened on 1 March 2015 supported by the Siemens Hosting organisation Global Compact Society (GCS) (2003) Integrity Initiative. It is designed to conduct research and training, provide a platform for dialogue and encourage policy Key focus area Environment, human rights and anti-corruption change to strengthen transparency in business. Notable fact The India network was the first Local Network to be launched IMPACT 157 158 II change IMPACT 159 SP OT L IG H T ON : A R G E N T I NA CORPORATE SUSTAINABILIT Y IN ARGENTINA developed a significant degree of maturity in sustainability, When the Global Compact was launched in 2000, Argentina the Local Network has represented a means to work with an was in the middle of a political, economic and institutional international corporate sustainability forum but with local ap- crisis. CSR was seen mainly as philanthropic action, although plicability and benchmarking. Corporate sustainability is now understanding was beginning to shift towards a wider notion seen not only in terms of reputation - as it was before the 2001 of CSR encompassing “private social investment” and “com- crisis - but as a mechanism to access new markets and create munity relations”. Some companies did have codes of conduct business opportunities. and compliance regimes in place, but were struggling with haphazard implementation. Labour rights were weak. Aware- CASE: ness of HSE issues was triggered by severe floods in Santa Fe LAUNCHING THE GUIDE BUSINESS and the death of 194 people after a fire in Cromañon nightclub AND HUMAN RIGHTS ‘PROTECT, RESPECT in 2004. AND REMEDY’: WE ALL WIN IN THE CIT Y OF BUENOS AIRES AND CÓRD OBA. THE LAUNCH OF THE NET WORK In 2012, the Global Compact Network Argentina and UNDP On 24 April 2004, 220 organisations established the Global Argentina developed a guide to support Argentinian compa- Compact Network Argentina. Since 2005, a board of 20 mem- nies to internalise the ‘Protect, Respect and Remedy’ frame- bers representing companies, business associations, NGOs, work. This guide is designed to enable businesses to operate academic institutions and others stakeholders have led the effectively in the context set by the UN Guiding Principles on Network. The Board is renewed every two years through a Business and Human Rights. democratic process that elects an Executive Secretariat. The Network partnered with the Social Responsibility Secretary from the National Ministry of Social Development KEY HIGHLIGHTS to launch the Guide. In addition to a launch event in Buenos The Global Compact Network Argentina has engaged in a Aires, the Guide was presented in front of 150 representatives variety of activities since its launch. Highlights include: from business, academia and civil society in the city of Cordo- ba, sponsored by the provincial government and Telemercado, • Through university lectures, conferences and open meet- a local communications company. The presentation was closed ings, the Local Network promoted and spread CSR good by the Minister of Finance Ángel Elettore and the Minister of practices, creating greater awareness about the ten principles Industry Jorge Lawson, who emphasized the role of the state and methodologies for the implementation of the Global in the diffusion of corporate sustainability practices. The event Compact principles. received comprehensive coverage from several television media • A Diploma of Advanced Studies in CSR was established in and the local press. 2013 and several CSR e-learning courses were conducted. • Strengthening public-private collaboration through the identification and implementation of activities with new ac- tors. An example of this is the institutional support provided to the “Practical Workshop: Building CSR programs for KEY FACTS AND FIGURES SMEs” alongside the Union of Industrialists for Matanza-Ri- Network launch 2004 achuelo Basin Sanitation and Reconquista (UISCUMARR). Number of business participants 402 THE ROLE OF THE LO CAL NET WORK Number of non-business participants 137 IN CATALYSING CHANGE The Local Network has provided a common framework for Total number Global Compact 300 signatories in Argentina companies, allowing them to express their organisation’s social and environmental commitment, values and practices Hosting organisation United Nations Development Programme (UNDP) whilst integrating them into business logic. It serves as a tool Key focus area Human rights and anti-corruption to engage management, and embed values and principles at the top of an organisation. For organisations that had already Notable fact One of the top 10 performers according to other Local Networks 160 II change SP OT L IG H T ON : N IG E R IA CORPORATE SUSTAINABILIT Y IN NIGERIA • Launch of the Children’s Rights and Business Principles in The death of General Sani Abacha in 1998 and the resulting 2012, the WEPs in 2013 and B4P in 2014. transition to democracy in 1999 raised the public appetite for • Two-day training workshop on anti-corruption risk assess- good governance, transparency and corporate sustainability. ment for senior administration officials from government Citizens had good grounds for concern: A survey by the ministries and agencies (see case below). Nigerian Securities and Exchange Commission (SEC) in April 2003 showed corporate governance was only at the rudimen­ THE ROLE OF THE LO CAL NET WORK tary stage. Only around 40 per cent of surveyed companies had IN CATALYSING CHANGE a corporate governance code. Today, corporate sustainability in Nigeria has become more The same year, the SEC adopted a voluntary Code of Corpo- sophisticated, going beyond philanthropy and becoming rate Governance Best Practices for publicly quoted companies, embedded in corporate culture. More companies, particularly known as the SEC code. Around the time the Global Compact in banking, now report explicitly on sustainability measures. was launched in Nigeria in 2006, the degree of implementa- There is also greater awareness of corporate sustainability in tion of corporate sustainability was low. Nigerian companies society at large. The Local Network has contributed to a wider typically perceived CSR or corporate sustainability practices as dialogue among stakeholders in Nigeria which has led to philanthropy aimed at addressing socio-economic challenges. considerable change. The Network’s greatest impacts to date include: THE LAUNCH OF THE NET WORK The Global Compact Network in Nigeria was formally • Raising awareness on anti-corruption, in both the public launched as a tripartite alliance of the Nigerian Economic and private sector. The Local Network has also targeted Summit Group (NESG), the African Leadership Forum and corruption in sports. the Nigerian Institute of International Affairs. Despite low • Supporting the Extractive Industry Transparency Initiative levels of activity in its early years, by 2010, the situation had (EITI) policy dialogues. changed as a result of a multilateral project partnership agree- • Creating awareness about the COP reporting process ment with the Siemens Integrity Initiative. through training of participants. KEY HIGHLIGHTS CASE: CORRUPTION RISK ASSESSMENT Since its launch the majority of the activities of the Local Net- TRAINING FOR NIGERIAN PUBLIC work have focused on corruption. Highlights include: SECTOR OFFICIALS In March, 2015, a two-day training workshop on anti-corrup- • Hosting the Africa Sustainable CEO Business Roundtable tion risk assessment for senior public sector officials was suc- Forum in January 2015, focused on addressing the issues cessfully organised by the Network in collaboration with the influencing collective action efforts related to corporate Global Compact, NESG, the Convention on Business Integrity sustainability in Africa. (CBI) and the Economic and Financial Crimes Commission (EFCC). This was supported by the Siemens Integrity Initiative. Attendees included officials in charge of ethics, compliance, legal, internal audit and risk management, as well as those in charge of procurement, accounting, finance and human resources at several ministries and agencies in Nigeria. KEY FACTS AND FIGURES The approach was interactive and practical. Using a fictional case study titled “Ms. Cora Liam joins the public service”, par- Network launch 2006 ticipants were taken through various definitions and forms of Number of business participants 41 corruption, the justification for conducting risk assessments, as Number of non-business participants 107 well different issues surrounding leadership and responsibility in risk assessments. Total number Global Compact 139 Participants were also guided through the process of plan- signatories in Nigeria ning for a risk assessment exercise. Other skills that partici- Hosting organisation The Nigerian Economic Summit Group (NESG) pants were equipped with included identifying factors, types, forms, risks, schemes of corruption and control measures that Key focus area Anti-corruption needed to be put in place. There was also an exercise to help Notable fact In 2010, NESG signed a project partnership agreement with the them rate the probability and potential impact of corruption. Foundation for the Global Compact and the Global Compact Office The course was unique because it showed how the private to implement an anti-corruption project aimed at creating fair market conditions and fighting corruption. The agreement was supported sector could, through collaborative action, help develop the by the Siemens Integrity Initiative and lasted from 2011-2014. public sector’s capacity in the area of anti-corruption. IMPACT 161 162 II change SP OT L IG H T ON : SPA I N CORPORATE SUSTAINABILIT Y IN SPAIN • Engaging large corporations during the early stages of When the Local Network was established, Spain was on the establishing the Network. This was an important step in the verge of a period of unprecedented economic growth. Then the promotion of corporate sustainability in Spain. 2008 financial crisis hit. These two contrasting time periods • Publishing regular reports showing how the number of par- have affected how Spanish companies address corporate re- ticipants and members has increased, and the progression sponsibility and the ten Global Compact Principles. Legislation of activities and support provided to companies. It has also related to the areas covered by the Principles has been promot- published annual reports analysing the COPs submitted by ed by both the European Union and Spain. On the national Spanish participants. level, apart from sectoral or area-specific regulations, the Law • Developing a range of publications and tools for partici- for a Sustainable Economy was passed in 2011 and the Spanish pants, including several tools to support participants with CSR Strategy was approved in 2014. their COPs, corruption risk management and a guide for sustainable supply chain management. THE LAUNCH OF THE NET WORK Initial activities started in 2002, leading to the formal launch THE ROLE OF THE LO CAL NET WORK of the Local Network in Spain in 2004. By 2014, the Network IN CATALYSING CHANGE had grown to 2,535 participants led by an Executive Committee In the ten years of its existence, the Local Network has been with representatives from some twenty Global Compact par- active in promoting corporate sustainability and also in ticipants, renewed every four years. Today, the Spanish Local promoting corporate sustainability-related initiatives at the Network is by far the largest Global Compact Local Network. government level in Spain. The Local Network has been a pio- neer in developing material and tools for its participants from KEY HIGHLIGHTS the start. In 2006 the Local Network launched an online tool The Network has engaged in a variety of activities since its to support the preparation of the COP. In 2013, CompactLink launch, focusing on networking and capacity building with was launched. This is an online platform creating a corporate a particular focus on outreach to support SMEs. Highlights responsibility ecosystem for its participants, which allows them include: to access an online training course, interact with other com- panies and use different tools available to report and monitor progress in different areas. The Local Network has been an active participant in CSR-related initiatives at the government level in Spain, and the government has both referenced the Global Compact in its communications and accepted the Communication on Prog- ress for reporting purposes. KEY FACTS AND FIGURES CASE: SUPPORTING SMES Network launch 2004 In 2009, the Local Network identified the need to provide more support to SMEs. It engaged some of the large companies Number of business participants 2,129 (as of March 2014) in the Network to start targeting relevant activities in their sup- Number of non-business participants 406 (as of March 2014) ply chains to this end. In 2011, an initiative to train and attract SMEs, called Total number Global Compact 1,648 signatories in Spain RSE-PYME, was launched in co-operation with the invest- ment bank ICO. Over the years, this initiative has provided Hosting organisation Global Compact Society (GCS) (2003) specialized CSR training and support to more than 700 small Key focus area Currently: post-2015 sustainable development agenda, human companies. In 2013, 197 SMEs became participants through this rights, corruption and sustainable volunteering initiative. The Network has also published specialised tools for SMEs Notable fact The Local Network in Spain is the largest of all the Global Compact Networks, with 2,535 participants as of March 2014. The network including the COP Template, as well as an online tool for cor- includes organisations that are not Global Compact participants. ruption risk management specially focused on SMEs in 2013. IMPACT 163 DE L I V E R I NG VA LU E ON T H E G R OU N D “I think the most important thing for the Global Compact going forward is to intensify resources for country level networks, country ownership agenda and country level implementation. It’s going to be very, very important going forward.” JANE