The UN Global Compact: A Voluntary Approach to Connecting Global Policy with Local Business Action
Georg Kell, Executive Head, United Nations Global Compact

Albert Fishlow: Thank you very much for that presentation. As an economist I'm not sure how to react quite, but I'm still thinking about it.

The next speaker is Georg Kell, who is the Executive Head of the United Nations Global Compact, the world's largest voluntarily corporate citizenship initiative with more than 2,400 participants from more than 80 countries. He had worked earlier with the UN Conference on Trade and Development. He ?? and he headed it from 1993 to '97. He was in 1997 a senior officer in the Executive Office of Secretary-General Koffi Annan, responsible for fostering cooperation with the private sector. It's a great pleasure to introduce Georg Kell, who will speak about the UN Global Compact, A Voluntary Approach to Connecting Global Policy with Local Business Action.

Georg Kell: Thank you for these kind words. Thanks to Jeffrey Sachs for inviting me here. What I want to do here in fifteen minutes or so is share with you both the rational, why they United Nations is reaching out to business, and also share with you experiences made so far to highlight some of the lessons learned I think we can digest as of this point already.

I believe that this is important because the United Nations Global Compact is a voluntary corporate citizenship initiative. As such it has its limits, it has its strengths. It's a complement to what governments do or don't do, and understanding how these complementarities play out I believe it's important for all those who believe in hybrids between public and private initiatives.

So let me start off by recalling why the UN Global Compact was started in the first place. It was actually an accident, it was never meant to be an operational initiative. Koffi Annan in a speech on a sunny Sunday afternoon at the World Economic Forum, Carol you were there, challenged the business leaders who were gathered there to take responsibilities within their own sphere of influence, arguing that look, globalization has brought you enormous opportunities, you have taken advantage of it, it's not only fair but it's also right for you to take on some of the responsibilities, and here is a set of universal principles drawn from legitimized frameworks conventions which governments have long recognized but whose implementation is lagging behind. And you, business leaders, if you implement them within your own operation sphere of influence, then you do two things. First you make the global market more stable, you give it environmental and social pillars, and you also make it more inclusive because once you embrace UN principles you also realize that acting in support of UN goals makes good business sense for you. So this is how the speech was in essence conveyed to business leaders, and the background was and remains very much that business has long gone global, but governments and most people are still local, we haven't caught up yet with the meaning of interdependence, and most policymakers indeed are on a short-term election cycle, and not too often does it happen that policy leader speak collectively to provide a voice of reason that lasts long into the future.

Business leaders at the forefront of taking advantage of opportunities and being called upon to implement and internalize universal principles in the area of human rights, workplace conditions, the environment, and anticorruption is a daunting challenge. And the initiative initially introduced had only fifty corporations and NGOs who embraced it. Within the last couple of years a phenomenal growth has happened, and the concept of engagement through learning, through examples, through project partnerships on the ground, has taken off like a wildfire. Today there are almost 3,000 participants from over 90 countries organized increasingly in local networks. Currently there are 50 of such local networks in existence, and they come in different degrees of formalization.

So what are some of the lessons learned so far? First, the issue has gone global. Responsibility for business is no longer a moral case. Initially NGOs, consumers, press and media made the case. Today the message has been heard, the moral case is understood at least. Increasingly the issue has moved from making the moral case towards the business case, and here important trends have indeed happened just in the last couple of years. Initially CEOs stepped in because they wanted to protect reputation. Avoiding costs was really the lesson learned from past mistakes. From avoiding costs to creating value means that financial markets and others who define on long-term viability slowly kick in. And here comes the good news. Finally financial markets, long-term investors, are increasingly recognizing that environmental, social and governance issues are not just soft issues but increasingly are material to long-term performance. This thinking is not yet fully established, but just in the coming couple of weeks major developments will occur which will strongly reinforce the business proposition that indeed embracing principles as a tool to force the organizational change on average, on average, makes organizations better equipped to deal with risks and opportunities associated with deepening interdependencies.

