Reflecting on the impact of the Global Compact: From action to attitudes

Catalysing change in a complex, global system such as the global economy is an ambitious goal, which challenges the actors, institutions, norms and many vested interests that comprise the status quo. But change is urgently needed to - if
we are to preserve a safe operating space and a prosperous future for humanity.
Standing back, we reflect on: How can change be catalysed in such a large
and complex system? How effective has the Global Compact been in terms of
catalysing change in the right direction? What has been the actual impact of
the Global Compact over the years? Building on the findings presented in the previous sections, we offer our observations on the key impacts of the Global Compact, and reflect upon whether the initiative has galvanised transformation towards its vision. The views presented below are solely the independent views of DNV GL.
“The concentration of economic power in the private
sector is unprecedented. So we are not talking about
companies. We are talking about world powers.”
ERIKA KARP FOUNDER & CEO, CORNERSTONE CAPITAL

LEVEL 1: THE IMPACT OF THE GLOBAL COMPACT ON CORPORATE PRACTICES

The goal of the Global Compact is to mainstream sustainable business practices,
by way of mainstreaming the ten principles, into corporate practices
everywhere and to advance action in support of UN goals, to ensure that global
markets work in favor of broader societal goals.

Based on our analysis, the Global Compact’s most significant impacts in changing
corporate practices have been:

  1. A UNIFYING FRAMEWORK
    To establish a unifying framework for sustainable, ethical business through a
    set of principles that are universally accepted by business, governments, labour organisations and civil society. This builds a common language and understanding enabling business and other stakeholders to work in the same direction.

  2. SPREADING TO NEW MARKETS
    To mobilise thousands of businesses to embark on the sustainability journey,
    including a significant proportion of the world’s largest companies. Companies in 156 countries are now talking about corporate sustainability and the Global Compact’s ten principles.

  3. WIDER RANGE OF TOPICS ON THE CORPORATE AGENDA
    To help legitimise a wider range of sustainability topics on the corporate agenda, and turning attention towards issues including human rights, bribery and corruption. This level of awareness did not exist before the Global Compact’s launch. The main issues of the Global Compact are now becoming part of the operational story of companies all over the world.

  4. EXPANDING THE BOUNDARIES OF BUSINESS
    By helping to expand the boundaries of responsibility, companies are now starting to take a broader responsibility for their impacts along the value chain.

  5. FOSTERING CROSS-SECTOR COLLABORATION
    To create a common space for dialogue, learning and collaboration between
    business and stakeholders at the highest level, including from government, in
    a way that no other organisation has ever achieved. This has been critical for
    bringing about better long-term solutions to complex sustainability challenges.

  6. RAISING THE BAR ON PERFORMANCE
    In some areas, by producing ground-breaking best practice resources across a
    range of areas, the Global Compact has helped push the sustainability agenda
    forward and raising the bar for corporate performance and practices. These
    tools have helped companies improve their performance (see page 77 for 50 key resources). The practical guidance is distinctively practical, a result of being produced jointly with business and other stakeholders. Hundreds of participants are also actively involved in the many business leadership platforms, including Collective Action Against Corruption, the CEO Water Mandate and the Women’ Empowerment Principles.

  7. FROM GLOBAL VALUES TO LOCAL PRIORITIES
    Advancing a set of global values reflected in the ten principles. Through the 88 Local Networks, the principles are applied to local challenges, priorities and opportunities. However, many remaining barriers will need to be removed before networks will reach their full potential and become uniformly effective.


SUMMING UP

The Global Compact has undoubtedly played an important role in spreading
sustainable business practices around the world, most notably to markets where
corporate sustainability was low on the corporate agenda prior to the launch of
the initiative.

The Global Compact has to a lesser extent contributed to operationalising
practices within companies, and in many areas, a clear gap remains between
commitment to sustainability and evidence of implementation. Consequently,
there is an urgent need to focus more on the company’s sustainability outcomes.
There are indications, however, that the more actively engaged a company is
in the initiative, the greater value it derives from participation and the more it
seeks to actively advance sustainability within its own operations.

In terms of advancing sustainability leadership, it is too early to say anything
about the impact of most of the initiatives. However, there is a strong potential
to have a greater influence through many of the Global Compact’s focus areas.
More radical, innovative approaches need to be explored to drive transformative
change. Many companies express a demand for more guidance on leadership
practices.

There is still a very long way to go before the Global Compact principles
around sustainable business become the universal norm. However, recent
changes in the corporate operating environment suggest corporate sustainability
has the potential to scale up significantly in the coming years.