NELSON, PROFESSOR HARVARD UNIVERSITY Fifteen years on from the launch of the Global Compact, no But as we have seen, there is a large variation in the maturity picture of the initiative’s impacts and achievements would be and effectiveness of Local Networks. Some groups are vibrant complete without looking at the contribution the Local and dynamic; others are still finding their feet. We have discov- Networks have made. ered the most successful networks include: While the Global Compact guides the overall direction of the initiative, the role Local Networks play in advancing the • A clearly articulated and communicated value proposition, Global Compact principles is critical. Jan Eliasson, the UN • Stable resources and funding, Deputy Secretary-General, goes so far as to say that the • A strong and visible brand highlighting the link with the UN “Local Networks are the soul and foundation of the Global • Systematic mechanisms for supporting participants with the Compact.”55 COP process, and It is only at the local level that overarching principles can • Acting as a convening platform for other local corporate be turned into concrete action, making progress in line with sustainability initiatives, and engaging in strategic and tacti- national priorities. That’s how we know that a Local Network is cal relationships with these initiatives. a success: the community sees the ten Global Compact princi- ples as relevant and valuable, and there’s meaningful change at The well-being of the Local Networks is paramount to the a regional level. ongoing success of the Global Compact. Going forward, these These tangible ‘on the ground’ results are not just important groups will need to be nurtured, trained, and equipped with in their own right. They are also the yardstick to justify the the tools they need to truly take root within their communities. ongoing existence of the Global Compact as a whole, as well In this way, the ten Global Compact principles across hu- as contributing to the success of the Sustainable Development man rights, labour, environment and anti-corruption can also Goals. take root, building a sustainable and inclusive global economy from the ground up. 164 II change SP OT L IG H T ON : C OL L E C T I V E AC T ION AG A I N ST C OR RU P T ION A L E V E L PL AY I NG F I E L D F OR FA I R C OM PET I T ION If corruption were an industry, it would be the world’s third largest, correspond- Clearly in contrast to other issue areas such as environment or women’s rights, ing to 5 percent of global GDP or USD 3 trillion. Corruption adds another 10 companies operating alone are very exposed and challenged in their anti- percent on the cost of doing business internationally and is estimated to be even corruption efforts. By the same token, there is a sense of resistance even to join higher in developing countries. It is the greatest obstacle to economic and social working group because of the risk of being tarnished by the very association development around the world. with the corruption issue. Corruption is not only a problem of pour countries. With the global business The first Collective Action initiative was developed in Egypt in 2010. It aimed community and extensive supply chains across different markets, corruption to produce policies and procedures for SMEs, support integrity in transactions impacts even the most transparent economies, with scandals surfacing in the between business and government, and draw up a local anti-corruption decla- top five least corrupt countries in the world, costing shareholders and the soci- ration. ety at large billions of dollars. Other initiatives have since followed in South Africa, Nigeria, Brazil and Corruption gives a direct as well as a long-term delayed impact. It generates India. These Collective Action programs have helped encourage best practice a direct cost on the balance sheet, and hinders the development of civil society and protect corporate reputations. Companies with international ambitions when resources for public housing, hospitals and schools are siphoned off by can prove that they are sustainable, and increase their chances of joining global cleptocrats and corrupt officials or when bribes are paid to evade environmental supply chains. regulations. As the last item on the list of sustainability issue areas, it has per- Perhaps most importantly, Collective Action initiatives can influence local haps the greatest impact and can make the biggest change with regards to the public policy and regulatory development. In India, following the National ambition of the Global Compact to achieve a sustainable and inclusive global Consultation on Anti-Corruption in 2012, local participants developed a white economy. paper on consultation proceedings with recommendations that fed into the In 2004, the Global Compact established the tenth principle against corrup- Public Procurement Bill (2012).56 tion, stating that “Businesses should work against corruption in all its forms, including extortion and bribery”. The principle sends a clear message to the global business community about the need to proactively manage the risk of corruption, and ensure that anti-corruption is recognized as integral part of sustainability. In recent years, a growing number of companies are also developing zero tol- EXAMPLES OF INITIATIVES: erance policies for bribery and corruption. However, fighting corruption alone Country Year Project represents a host of reputational, legal and financial challenges. Nigeria 2004– Anti-corruption declaration, integrity pact, training program of public officials (see case in the deep dive on Nigeria). WORKING TO GETHER Collective Action methods encompass project-specific, sector-wide and long- South Africa 2011– Integrity pact. A collective action initiative participated in round table talks with the South African government regard- term initiatives. The concept is closely related to Integrity Pacts, which are ing a Public Service Anti-Corruption Strategy in 201457. intended to guarantee transparency in the order-awarding process and to rule out bribery in the awarding of public-sector contracts. Some Collective Action India 2011– Integrity pact. A fraud report from the Indian Local Network in 2013 resulted in questions to the Indian Lower House of initiatives work to establish sector-wide codes of conduct, developed by compa- Parliament, while Global Compact recommendations were nies from the same sector. fed into India’s Public Procurement Bill a year earlier. Collective Action provides a reason to get together and allows companies to Nigeria 2011– Siemens integrity pact, anti-corruption declaration, collective talk about corruption without being singled out, and describes various methods platform for private sector operations. of combating corruption, with the ultimate goal to create a “level playing field”, setting up the conditions for fair competition within a corrupt environment and Brazil 2011– A collective action program to promote transparency and integrity for the 2014 World Cup and the 2016 Olympic thus promoting innovation. Games was set up in 2011. This was delivered through social monitoring and control IMPACT 165 166 II change IMPACT 167 R E F L E C T I NG ON T H E I M PAC T OF T H E U N I T E D NAT ION S G L OBA L C OM PAC T FROM ACTION TO ATTITUDES PUTTING THINGS IN PERSPECTIVE: “The concentration of economic power in the private sector is unprecedented. So we are not talking about companies. We are talking about world powers.” ERIKA KARP FOUNDER & CEO, CORNERSTONE CAPITAL 168 II change Catalysing change in a complex, global system such as the global economy is involved in the many business leadership platforms, including Collective Action an ambitious goal, which challenges the actors, institutions, norms and many Against Corruption, the CEO Water Mandate and the Women’s Empowerment vested interests that comprise the status quo. But change is urgently needed - if Principles. we are to preserve a safe operating space and a prosperous future for humanity. Standing back, we reflect on: How can change be catalysed in such a large Impact 7: and complex system? How effective has the Global Compact been in terms of FROM GLOBAL VALUES TO LO CAL PRIORITIES catalysing change in the right direction? What has been the actual impact58 of Advancing a set of global values reflected in the ten principles. Through the 88 the Global Compact over the years? Local Networks, the principles are applied to local challenges, priorities and op- Building on the findings presented in the previous sections, we offer our ob- portunities. However, many remaining barriers will need to be removed before servations on the key impacts of the Global Compact, and reflect upon whether networks will reach their full potential and become uniformly effective. the initiative has galvanised transformation towards its vision. SUMMING UP THE IMPACT OF The Global Compact has undoubtedly played an important role in spreading THE GLOBAL COMPACT ON sustainable business practices around the world, most notably to markets where corporate sustainability was low on the corporate agenda prior to the launch of C OR P OR AT E the initiative. The Global Compact has to a lesser extent contributed to operationalising PR AC T IC E S practices within companies, and in many areas, a clear gap remains between commitment to sustainability and evidence of implementation. Consequently, The goal of the Global Compact is to mainstream sustainable business prac- there is an urgent need to focus more on companies’ sustainability outcomes. tices, by way of mainstreaming the ten principles, into corporate practices There are indications, however, that the more actively engaged a company is everywhere and to advance action in support of UN goals, to ensure that global in the initiative, the greater value it derives from participation and the more it markets work in favor of broader societal goals. seeks to actively advance sustainability within its own operations. Based on our analysis, the Global Compact’s most significant impacts in chang- In terms of advancing sustainability leadership, it is too early to say anything ing corporate practices have been: about the impact of most of the initiatives. However, there is a strong potential to have a greater influence through many of the Global Compact’s focus areas. Impact 1: More radical, innovative approaches need to be explored to drive transforma- A UNIFYING FRAMEWORK tive change. Many companies express a demand for more guidance on leader- To establish a unifying framework for sustainable, ethical business through a ship practices. set of principles that are universally accepted by business, governments, labour There is still a very long way to go before the Global Compact principles organisations and civil society. This builds a common language and understand- around sustainable business become the universal norm. However, recent ing, enabling business and other stakeholders to work in the same direction. changes in the corporate operating environment suggest corporate sustainabili- ty has the potential to scale up significantly in the coming years. Impact 2: SPREADING TO NEW MARKETS To mobilise thousands of businesses to embark on the sustainability journey, including a significant proportion of the world’s largest companies. Companies Key impacts in 156 countries are now talking about corporate sustainability and the Global Compact’s ten principles. 156 25% Impact 3: Countries with Global Compact Of Fortune Global 500 WIDER RANGE OF TOPICS ON THE CORPORATE AGENDA business participants companies are Global To help legitimise a wider range of sustainability topics on the corporate agen- Compact signatories da, and turning attention towards issues including human rights, bribery and corruption. This level of awareness did not exist before the Global Compact’s launch. The main issues of the Global Compact are now becoming part of the operational story of companies all over the world. 