The Future of the Global Compact

Does the new UN Secretary General have the commitment—and corporate experience—to drive the compact?

By Andrew Savitz and Moses Choi

When the CEO of Novartis met with the Secretary General of the United Nations in the summer of 2000, neither suspected that the result would be to reinvent the very way the Swiss pharmaceutical giant does business. Kofi Annan was merely trying to entice Dr. Daniel Vasella and other corporate leaders to join his new Global Compact.

Since then, more than 3,000 CEOs have signed the Compact, making it the world’s largest voluntary corporate citizenship initiative. Annan’s objective was to bring companies together with labor, civil society and UN agencies “to unite the power of the market with the authority of universal ideals.”

Half the companies have reported changing their policies to harmonize with the Compact’s 10 principles for corporate behavior, which address human rights, labor standards, environment and corruption. And many have made efforts to address the underlying problems that impede a more inclusive global economy: poverty, disease, the lack of safe drinking water and sanitation, substandard, unsafe or inhumane working conditions and the bribery and extortion that undermine the rule of law and sap economic vitality.

That progress, however, will be jeopardized unless Annan’s successor—sworn in at the end of 2006—shows an equivalent commitment to the Compact. And the signs so far are not encouraging.

Secretary General Ban Ki-moon is a career diplomat who was selected because he is, in the words of one UN-watcher, “more Secretary than General.” He is said to be uncomfortable banging the bully pulpit, which was Annan’s primary modus operandi. Ban has no business background or training, and no experience with issues of corporate citizenship. And in his native South Korea, only 12 firms have signed the Compact even as corruption remains a huge challenge.

In a recent speech to leaders of the New York business community, the Secretary General appeared to reverse the logic of the Compact, saying that the UN can create an “enabling environment in which business can thrive.” But Compact signatories intend to create the conditions in which the UN can succeed, which in turn, will help business. The Compact thus calls for direct corporate action on human and worker rights, the environment and corruption—a call that is nowhere to be found in the Secretary General’s speech.

Does any of this matter to the wider world?
Absolutely, judging from the last six years of experience with the Compact. The Compact is the first formal corporate citizenship initiative for many companies. It has triggered hundreds of multi-sector projects such as Norway’s Statoil and the International Federation of Chemical, Energy, Mine and General Workers’ Unions collaborative effort to extend Norwegian health, safety and labor standards to the company’s world-wide operations.

And it has inspired comp­anies to take significant unilateral action.

After his meeting with Kofi Annan, Dr. Vasella signed the Compact and began to take action to transform Novartis. The company issued a Corporat Citizenship policy and a new code of conduct that incorporated the Compact’s principles, directing each division to build them into its planning and operations. Corporate citizenship achievements were made a formal part of senior managers’ annual reviews. The Board of Directors also created the Novartis Foundation for Sustainable Development, which is working with the World Health Organization to eliminate leprosy by the end of the decade; more than 4 million patients have already been cured as a result. The foundation recently concluded an analysis to ensure that all Novartis employees, working in more than 140 countries, are being paid a living wage which, under the Compact, is considered a human right.

Despite six years of solid progress, the Compact is at an important juncture. Only 5 percent of multinational corporations have joined and some are not actively engaged. The UN’s Compact office recently de-listed 345 companies for failing to report on their progress in implementing the principles, one of the few requirements of membership.

Some observers believe that the Compact is now a fact of corporate life, with its own internal momentum, while others suspect that without the active and visible support of the incoming Secretary General, it will quickly become yesterday’s initiative. While it is possible that CEOs will continue to push it forward without him, Ban’s personal involvement in recruiting new CEOs, inspiring participants and promoting the Compact’s successes will be critical.

Secretary General Ban brings a wealth of diplomatic experience and respect from UN insiders. He takes the reins of the organization at a time when business, government and civil society are finding new ways to work together for the common good. The UN Global Compact is a critical initiative, both for the progress it can inspire, and because it shows how the UN can reinvent itself from within and find new ways of leveraging its resources and its moral authority. We urge Mr. Ban and CEOs around the world to lift the Compact even higher.

Andrew Savitz, a former lead partner at PwC, has more than 20 years of experience in sustainability and environmental performance and is author of “The Triple Bottom Line” (Wiley 2006). Moses Choi is currently a master’s degree candidate at the Fletcher School of Law and Diplomacy.

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