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Dilemmas in Competitiveness, Community and
Monthly Bulletin Citizenship Business and Human Rights Seminar -
"Toward Universal Business Principles"
Leaders Summit 2010
The London School of Economics and Political Science
Speeches
Remarks by Georg Kell, United Nations
 
Academic Literature
22 May 2001
Archive
Thank you for the kind introduction. I am pleased and honoured to be with you here today at the
prestigious London School of Economics to talk about the Global Compact. I truly welcome the
Media Contacts
opportunity to share with you a few thoughts on the subject and hope that some of the open questions I
submit to you will be taken up for further exploration. I will focus my talk on two parts. First, I will
concentrate on where we came from and where we stand, and in the second part, I will discuss some
open questions that remain unsettled.

I. Where We Came From and Where We Stand

We really did not know where we were headed when we started talking about the Global Compact two-a-
half-years ago. The truth is we had no intention of actually doing something. The Global Compact was a
call-to-action to business leaders by UN Secretary-General Kofi Annan in a speech he delivered at the
World Economic Forum in Davos in January 1999. Although Mr. Annan was most sincere in his remarks,
and the contents of the speech had been very carefully constructed, we had no plans at that time to
embark on a major initiative. Mr. Annan proposed to the business leaders that they, together with the
United Nations, initiate a global compact of shared values and principles to give a human face to the
global market.

He emphasised that restrictions on trade were not the way to tackle these issues and that corporations
should tackle them directly. Specifically, companies should apply nine principles. In the area of human
rights, they should ensure that they support and respect human rights within their sphere of influence and
are not themselves complicit in human rights abuses. Regarding labour standards, they should uphold
freedom of association and the right to collective bargaining, make sure that they are not employing
under-aged children or forced labour, and that they do not discriminate in their hiring and firing policies on
grounds of race, creed, gender or ethnic origin. In relation to the environment, companies should support
a precautionary approach to environmental challenges, promote greater environmental responsibility, and
encourage the development and diffusion of environmentally friendly technologies.

The overriding objective of the speech was to offer a framework for filling the governance void at the
international level for social and environmental issues that were being bundled with trade and to protect
the open global market from protectionism. The idea was to propose a reasonable way forward to help
bridge the gap between economic issues, which enjoy a strong set of governing rules, and social
concerns, which do not.

The self-serving intent was to boost the three United Nations agencies charged with worker and human
rights and the environment, which are the International Labour Organization (ILO), the Office of the High
Commissioner for Human Rights, and the UN Environment Programme (UNEP). In the Davos speech,
the UN Secretary-General called on leaders to encourage governments to give the UN the resources and
authority to do its job.

A second goal was to give meaning to universal principles long agreed upon by member States of the
United Nations but lacking implementation.

In essence, the Global Compact speech was an opportunity to position the United Nations as part of the
solution to tensions both at the global rule-making level and at the micro-level for social change. In the
speech, we put the UN squarely into focus where tensions were the highest: trade and globalisation,
corporate social responsibility, human rights, environmental protection and workers' rights.

Now, I'll talk a little bit about the overall environment that produced the speech and the call for action in the
form of the Global Compact.

It was ten months before the Seattle meeting of the World Trade Organization but the fragility of
globalisation had become obvious. The debate about trade could no longer be reduced to the
oversimplified battle of liberalisation versus protectionism. The situation was more complex. It was no
longer a case that could be solved solely through negotiations between states. It was apparent that
issues of trade, investment and the role of multinational corporations had become thoroughly intertwined
with most aspects of domestic policy making and nearly every aspect of economic life.

Secondly, there was the void in governance. Trade negotiators and governments seemed ill prepared to
respond to growing public awareness about the imbalances between a fairly robust economic rule-based
system and the neglect of valid concerns such as human rights, the environment, and development.
People were questioning a system that stood ready to enforce intellectual property rights but turned a
blind eye to basic human rights.