58 MILLION 50% People work for a Of survey respondents state Impact 4: Global Compact company that the Global Compact has EXPANDING THE B OUNDARIES OF BUSINESS played an important role in By helping to expand the boundaries of responsibility, companies are now start- shaping their company’s vision ing to take a broader responsibility for their impacts along the value chain. Impact 5: FOSTERING CROSS-SECTOR COLLAB ORATION 17% 65% To create a common space for dialogue, learning and collaboration between Of large survey respondents Of survey respondents say that business and stakeholders at the highest level, including from government, in require their suppliers to the Global Compact has played a way that no other organisation has ever achieved. This has been critical for adhere to the Global Compact an important role in guiding bringing about better long-term solutions to complex sustainability challenges. their sustainability reporting Impact 6: RAISING THE BAR ON PERFORMANCE 60% In some areas, by producing ground-breaking best practice resources, the Of survey respondents say Global Compact has helped push the sustainability agenda forward and raising that the Global Compact has the bar for corporate performance and practices. These tools have helped played an important role in companies improve their performance (see page 77 for 50 key resources). motivating the company to The guidance is distinctively practical, a result of being produced jointly with take action towards business and other stakeholders. Several hundred participants are also actively broader UN goals IMPACT 169 THE IMPACT OF THE Bringing investors together, particularly over high-risk issues under the Busi- GLOBAL COMPACT ON ness for Peace umbrella, seems to have been particularly effective in fostering a common understanding between investors and companies. This has helped to T H E C OR P OR AT E show how investors can support companies operating in difficult environments. OPE R AT I NG Impact 3: FOSTERING UN-BUSINESS COLLAB ORATION E N V I R ON M E N T The Global Compact has played a significant role in catalysing institutional change, particularly within the United Nations itself. Attitudes have shifted While the Global Compact’s direct influence on corporate practices can be from concerns about the risk that business might pose to the UN brand. Now, observed and measured, it is more difficult to gauge its impact on the broader business is seen as a partner to meet UN objectives. operating environment. Bearing that in mind, our research indicates the Global Compact has in some areas exercised significant influence on the external driv- SUMMING UP ers of corporate conduct, which has spread its influence beyond its immediate The Global Compact has played an increasingly active and important role participants. in strengthening the enabling conditions for sustainable business. This has In our opinion, these have been the most significant impacts of the UN Global indirectly impacted the uptake of corporate sustainability by breaking down Compact on the corporate operating environment: political, financial and other barriers, and energising positive drivers. As seen in Part I, there are many drivers of change in the global economy, Impact 1: and caution is needed in terms of offering statements about the unique influ- HARMONISING THE LANDSCAPE ence the Global Compact has had. OF VOLUNTARY INITIATIVES In terms of influencing regulation, the contribution of the Global Compact By focusing on collaboration with other organisations, the Global Compact has is more difficult to assess. In recent years, there has been a move to mobilise helped to simplify the landscape of voluntary initiatives. By harmonising efforts leading companies to speak out about the need for smarter regulation, most and aligning guidelines, the Global Compact is minimising duplication of work notably in the area of anti-corruption, climate and water. An increasing number and concentrating the efforts and impacts of voluntary schemes. As a result this of public authorities are recognising the Global Compact as the globally accept- has made the landscape less confusing for business. ed framework for corporate sustainability. Notable examples include the EU directive on non-financial reporting and the recent G7 declaration referencing Impact 2: the Women’s Empowerment Principles. MOBILISING CAPITAL MARKETS Further, in the area of education, it is promising to see that business schools The Global Compact has played a significant role in changing mainstream are committing to the Principles for Responsible Management Education. In the investor attitudes and practices. It has mobilised capital markets on ESG issues, UK particularly this is nearing a tipping point: 50 per cent of business schools most notably through the launch of the Principles for Responsible Investment59 have now joined the initiative. We acknowledge that a significant gap between and the Sustainable Stock Exchanges initiative60. Although a gap also remains commitment and implementation needs to be bridged before real impact can be between commitment and practice in the financial sector, the USD 45 trillion achieved. in assets under management backing the PRI shows an immense achievement. Consequentially, through its work on driving change in the corporate operat- Even though implementation is lagging, the fact that investors increasingly ing environment, it is likely that the Global Compact has extended its influence show commitment on these areas can be seen as a catalyst of change in itself. on the business community much beyond its immediate participant base. Key impacts 45 TRILLION 18 000 500 USD in assets under management, Companies are traded on 16 Business schools have endorsed the backing the Principles for Responsible Partner Exchanges of the Sustainable Principles for Responsible Management Investment, a Global Compact Stock Exchanges – a Global Compact Education, a Global Compact sister initiative. sister initiative. sister initiative. THE UN GLOBAL COMPACT TOOL BOX FOR CATALYSING CHANGE Being the United Nations: Being the UN, The multi-stakeholder nature: The involve- ress, it is removed from the Global Compact Global Compact enjoys, in most countries, ment of civil society and labour, together with participant list. greater legitimacy and convening power than business, is a key differentiator, and enables similar organisations, enabling more effective important learning and cross-fertilisation The engagement model: The Global Com- facilitation of multi-stakeholder dialogue and across sectors. pact engages companies primarily through access to high-level decision-makers. activities focusing on learning, dialogue, Low barrier to entry yet accountability: The partnerships and actions. The purpose is to Dynamic, flexible and principles-based: The Global Compact is purposefully set up so that raise awareness, foster collaboration and en- ten principles represent fundamental human there is a low barrier to entry, and all com- gagement in collective initiatives and improve values that can be supported by business all panies are invited to join irrespective of size, practices. over the world. Although participants are re- nationality or starting point. The requirement: quired to address all principles, the dynamic a signature of your CEO, and commitment to model based on a philosophy of continuous a process of continuous improvement and improvement encourages focus on issues annual reporting. The accountability mecha- where their biggest impacts are. nism: If the company fails to report on prog- 170 II change “The future cannot be known. The only thing certain about it is that it will be different from, rather than a continuation of, today. But the future is as yet unborn, unformed, and undetermined. It can be shaped by purposeful action. And the one thing that can effectively motivate such action is an idea – an idea of a different economy, a different technology, or a different market exploited by a different business. But ideas always start small…” PETER F. DRUCKER THE BIG POWER OF LITTLE IDEAS (1983) THE IMPACT OF Impact 4: THE GLOBAL COMPACT ON SUSTAINABILIT Y AS AN OPPORTUNIT Y The business approach to sustainability has gradually evolved from a mere ‘do T H E D OM I NA N T no harm’ attitude, to understanding the potentially significant opportunities arising from being more sustainable. There has been a significant shift in mind- WOR L DV I E W sets among leading businesses. In particular, the opportunities identified in the transition to a low-carbon economy are driving innovation, efficiency, technol- Over the past 15 years, there has been a significant shift in the understanding ogy development and new business models. of the role and responsibility of business, and how business can contribute to sustainability solutions. Although this area is challenging to assess, our analysis Impact 5: indicates that the Global Compact has made an important contribution to this ON DIFFUSION OF IDEAS AND NARRATIVE change in attitude. Through its Local Networks, the Global Compact has helped diffuse ideas and Based on our analysis, the Global Compact’s most significant impacts in chang- concepts around responsible business at the country and community level ing the dominant worldview have been: worldwide. Global norms and values have been adopted locally through transla- tion and appropriation. This makes the universal principles real and relevant to Impact 1: businesses in their local contexts. GLOBAL RECO GNITION OF WHAT ‘SUSTAINABLE BUSINESS’ IS SUMMING UP The Global Compact has been instrumental in spreading a common under- Sustainable business is by no means ‘the new normal’. However, for most global standing of the principles of responsible business and sustainability on a global companies, it is almost impossible not to have sustainability on the agenda. As scale. The framework has been largely accepted by global business, civil society global business leaders become increasingly outspoken on sustainability issues, and governments all over the world. it is likely action and awareness will spread to a broader segment of the business community. Impact 2: Our analysis and observations on the impacts of the Global Compact show CHANGING THE UNDERSTANDING that the business narrative has shifted. The way mainstream global businesses OF THE ROLE OF BUSINESS talk about corporate sustainability and responsibility today is vastly different Over the past 15 years, there has been a significant shift in the understanding of from 15 years ago. Far more companies are involved in sustainability report- sustainability amongst global business executives. Attitudes have changed from ing, the reports are much more sophisticated, and the issues are more widely viewing the role of business purely in transactional terms, to understanding that covered in mainstream business media. It is evident that a change in worldviews long-term business value depends on good performance across a broader range has occurred beyond the Global Compact participant base. of ‘capitals’. This includes a fundamental shift towards recognising the positive There is, as noted earlier, a multitude of events, trends and organisations that role that business can play as a partner and contributor to sustainable devel- should be recognised for having contributed to the changes we have observed. opment. The Global Compact has, in our opinion, played a significant role in It is implausible to fully attribute change to any one initiative or event. Howev- catalysing this change. er, the Global Compact has been a an incubator of ideas and a first-mover in raising the bar when it comes to sustainability, advancing collective business Impact 3: attitudes, expanding the notion of business responsibility and spreading these CHANGING THE WORLDVIEWS ideas globally through its networks. OF IMPORTANT STAKEHOLDERS Although it is difficult to unassailably qualify, we believe the Global Compact The Global Compact has inspired a change in government mindsets, as seen has played a distinct and important role in changing our understanding of and through the biannual General Assembly resolutions. These decisions increas- attitudes towards business. It will continue to have a key role going forward. ingly acknowledge that business is a powerful force and an essential contributor to the world’s development priorities. There has also been a shift in the mindset of the global investor community regarding the importance and materiality of ESG risks. The Global Compact has played a key role through its work with the financial sector since 2003, and the launch of the PRI. IMPACT 171 THE IMPACT OF THE GLOBAL COMPACT Our research demonstrates that the Global Compact has had a significant im- pact on the change observed over the past 15 years. And perhaps it was the sim- F R OM AC T ION ple idea that change begins with practice which in the end has been the most significant contribution. The Global Compact’s low barrier to entry ensures that TO AT T I T U DE S many companies are willing to sign a practical and simple act of commitment – without a range of requirements attached. Companies “start where they are”, Common knowledge tells us that to make significant changes; you must first and embark on a continuous process of change with a high degree of freedom alter people’s mindsets, then behavioural change will follow. In a global context, with regard to focus and speed. this would mean we would need a significant shift in worldviews in order for For many, this is a main point of critique. In our view, this might be a decisive transformation at the practical level to occur. factor that has enabled the Global Compact to have had an actual impact. By Over the years, this has been the focus of sustainability change-makers: targeting first and foremost corporate practices as seen through the objectives, spreading knowledge about the challenges we face, the barriers blocking prog- and shepherding participating companies to continuously improve practices ress, and the actions needed to overcome these issues. However, it is obvious and reach new levels of maturity, gradually raising expectation levels, this has from our unsustainable global trajectory that all this talk of facts and figures is enabled change in the other important dimensions of the system. not driving change at the scale or speed that is needed. In conclusion, the jury is still out on whether a sustainable and inclusive Returning to our original question: How can change in large-scale systems be economy will be achieved. But the Global Compact has been an institutional catalysed? If new knowledge is not enough to trigger change, what will it take? entrepreneur, an incubator of new ideas, which have contributed to changing The latest research in climate psychology and behavioural change postulate the understanding of the responsibility of business all around the world. Per- quite the opposite story of change. In fact, contrary to common knowledge, the haps its most significant contribution is exactly through its simple model which most effective way to begin a change process is through first incentivising minor encourages business to take the very important first step towards sustainability. changes in behaviour. Changing practices first, then frameworks and minds will follow. 