UN Global Compact

DEFINITION of 'UN Global Compact'

The United Nations Global Compact is a strategic initiative that supports global companies whose CEOs are committed to responsible business practices in the areas of human rights, labor, the environment, and corruption. This initiative, implemented by the United Nations (UN), is involved in activities that achieve sustainable development goals to create a better world.

BREAKING DOWN 'UN Global Compact'

The UN Global Compact is based on 10 principles that should define a company’s value system and approach to doing business. These principles are collectively founded on the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. Member companies are expected to engage in specific business practices that are responsible to people and the planet while pursuing profitability with integrity.

The 10 principles, as stated on the UN Global Compact’s website, are as follows:

Businesses should -

Principle 1: support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Businesses should also -

Principle 3: uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: eliminate all forms of forced and compulsory labour;

Principle 5: effectively abolish child labour; and

Principle 6: eliminate discrimination in respect of employment and occupation.

In addition, businesses should -

Principle 7: support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Finally,

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery

Companies that join the compact are expected to integrate these principles into their company’s strategy, culture and day-to-day operations as well as advocate the principles publicly and communicate with stakeholders on their progress toward meeting the principles. Almost any company with a serious commitment to working toward the principles may join the compact. The compact is not legally binding and is purely voluntary, and the initiative does not police member companies’ behavior. Companies might choose to join the compact because of the importance of corporate codes of conduct for developing and maintaining positive relationships with customers, employees, and other stakeholders, and for avoiding regulatory and legal problems.

Member companies of the UN Global Compact are expected to develop a holistic and comprehensive strategy to act in environmentally responsible ways with regard to climate change, water and sanitation, energy, biodiversity, and food and agriculture, and to recognize the ties between environmental issues and social and development priorities. Rather than meeting minimum standards for assessing risk and complying with regulations, businesses are expected to actively address environmental risks and opportunities and to make major efforts towards creating a more sustainable future.

These member companies must also be focused on social sustainability, especially human rights as they apply to labor, women’s empowerment and gender equality, children, indigenous peoples, people with disabilities, and people living in poverty. The compact believes that protecting human rights is primarily a government responsibility but that businesses should contribute or, at a minimum, avoid harm. Ways that businesses can contribute to human rights including creating decent jobs, developing goods and services that help people meet their basic needs, promoting public policies that support social sustainability, joining forces with like-minded businesses to have a greater impact, and making strategic social investments.

One of the UN Global Compact’s fundamental beliefs is that a business cannot offset its harmful activities in one area by doing good in another area. A business must attempt to avoid all types of harmful impacts while also doing good. Businesses, in turn, choose to support social and environmental sustainability not just for the greater good, but also because being associated with poverty and inequality and operating in environments where the rule of law is weak can harm the company’s reputation and its bottom line. Further, companies that commit to sustainability may have an advantage in accessing untapped markets, attracting and retaining business partners, and developing innovative new products and services while operating in a lower-risk environment and encouraging employee satisfaction and productivity.

The UN Global Compact provides businesses with guidance on how to achieve the 17 sustainable development goals it espouses. For example, a company can support inclusive and equitable quality education and promote lifelong learning opportunities for all by joining forces with governments and with other companies to create open-source technology that helps deliver education to hard-to-reach communities and to develop low-cost learning materials for under-resourced schools.

In the area of promoting strong, peaceful and accountable institutions (i.e., governments), companies can respect and support the rule of law, especially in areas where it is weak, by rooting out any corruption within their own organization, joining the anti-corruption working group to share their experiences and best practices for eliminating corruption with other companies, and joining forces with governments, nonprofit organizations and other companies to take collective action against corruption.