UN Global Compact
ComplianceMay 06, 2022

The UN Global Compact: Uniting Businesses, Defining Principles

During its Annual Local Network Forum in Dubai in March, the United Nations (UN) Global Compact (Compact) announced the Chief Financial Officers’ Coalition for the Sustainable Development Goals (SDGs). This provides a platform “where global CFOs and other corporate officers can collaborate with peers, investors, financial institutions, and UN agencies to develop principles, frameworks and recommendations to integrate the Sustainable Development Goals (SDGs) in corporate finance and create a market for mainstream SDG investments.”

It is made up of a CFO Leadership Group which guides the work of the CFO Coalition for the SDGs.

This is the latest initiative from the 22-year-old Compact.

In previous posts, we discussed two major initiatives that companies can join to help navigate the implementation of climate change technologies, strategies, and ideas.

The Better Climate Challenge sponsored by the U.S. Department of Energy, encourages companies to commit to reducing their carbon output by 50% by 2030. The DOE acts as a consultant as well as a depository for successful green technology and climate change methods that others can access.

Carbon Call, founded by the ClimateWorks Foundation along with 20+ leading organizations, begins to specifically address reliability and interoperability in carbon accounting through accurate and transparent reporting procedures.

Both of these are fairly new groups.

The UN Global Compact, started in 2000, was the first. It was initiated by former UN Secretary-General Kofi Annan, in order to give a human face to the global market and promote environmental and societal change.

It is easily “the largest voluntary corporate responsibility initiative in the world.” This can be seen by its more than 14,000 corporate participants plus 4,000 non-business members from more than 145 countries.

The Ten Principles 

The Compact encourages businesses to align their operations and practices with 10 universally accepted principles that it feels are required for corporate sustainability. These principles are derived from the following documents: the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption.

As a result, the principles are sub-divided into four categories: human rights, labor, environment, and anti-corruption.

According to its website, “It is a practical framework for the development and implementation of sustainability policies and practices to help advance sustainable business models and markets.”

The 10 Principles, by category, include:

Human Rights

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

Principle 2: They should make sure that they are not complicit in human rights abuses.

Labour

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

Principle 4: They should uphold the elimination of all forms of forced and compulsory labour.

Principle 5: They should uphold the effective abolition of child labour.

Principle 6: They should uphold the elimination of discrimination in respect of employment and occupation.

Environment

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

Principle 8: They should undertake initiatives to promote greater environmental responsibility.

Principle 9: They should encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

Each principle is further broken down on the website as to what it means for the company, why a company should care, and what companies can do to comply.

For example, Principle 7 is derived from Principle 15 of the 1992 Rio Declaration that states that “where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.”

This means the application of risk assessment, risk management, and risk communication should be used to put into place preventive procedures and technologies before climate change disaster strikes.

The “acceptable” level of risk involves not only scientific-technological evaluation and economic cost-benefit analysis, but also political considerations such as acceptability to the public.

Companies should care because prevention is less costly that remediation, both in terms of treatment as well as the company’s reputation.

A few specific steps a company can take to communicate potential risks to the consumer and the public are:

  • Develop a code of conduct or practice for its operations and products that confirms commitment to care for health and the environment.
  • Develop a company guideline on the consistent application of the approach throughout the company.
  • Create a managerial committee or steering group that oversees the company application of precaution, in particular risk management in sensitive issue areas.
  • Establish two-way communication with stakeholders, in a pro-active, early stage and transparent manner, to ensure effective communication of information about uncertainties and potential risks.

Because it is a voluntary initiative, there are no joining fees. Companies are expected, however, to incorporate the 10 principles in a business culture and day-to-day operations; publicly advocate the UN Global Compact and its principles through press releases and such; and annually communicate to stakeholders on any progress made. To join, visit https://www.unglobalcompact.org/participation/join/application

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