3 PATHWAYS OF TRANSFORMATION TOWARDS A SUSTAINABLE AND INCLUSIVE GLOBAL ECONOMY 174 III pathways Let’s face the facts. There is a vast gap between where the economic system is today and where it needs to be. The incremental progress we are making is not THE WORLD IN 2050: BUSINESS AS USUAL DISTRACTS sufficient to stay within the boundaries of a planet with finite resources. We FROM THE VISION2 are not doing enough to secure a safe and prosperous future for humankind. Change takes time, but science tells us time is not on our side. We need radical Wilder weather transformative change. – Between 3–6 ºC temperature rise by 2100 causing storms, heat Realising a sustainable economy will not be a smooth ride for society. It waves, extreme precipitation requires ‘creative destruction’ to change direction, dismantle cultures and struc- – 65% of mega-cities - home to 10% of world population - at risk of tures that uphold unsustainable behaviour and create new practices, technolo- sea level rise gies and resource systems. – USD 70–100 billion a year will be the cost of adapting to a 2 ºC Opportunity and innovation lie at the core of this transition. We are at a warmer world pivotal moment in time where we have the knowledge to consciously create new ways of living. As the environmental economist Pavan Sukhdev says, “change Ecosystems under strain will happen in any case, either by default, design or disaster”1. It is in our power – 5 out of 10 million species will be extinct by end of century to decide how this change will occur. We have the resources, the technology and – 60% of ecosystems will be under strain solutions – if we make the right choices, and if we make them now. – Global waste generated will be 13.2 billion tonnes per year AN AMBITIOUS VISION OF CHANGE Social stress The vision of the Global Compact is audacious: to work toward a sustainable – 1.5 billion people will be negatively affected by degraded land and inclusive global economy. By offering a set of shared values, convening key – 6 million people die every year from air pollution actors, establishing best practice and scaling up solutions to create impact, the – Water scarcity threatens 52% of global population Global Compact is in a unique position to drive the necessary change. – 1 billion people may be displaced due to environmental factors As described in Part II of this report, the past 15 years have kick-started the pro- by 2080 cess of mainstreaming the ten principles into corporate practices and catalysing action in support of broader UN goals: Rising costs – 5-20% of global GDP is the long term cost associated with climate 1. Corporate practices: More companies across the globe are realising and acting change per year on the impact that they have on society and the environment. However, – Cost of externalities are USD 28.6 trillion, 18% of global GDP much of this work is incremental and the scale and pace of change is not – 40% gap between water supply and demand has the potential to enough. A step change in ambition and outcomes is needed. put 45 %, or USD 63 trillion, of global GDP at risk by 2050 – the 2. Corporate operating environment: Whilst the operating environment is approximate size of today’s global economy becoming more conducive to change, many barriers remain. We need to proactively deconstruct these barriers and incentivise drivers of change. 3. Dominating worldviews: A significant shift in our understanding of the role of business and the economy has occurred in the past 15 years, and sustain- ability is higher on the business agenda than ever before. But it has yet to be mainstreamed and translated into action. The Global Compact has had a profound, and probably underrated, impact in many areas. However, given the current and projected challenges of the world, there is a need to revitalise efforts to deliver a real and lasting impact. Part III is divided into two sections. First, we present 15 trends that will influence the global business landscape in the next 15 years. Subsequently, we propose three possible pathways of change to realise the vision of a sustainable and inclusive economy, which the Global Compact should strive to support through learning, dialogue and partnerships. IMPACT 175 176 III pathways IMPACT 177 STAY I NG I N T H E G A M E : 1 5 T R E N D S I M PAC T I NG T H E G L OBA L BU SI N E S S L A N D S C A PE Change is a constant. Business leaders cannot rely on a rear-view mirror in a fast- changing world. To provide context for the next section, we highlight 15 trends that will shape the global business landscape in the next 15 years. 178 III pathways L O OK I NG F ORWA R D TO 2030: 1 5 T R E N D S F OR 1 5 Y E A R S 1. PLANET UNDER PRESSURE “think global, act local’ movement will favour urban farmers, local producers Human activity is driving negative changes in the global environment resulting and community groups working to transform their communities. in climate change, deforestation, loss of biodiversity, ocean acidification, soil degradation and pollution. We are crossing planetary boundaries and chang- 9. FRAGMENTING POWER ing fundamental earth systems, which risks triggering abrupt and irreversible Economic power is moving South and East. Power is dispersed and congregat- damage to the planet. This will have catastrophic consequences for humanity, ing around new countries and entities. A reassertion of nationalism and protec- threatening long-term development opportunities and prosperity. tionism will create a less open world, putting global agreements and multilater- alism under stress, closing the space for business. New transnational networks 2. RESOURCES – FROM ABUNDANCE TO LIMITS can bridge this governance gap by bringing actors together under shared global The world has entered a period of intensified resource stress. Three planets are policy objectives. needed to meet human consumption by 2050. The essentials for human life – water, food and energy – are under pressure. In 2050, severe water stress will 10. DETERIORATING SECURIT Y affect 45% of global GDP. The challenge of increasing food production by 70% Fierce competition for natural resources, crowded urban centres, mass migra- to meet future demand will be enormous. tion, and a widening gap between rich and poor will intensify social pressures and cause violence to erupt. The rise of religious extremism and populist na- 3. ENERGY TRANSITION tionalist movements makes states vulnerable and unstable, and fuels terrorism. Changing regulations, dramatic reductions in renewable energy costs and Business activity is increasingly more difficult and dangerous in vast regions concerns about energy security will impact energy markets. Climate change around the world. and new divestment initiatives will put pressure on fossil fuel-based energy companies. Developing countries will have the opportunity to leapfrog into the 11. RISE OF THE CIT Y renewable age; however the entrenched position of fossil fuels will make the 60 percent of the world’s population will be urban by 2030. Affluent cities will timing of this transition uncertain. be powerhouses with smart technology driving green and resilient environ- ments. By contrast, rapid and unmanaged urbanisation in the developing world 4. FUTURE DEMO GRAPHICS leads to overcrowded slums with poor sanitation, polluted air, poverty, unem- The population will pass 8 billion by 2030 with most growth in low-income ployment, crime and social tension. countries. Western countries face stagnant and ageing populations and a shrinking pool of workers. Developing regions face youth bulges that pressure 12. HYPER-TRANSPARENCY education and employment. Environmental stress makes areas uninhabitable Digital technology will continue to revolutionise communications. There will and may force up to 1.6 billion people to migrate, destabilising societies and be even greater demand for hyper-transparency in business supply chains, at fuelling conflict. all levels. Social media will escalate the pressure on business to disclose and self-regulate. Hyper-transparency is a powerful force as wealth in the informa- 5. THE GROWING WEALTH GAP tion age will be held in ‘intangible’ assets such as brands, patents and customer The rich are getting richer and income inequality is widening both within and trust. between countries. Today, the richest 1% own more than 50% of the world’s wealth, although absolute poverty is likely to fall and the middle class grow. 13. INTERNET OF THINGS Wealth is concentrating and extreme inequality poses great risk to global stabili- The Internet of Things will reach a tipping point. By 2020, an estimated 50 ty, erodes trust in governments and fuels social unrest. billion devices will be connected to the Internet making it possible to auton- omously monitor, optimise and control our lives. Threats to security and our 6. EMPLOYMENT UNDER PRESSURE privacy will increase, nevertheless the Internet of Things will revolutionise Automation will continue to reduce labour intensive industries, lowering em- manufacturing, resource use, smart grids and profoundly change personal ployment opportunities. The full impact of large scale automation has yet to be health care. felt - income generating work designed to pay for basic needs may cease to be the norm. Mass unemployment and accumulated wealth in the hands of the few 14. SUSTAINABLE BUSINESS will become one of the defining issues of our age. Full cost accounting will become the norm and ‘all inclusive’ pricing systems will reflect social and environmental impacts. Accounts will recognise a broader 7. GENERATION NEXT set of ‘capitals’ than merely financial. Traditional business models will be The Millennial Generation are digital natives and understand the opportunities challenged as entrepreneurship flourishes with ‘bottom of the pyramid’ models, inherent in crowd-sourcing and connectivity. Better-educated, empowered crowd-funding, open source tools, the sharing economy (e.g. Airbnb, Cleanweb, and more self-reliant, Generation Next knows the challenges of their time and Uber) and circular “cradle-to-cradle” thinking. demand transparency and accountability. Unprecedented access to information and innovation platforms is nurturing new relationships, and drives co-creation 15. RADICAL INNOVATION UNLEASHED of solutions between business and change makers. Transformative breakthroughs ranging from nano- and biotechnology, graphene, bio mineralisation, robotics, artificial intelligence to 3D printing will 8. LO CAL IS KING revolutionise the world. But technology in the hands of ill-intended groups can Small is beautiful in economies where people matter. Local entrepreneurship do harm. Deliberate large-scale manipulation of the planet like geoengineering, is growing to foster more sustainable lifestyles as a backlash to globalisation. fears of corporate ownership of the genome, cross species genetic fusion gone The global citizen is trying to re-root and reconnect with place and locality. The wrong, create reasons for concern. IMPACT 179 180 III pathways PAT H WAYS OF T R A N SF OR M AT ION Standing in 2015 and looking towards 2030, we face a very complex and fast-changing world. Our ability to achieve a sustainable and inclusive global economy depends on how we understand trends and critical risks. Most importantly, it depends on our ability to take concerted actions to change course. For those able to navigate the map of the new Millennium, the path to a sustainable and inclusive economy is paved with opportunity. In this section, we present three broad pathways of transformation which we believe are crucial to accelerating progress towards sustainability. The pathways should not be seen as separate, but as interconnected aspects of what it will take to secure the future we want. We begin each pathway by describing where we need to be and then outline the essential building blocks – the enablers – that help us reach our destination. In conclusion, we offer some concrete recommendations for change to be realised. The recommendations for the Global Compact builds on the assessment of impacts and strengths previously described in this report, to encourage mobilisation of resources and efforts where the initiative seems to have the greatest leverage. Our strong recommendation is that most activities should be conducted jointly with relevant partners from the UN, governments, other voluntary initiatives, and relevant civil society and academic institutions, as well as business. PATHWAYS PATHWAY 1: SUSTAINABILITY IS PATHWAY 2: BREAK DOWN PATHWAY 3: NEW THINKING THE ‘BUSINESS OF BUSINESS’ BARRIERS, ENERGISE POSITIVE FOR A NEW REALITY DRIVERS ENABLERS 1. Mobilising the majority: Getting 4. Better governance: Aligning 8. A compelling story: Creating a all companies on board regulation with sustainability new narrative of opportunity 2. A new motive: Adapting corpo- priorities 9. Redefining value: A new per- rate visions and objectives 5. Add value to society: Mobilising spective of worth and prosperity 3. Reboot corporate sustainability: capital to enable the transition 10. Visionary leaders: Redefining Making sustainability a part of 6. Transformative collaboration: the notion of leadership daily business Scaling up new practices to 11. Spreading the messages: Get- achieve impact ting the word out 7. Awaken the consumer: Catalys- ing consumer action in partner- ship with business IMPACT 181 182 III pathways PATHWAY 1: ENABLER 2: A NEW MOTIVE: ADAPTING CORPORATE VISIONS AND OBJECTIVES SU STA I NA B I L I T Y I S T H E The global economy cannot be based on business that builds on high material consumption and impacts negatively on natural capital and societal health. ‘BU SI N E S S OF BU SI N E S S’ This is dawning on leaders in most sectors. Social deficits and environmental constraints generate economic costs, reduce business productivity and hamper In a sustainable and inclusive global economy, business is principled and all competitiveness. A new generation of entrepreneurs see social and environ- externalities are taken into account. Valuation considers a broad range of social, mental issues for what they really are: business opportunities to satisfy unmet environmental and economic ‘capitals’. Resources are produced, consumed and needs and address the challenges of the 21st century. Business is re-inventing returned into a recycling, circular economy. Governance interests are stakeholder itself to produce shared value while optimising results for shareholders. inclusive; business is transparent and aims for a zero or positive footprint. RECOMMENDATIONS Sustainability is fully embedded in core business practices globally. This means 1. Align corporate vision and strategy with the ten Global Compact principles, aligning the corporate vision and strategy with sustainability objectives and the Sustainable Development Goals (see box on page 23) and other relevant setting business targets that drive broader values. Leading companies treat UN declarations. sustainability both as a shared responsibility as well as an opportunity, accom- 2. Map the synergies between business purposes and objectives and the Sus- panied by proactive strategies that drive transformation through market-chang- tainable Development Goals. Assess how your company contributes to the ing ideas and products and by investing in technological innovation and new Goals and respond in your strategy with goals aligned with science (e.g. the business models. Planetary Boundaries framework). 