Thirdly, it was apparent that globalisation had not brought about a convergence of income as had been
hoped. Widespread poverty was not shrinking. Billions of people remained extremely poor and poor
countries, especially the least developed, were questioning the rules. With the number of millionaires and
billionaires growing and their wealthy lifestyles highlighted in the media, the differences between the
richest people and the poor became even more obvious and troublesome.

Fourthly, rising public pressure about the negative aspects of globalisation —however mistaken some of
it may have been—was reinforced by changing perceptions about the role of the international business
community. It was no longer sufficient that corporations merely comply with laws. There was a push for
them to do more—especially in the areas of labour, the environment and human rights where
international rules are weak.

At the same time, the governments of rich countries were facing conflicting priorities from their
constituencies at home. Many labour unions were concerned with protecting jobs and viewed
globalisation, more specifically—the outflow of direct foreign investment, free trade, and the inflow of
immigrants—a s threatening. Some political parties also continued to champion the protection of jobs at
home and the stemming of immigration.

NGOs, church groups, and labour unions were all marching against free trade because of perceived
resultant job loss and low labour standards, inadequate environmental standards and violations of
human rights in poor countries. And they were advancing their agendas by calling for restraints on market
access. Corporations, of course, were lobbying for free trade when it benefited them. And political parties
were also generally pro-free trade.

At the same time, developing countries were putting out the message that globalisation was not
benefiting them as much as they would like. And they were opposed to linking labour, environment and
human rights to trade agreements.

Against this background, the United Nations seemed to offer part of the solution. Organisationally, we had
the agencies to deal with labour, human rights and the environment and address some of the governance
issues. We had the international standards in these areas that had been agreed upon by all countries—
specifically, the Universal Declaration of Human Rights, the International Labour Organization's
Fundamental Principles on Rights at Work, and the Rio Principles on Environment and Development that
had been adopted at the Earth Summit in 1992. And we had the legitimacy of being the paramount
international organisation headed by a Secretary-General who was perceived as having moral authority.

Having said all of that, as I mentioned earlier, we did not really plan to mount a separate initiative on the
global compact. We just thought that the Secretary-General's call to action would generate action and run
its own course. Well, it did all right! And that course ran right back to the Secretary-General. The response
to the speech was extraordinary. Leaders wanted to collaborate with the United Nations and move
forward. CEOs and Foreign Ministers took up the concept of the Global Compact with enthusiasm and in
six months we realised that we had to do more than just produce fine words and be available for
individual meetings. We had to develop the idea further and build an organisational framework.

So, together with the three UN agencies, we started on a long journey with two basic assumptions:

1. We thought that if the nine principles of the Global Compact became an integral part of economic
activities everywhere then economic rules and social concerns would be more balanced. The
threat of protectionism would be reduced and millions of people around the world would benefit,
directly and indirectly, through increased opportunities, better working conditions, protection of the
environment, and respect for human rights. We also thought that keeping protectionism at bay
would foster development.
2. We believed that if the international business community would embrace the nine principles as a
broad value platform then their actions would be closer aligned with the goals of the international
community and we would have a better chance of implementing the goals through action,
advocacy and practical partnerships.

Clearly, the key challenge was to motivate business to act out of self-enlightened interest. And in this, we
assumed that doing the right thing made good business sense. If this were not true, we thought it would
become true once a sufficient number of businesses took up the challenge and raised the bar. A
sufficiently large number of first movers could be motivated to step forward and bring others on board. We
believed we were capable of devising a framework of action that was credible enough and practical
enough to gain support.

So at that point we began to cultivate endorsements from global actors of the basic concept and the
principles of the Global Compact. Some of the first endorsements came from the International Chamber
of Commerce, the International Organization of Employers and the International Confederation of Free
Trade Unions. We then realised that unless individual CEOs took it up we could never succeed in making
the nine principles truly operational. Our first encounters with business were in late 1999. We then
realised that we needed major civil society organisations, without which we would not be fully effective
either. So we decided we needed at least three major organisations for both environment and human
rights. And we got the support of Amnesty International, Human Rights Watch, the Lawyer's Committee for
Human Rights, the World Resources Institute, the World Wildlife Fund for Nature and the World
Conservation Union.

