Voluntary is booming: Business is taking the lead

The last 15 years have seen a boom in voluntary corporate sustainability initiatives across markets and sectors. Today, most multinational companies worldwide take part in some kind of voluntary scheme.

Voluntary standards and initiatives fill governance gaps and allow businesses
to progress beyond legal minimum requirements. Initiatives involve voluntary
codes of conducts, standards of performance and disclosure, principles of
conduct and other types of practice requirements over a wide range of environmental, social and governance issues.


FROM GENERIC TO SPECIFIC
Voluntary initiatives are moving from generic schemes, such as the Global
Reporting Initiative, ISO 26000 and the UN Global Compact itself, to more
issue-specific schemes such as the Sustainable Soy and Palm Oil initiatives and
sector-specific schemes like the Extractive Industries Transparency Initiative
(EITI), the Electronic Industry Citizenship Coalition (EICC) and the Sustainable
Shipping Initiative.

The development of the UN Guiding Principles on Business and Human
Rights (2011) is a milestone in its field. Today this is the most widely recognised
framework for businesses aiming to operate and invest in a way that respects
human rights.

Our findings show that many leading companies are increasingly turning to
issue and sector-specific schemes for practical support and guidance in terms of
establishing good practice.
Evidently, wide variations between regions exist, as well as variations between
the requirements that different schemes ask of their participants.


BUSINESS TAKES THE LEAD

The past decades have seen continuing and often intense discussions around the
merits of voluntary versus regulatory approaches, and whether voluntary initiatives
undermine attempts for stricter regulatory controls. However, as authorities
have failed to agree on regulating some of the world’s most pressing issues
like GHG emissions and natural resource management, voluntary approaches
are seen as having played an important role in supporting leading business to
improve performance.

One promising development is the increasing extent to which companies set
voluntary goals for carbon and water neutral operations, and work to remove or
replace the use of limited natural resources in their products. Many are investing
heavily to develop and shift to more environmentally friendly technologies
(global investments in green energy increased with almost 17 percent in 201426).
For business, this is no longer only a matter of responding to stakeholder pressure,
it is increasingly about cost saving, gaining a competitive advantage and
pre-empting future legislation.


CALLING FOR MORE REGULATION

An increasing number of forward-thinking companies are voicing their
readiness for smarter and more responsible regulation of natural resources. An
example of this is the Call to Action on Sustainability in the Water-Energy-Food
Nexus issued by WBCSD in 2014. Voluntary schemes are good supplements to regulation, and at the moment they are playing a partial, arguably crucial, role in influencing and inspiring corporate behaviour.

“We need partners to succeed. The key partners for success, of course, need to be the UN and the governments. We can arrange it, we can lead it,
but we cannot do it by ourselves. This needs to be a joint effort between the public sector and the governmental sector, working together.”
RAN MAIDAN, CEO, NETAFIM

THE ROLE OF THE UN GLOBAL COMPACT:
CHANGING THE PACE OF CHANGE

As voluntary initiatives have gone global and increasingly filled important governance gaps, what has been the role of the Global Compact in catalysing change?

The Global Compact has grown to become the world’s largest voluntary corporate
citizenship initiative, with increasingly deeper penetration in markets and
sectors everywhere. Its most significant contribution lies in the ten principles
themselves. Covering a broad range of human and labour rights, environment
and anti-corruption issues, the principles define the meaning of corporate
sustainability and clarify the range of actions needed for companies to call
themselves sustainable. Moreover, by encouraging business to take action to
positively impact broader societal and environmental goals, and by mobilising
leading businesses around policy and broader systems change, the Global Compact
is raising the bar for how the corporate sector can play an important role in
catalysing positive change.


MANDOTARY DISCLOSURE
A unique aspect of the Global Compact is the mandatory requirement to report
on performance every year. This accountability mechanism seeks not only to
strengthen the legitimacy of the initiative itself but also to function as a catalyst
for improving business performance. As such, the Global Compact has been
widely accepted as a hybrid voluntary organisation with some mandatory
requirements.


DEEPER ENGAGMENT ON ISSUES
Since 2007, the Global Compact has moved towards more voluntary issue-specific
engagement for companies who seek to take a leading role on critical
issues. Examples include the Caring for Climate platform on climate leadership,
the CEO Water Mandate on water management and the Women’s Empowerment
Principles advancing non-discrimination and gender equality. In many
cases, these initiatives have grown to become the largest initiatives of their kind
globally.


ADVANCING THE WORK OF OTHERS
As a result of its collaborative nature, the Global Compact has in many instances
acted as a platform for other voluntary initiatives. It has become a megaphone
for other organisations such as Transparency International in the area of
anti-corruption, the ILO in the area of labour standards, and Business for Social
Responsibility in the area of supply chains. While aiming to avoid parallel efforts,
the Global Compact is contributing to making the landscape of voluntary
initiatives easier to navigate for business. This is particularly exemplified by the
Memorandum of Understanding with the Global Reporting Initiative (GRI) and
the International Standards Organisation (ISO).