3. Understand organisational performance and value in terms of inputs from, The three enablers in this pathway: and impacts on, a wider range of environmental and social ‘capitals’ in addi- 1. Mobilising the majority: Getting all companies on board tion to financial. 2. A new motive : Adapting corporate visions and objectives 4. Formalise oversight and responsibility for performance with boards and top 3. Reboot corporate sustainability: Making sustainability a part of daily executives. business 5. Work proactively to ensure a smooth transition from the old to the new practices, technologies and resource uses, and support and scale radical new ENABLER 1: MOBILISING THE MAJORIT Y: business models. GET TING ALL COMPANIES ON B OARD Despite great progress, the vast majority of the world’s companies have not RECOMMENDATIONS FOR THE GLOBAL COMPACT started the journey towards sustainability. At present, Global Compact signa- a. Invigorate motives: Inspire thinking about the broader purpose of business tories total more than 8,000 companies. 25 per cent of the Fortune Global 500 that meets the needs of the 21st century. participate and two per cent of publicly listed companies. Of course, sustainabil- b. Act as a bridge: Connect scientific research and business to align and trans- ity can be pursued outside of the Global Compact. However, Global Compact late scientific goals into practical business activities. participation is a good proxy for the spread of sustainable business practices. c. Broaden the scope: Equip participants with knowledge and practice on the Most companies still need to be convinced that sustainability is not about integration of non-financial capital and impacts in company decision-making philanthropy and public relations, but simply about doing better business. The and performance. greatest challenge in the next 15 years will be to penetrate all markets and sec- d. Inspire leadership: Strengthen the focus of LEAD to explore and spread more tors and to mobilise the majority of companies. radical business models of the future. Showcase innovative solutions and best practices. RECOMMENDATIONS e. Mentor old with new: Use the convening power of the Global Compact to 1. Boards and chief executives should urgently plan their businesses transition drive engagement between existing companies, enabling institutions and new towards a sustainable and inclusive mode of business. This means commit- players to rapidly scale new business models and innovations. ting to the Global Compact. 2. Large companies should encourage suppliers to join the Global Compact as ENABLER 3: REBOOT CORPORATE SUSTAINABILITY: the best way to drive uptake amongst smaller companies. MAKING SUSTAINABILIT Y A PART OF DAILY BUSINESS 3. Trade and industry associations should encourage their members to join the The urgency to ‘future proof ’ business against sustainability risks - pressures on Global Compact. people, natural resources and profitability - is mounting. The objective must be 4. Governments should urge state-owned companies to commit to the Global zero or positive footprint through systematic integration of the Ten Principles Compact principles and make state-owned enterprises leaders in sustainabili- and the Sustainable Development Goals into core business decisions, processes, ty. activities and culture. The flipside is opportunity. Evaluating current perfor- mance through a more sophisticated, next generation-oriented, sustainability RECOMMENDATIONS FOR THE GLOBAL COMPACT lens is a good starting point. Use this knowledge to drive operational efficiency, a. Targeted recruiting: Develop a differentiated recruitment strategy, in collab- solutions and innovation. Organisations which are already doing this will have oration with Local Networks, focusing on the “right” companies in terms of a distinct advantage. critical or high-risk planetary, social and governance issues and high-impact industries. b. Mobilise value chains: Call on large signatories to encourage participation of “The purpose of the economy is not producing GDP, small and medium-sized enterprises throughout their value chains. it is increasing the welfare of citizens, and it is c. Create a buzz: Launch a coordinated global mass-marketing campaign to promote sustainable business and to encourage partners and peers to sign on increasing the welfare of most citizens” to the Global Compact (e.g. using corporate twitter accounts). d. Build local capacity: Strengthen the capacity of Local Networks to recruit, JOSEPH STIEGLITZ to reach out to local companies, and to drive change at a scale and speed through a joint campaign approach. e. CEO-to-CEO: Convene dialogues between leading top executives participat- RECOMMENDATIONS ing in the Global Compact and executives from companies that are not yet 1. Embed oversight and accountability for sustainability performance within convinced of the sustainability agenda. the highest governance body (i.e. the Board). Assign clear responsibility to all core business functions. IMPACT 183 2. Assess sustainability footprint across the entire value chain, determine mate- b. Support integration: Raise awareness of practical tools and guidance on how rial issues and factor them in when measuring and accounting for business to embed the Global Compact objectives into business strategies and opera- performance and product cost. tions. 3. Systematically embed sustainability into goal setting, management systems c. From generic to specific: Stronger focus on sector and value chain specific and day-to-day operations. Monitor performance using agreed metrics and information through targeted peer-to-peer learning, convening events and indicators. disseminating best practice. 4. Develop transparent and integrated performance reporting. d. Race to the top: Re-energise and reward leadership. Expand engagement with 5. Lobby responsibly to ensure that public policy, marketing and communica- leading companies. tions are aligned with sustainability priorities. e. Improve reporting: Refresh the accountability model by strengthening the 6. Engage with Global Compact issue initiatives and principles relating to chal- searchability of the Communication on Progress reports to facilitate use lenging issues such as water, gender equality, human rights, business ethics among stakeholders. Support development of standardised and sector-spe- and biodiversity. cific reporting metrics, and bring in investors and other stakeholders to the discussion. RECOMMENDATIONS FOR THE GLOBAL COMPACT f. Strengthen local: Significantly build the capacity of Local Networks to realise a. Prioritise BIG issues: Match high-impact players with high-risk issues, geo- their full potential, by providing the ‘basics’ for success: a common brand, graphical hotspots or countries, on critical planetary, social and governance empowered leadership, strengthened governance requirements, stable fund- issues to have the greatest impact. ing and improved communication. 184 III pathways IMPACT 185 PATHWAY 2: b. Responsible lobbying: Develop guides for responsible lobbying and policy engagement in areas where governance gaps remain, in collaboration with B R E A K D OW N leading companies and stakeholders. c. Public-private dialogue: Convene smaller leadership dialogues between public BA R R I E R S , E N E R G I SE officials, leading companies and relevant trade and industry associations on critical sustainability issues (high-risk, high-impact approach), in collabo- P O SI T I V E DR I V E R S ration with Local Networks where relevant (including on a new measure of growth beyond GDP). In 2030, corporate sustainability will come of age, permeating all levels of com- d. Guide for governments: In close collaboration with the Friends of the Global merce. Effective corporate actions and performance are rewarded by fiscal and Compact government group, develop a guide to implement the Global other incentives. The corporate operating environment has shifted towards penal- Compact in government institutions, including public procurement to foster ising unsustainable business behaviour. Policy makers, regulators, investors and responsibility, accountability and sustainability in the public domain. educators have adopted consistent and complementary positions on sustainability. e. Foster a new attitude on tax payment: Propose new aspirational principles promoting the fair payment of taxes in every jurisdiction to discredit tax To achieve the vision of a sustainable and inclusive global economy, actors and avoidance and secretive tax strategies. conditions in the corporate operating environment need to facilitate the dis- f. Engagement at the national level: Mobilise Local Networks to use the new re- mantling of old practices and the building of new by sending the right signals, quirement to write National Plans to deliver on the Sustainable Development and by pooling competences and resources towards the right priorities. Strong Goals as a unique opportunity for responsible business engagement with directional impetus is needed to close the gap between where we are today, and public policy. where we need to be. Regulatory bodies, investors, educational institutions, civil g. Innovation platforms: Support platforms addressing opportunities and barri- society and the UN should work with common purpose to legitimise, incentiv- ers to leapfrog old solutions in emerging economies, to make new innovative ise and catalyse a systemic shift in the economy. models possible. The 4 enablers in this pathway are: ENABLER 2: ADDING VALUE TO SO CIET Y: 1. Better governance: Aligning regulation with sustainability priorities MOBILISING CAPITAL TO ENABLE THE TRANSITION 2. Add value to society: Mobilising capital to enable the transition Finance has to catch up. Most capital today is invested in companies based on 3. Transformative collaboration: Scaling up new practices to achieve impact short-term profit maximisation with no consideration for non-financial risks 4. Awaken the consumer: Catalysing consumer action in partnership with that may impact value in the longer term. The result is that financial markets business encourage unsustainable company behaviour. While an increasing volume of assets are managed according to ESG criteria, there is a growing gap between ENABLER 1: BET TER GOVERNANCE: commitments, such as to the Principles for Responsible Investment, and proper ALIGNING REGULATION WITH SUSTAINABILIT Y PRIORITIES integration into analysis and investment decisions. At the same time, invest- For the transition towards a sustainable and inclusive economy to take hold, ments in new, green, circular, sharing businesses and technologies have never sustainability must be adopted as a priority across all levels of governance. Any looked as attractive on a risk reward basis, and it is in the self-interest of capital policy, framework agreement, mandate, law, regulation or incentive that acts owners to allocate money towards sustainable investment. against this priority needs to be amended. Smart and well-designed regulatory frameworks must respond to immediate social and planetary needs whilst at RECOMMENDATIONS the same time lay the ground for long-term prosperity. The post-2015 agenda 1. Mainstream the adoption of the Principles for Responsible Investment requires: widespread adoption of the UN Sustainable Development Goals; a 2. Future-proof investment decisions by integrating ESG risks into mainstream strong global climate agreement from the COP 21 (Conference of the Parties investment analysis and decision-making. to the UNFCCC) negotiations; a new governance mechanism for global water, 3. Investors should actively engage with companies to further stewardship and food and energy supplies and regulation to protect our global commons such as responsible ownership. our air, oceans and fish stocks. 4. Require transparency and disclosure of corporate performance across a broader range of capitals. Contribute to development of standards for disclo- RECOMMENDATIONS sure of material ESG issues by sector in order to create best-in-class reference. 1. Adopt new measures for growth and prosperity – Beyond GDP –that include 5. Incentivise corporate management based on long-term rather than short- social and environmental ‘capitals’ in national accounts. term objectives. 2. Create confidence and incentivise transformation by: setting sustainability 6. Develop and encourage the use of financial instruments that advance sustain- targets, ensuring predictability and stability in policy frameworks, scaling able business practices and positive sustainability outcomes, such as access to up innovation incentives, introducing carbon pricing and ending harmful capital through green bonds. subsidies. 7. Develop a binding code of ethics for the financial sector. 3. Make information about public procurement public. 8. Transform education to train future financial analysts in sustainable invest- 4. Take robust steps to stamp out tax evasion. Crack down on tax havens, close ment practices. tax loop-holes, require companies to provide transparent county-by-country accounts, enforce equitable tax laws to ensure that tax benefits society. RECOMMENDATIONS FOR THE GLOBAL COMPACT 5. Education policy should embed systems theory, environmental science, a. Foster commitment: Continue to advocate the Principles for Responsible human rights and ethical conduct in all curricula. Investment. 