Finally, there's an important symbiosis that has happened just over the last two years. Corporate governance and corporate responsibilities are converging. What started off as the fall of corporate icons in the US and elsewhere has not only promoted SEC and other regulatory frameworks to mandate publicly to disclose codes of conduct, it has also greatly infused the notions of transparency and accountability. Within the Global Compact we have introduced what we call communication on progress. We are asking all participants to communicate at least once a year not to us, the United Nations, but to shareholders and stakeholders in their own public reports what kind of progress is made. The reporting pattern is clearly very uneven, and you find all sorts of entries, some of them are early learners, some of them are pretty advanced, but the trend is very clear and very strong. The issue is no longer just a northern issue, increasingly it is embraced also by southern champions. Out of the 3,000 participants today more than half are from the emerging economy, and most of the growth actually is happening as we speak in India, in China, Brazil and South Africa.

So what is the impact that has been achieved so far, and is voluntarily initiative somehow a useful tool to complement what governments try to do or not to do, and where are the limits? First I would argue voluntary initiatives do work, they make a lot of sense, especially if you look what's happening down at the grassroots level. We heard before practical examples of partnerships. Within the Compact we have probably motivated 700, 800 very concrete partnership projects from workplace health provisions to community engagement on a sustainable level. These partnership projects are very diverse, and they come like a bunch of novel innovative efforts. Some of them have existed already, some of them have been geared up. It is clearly too early to see a clear pattern how the scaling up evolves, but no doubt the trend is a very global one.

Second, voluntarily initiatives can never, ever be a substitute for what governments do or don't do. At the end of the day whatever voluntary happens unless it is supported by solid public institution making will not reach a certain impact which would characterize it as being critical for bringing about large change. Therefore private solutions must be tied with public policy improvements at the same time, and here is where some of the most exciting experiments are going on right now, it is combining a private advocacy platform at country levels in several countries with public policy dialogues so that public and private actors walk together and do the first steps together. And that is happening as we speak in several countries, and some of the most exciting experiences I just want to share with you.

In one country where indeed systemic corruption is very dominant, business leaders have stood up, sit together with public policymakers arguing, “We can not become competitive if you, public institutions, don't become more effective. Let us work together. It will benefit both society at large and us as corporations.” This is one example where the collective action notion induced first by the private sector out of selfish objectives can indeed make a big difference. And there are many other examples which fall into similar categories.

For the United Nations I believe this is a very important development. Learning how to work with non-state actors at the global level is an innovative approach where we can find additional momentum for the goals of what we promote. It is not a substitute for what governments do, but it can clearly reinforce what governments do. Think about the situation of failing states or conflict situations. These are situations where you need some initial push of some major impetus that comes from somewhere. Here the private sector can, under certain circumstances, become a positive force for change.

Overall we are quite excited about the initiative. It continues to enjoy tremendous growth. We are working very hard on what we call integrity measures. We are quite aware that we are walking a very fine line between public and private interests, and separating the two remains an ongoing challenge. We spent two years in devising a new governance structure because combining a global advocacy campaign with local infrastructure that enables scalable solutions is a daunting challenge. We have merged some elements from the Veizer [?] model to ensure quality with the models of Amnesty International and Transparency International who have long experience in building global campaigns with networks, combining with a unified purpose at the global level.

Where will this end? I hope, I very much believe, that in five years or so most corporations in the world will recognize that if we are to sustain global market sustainability in its robustness, if we want to carry it forward and bring more people into it, we have no choice but to imbed it in broader legitimacy, and legitimacy can only be gained if markets are imbedded in social, environmental and governance frameworks that are solid and support market transactions.

Today 3,000 corporations out of 70,000 transnationals. It's still a long way to go. Yearly there are roughly 500 billion of foreign direct investment flows occurring around the world. The globalization of the marketplace has long happened. Catching up on the social and environmental front is an imperative, not only for sustaining markets but also for spreading the benefits that come with it.

Thank you very much.