LEVEL 2: THE IMPACT OF THE GLOBAL COMPACT ON THE CORPORATE OPERATING ENVIRONMENT

While the Global Compact’s direct influence on corporate practices can be easily
observed and measured, it is more difficult to gauge its impact on the broader
operating environment. Bearing that in mind, our research indicates the Global
Compact has influenced the external drivers of corporate conduct, which has
spread its influence beyond the sphere of its immediate participants.

In our opinion, these have been the most significant impacts of the UN Global
Compact on the corporate operating environment:

  1. HARMONISING THE LANDSCAPE OF VOLUNTARY INITIATIVES
    By focusing on collaboration with other organisations, the Global Compact has helped to simplify the landscape of voluntary initiatives. By harmonising efforts and aligning guidelines, the Global Compact is minimising duplication of work and concentrating the efforts and impacts of voluntary schemes. As a result this has made the landscape less confusing for business.

  2. MOBILISING CAPITAL MARKETS
    The Global Compact has played a significant role in changing mainstream
    investor attitudes and practices. It has mobilised capital markets on ESG issues, most notably through the launch of the Principles for Responsible Investment and the Sustainable Stock Exchanges initiative53. Although a gap also remains between commitment and practice in the financial sector, the USD 45 trillion in assets under management backing the PRI shows an immense achievement. Even though implementation is lagging, the fact that investors increasingly show commitment on these areas can be seen as a catalyst of change in itself. Bringing investors together, particularly over high-risk issues under the Business for Peace umbrella, seems to have been particularly effective in fostering a common understanding between owners and their companies. This has helped to show how investors can support companies operating in difficult environments.

  3. FOSTERING UN-BUSINESS COLLABORATION
    The Global Compact has played a significant role in catalysing institutional
    change, particularly within the United Nations itself. Attitudes have shifted
    from concerns about the risk that business might pose to the UN brand. Now,
    business is seen as a partner to meet UN objectives.


SUMMING UP

The Global Compact has played an increasingly active and important role
in strengthening the enabling conditions for sustainable business. This has
indirectly impacted the uptake of corporate sustainability by breaking down
political, financial and other barriers, and energising positive drivers.
As seen in Part I, there are many drivers of change in the global economy,
and caution is needed in terms of offering statements about the unique influence
the Global Compact has had.

In terms of influencing regulation, the contribution of the Global Compact
is more difficult to assess. In recent years, there has been a move to mobilise
leading companies to speak out about the need for smarter regulation, most
notably in the area of anti-corruption, climate and water (see page X). An
increasing number of public authorities are recognising the Global Compact as
the globally accepted framework for corporate sustainability. Notable examples
include the EU directive on non-financial reporting and the recent G7 declaration
referencing the Women’s Empowerment Principles.
Further, in the area of education, it is promising to see that business schools
are committing to the Principles for Responsible Management Education. In the
UK particularly this is nearing a tipping point: 50 per cent of business schools
have now joined the initiative. We acknowledge that a significant gap between
commitment and implementation needs to be bridged before real impact can be
achieved.

Consequentially, through its work on driving change in the corporate operating
environment, it is likely that the Global Compact has extended its influence
on the business community beyond its immediate participant base.

LEVEL 3: THE IMPACT OF THE GLOBAL COMPACT ON THE DOMINANT
WORLDVIEW

Over the past 15 years, there has been a significant shift in the understanding
of the role and responsibility of business, and how business can contribute to
sustainability solutions. Although this area is challenging to assess, our analysis
indicates that the Global Compact has made an important contribution to this
change in attitude.

Based on our analysis, the Global Compact’s most significant impacts in changing
the dominant worldview have been:

  1. GLOBAL RECOGNITION OF WHAT ‘SUSTAINABLE BUSINESS’ IS
    The Global Compact has been instrumental in spreading a common understanding of the principles of responsible business and sustainability on a global scale. The framework has been largely accepted by global business, civil society and governments all over the world.

  2. CHANGING THE UNDERSTANDING OF THE ROLE OF BUSINESS
    Over the past 15 years, there has been a significant shift in the understanding of sustainability amongst global business executives. Attitudes have changed from viewing the role of business purely in transactional terms, to understanding that long-term business value depends on good performance across a broader range of ‘capitals’. This includes a fundamental shift towards recognising the positive role that business can play as a partner and contributor to sustainable development. The Global Compact has, in our opinion, played a significant role in catalysing this change.

  3. CHANGING THE WORLDVIEWS OF IMPORTANT STAKEHOLDERS
    The Global Compact has inspired a change in government mind-sets, as seen
    through the biannual General Assembly resolutions. These decisions increasingly acknowledge that business is a powerful force and an essential contributor to the world’s development priorities. There has also been a shift in the mindset of the global investor community regarding the importance and materiality of ESG risks. The Global Compact has played a key role through its work with the financial sector since 2003, and the launch of the PRI.