6. Conduct multi-stakeholder consultation to develop National Plans to deliver b. From talk to walk: Work with the PRI to convene regular investor-company Sustainable Development Goals. Use these as a unique opportunity for busi- dialogues and collaboration to enhance skills and capabilities on critical sus- ness to influence and interact with policy and science. tainability issues to translate the language of sustainability into the language 7. Urgently address governance gaps related to critical planetary boundaries of finance. and social deficits that threaten to destabilise and disrupt the planet and c. Standardisation: Contribute to initiatives and involve leading participants to global society. develop standardised metrics for disclosure of sustainability performance by sector. RECOMMENDATIONS FOR THE GLOBAL COMPACT d. The power of clients: Mobilise leading companies to influence their owners to a. Voice the voice of business: Mobilise leading companies to speak out on issues move away from short-term perspectives to longer-term valuations. where there are regulatory gaps and call for better governance. Bring leading e. Engage regulators: Encourage work by national securities regulators to man- companies to the table in important international negotiations. date detailed disclosure of ESG risks by companies. 186 III pathways ENABLER 3: TRANSFORMATIVE COLLAB ORATION: ENABLER 4: AWAKEN THE CONSUMER: CATALYSING SCALING UP NEW PRACTICES TO ACHIEVE IMPACT CONSUMER ACTION IN PARTNERSHIP WITH BUSINESS We live in an era of interconnected trans-border problems too large and com- The digital revolution is fundamentally changing access to information. plex for any one actor or sector to solve alone. Embracing complexity means Whilst we still cannot assume everyone has access to telecommunications and recognising the need for cross-sector collaboration. Operating in silos has uncensored information, increasingly we are a global community with shared proven costly and failed to adequately address challenges; however, realising resources and Generation Next will be digital natives. The challenge now is synergies from collaboration has been difficult. Aligning objectives, pooling how far we trust information, how reliable it is and how it can push consumer resources, knowledge, competence and insights from a range of actors – private intention into action. To change consumer habits and decisions, global citizens and public – can deliver new solutions, bring new approaches and opportunities can be aided and stimulated to assume greater personal responsibility for their into light and scale efforts to transform existing structures and practices. How- lifestyles and choices. This will enable them to hold business to account, which ever, for collaboration to work and be more effective, there is a need to develop in turn will help business see the value in delivering sustainable products and better collaboration models. services. RECOMMENDATIONS RECOMMENDATIONS 1. Use and align the Sustainable Development Goals and the Global Compact 1. Strengthen laws and legal recourse for misleading advertising to increase principles as the basis of a common language of sustainability and sustainable scrutiny, and to ensure greater alignment with sustainability objectives, business. prevent green-washing and recognise best practices. 2. Foster a culture of collaboration and inclusivity, recognising diversity but 2. Enforce guidelines for product communication by supporting the expansion, corralling opinion around common values. standardisation and accessibility of product transparency disclosures to 3. Actively engage in multi-stakeholder initiatives around critical issues where strengthen the ability of consumers to evaluate products and take action. the organisation has expertise, impact or influence. 3. Push the valuation and measurement of non-financial capitals and impacts 4. Rebalance power bases by building capacity amongst the disenfranshised and allowing consumers to compare the sustainability performance – real cost empowering transition economies to make sustainable choices. and real value - of products and companies; and for sustainability to become a competitive advantage with increased transparency. RECOMMENDATIONS FOR THE GLOBAL COMPACT 4. Support consumer engagement and behavioural change campaigns. a. Facilitate collaboration: Continue to act as a convener and facilitator of col- laboration related to critical sustainability issues but allow others to support RECOMMENDATIONS FOR THE GLOBAL COMPACT at a more operational level. This may be a less obvious area for the Global Compact to lead and place full b. Transformative solutions: Use the convening power to bring in the ‘radicals’ efforts, primarily because of the multitude of existing organisations in this field for dialogues on new, ground-breaking innovations and solutions. Facilitate and the fact that consumer initiatives are often very local. However, some points conversation between ‘new’ businesses and the ‘old’ to share learning and can be raised: enable transfer of information and competence to smooth the transition. c. Assess impact: Improve and disseminate models and tools to improve the val- a. Share good practices: Collect good stories of how participants are working to ue and impact of partnerships, and call on companies and other stakeholders raise consumer awareness and influence demand and behaviour and drive to use tools when designing, managing and reporting on partnership impact. the ‘sustainable’ consumer. d. Share practices: Collect and share good stories of the impacts partnerships are b. Convene platforms to explore new models: Support dialogue and awareness of having on the ground. new business models which empower consumers to make more sustainable e. Foster transformative partnerships: To raise standards related to critical issues, choices, where relevant together with Local Networks. form collective action groups of leaders to lead the way. Convene the 8-10 c. Open source: Support efforts to increase transparency, create open source biggest businesses in any sector and match with the 4-5 most relevant govern- environments so that solutions can be copied, adopted and tailored to various ments to agree on collective targets. audiences. d. Local activities: As consumer initiatives often are local, link Global Compact Local Networks with most prominent players on the ground and support their efforts. IMPACT 187 188 III pathways IMPACT 189 PATHWAY 3: d. Celebrate stories of success: Be more vocal about signatory and partnership successes and the value of the Local Networks. N E W T H I N K I NG F OR e. Simplify the message: Develop a set of inspiring core messages about the Global Compact that unites issues and activities, to communicate more effec- A NEW REALIT Y tively its value. In 2030 we are adjusting towards the transition towards a sustainable and ENABLER 2: REDEFINING VALUE: inclusive economy. A new worldview has emerged where people have a different A NEW PERSPECTIVE ON WORTH AND PROSPERIT Y understanding of corporate success and outcomes. The narrow view of ‘economic Measuring affects what we do, and if measurements are flawed, so are deci- efficiency’ has been replaced by a broader measure of how organisations contrib- sions. The current practice of measuring GDP means that we do not capture ute towards economic prosperity, ecosystem resilience, social cohesion and a good vital aspects of national wealth and well-being (e.g. quality of natural resources quality of life for all. and health). We need a new holistic measure of wealth and worth, reflecting a broader picture of progress and prosperity, beyond GDP. This implies rede- To have a chance of achieving this vision, we need to accept new ways of think- fining the purpose of the corporation to deliver value across a broader range ing. Even though change is often resisted, experience shows that even the most of capitals, not just financial profit for the shareholders. The purpose of the embedded cultural norms can be reversed. Real change has happened in the economy and business will be to add value also to society and the planet. At the past, it can happen again. individual level, a new understanding of success and worth should be pro- The Global Compact is uniquely positioned to facilitate a renewal in thinking moted, not based on the accumulation of material wealth but enhancing other and priorities in the global business community. Our recommendations below relational, collective qualities, based on the fundamental dignity of each human involve creating a sea change for sustainability, bringing networks of people being. together and redefining prosperity. RECOMMENDATIONS The four enablers in this pathway: 1. Develop a new notion of growth, redefine prosperity and the role of the cor- 1. A compelling story: Creating a new narrative of opportunity poration and translate this into concrete tools to measure all types of capitals. 2. Redefining value: A new perspective of worth and prosperity 2. Rethink current financial and economic models and consider concepts such 3. Visionary leaders: Redefining the notion of leadership as the ‘regenerative economy’ recognising the need to regenerate the funda- 4. Spreading the messages: Getting the word out mental capitals. 3. Advance a new understanding of human value and worth, away from viewing ENABLER 1: A COMPELLING STORY: human success in terms of accumulation of material goods. Promote a wider CREATING A NEW NARRATIVE OF OPPORTUNIT Y view of ‘quality of life’. The world needs a new language of sustainability that is both transformative 4. Governments should integrate ‘well-being’ indexes and hold all agencies and realistic, and that communicates, simplifies and inspires. A story about the accountable for measuring progress against them. challenges we face and the consequences of inaction, but most importantly a vision of the desired future that we would like to see – one that is safer, fairer RECOMMENDATIONS FOR THE GLOBAL COMPACT and more vibrant. Rational facts appear to have insufficient capacity to compel a. A new notion of prosperity: Support initiatives to develop new ways of mea- change. To set in motion new ways of thinking and new courses of action, we suring growth and prosperity. Take initiative to facilitate multi-stakeholder need a compelling narrative focusing on the upside of living within the limits dialogue to advance the issue through platforms like LEAD. of the planet - emphasising sustainability-centred creativity, ingenuity and b. Total impact: Call on participants to lead by example by measuring total entrepreneurship. impact and implementing integrated bottom line accounting. c. Advancing human values: Encourage companies to develop organisational RECOMMENDATIONS strategies that safeguard the human and labour rights principles, emphasising 1. Create the positive vision for the world, uniting all actors in society, mobil- the dignity and worth of each employee. ised around the new Sustainable Development Goals. d. Protecting the well-being of employees: Encourage participants to improve 2. Develop the 21st Century Capitalism Story about the new sustainable econo- work-life balance, implement flexible working hours and other efforts to my, revamping the purpose from generating GDP to increasing the well- better the lives of employees. being of all citizens. 3. Balance the language of risk with the language of opportunity. A new set of ENABLER 3: VISIONARY LEADERS: messages should focus on sustainability not as about risks or constraints, but REDEFINING THE NOTION LEADERSHIP as about innovation, creativity and smarter ways of living. A fundamental shift in the quality of leadership is needed, across all domains, 4. Move the proof of concept by sharing convincing success stories about if we are to bring about positive change. Leaders must become ambassadors actions, breakthrough innovations and solutions to motivate and encourage of change, and reconnect with a greater purpose that serves the greater good. behavioural change. Short-termism fostered by political election cycles, quarterly performance 5. Popularise sustainability information by developing short and concise reporting and immediate rewards represents significant barriers for leadership narratives tailoring messages to specific audiences. and decisions for the long-term. To restore legitimacy and trust, business leadership must be invigorated and RECOMMENDATIONS FOR THE GLOBAL COMPACT reconnected with societal progress. The attention of the boardroom to foster a. Make the vision a laboratory for action: Convene stakeholder dialogues to big and bold leadership is needed to ensure we actively manage risks, identify build a shared understanding of what an ‘inclusive and sustainable global opportunities and catalyse innovation. Leaders across all domains must rise to economy’ looks like – the destination – and use it as a reverse ‘engineering’ the challenge and take responsibility for steering the world towards a resilient, frame in terms of the technologies, investments, policies and behaviours stable and equitable future within the environmental limits of the planet. needed to get there. b. Showcase inspiring practices and solutions: Continue sharing good practices to RECOMMENDATIONS inspire companies to take the first step and to encourage ‘the possible’. From 1. Network with other leaders to develop collective visions for – and pathways the pool of participants, focus on identifying and highlighting vibrant new towards – sustainability within their spheres of influence (country, sector). business models and solutions of the new economy. 2. Within own organisations, leaders from all sectors must develop long-term c. Create the boardroom story: To capture the attention of boardrooms around visions and ambitious (zero footprint) aspirations and targets aligned with the world, focus on telling stories not only of risks but of opportunities, about long-term sustainability objectives, including mapping how the company can innovation, future winners and losers. contribute to the Sustainable Development Goals. 