beyondbrics

A global business summit starting on Thursday in New York will be a showcase for companies from emerging economies looking to highlight their credentials in promoting ethical corporate values. But there are questions about whether there is real substance behind their glossy presentations.

Over a thousand people are expected at the June 24-25 “leaders’ summit” of the United Nations’ Global Compact, the world’s largest corporate social responsibility initiative, including hundreds of executives from emerging economies, where CSR has been catching on in recent years.

The Global Compact promotes good business behaviour based on ten principles concerning human rights, the environment, labour and anti-corruption and has over 6,000 companies as members. Just under half of these are from non-OECD countries, a sharp increase from the Compact’s launch a decade ago, when western multinationals dominated.

Even critics agree that the Compact has helped spread the word on business ethics to countries where conditions are tough, and has helped build the bottom-line case – rather than just the moral or philanthropic one – for better behaviour.

But critics question whether the surge in membership actually means more companies are behaving better, or whether many polluters and abusers see the Compact as an opportunity to polish their image while doing little to fulfil the ten principles.

The Institute for Human Rights and Business, a London-based think tank, notes in a study this week on the Compact that it is too often seen as a “talking shop”. The initiative should “raise the bar” by expecting much more measurable commitment from companies.

The role of Chinese companies highlights the dilemma facing the Compact. Around 160 are now members (similar to the British total) including four big state-owned enterprises – Petrochina, China Development Bank, China Minmetals and China NTG Gas Group – that are among the summit’s main sponsors, together paying $300,000 to buy some good PR.

The Compact argues that it’s better to have such key players “inside the tent” of global efforts to improve standards rather than outside. Yet as the FT’s Beijing correspondent Jamil Anderlini notes:

“The explicit role of these companies is to support and extend Chinese state policies and carry out the policies and directives of the ruling Communist Party”.

Some of the sponsors are “associated with shocking levels of pollution within the country and numerous environmentally questionable projects abroad” and could not meaningfully implement the principles on trade unions or human rights as they violate Communist policy.

He concludes:

“CSR has become a hot topic in China in recent years but the debate often centres around the need to introduce this concept for foreign consumption as China’s “national champion” state enterprises expand abroad.”

Georg Kell, the Compact’s executive director, counters that despite Chinese politics, it is possible “within such companies to establish value-based frameworks” compatible with the Compact.
It would be helpful if any commitments such companies made to the Compact could be tested, but they cannot. Companies must submit statements saying how they are complying with the ten principles but there is no system for checking they are doing what they say.

Companies can be “delisted” for not submitting these statements, and over 1,800 have been ejected, many of them from non-OECD countries, suggesting the rate of non-compliance with Compact standards is high.

Yet, oddly, the Compact recently suspended for 12 months the process of delisting non-compliant companies from non-OECD countries, giving breathing space to rule-breakers, because, says Mr Kell, too many were being thrown out.

Irene Khan, until recently the global head of Amnesty International, a Compact supporter, says “the strength of the Compact, in encouraging many companies around the world to join, could become its weakness unless it really has an honest look at what impact it is having on its corporate members’ behaviour”.

This week’s New York jamboree would be a good place to start.