Assessing change 2000-2015 and the role of the UN Global Compact

Executive summary - Part II

LEVEL 1: CHANGE IN CORPORATE PRACTICES – HAS BUSINESS BECOME MORE SUSTAINABLE?

CORPORATE PRACTICES: WHAT HAVE WE FOUND?

  1. Taking root: The global spread of sustainability
  2. Into the fold: Expanding the scope of corporate sustainability
  3. Moving up: Sustainability gaining strategic ground
  4. Mind the gap: Actions and intentions are still not aligned
  5. Chain reaction: Sustainability cascading through the value chain
  6. Nowhere to hide: Transparency is becoming the new norm
  7. Smarter together: New forms of collaboration between business
    and society

Over the past 15 years, business has significantly increased its focus on sustainability
issues. The number of Global Compact signatories is growing with both large influential and small companies coming on board. Corporate sustainability has become a broad global movement. A success story, in slow motion.

Today, the umbrella of ‘corporate sustainability’ covers a much broader range of social, environmental and governance issues than before. However, companies have become increasingly sophisticated in their approach, and are focusing on issues that matter the most – targeting responses to achieve greater impact.

Responsibility is also moving upwards in corporate hierarchies. Top executives are gradually taking ownership of developing sustainability strategies, and building them into core business functions.

There is still a very long way to go before sustainability is fully embedded into the DNA of business globally, but there are clear signs of progress. A much larger proportion of leading companies today show real commitment to embedding their sustainability efforts into the core business strategies and practices, and are doing so in a systematic way. Sustainability is gaining strategic weight and is increasingly understood as a driver of innovation, technology development and new business models.

Over the past 15 years, the Global Compact has made important strides to inspiring companies to improve practices and advance reporting on performance. As the only global voluntary framework with a mandatory reporting requirement, the Global  Compact has played an important role in challenging companies to become more open and transparent. Governments, corporations and civil society must all act according to the ten principles if they want to be recognised as aligning with   universally accepted norms.

Stable, prosperous business and society go hand in hand. Cross-sector collaboration
continues to evolve as the realisation of the need for this symbiosis grows.

Throughout this section, we demonstrate how corporate practices have changed by outing a spotlight on some of the Global Compact initiatives. These include Caring for Climate, the CEO Water Mandate and LEAD.


LEVEL 2: CHANGE IN THE CORPORATE OPERATING ENVIRONMENT – IS THE PRESSURE ON?

THE CORPORATE OPERATING ENVIRONMENT: WHAT HAVE WE FOUND?

  1. Playing catch-up: Bringing regulation up to speed
  2. Voluntary is booming: Business is taking the lead
  3. Exercising power: Investors’ sights set on sustainability
  4. From confrontation to collaboration: A new relationship with NGOs
  5. Open for business: The UN embraces corporate partnerships

Business is beginning to realise that it is not operating in isolation from a rapidly
changing world. More informed stakeholders exert pressures on business from both markets and broader society. In this new paradigm, a corporate licence to operate is increasingly granted by society, not by governments or regulatory bodies.

Regulation can be powerful in driving sustainability, but in some important areas governments lag behind. Conversely, leading companies have begun to push for smarter regulation. Even where regulation is lacking, there has been a significant increase in the number of businesses signing up to voluntary corporate sustainability initiatives. In fact, most multinational companies are involved in some kind of voluntary scheme today.

Investors are requesting a higher degree of disclosure and risk management from the companies they engage with. Instead of simply divesting, investors today are more likely to work with their investees to achieve better performance. More and more, environmental, social and governance (ESG) disclosures are being included in financial evaluations and forecasts.

In recent years, civil society tactics have evolved from ‘naming and shaming’ to seeking positive dialogues and partnerships. In this context, the Global Compact has facilitated the merger of interests that have long been at odds, leading to new and valuable understanding.

For the United Nations itself, relations with business in the early 2000s were
limited and marked by a high degree of distrust. The private sector was largely
excluded from international deliberations. Now, the UN is open for business,
and partnerships are booming across the system.

Throughout this section, we highlight how changes in the corporate operating
environment have been influenced by Global Compact activities, in particular
the Principles for Responsible Investment, the Principles for Responsible
Management Education and Business for Peace.

LEVEL 3: CHANGE IN DOMINANT WORLDVIEWS - WHO’S GETTING IT?

DOMINANT WORLDVIEW: WHAT HAVE WE FOUND?

  1. Wrong direction: A deep sense of urgency is emerging
  2. More than just buzz: Mainstreaming sustainability in the business
    sphere
  3. A balancing act: Redefining the fundamental purpose of business
  4. Key to the future: Sustainability is critical to business success

For real transformation to a sustainable and inclusive economy to happen, it is not just corporate practices and operating environments that need to change. A change in the beliefs, values and worldviews which ultimately guide behaviour is essential. As the social and economic cost of environmental degradation becomes clearer, a deep sense of urgency is emerging around the need to prevent the world from moving in the wrong direction.

Today, it would be implausible for any global company today to exclude sustainability from its agenda. This has been a major shift over the last 15 years. Mainstream business media have clearly responded, raising aspirations and encouraging a more sophisticated discussion around the responsibility of business.
New and different expectations on the role of business in society are emerging. When the Global Compact was first launched, business was largely about generating
value for shareholders. Corporate sustainability and stakeholder matters drew marginal attention.

The idea that business can, and should, balance profit with purpose has started to challenge the long-held view of short-term profit-maximisation. The Global Compact has contributed to a cognitive overhaul around the purpose of business and its obligations to society, and importantly challenged the view that sustainability is only about risk.

In this section, we give concrete examples of how the dominant worldview has changed by turning the spotlight on the Women’s Empowerment Principles.

LOCAL NETWORKS – A SUSTAINABLE GLOBAL ECONOMY FROM THE GROUND AND UP

The Local Networks take the Global Compact beyond boardrooms. Every nation faces a unique set of challenges and opportunities, and different political, economic, social and environmental conditions shape the business environment. Local Networks help companies identify the most pressing issues in a specific country, and seek to offer support particularly to smaller and mid-sized enterprises and to unite local stakeholders to mobilise change. In doing so, they anchor the Global Compact within individual national, cultural and linguistic contexts.

THE IMPACT OF THE GLOBAL COMPACT

There are a multitude of events, trends and organisations that together are contributing to shape and mainstream sustainable business globally. The Global Compact has been one of these driving forces, and perhaps one of the most important ones. Through encouraging all companies – no matter the size, nationality or starting point - to take the first steps towards sustainability, it has made real headway in championing the ten principles across human rights, labour, environment and anti-corruption in global business.

The Global Compact has impacted corporate practices by drawing more companies into the network, and pushing into markets where corporate sustainability was not yet on the agenda. Much more remains to be done to drive active engagement, and to bridge the gap between commitment and action.

When it comes to shaping the enabling environment, the Global Compact has played an increasingly important role. Shaping the drivers of business conduct, the Global Compact’s efforts have a flow-on effect to the wider business community beyond its immediate participant base.

Finally, the Global Compact has contributed to shifting the dominant worldview
by driving a change in our perception of the purpose and responsibility of business, and by inspiring a new narrative around business as a force for good. The outcome: It is almost impossible for a global company today to avoid having sustainability on the agenda. But there is still a long way to go to achieve the scale of mindset change the world needs.