SHARPENING THE TOOLS

In the 1990s atmosphere of anti-globalization and distrust in business, the Global Compact was the right tool to engage business in sustainable development. Today, the dynamics and ethos have changed, leading businesses are leaping towards social responsibility, and we need to rethink the approach,
says John Ruggie.
John Ruggie
Berthold Beitz Professor in
Human Rights and International Affairs
Harvard Kennedy School
“Even the Economist magazine now writes that the question is not whether, but how, we are to go forward on corporate responsibility.”
John Ruggie

It was in no way an easy job that John Ruggie faced as Assistant Secretary-General for Strategic Planning at the United Nations in the late 1990s. Governments were assigning growing responsibilities to the UN, including poverty eradication and healthcare, but the budget needed to be constant.

The landscape was also changing and initially did not necessarily seem to be helping the UN to shoulder its growing responsibilities. Following a decade of deregulation, privatization and liberalization, the role and influence of private corporations had been vastly expanded over a short period of time.

“But neither governments nor companies were prepared to deal with the adverse consequences for people and the environment,” says John Ruggie, today Berthold Beitz Professor in Human Rights and International Affairs at the Harvard Kennedy School of Government.

Additionally, in his analysis, nations were unwilling to enter the scene and address these issues. They were much too concerned about making themselves attractive for foreign investment.

“Those extremes came together when we designed the Global Compact,” says Ruggie.

Traditionally, the relationship between the UN and the business community had been “quite adversarial” as he puts it. However, driven to a large extent by the then Secretary-General Kofi Annan, a realization emerged that the UN was unlikely to meet its challenges without actively engaging the business community and civil society.

“So we came up with the idea of the UN Global Compact, not as a regulatory instrument, but as an engagement mechanism whereby companies could take seriously the nine – later ten – principles of the Compact,” says Ruggie.

“The Compact was an invitation, a reaching out to business. As a tool for engagement, it had to reflect the ethos and dynamics of the time, and business couldn’t be coerced,” he explains.

“The Compact never had an intergovernmental mandate, which is an important fact. It was a personal initiative of the Secretary-General. This of course placed some restraints on it, but it also opened doors that would otherwise have been closed.”

The invitation was well received though the start was modest. The Global Compact was launched on 26 June 2000 with 46 signatories. Today, there are more than 8,000 business participants and 4,000 from other sectors of society. The dynamics and ethos in the interface between business and society have also changed. Corporate responsibility has in many companies moved from a sidelined existence in PR or philanthropy to being an integral part of how they manage risks and conduct due diligences.

“Even the Economist magazine now writes that the question is not whether, but how, we are to go forward on corporate responsibility,” says Ruggie with a laugh.

While at least some of this might be a testament to the strength of the Compact’s design, Ruggie warns that the Compact also needs to develop to stay sharp. “I hear from some of the leading companies that the Global Compact is no longer sufficiently cutting-edge for them. That they’ve outlived what it has to offer. That I think is a worrisome development.”

The challenge facing the Compact is how to be the bridge between leading companies seeking to move faster on their sustainability journey, others that are only just beginning the journey, and parts of the UN system that seek to create a legally
binding treaty on business and human rights.

“In my view, it’s impossible to include all aspects of human rights and business in a single treaty instrument, so they risk ending up with a piece of paper that will be of little use to real people in real places,” says Ruggie.

Keeping the position as the platform and tool for engaging business in the UN agenda will continue to be hard work, he points out. But he does have a few words of advice.

“I would focus on creating stronger metrics to document progress over time. What’s the incentive for business to compete for higher status if no one is measuring anything? And I would focus on selected constituencies of companies, for example SMEs in Europe and companies in emerging economies, to pull them into the family. And then of course I would focus on raising the participation of US  companies.”


WHAT’S NEXT?
DEFINING THE PURPOSE OF THE CORPORATION

We are at a crossroads, where old ideas about why we do business are being challenged and new ones have yet to mature. John Ruggie sees a need for a debate about “the social purpose of the corporation”.

“Too many people have accepted at face value the myth of short-term shareholder-value maximization as the be-all and end-all of what the corporation is intended to achieve. If that doesn’t change, we’re not going to make much progress. This debate, which we haven’t had for a long time, about the social purpose of the corporation is I think the most critical question going forward,” says Ruggie.