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Business and The UNITED NATIONS
by Paul O. Pederson

1. Introduction
   
   Our business world today is increasingly complex and its purpose cannot be viewed as solely to maximize profits, nor on the other hand can it be assumed that its major purpose is other than making a profit and increasing shareholder value. Those enterprises whose value chains span our global commercial world are particularly challenged to first understand and then to act in ways that may seem unusual for those of us who are accustomed to business in the United States.
   
   Many of the practices, standards and institutions that we take for granted in the United States are different in many countries or non-existing in some parts of the world. Today in 2004 many standards, regulations and customs have been in existence in the U.S. for 50 or even 100 years. The rule of law that underpins commercial practices has evolved over several hundred years from our nation’s beginnings.
   
   To those of you who are involved in global business, this is old news. But even in the complex world of global business, there are many business conventions and methods to resolve differences that we have grown to assume and depend upon. The United Nations (UN) has been one of the major facilitators of the smooth flow of global commerce. The following comments provide a brief insight into some of these areas where the activities of the UN help global business.
    
2. How the United Nations Help Business
   
   The UN is a vast organization. After nearly 40 years of serving the business corporate community as a CPA and Management Consultant, I had very little knowledge about the United Nations beyond what the newsmakers provided me. To me it sounded as if the UN Security Council, UN Nuclear Inspections and UN parking fines in New York were the sum total of its activities. After retiring I spent some time researching the area of corporate responsibility at the University of Dallas and participating in several conferences of the UN Global Compact. I learned much more about this network of people that was formed at the end of World War II with significant sponsorship of the United States.
   
   Did you know that parts of this vast UN organization help business in many rather obscure and sometimes technical matters? In addition to the World Bank, the International Monetary Fund and the World Trade Organization, there are twelve specialized agencies that help to maintain the commercial order and openness that business depends upon. Examples of this include such things as:
    
   • When ships sail freely across the seas and through international straits, rules legitimized in the UN protect them.
   • Commercial airlines have the right to fly across borders, and make emergency landings due to agreements facilitated in the UN Civil Aviation organization.
   • Intellectual property agreements regarding copyrights, trademarks and patents are promoted through the UN affiliated World Intellectual Property Organization.
   • The UN’s World Health Organization sets criteria for pharmaceutical quality and standard names for drugs.
   • The UN’s Universal Postal Union protocols allow mail to move across national borders.
   • The allocation of airwaves to telecommunications are based in the standards of a UN agency,
   • And, the UN’s World Meteorological Organization helps establish the standards that make worldwide weather forecasts possible.

   So, when our ships sail, the planes fly, and when technology is sold worldwide, the UN has played some role in making it possible. Likewise, when we travel, make telephone calls, have health concerns and depend on weather the United Nations has helped us.
    

3. The United Nations Global Compact
   
   Now let us turn to the Global Compact. I would like to start with a quote by the late Sergio Vieira de Mello. You will no doubt remember that he was the UN’s special representative in Iraq who was killed by a terrorist attack on the UN mission in Baghdad August 19th, 2003. Mr. de Mello was the UN high commissioner of human rights. In the 2003 edition of a prominent academic publication he said and I quote:
   
   “The UN Global Compact is a voluntary initiative to promote good corporate citizenship. I want to stress that it is not, and must not be, a mere public relations exercise.
   A commitment to the Global Compact has to lead to concrete actions in support of the core principles.
   
   None of this is meant as a substitute for action by governments. Rather, the compact is a platform for showing how markets can be made to serve the needs of society as a whole.”
   
   UN Secretary General Kofi Annan proposed the idea of forming the Global Compact at the annual meeting of the World Economic Forum in 1999. Since then the Global Compact has developed and evolved rapidly. It was formed in Mid-2000 when the Secretary General hosted a meeting of senior executives of 50 major corporations and the leaders of labor, human rights, environmental and development organizations. From this beginning the organization has grown to include over 1,200 companies. In addition, 17 business associations participate, including the International Chamber of Commerce, The Conference Board, and Business for Social Responsibility. There are also 24 organizations representing civil society that have become participating members of the Global Compact. They include such organizations as Amnesty International, Transparency International, Conservation International and the International Federation of Free Trade Unions that has 156 million members worldwide.
   
   Just a few of the corporations familiar to us here in the Dallas / Fort Worth area that are members of the Global Compact include:
   
   Alcatel, British Petroleum, Daimler Chrysler, Dupont, Cisco Systems,
   Hewlett-Packard, Nestle’, Nike, Nokia, Pfizer, Royal Dutch/Shell Group, STMicroelectronics, The GAP Inc., Unilever
   
   And the large accounting firms are members including:
   
   Deloitte, Touche & Tohmatsu, Ernst & Young, KPMG
   PricewaterhouseCoopers
   
   So you are probably thinking – just what is the UN Global Compact? Is it another costly bureaucracy? The answer is NO! The Global Compact has a staff of less than a dozen and that includes an intern or two. The Global Compact is a voluntary corporate citizenship initiative. It is not a regulatory instrument nor does it police or enforce the behavior of companies. Rather, the Global Compact relies on the enlightened self-interest of companies, labor and civil society. It relies on them to initiate and participate in pursuing the Compact’s 9 principles.
   
