The Global Compact and Civil Society: Averting a Collision Course

1 Nov 2002

Author(s): Peter Utting
Source: Development in Practice, Volume 12, Number 5, November 2002

Anyone from the UN who attended the 2002 World Social Forum (WSF) in Porto Alegre would have been struck by the fact that, while many activists are critical of the UN, they still believe in the organisation. In sharp contrast to the demands for a radical downsizing or the abolition of organisations such as the WTO, World Bank, and IMF, many civil society organisations (CSOs) are calling for a reformed but strengthened UN. Criticism, however, is building, notably on the question of UN relations with transnational corporations (TNCs). Recent `partnerships' between UN organisations and TNCs symbolise the increasingly close nature of this relationship. The most high profile of these is the Global Compact, which by the end of 2001 had enlisted the support of approximately 400 companies in 30 countries. These companies have agreed to adhere to nine principles related to human rights, labour standards, and environmental protection. At the WSF the Global Compact came in for heavy criticism.

In an article I wrote on UN-business partnerships published by the United Nations Research Institute for Social Development (UNRISD), I suggested that one of the risks associated with the warming of relations between the UN and TNCs is that of heightened tensions between the UN and certain civil society actors (Utting 2000). During the past two years such tensions have indeed escalated. This is most evident in communications between the Global Compact office and the US-based NGO Corpwatch. Arguments between a UN office and a particular NGO shouldn't come as a surprise. Of concern in this case, however, is the fact that Corpwatch acts as the Secretariat for the Alliance for a Corporate Free UN, which is composed of several well-known and respected Northern- and Southern-based research and advocacy groups such as Third World Network, the Institute for Policy Studies, Focus on the Global South, and IBASE (the Brazilian Institute for Social and Economic Analyses). At the WSF it was evident that these organisations have assumed a leading role in the global `movement' that is trying to construct an alternative to the contemporary model of economic globalisation. Among the 5000 organisations present at the WSF and many others that could not make it to Porto Alegre such organisations have considerable legitimacy.

Given that part of the Global Compact's raison d'être is the promotion of new forms of `good governance' based on multi-stakeholder dialogue and collaboration, it is unfortunate that such an initiative is providing a basis for confrontation with some sectors of civil society. Why the tensions? Several concerns have been raised:

few effective mechanisms are in place to ensure that companies comply with the Global Compact principles;
rather than systematically address and internalise all nine principles, companies can pick and choose among the principles and corporate activities they want to deal with;
the Global Compact does more to enhance the image and legitimacy of big business than to improve social and environmental standards;
the ‘social learning’ theory and `best practices' approach that underpin the Global Compact are flawed, as they tend to ignore key pressures and institutional contexts that encourage companies to raise standards, divert attention away from `bad practice', and ignore fundamental structural and other factors that encourage corporate irresponsibility.

Research being carried out at UNRISD on UN-business partnerships and corporate social responsibility has raised similar concerns and suggests that another approach is needed. How might things evolve? One can envisage three scenarios.

In the first instance, the UN can pursue the current course of engaging TNCs via fairly weak voluntary initiatives. Leaving aside the question of whether such patterns of engagement are effective in promoting corporate social responsibility, such a path suggests a collision course with a vociferous sector of civil society. Such tensions would seem to contradict what the UN has been trying to achieve for over a decade in terms of global governance arrangements involving improved relations with civil society.

A second alternative is that the UN heed the calls not only of the Alliance for a Corporate Free UN but also of the United Nations High Commissioner for Human Rights and other Global Compact stakeholders to modify or re-design the Global Compact to allow greater scope for compliance with the nine principles. Some of the ideas or proposals for reform involve the screening of potential corporate participants, greater transparency about which companies are involved in the Global Compact, the forcing of companies to report on all nine principles, greater attention to and public disclosure of feedback and commentary from non-corporate stakeholders, independent monitoring of compliance, greater controls on how companies use their association with the UN, and other safeguards to prevent companies from using the Global Compact for essentially PR purposes.