  4. SUSTAINABILITY AS AN OPPORTUNITY
    The business approach to sustainability has gradually evolved from a mere ‘do
    no harm’ attitude, to understanding the potentially significant opportunities
    arising from being more sustainable. There has been a significant shift in mindsets among leading businesses. In particular, the opportunities identified in the transition to a low-carbon economy are driving innovation, efficiency, technology development and new business models.

  5. ON DIFFUSION OF IDEAS AND NARRATIVE
    Through its Local Networks, the Global Compact has helped diffuse ideas and
    concepts around responsible business at the country and community level
    worldwide. Global norms and values have been adopted locally through translation and appropriation. This makes the universal principles real and relevant to businesses in their local contexts.


SUMMING UP
Sustainable business is by no means ‘the new normal’. However, for most global
companies, it is almost impossible not to have sustainability on the agenda. As
global business leaders become increasingly outspoken on sustainability issues,
it is likely action and awareness will spread to a broader segment of the business
community.

Our analysis and observations on the impacts of the Global Compact show
that the business narrative has shifted. The way mainstream global businesses
talk about corporate sustainability and responsibility today is vastly different
from 15 years ago. Far more companies are involved in sustainability reporting,
the reports are much more sophisticated, and the issues are more widely
covered in mainstream business media. It is evident that a change in worldviews
has occurred beyond the Global Compact participant base.

There is, as noted earlier, a multitude of events, trends and entities that
should be recognised for having contributed to the changes we have observed.
It is implausible to fully attribute change to any one initiative or event. However,
the Global Compact has been a an incubator of ideas and a first-mover in
raising the bar when it comes to sustainability, advancing collective business
attitudes, expanding the notion of business responsibility and spreading these
ideas globally through its networks.

Although it is difficult to unassailably qualify, we believe the Global Compact
has played a distinct and important role in changing our understanding of and
attitudes towards business. It will continue to have a key role going forward.
Now, a critical need remains to accelerate and increase the scale of corporate
sustainability action.

“The future cannot be known. The only thing certain about it is that it will be different from, rather than a continuation of, today. But the future is as yet unborn, unformed, and undetermined. It can be shaped by purposeful action. And the one thing that can effectively motivate such action is an idea – an idea of a different economy, a different technology, or a different market exploited by a different business. But ideas always start small…”
PETER F. DRUCKER THE BIG POWER OF LITTLE IDEAS (1983)

THE IMPACT OF THE GLOBAL COMPACT FROM ACTION TO ATTITUDES

Common knowledge tells us that to make significant changes; you must first alter
people’s mind-sets, then behavioural change will follow. In a global context,
this would mean we would need a significant shift in worldviews in order for
transformation at the practical level to occur.

Over the years, this has been the focus of sustainability change-makers:
spreading knowledge about the challenges we face, the barriers blocking progress,
and the actions needed to overcome these issues. However, it is obvious
from our unsustainable global trajectory that all this talk of facts and figures is
not driving change at the scale or speed that is needed.

Returning to our original question: How can change in large-scale systems be
catalysed? If new knowledge is not enough to trigger change, what will it take?
The latest research in climate psychology and behavioural change postulate
quite the opposite story of change. In fact, contrary to popular opinion, the
most effective way to begin a change process is through incentivising first minor
changes in behaviour.

Organisations are open and dynamic systems and evolve in line with the
changes in their surrounding environments. During eras of change, some companies
keep up and endure, others do not. Company practices change through
concrete activities and achievements - around the development of products,
technologies, services - based on new expectations, new understandings and
new ideas on what to do and how to do it.

Our research demonstrates that the Global Compact has had a significant impact
on the change observed over the past 15 years. And perhaps it was the simple
idea that change begins with practice which in the end has been the most
significant contribution. The Global Compact’s low barrier to entry ensures that
many companies are willing to sign, a practical and simple act of commitment
– without a range of requirements attached. Companies “start where they are”,
and embark on a continuous process of change with a high degree of freedom
with regard to focus and speed.

For many, this is a main point of critique. In our view, this might be a decisive
factor that has enabled the Global Compact to have had an actual impact. By
targeting first and foremost corporate practices as seen through the objectives,
and shepherding participating companies to continuously improve practices
and reach new levels of maturity, gradually raising expectation levels, this has
enabled change in other domains within the system.

In conclusion, the jury is still out on whether a sustainable and inclusive
market will be achieved. But the Global Compact has been an institutional entrepreneur, an incubator of new ideas, which have contributed to changing the
understanding of the responsibility of business all around the world. Perhaps
its most significant contribution is exactly through its simple model which
encourages business to take the very important first step towards sustainability.
Changing practices first, then frameworks and minds will follow.