United Nations Global Compact and its Implications for CSR Practice by Corporates

What is the United Nations Global Compact ?

The United Nations Global Compact is a set of principles that encourage the signatories to the compact to pursue social and environmental responsibility. Unlike the UN Millennium Development Goals, the UN Global Compact has corporates as its signatories and hence, this is the first comprehensive and cohesive CSR initiative by the UN that targets the corporates directly.

There are many advantages of having the UN Global Compact, they relate to the fact that pursuing social, and environmental responsibility by corporates is easier to track and monitor.

In other words, the UN has the mandate to monitor how well the signatories to the Global Compact are actualizing CSR in their everyday operations. Having said that it must be remembered that the UN Global Compact is not legally binding meaning that there is no legal obligation on the part of the signatories to actualize the targets set under the Compact.

However, signing the UN Global Compact confers a certain responsibility on the corporates and it has been noticed over the last few years after the Compact came into existence that the corporates were indeed taking steps that would actualize the CSR objectives.

Further, signing the UN Global Compact is like a badge of honor for the corporates as the partnership with the UN lends credibility and legitimacy to their CSR efforts.

The Principles of the UN Global Compact

The set of principles that make up the UN Global Compact include guidelines regarding social and environmental responsibility and range from setting aside budgets for CSR activities to taking on board the indigenous communities and those affected by the operations of the corporate in various locations around the world.

In other words, the UN Global Compact specifies how all the stakeholders including the indigenous peoples, the civil society, and others must be brought on board by the corporates.

Further, the UN Global Compact enjoins the corporates to commit themselves to protecting the environment, contributing to causes that are socially and environmental responsible, reducing emissions, and following best practices in their operations that would be CSR compliant.

The key aspect about the UN Global Compact is that corporates have realized that signing it would add the much-needed legitimacy to their CSR activities and this has made many corporates especially the multinationals to become members of the compact. The case of the multinationals is particularly instructive as they operate across the world and hence, the UN Global Compact has specific provisions to regulate their operations.

Need for International Regulation and the Threat of Green Washing

Taking the cue from the UN Global Compact, many countries around the world have passed laws that specify how the CSR activities of the corporates are now legally binding.

In other words, there are many countries where it is now legally binding for the corporates to follow certain norms including allocating a percentage of their profits to CSR activities. This is the case with India where the recently passed companies’ bill explicitly sets out rules and regulations that specify how the CSR activities must be carried.

Having said that, it needs to be remembered that while national laws and regulations play an important part in actualizing CSR, agreements like the UN Global Compact are especially relevant in this globalized world where multinationals straddle the globe and hence, international agreements like the compact are very relevant to ensure some compliance with CSR.

Apart from this, there have been many suggestions that have been made by activists and NGOs to the UN to ensure that the signatories to the UN Global Compact are not indulging in Green Washing or the term used to describe commitment to CSR in words but not in action. This is the danger that any agreements like the UN Global Compact carry, as it is easy for the signatories to claim that they are pursuing CSR whereas in practice, they renege on their commitments.