Potentially, a re-designed Compact could serve a dual purpose of improving UN-civil society relations and making it a more effective instrument to promote corporate responsibility and accountability. The unintended consequence, of course, might be that business signs off. One of the main backers of the Global Compact, the International Chamber of Commerce, has made it overtly clear that it would `look askance' at any such moves. In the case of large TNCs, some would argue that this may not be a bad thing: they are already involved in voluntary corporate responsibility initiatives and `best practice' reporting and, from the perspective of social and sustainable development, there may be little added value to be obtained from their involvement in the Global Compact. Where corporate disengagement might be more of a problem is at the level of some developing and transitional countries where the Global Compact can play a useful role in raising awareness of corporate responsibility issues and where there may be greater scope for `social learning'. Another potential benefit of TNC involvement in the Global Compact is that it could serve to bring TNCs under the remit of international law—albeit weak forms of 'soft' or `customary' law—such as the Universal Declaration of Human Rights. It has often been assumed—incorrectly—that such human rights norms target states and not corporations. The Global Compact could help to redress this misperception by making the connection between corporations and some aspects of international human rights law more explicit.

The third scenario consists of continuing with the Global Compact experiment, with or without major reforms, and pursuing an alternative approach elsewhere in the UN system. The Global Compact has always stated that it is not meant to be a substitute for other `regulatory' approaches at the international level that rely on monitoring and enforcement. In practice, however, it is just about the only game in town that extends to a significant number of corporations.

A basic concern with UN-TNC partnerships in general is that they reflect a shift in approach whereby lukewarm voluntary initiatives have crowded out important mechanisms and institutional arrangements involving new forms of international law, oversight or monitoring of TNC activities, mediation or arbitration of disputes, and critical research into regulatory alternatives, as well as on the social, environmental and developmental impacts of TNCs. Several proposals involving the UN system have emerged which could serve to correct this imbalance:

Friends of the Earth International has proposed that the World Summit on Sustainable Development consider a Corporate Accountability Convention that would establish and enforce minimum environmental and social standards, encourage effective reporting, and provide incentives for TNCs taking steps to avoid negative impacts.
The International Forum on Globalisation has advocated the creation of a UN Organisation for Corporate Accountability that would provide information on corporate practices as a basis for legal actions and consumer boycotts. Christian Aid has proposed the establishment of a Global Regulation Authority that would establish norms for TNC conduct, monitor compliance, and deal with breaches. Others have called for the reactivation of the defunct United Nations Centre on Transnational Corporations, some of whose activities were transferred to UNCTAD a decade ago.
The Sub-Commission on the Promotion and Protection of Human Rights has established a Working Group on TNCs, and this group is considering a Code of Conduct for TNCs and has drafted a set of Human Rights Principles and Responsibilities for TNCs and Other Business Enterprises. The Working Group has also proposed the establishment of entities to assist with the implementation of the Principles and to monitor compliance.
There have been calls for a Special Rapporteur on TNCs to be established by the Human Rights Commission and for some existing Special Rapporteurs to deal with problems involving TNCs. The need to extend international legal obligations to TNCs in the field of human rights and to bring corporations under the jurisdiction of the International Criminal Court has also been suggested.
UN agencies could impose or broaden procurement standards related to social and environmental norms on the companies they do business with.
For many years trade unions and others have urged the ILO to strengthen its follow-up activities and procedures for examining disputes related to the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, which have remained extremely weak.
UN agencies such as UNCTAD, UNDP, UNEP, and WHO, as well as the ILO, should not shy away from critical research and policy analysis on TNCs and their social, environmental, and developmental impacts in developing countries, as well as on regulatory initiatives.

Movement on these ideas and proposals has been either extremely slow or nonexistent. If the UN is serious about the question of promoting corporate social responsibility as well as good governance and multi-stakeholder participation, the time has surely come to consider such alternatives more seriously.

Acknowledgement

Research assistance by Désirée Abrahams is gratefully acknowledged.

The present Viewpoint appears in the journal Development in Practice, Volume 12, Number 5, 644-647, November 2002, www.developmentinpractice.org. A modified version is published in UNRISD News No. 25, Autumn/Winter 2002.

This article reflects the views of the author(s) and does not necessarily represent those of the United Nations Research Institute for Social Development.