   Those who are part of the Global Compact believe voluntary initiatives and regulatory systems complement each other and provide a powerful encouragement for the wide spread adoption of responsible corporate citizenship and sustainability.
   
   In summary, the Global Compact is a voluntary initiative and provides a framework to promote sustainability and good corporate citizenship. It is not a regulatory instrument, a code of conduct or legally binding standard.
   
   The next thing I asked about the Global Compact was “just what does it do?” The Global Compact provides a way for its members and others to participate in four activities:
    
   • It organizes global dialogs on tough problems. Annually there are a number of action-oriented meetings. These dialogs include timely topics, such as The role of the private sector in zones of conflict, that reflect a serious effort to work out very difficult problems in today’s complex world.
   • The Global Compact helps in establishing local networks in industries and in countries where business, Non-Government Organizations (NGOs) and other groups work together on the application of the 9 UNGC principles.
   • It organizes learning forums where companies, NGOs, and those involved in academic and corporate education meet and share cases and best practices.
   • And fourth, it encourages companies to participate in partnership projects with other UN Agencies and civil society organizations aligned with the UN’s agreed upon development goals.

   So, how does a company become a part of the Global Compact? Remember that this is a voluntary initiative. The CEO simply sends a letter to United Nations Secretary General Kofi Annan expressing support for the Global Compact and its principles. The company implements the ideas underpinning the 9 principles in the company’s strategy and its education of its employees, customers and suppliers. And, it agrees to publish in its annual report or by other means a description of how it is supporting the 9 principles.
    

4. The Nine Principles of the UN Global Compact
   
   The 9 principles of the UN Global Compact are simple and straightforward. There are three areas: Human Rights, Labor and the Environment.
   
   In the first category, Human Rights, a business is asked to support and respect the protection of international human rights within their sphere of influence and to make sure that their own corporations are not complicit in human rights abuses.
   
   For the second category, Labor, a business is asked to uphold the freedom of association and the effective recognition of the right to collective bargaining. It is also expected to support the elimination of all forms of forced and compulsory labor and to abolish the use of child labor. And finally it is expected to support the elimination of discrimination with respect to employment and occupation.
   
   In the third category, Environment, a business is asked to support a precautionary approach to environmental challenges and to undertake initiatives to promote greater environmental responsibility. Last in this category a business is expected to encourage the development and diffusion of environmentally friendly technologies.
   
   In signing up to the Global compact, the business community is publicly saying that it is prepared to stand up and be judged by its actions rather than its words. However, for those companies that do decide to publicly commit to these 9 principles, the Global Compact should not be thought of as a safe haven to sign up and do nothing. One observation expressed by a number of business executives about these principles is that they are matters that corporations subject to public ownership and oversight are already expected to follow in The United States because of laws, regulations or accepted good business practice.
    
5. Conclusion
   
   The public stance of a corporation in our global economy is a challenge that many business executives face in these times. With pressures to maximize earnings and shareholder value, where do you draw the line? Where is this point between not enough involvement in good works such as the UN Global Compact, and too much involvement? Just about every large trans-national corporation today has a program to practice Corporate Citizenship, Corporate Social Responsibility, Environmental Responsibility and Sustainable Business Practices. This challenge of determining where to draw this line paints a larger picture of what a business leader must do to preserve the enterprise’s role, value and license to do business for the future generation of our society.
   
   The assessment of and management of risks is becoming one of the most important responsibilities of CEOs in our post 9/11 tumultuous economic times. A recent survey of nearly 1400 CEOs on a global basis indicates that most large corporations have or are developing formal risk management processes and programs. This survey indicates one of the most prevalent concerns is that there will be an over-regulation of business on a global basis. One question that an executive should consider is whether participating in programs such as the United Nations Global Compact and the UN’s other activities to facilitate a global economy are good insurance against unnecessary regulation, and for the-long term sustainability of their enterprise.

References:

The United Nations and Global Commerce, Mark Z. Zacher, United Nations Department of Public Information, Development and Human Rights Section, New York: 1999

United Nations Global Compact: www.unglobalcompact.org
7th Annual Global CEO Survey – Managing Risk: An Assessment of CEO Preparedness, PricewaterhouseCoopers, New York: 2004

Originally published in the University of Dallas Graduate School of Management - Management Review March 2004
http://udmr.udallas.edu

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