190 III pathways 3. CEOs and leadership should better advocate for sustainable business practic- 4. Leverage artists and storytellers that can help raise awareness among the es and take long-term perspectives in public commentary, and towards peers younger generation. and stakeholders including investors. 4. Publicly recognise and convey that the kind of growth created in the future RECOMMENDATIONS FOR THE GLOBAL COMPACT must be different from the kind of growth created in the past. a. Targeted outreach: Conduct more targeted outreach towards different audi- 5. Show courage and dare to voice concerns that may be unpopular and uncom- ences (sectors, leaders, youth, authorities). Identify key agents of change in fortable to hear. By clearly articulating positions such as ‘business as usual the network, and collaborate with them to mobilise broader networks. cannot continue’, business leaders can help to challenge outdated convention- b. Local campaigns: Initiate regular outreach campaigns together with the Local al wisdom and create the conditions for change. Networks, and support them more actively in their communication efforts. 6. Be political: Support and advocate for good regulation to set the framework Develop a more standardised approach to communication across the Global for sustainability innovation. Publicly welcome clear policy frameworks with Compact network. appropriate targets and price signals. c. Convene a multi-stakeholder meeting to develop the 21st century messages for the future of the Global Compact, focusing on simple messages that speak RECOMMENDATIONS FOR THE GLOBAL COMPACT the language of business, and that can be easily tailored to specific markets 1. Reward true leadership: Create a platform or mechanism for recognising and and different audiences. rewarding the real visionary business leaders not only by participating in the d. Involve religion: Invite religious leaders to become more engaged in sharing Global Compact but by significantly contributing to raising the bar. the message about sustainable principled business. 2. Define the 21st century CEO: LEAD should engage its participating compa- e. Speak to Generation Next: Explore use of new media to communicate brief, nies to discuss and describe the role of business leaders. What does the 21st inspirational stories from the network. Promote the use of open source ad- century business leader look like? What are expectations of him/her? visory tools, and information sharing through collaboration and unconven- 3. Use convening role to create small networks of leaders: Create sector- and tional learning arenas on the web, through art and in public spaces to engage issue-specific networks of C-suite leaders to develop more systemic and a wider audience. standardised solutions. ENABLER 4: SPREADING THE MESSAGES: Whereas industrialisation was the great project of modernity, sustain- GET TING THE WORD OUT ability has become the greatest project of our time. The question is: The Global Compact has undoubtedly had a positive impact on the world by Will mankind step up, take responsibility and meet this challenge in gradually embedding the universal values in the global market place. However, time to avert major crisis? despite an ever increasing proportion of the world’s corporations supporting Global Compact principles, the vast majority of global business and the public in general are unfamiliar with the initiative. Even the employees of participating companies have a low level of awareness with regard to how their own organi- sations are adopting and acting on the principles. Also the public at large know relatively little about the Global Compact despite the broad support it has with 8,041 participating companies. There is an urgent need to revamp communica- tion and marketing – exploring new strategies and tools to get the message out. C ONC LU SION RECOMMENDATIONS It is naive to think that the challenges we face today are marginal. They are not. 1. Global Compact participants and partners should initiate a joint marketing In the face of the greatest challenge humanity has ever faced – the gradual de- campaign to inform peers, partners and suppliers about the Global Compact struction of the planet upon which we depend for our existence – our response (such as through the company or organisations social media accounts). must not be inaction. It must not be resistance to change. Our response must 2. Government leaders should underscore the importance of responsible busi- be to trust science, embrace change and show leadership to turn challenges into ness in all public remarks to the business community, and refer to the Global opportunities. Compact as the world’s most acknowledged framework for sustainability. Because in change lies opportunity. The global business community must 3. Mainstream media should take a more active role and responsibility to ensure seize this juncture in history and become part of the solution by reconnecting that positive stories about new sustainable business models, future-oriented with a broader social purpose, and by recognising that the well-being of society solutions, and radical breakthrough innovations are communicated broadly. and the planet is core to business success. IMPACT 191 192 CONCLUSION A CA L L TO AC T ION FOR ... IMPACT 193 - Business to join the Global Compact and fully embed sustainability in business strategy and day-to-day operations - Governments to recognise and support the Global Compact, create an enabling environment for sustainable business, and align regulation with sustainability priorities - Investors to sign up to the Principles for Responsible Investment and ensure environmental, social and governance issues are incorporated in investment analysis and decision-making - Business and industry associations to encourage their members to pursue sustainability and adopt the Global Compact’s principles - Business schools to commit to the Principles for Responsible Management Education and incorporate sustainability into curricula and research - Civil society to collaborate with business to develop solutions to societal challenges, while holding companies accountable for their actions - The United Nations to actively engage with business to achieve the Sustainable Development Goals, and promote the Global Compact 194 195 END NOTES & COMMENTS Part I – History status to non-communicating and can 33 United Nations (1999): Secretary-Gen- 59 Together with UNEP FI in 2007 eventually lead to the expulsion of the eral Proposes Global Compact on 1 Financial Times (2015): Bank fines: get participant. Human Rights, Labour, Environment, 60 In 2009 the data, Financial Times, 22 May 2015. in Address to World Economic Forum Available from: http://blogs.ft.com/ftda 15 The Global Reporting Initiative registers in Davos. Press Release SG/SM/6881. Part III – Pathways ta/2015/05/22/bank-fines-data/? sustainability reports that are published Available from: http://www.un.org/press/ globally. Available from: http://database. en/1999/19990201.sgsm6881.html 1 Sukhdev, P. (2014): Valuing Natural 2 Center for Strategic and International globalreporting.org Capital: What Next and Why? Huffington Studies (2014): The Cost of Corruption: 34 Kell, G. (2000): Remarks on the Global Post, http://www.huffingtonpost.com/ Strategies for Ending a Tax on Pri- 16 Shift (2014) Compact - Corporate Citizenship: Defin- pavan-sukhdev/valuing-natural vate-sector-led Growth. Available from: ing the New Responsibilities, Remarks by -capital-w_b_5193610.html http://csis.org/files/publication/140204_ 17 Global Carbon Atlas (2015). Available Georg Kell 24 October 2000 at Chatahm Hameed_CostsOfCorruption_Web.pdf from: http://www.globalcarbonatlas. House, London. Available from: https:// 2 DNV GL (2014) org/?q=en/content/welcome-carbon-at- www.unglobalcompact.org/NewsAnd Part II – Change las Events/speeches_and_statements/ chatam_house_london.html 1 As of May 2015 18 Global Greenhouse Gas Reference Network (2015): Trends in Atmospheric 35 PwC (2014) 2 Fortune Datastore (2014) Carbon Dioxide. Available from: http:// www.esrl.noaa.gov/gmd/ccgg/trends/ 36 MIT Sloan School Management Review 3 Wages of Global Compact signatories and The Boston Consulting Group on the Fortune Global 500 list of year 19 Deloitte and UN Global Compact (2014): (2015) 2014 have been estimated based on the Caring for Climate progress report 2014. number of employees of these compa- Available from: https://www.unglobal 37 MIT Sloan Management Review (2013) nies and an US annual mean wage of compact.org/docs/issues_doc/Environ USD 47 230 (United States Department ment/climate/C4C-ProgReport2014.pdf 38 Accenture (2013) of Labor, Bureau of Labor Statistics). 20 Deloitte and UN Global Compact (2014): 39 PwC (2014) 4 Statista (2015) Caring for Climate progress report 2014. Available from: https://www.unglobal 40 KPMG (2013) 5 The Global Private Sector Workforce compact.org/docs/issues_doc/Environ has been estimated based on the ment/climate/C4C-ProgReport2014.pdf 41 UN Global Compact Office (May, 2015) Global Employed Workforce and the average share of public employment 21 GLOBE International and the Grantham 42 UN Global Compact Office (May, 2015) in total employment (Survey on public Research Institute on Climate Change sector employment statistics, Bureau of and the Environment (2015) 43 UN Global Compact Office (May, 2015) Statistics, ILO, October 1998). The Global Employed Workforce is based on World 22 Deloitte and UN Global Compact (2014) 44 UN Global Compact Office (May, 2015) Development indicators ‘Labor Force, total’ and ‘Labor force participation rate, 23 Deloitte and UN Global Compact (2014) 45 Factiva, Inc. (2015) total’ (World Bank - World Development Indicators, 2015-04-14). 24 Accenture (2013) 46 2015 Global Compact Implementation survey 6 World Bank 2015: World Development 25 MIT Sloan School Management Review Indicators (Listed domestic companies, and The Boston Consulting Group 47 EY (2013) total). Available from: http://data.world (2015) bank.org/indicator/CM.MKT.LDOM.NO 48 UN Women and UN Global Compact 26 The G8 is now G7 (2015). Gender Equality and Women’s 7 Many of these listed companies are, Empowerment Reporting Trends for UN traded on stock exchanges that are 27 Relander, B. (2015). Investing in Green Global Compact Companies That Signed Partner Exchanges to the Sustainable Technology - The Future Is Now, the WEPs. Available from: http://weprin Stock Exchanges initiative of the Global Investopedia. Available from: http:// ciples.unglobalcompact.org/files/attach Compact. www.investopedia.com/articles/invest ments/Gender_Equality_and_Women’s_ ing/040915/investing-green-technolo Empowerment_Reporting_Trends.pdf 8 2015 Global Compact Implementation gythe-future-now.asp survey 49 The World Bank (2013) 28 Eurosif (2014): European SRI Study 2014. 9 2015 Global Compact Implementation Available from: http://www.eurosif.org/ 50 Strategy& and PwC (2012) survey wp-content/uploads/2014/09/Eurosif -SRI-Study-20142.pdf 51 Catalyst (2015) 10 WEF (2015) 29 Throughout this report responsible 52 ILO (2015) investing and sustainable investing are 11 DNV GL (2014) used interchangeably and are defined as 53 OECD (2012) an approach to investment that explicitly 12 The data does not reflect that some of acknowledges the relevance to the 54 DNV GL (2014) the larger companies had negative sav- investor of environmental, social and ings over time due to company growth governance (ESG) factors, and the long- 55 UN Global Compact (2013): Local or improved methods of measurement. term health and stability of the market as Network Report 2013. Available from: Efficiency measures were not signifi- a whole. It recognises that the genera- https://www.unglobalcompact.org/docs/ cant enough or largely comparable, tion of long-term sustainable returns is publications/LN_Report_2013.pdf but in terms of water saved relative to dependent on stable, well-functioning company size we can assume the impact and well governed social, environmental 56 Based on interview with the first described is a conservative estimate. and economic systems.’ (PRI) chairman of the Indian local network Dr Report content also varies significantly, Balyan, and information from Shabnam and some reports were excluded as they 30 The PRI Clearinghouse is a unique global Siddiqui, Project Director Global Com- do not provide comparable data. platform for collaborative engagement pact Network India initiatives. It provides PRI signatories with 13 Ceres (2014) a private forum to pool resources, share 57 South African Government (2013): information, enhance influence and Speech by Minister Collins Chabane: 14 Communication on Progress (COP): engage with companies, stakeholders, Roundtable of UN Global Compact Companies participating in the Global policymakers and other actors in the in- Network in South Africa, Topic: Anti- Compact commit to issue an annual vestment value chain on environmental, Corruption Collective Action and Communication on Progress, a public social and corporate governance issues Integrity in Business. Available from: disclosure to stakeholders (e.g., across different sectors and regions. http://www.gov.za/minister-collins- investors, consumers, civil society, chabane-roundtable-un-global governments, etc.) on progress made in 31 2015 UN-business partnership survey, -compact-network-south-africa implementing the ten principles of the conducted by the UN Global Compact. 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Available from: http://data.worldbank. org/english/issues/water/contributions/ org/indicator/CM.MKT.LDOM.NO Adamson, Rebecca, Founder and President, Bluthner, Andreas, Global Coordinator Food PrivateSector/Veolia.pdf First Peoples Worldwide Fortification, BASF Bock, Kurt, Chairman of the Board of Executive Directors, BASF SE Vittal, N. (2012): Ending Corruption – how World Bank (2015): Labor force participa- Ademola, Oyinlola, Deputy Editor in Chief, to clean up India, Penguin Viking, India. tion rate, total (% of total population ages Tell Magazine Broderick, Elizabeth, Sex Discrimination 15+) (modeled ILO estimate). Available Commissioner, Australian Human Rights Water Footprint Network: Available from: from: http://data.worldbank.org/indicator/ Adetayo, Wonu, CEO, Soft Skills / Kainos Commission http://waterfootprint.org/en/ SL.TLF.CACT.ZS Consulting Brooks, Jermyn, Chair of Business Advisory Water is a human Rights (2013): Unions World Bank (2015): Labor force participa- Ahmed, Mansur, Director, Stakeholder Board, Transparency International and others expose lobbying of private water tion rate, total (% of total population ages Relations and Corporate Communications, company to influence EU policy. Available 15+) (modeled ILO estimate). 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Available from: http://data.worldbank. 216 34 56 org/indicator/CM.MKT.LDOM.NO Interviews countries represented top excecutives conducted in total by the interviewees interviewed 202 INTERVIEW LIST Faine, Ignasi, Finance Director, Global Garro, Isabel, Managing Director, Global Harvey, Evan, Director of Corporate Jennings, Philip, General Secretary, Compact Network Spain Compact Network Spain Responsibility, NASDAQ OMX UNI Global Union Fainé de Garriga, Ignasi, Communication Ghosh, Anirban, Senior Vice President: Haufler, Virginia Ann, Director, Global Joaquin, Garralda, Dean of Academic and Corporate Responsibility Director, Sustainability, Mahindra & Mahindra Communities, University of Maryland Affairs, Instituto de Empresa AGBAR Gifford, James, Senior Fellow, Initiative for Henzell-Thomas, Simon, Head of Junardy, Y.W., President Commissioner, PT Favaretto, Sonia, Press and Sustainability Responsible Investment, Harvard Kennedy Stakeholder Engagement, IKEA Rajawali Corpora Director, BM&F BOVESPA School Holliday, Chad, Chairman, Royal Dutch Shell Jungk, Margaret, Independent Advisor Filgueiras, Liesel, Human Rights, Indigenous Ginster, Martin, Specialist Environmental to the United Nations, Danish Institute for Community Relations, International Advisor, Sasol Hong-jae, Im, Vice president and Secretary- Human Rights Community Relations and Vale Volunteers, General, Global Compact Network Korea Vale Giri, Sunil, Associate Professor, Kakabadse, Yolanda, President, WWF Management Development Institute, Hovi, Kirsten Margrethe, Head of Viability International Fogelberg, Teresa, Deputy Chief Executive, Murshidabad Reporting, Norsk Hydro ASA GRI Kantrow, Louise, Permanent Representative Gitsham, Matthew, Director of the Ashridge Hoxtell, Wade, Head of Operations, Global to the United Nations, International Joan, Fontrodona, Professor and Head of Centre for Business and Sustainability, Public Policy Institute Chamber of Commerce Business Ethics Department, IESE Ashridge Business School Hutchings, Graham, Managing Director, Karp, Erika, Founder & CEO, Cornerstone Forstnig-Errath, Birgit, Director Collective Gorleri, Constanza, Sustainability Manager, Oxford Analytica Capital Action, Siemens AG Banco Galicia Ikpoki, Michael, CEO, MTN Nigeria Keefe, Joseph, President & CEO, Pax World Frankoul, Hiba, Partnerships Manager, Goswami, Pranjal Jyoti, Head of Communications Limited UNICEF Sustainability, Novozymes South Asia Pvt. Kelan, Elisabeth, Professor of Leadership, Ltd. Im, Hong-Jae, Local Network representative, Cranfield School of Management Freeman, Bennett, Former SVP, Global Compact Network Korea Sustainability, Research and Policy, Calvert Grant, David, Sustainable Development Ki-moon, Ban, Secretary General Investments Project Manager, SABMiller Plc Jafa, Sayantani, Principal Audit Director United Nations at Civil Service, Institution of Comptroller Frolova, Renata, Head of Responsible Gulati, Mukesh, Executive Director, and Auditor General, Government of India, Koch, Stefanie, Head of Corporate Social Procurement, Maersk Foundation for MSME Cluster Kolkata Responsibility, Holcim Technology Ltd Fuertes, Flavio, Global Compact Local Guyton, Odell, Corporate Vice President Jagun, Ayootola, Chief Compliance Officer Kohli, Uddesh, Chairman Emeretus, Coordinator, Global Compact Network and Head of Global Compliance, Jabil & Company Secretary, Oando Plc Construction Industry Development Council Argentina Circuit Janssen, Juergen, Local Network Kreissler, Barbara, Partnerships and Results Gadegaard, Anne, Director Global TBL Haibin, Li, Director, China Mobile representative, Global Compact Network Monitoring Branch, UNIDO Management, Novo Nordisk Germany (DGCN) Hargil, Patricia, Head of Global Strategic Kruse, Claudia, Managing Director, Head of Gagnon, Damian, Corporate Compliance Programs, Alcatel-Lucent Janus, Bertrand, Head of CSR Reporting, Governance & Sustainability, APG and Social Responsibility Officer, Lazare Total Kaplan 43 Interviews by category Business 114 Civil society 31 Academia 23 Finance 20 Local Network representative 14 UN and intergovernmental organisations 11 Government 3 44 Interviews by region Europe 81 North America 44 Asia 37 Latin America & the Carribean 25 Africa 24 MENA 3 Oceania 2 203 Labelle, Huguette, Former Chair, Nielsen, Peder Holk, CEO, Novozymes Randers, Jørgen, Professor of Climate Tewari, Col. Prakash, Vice President: CSR & Transparency International Strategy, BI Norwegian Business School Education, Jindal Steel & Power Limited Niethammer, Carmen, Employment Lead for Langlois, Alejandro, Director, ComunicaRSE IFC’s Gender Secretariat, IFC Rasche, Andreas, Professor of Business Thatcher, Anastasia, Senior Manager for in Society, Centre for Corporate Social Accenture Development, Partnerships, Laoye, Jaiyeola, Director-General Designate, Nordstrom, Mark, Senior Labour and Responsibility, Accenture The Nigerian Economic Summit Group Employment Counsel, General Electric Copenhagen Business School Tilaar, Martha, Chairperson, Martha Tilaar Larsen, Søren, Head of SRI, Nykredit Nwagwu, Ijeoma, Manager, First Bank Rena, Cecilia, Manager for Institutional Group Sustainability Centre, Lagos Business School Strategies of Sustainability, GRUPO Arcor Le Roux, Corli, Head of SRI Index and Tomás, Marta, Marketing and Development Sustainability, Johannesburg Stock Nylund, Bo Viktor, Senior Advisor - Reynolds, Fiona, Managing Director, Manager, Global Compact Network Spain Exchange Corporate Social Responsibility, UNICEF Principles for Responsible Investment Udoh, Uduak Nelson, Group Chief Internal Leisenger, Klaus, Former President, Oberti, Silvina, Executive Director, YPF Richter, Klaus, CSR Manager - Coordination Auditor, First Bank of Nigeria Limited Novartis Foundation CSR & Sustainability, Volkswagen AG Ukpanah, Uto, Company Secretary, Olowola, Bekeme, Executive Director, MTN Nigeria Communications Ltd. Li, Decheng, Director General and CSR-in- Action Rippman, Heather, Water Program Manager, Executive Vice Chairman, China Enterprise Nike, Inc. Vargas, Anamaria, Coordinator, Global Confederation Onajide, Funmi, GM, Corporate Affairs, MTN Compact Network Colombia Nigeria Communications Ltd. Robbins, Rachel, Non Executive Director, Liu, Zhenya, Chair, State Grid Corporation Atlas Mara Co-Nvest Limited, FINCA Vazón, Silvina, CSR and Institutional deputy, of China Orr, Stuart, Freshwater Manager, WWF Microfinance Holding Company LLC Rio Uruguay Seguros Llapur, Betina, External Affairs Manager, Gas Øvlisen, Mads, Chair of the UN Global Robinson, Mary, President and Chair, The Victor-Laniyan, Omobolanle, Head of Natural Fenosa Compact Advisory Group on Supply Chain Board of Trustees of the Mary Robinson Sustainability, Access Bank Plc Sustainability and Former CEO of Novo Foundation - Climate Justice Madan, Poonam, Founder & Managing Nordisk Vikas, Namita, Senior President and Country Director, Inesa Advisory Services Pvt. Ltd. Rodriguez, Vanesa, Communication Head – Responsible Banking, YES BANK Pablo, Martín, Director Madrid. Journalist, Manager, Global Compact Network Spain Maidan, Ran, CEO, Netafim CORRESPONSABLES Waygood, Steve, Chief Responsible Investment Officer, Aviva Investors Manhas, Reg, Senior Vice President, External Paila, Dr. Anil Subea Rao, Dean & Director, Rossa, Marcos Muniz, Sustainability & Affairs, Kosmos Energy Welingkar Institute of Management Workplace Safety Manager, Grupo Libra Wei, Zhang, Project Manager, China Mobile Mateo, Tess, Managing Director & Founder, Pais, Gaynor, CEO, International Resources Ruggie, John, Berthold Beitz Professor in Wilson, Matt, Head of Environmental, CXCatalysts for Fairer Trade (IRFT) Human Rights and International Affairs, Sustainability Centre of Excellence, Harvard Kennedy School GlaxoSmithKline Melvin, Colin, Founder & CEO, Hermes EOS Palomeque, Mariel, Comunities Manager, YPF Salazar-Xirinachs, José Manuel, Assistant Withanage, Rasika, Marketing and Midttun, Atle, Professor of Innovation and Director - General for Policy, International Sustainability, Virtusa Corporation Economic Organisation, BI Norwegian Pandey, Vinod, Head of Government Affairs, Labour Organization Business School BMW Group India Xavier, Guerrero, Deputy General Manager, Sané, Pierre, Founder and President, ANUE Migliorato, Marina, Global Sustainability Pandey, Pooran Chandra, Executive Director, Imagine Africa Institute Director, Enel Global Compact Network India Xuelian, Wen, Deputy Director, China Sanz, Marta, HHRR and Administration Mobile Mills, Laraine, Private Sector Partnerships Parkes, Carole, Director of Social Manager, COPREDIJE Specialist, UN Women Responsibility and Sustainability, Aston Yaniskowski, Mario, Institutional Relations University Shahaney, Roopali, Group General Manager, Transportadora de Gas del Sur Miriklis, Freda, Co-chair, Commonwealth Manager, Paharpur Business Centre Businesswomen Network (CBW) Peleg, Amir, Founder and CEO, TaKaDu Yong-Seung Park, Stephen, Dean, Office Share, Bert, Senior Global Director, Beer & of International Affairs; Director, Institute Montemayor, Antonio Ernesto Guerrero, Perez, Gustavo, Director de Responsabilidad Better World, ABInBev for Peace through Commerce; Professor of Director CSR Observatory, Executive Board Social, TOKS Human Resource Management, Kyung Hee UGT, UGT Silva Ferrada, Juan Ramon, Senior Executive University Pes, Angel, President, Global Compact Director Sustainability, Acciona Moody-Stuart, Sir Mark, Chairman, Network Spain Zaman, Shahamin, Local Network contact Foundation for the Global Compact Singh, Gen Rajender, CEO, DLF Foundation person, Global Compact Network Philippe, Elizabeth, Sponsor Development/ Bangladesh Moreno, Claudio, Head of CSR, PR Manager, UNFCU Singh, Ravi Pratap, Regional Director, Transportadora de Gas del Norte Aide et Action Zhijun, Yang, Project Manager, China Mobile Phillips, Foluso, Chairman, The Nigerian Morrison, Jason, Globalization Program Economic Summit Group Sirito, Adriana, Inclusive Business Coord., Zurita, Antonio Fuertes, Reputation and Director, Pacific Institute Business School of the Pontificia UCA Sustainability Senior Manager, Gas Natural Pickard, Simon, Director General, The Fenosa Muritala, Ayo, CEO, Knewrow Resources Academy of Business in Society Skancke, Martin, Chair of the Board, Principles for Responsible Investment (PRI) Murphy, Helen, Social Responsibility and Pineda, Alberto Carrillo, Head of Climate Reporting Manager, IPIECA Business Engagement, WWF International Slaatten, Bente G. Herlofsen, Chief Communication and Branding Officer, Yara Musa, Fernando, CEO, Braskem America Polman, Paul, CEO, Unilever Smith, Benjamin, Senior Officer for Myers, Susan, Senior Vice President, UN Portmann, Caroline, Vice President Corporate Social Responsibility, Foundation Sustainability Affairs, Credit Suisse International Labour Organization Nanda, N.K., Director - Technical Price, Abi, Senior CSR Specialist, Hitachi Sonesson, Casper, Deputy Director, Private NMDC Limited Europe Sector, UNDP Naqvi, Arif, Group Chief Executive, Abraaj Purg, Danica, President, Central and East Soto, Jorge, Sustainable Development Group European Management, Development Director, Braskem Association Natour, Faris, Managing Director, Advisory Stormer, Susanne, Vice President, Chief Services, BSR Raina, Jyrki, General Secretary, IndustriALL Sustainability Officer, Novo Nordisk Global Union Nelson, Marilyn Carlson, Former Chair & Strozzi, Valeria, CSR Analyst, Grupo Peñaflor Executive Officer, Carlson Ramachandran, Dr. Raman, Chairman & Managing Director, BASF India Sullivan, Rory, Independent Adviser: Nelson, Jane, Director Corporate, Social Responsible Investment and Corporate Responsibility Initiative, Kennedy School of Rambharos, Mandy, Senior Manager, Responsibility Government, Harvard University Climate Change and Sustainable Development, Eskom 205 ACKNOWLEDGING THE TEAM This report is a joint product of DNV GL and the UN Global Compac Office, marking the occasion of the 15th anniversary of the Global Compact. The following people have contributed to the assessment. DNV GL PROJECT DIRECTOR Cecilie Hultmann CORE TEAM Kjersti Aalbu Louise Brown Kate Bruintjes Sophie Davidsson Mark Line Anne Louise Koefoed SOUNDING BOARD Bjørn K. Haugland (Project Sponsor) Sverre Alvik Anne Karin Kvam Asun Lera St. Clair Anders Magnus Løken Sven Mollekleiv CONTRIBUTORS Kristine Berg Lisa Berg Carolina Conde Agnes Dudek Hanne Fjeldskår Roma Gore Henriette Frølich Holte Dave Knight Youri Lie Deepika Mital Adekola Oyenuga Bettina Reinboth Miguel Alejandro Rescalvo Egle Sakalauskaite Simen Sletsjøe Anna Turrell Nandkumar Vadakepatth Dag Thorstensen Vegard Tørstad Emily Woodgate DESIGN ANTI UN GLOBAL COMPACT OFFICE Georg Kell Carrie Hall Bianca Wilson We would like to acknowledge and thank the numerous people at the UN Global Compact Office and the many Local Networks who have generously shared information with the DNV GL team and spent many hours discussing the project with us. A SPECIAL THANK YOU Mr. Jørgen Randers, Professor of Climate Strategy, Norwegian Business School Mr. Atle Midthun, Professor, Norwegian Business School, Department of Innovation and Economic Organisation For taking the time to discuss the assessment with us. 93 Project Coordinator DEEPIKA MITAL Contributing Writer TORE HØIFØDT Contributing Photographer AL SIGRID BJORBEKKMO Published by DNV GL AS Sponsored by THE FOUNDATION DET NORSKE VERITAS Print PROOF 7, NYC Volume 3000 Paper FINCH FINE