In July 2000, we launched the operational phase of the Global Compact at a meeting at UN Headquarters
in New York, in which about 50 business leaders, labour leaders and about 12 civil society organisations
participated and took a stand, giving much impetus to the initiative.

Today, I am proud to announce that the practical framework for implementing the Global Compact is now
in place. The infrastructure and concepts have been refined and are ready. We are employing three
instruments: learning, dialogue and action.

Learning takes place through the Learning Forum, which is based on annual submissions by
corporations of a concrete action or set of actions undertaken to apply at least one of the nine Compact
principles. These examples or actions will form the basis of a learning bank about what works and what
doesn't in putting the principles into practice. Companies will learn directly from one another's
experiences and from the comments made by unions, civil society organisations and the academic
community. The Warwick Business School as well as the MIT and think tanks from Brazil and India are
supporting the Global Compact office in the operation of the Learning Forum, which is in the midst of a
pilot phase and should be ready by October.

Dialogue happens through policy dialogues, which take place each year on specific themes. The first
dialogue took place this past March on the theme, "The Role of the Private Sector in Zones of Conflict." As
an outcome, progress is being made on such issues as collective action to break the cycle of corruption,
measures to enhance transparency, capacity building to create a culture of peace and the elaboration of
tools to increase understanding of the impact of business in conflict situations. Basically, the dialogues
provide a platform for Compact participants to exchange views and develop concrete action plans to
address key challenges of globalisation. Next year's dialogue will review practical experiences dealing
with sustainability issues, in preparation for Earth Summit II in South Africa.

Action takes place through partnership projects that contribute to broad United Nations goals such as
poverty reduction and development. In addition to applying the nine principles, the Compact also
encourages companies to act on broader corporate responsibility issues external to the company,
especially to benefit poor countries. Ideally, these projects are undertaken in collaboration with other
organisations in support of United Nations goals. So far, dozens of partnerships have been formed to
reduce carbon dioxide emissions, combat HIV/AIDS, provide basic education, assure micro-credit, and
promote investment in less-developed countries.

We are also doing individual country outreach to bring the Compact to the local level and ensure that the
initiative is truly global. We have more companies participating from developing countries than we have
from OECD countries. Currently Brazil, China, Ghana, India, Indonesia, Lebanon, Pakistan, South Africa
and Thailand are participating and we will shortly move into many more countries. By the end of this year,
we will have established the Global Compact in every region. That will solidify its political underpinning
and enable us to feed local experiences into the global learning forum and it will offer a local platform for
action where business can mobilise concerted support for development. More broadly, the goal is to align
corporate social responsibility goals with UN goals and to promote partnerships.

Today we have several hundred companies participating. However, we do not publish the list of
companies whose CEOs have written a letter to the Secretary-General pledging their support for the
Compact because just pledging support is not sufficient. Of course, it is a good start; we welcome and
encourage that first step but we cannot publicly list names until case studies come in and we have
something concrete to go on.

Needless to say, there is much activity at all levels. In two months, by mid-July, one year after the
operational launch, we will be in a position to communicate progress. What I can tell you now is that
dozens of projects are taking shape. Many companies are carrying the principles into the core of their
companies. Labour is concluding framework agreements, and NGOs are undertaking concrete initiatives.

Now that I've told you where we came from and where we stand, I would like to address some of the open
questions that have arisen during this journey that, in my opinion, require further exploration.

But before I do, I would like to stress that the Global Compact remains an experiment. Success is not
assured. Tensions and conflicting interests need to be balanced and managed on four fronts:

1. Companies have conflicting goals. A few want to be "free riders". Others want to be strategic
partners around certain issues that are of particular interest to them. Still others are interested in
being true global citizens in full acknowledgement of their social responsibilities and for most of
them doing the right thing is nothing new.
2. Governments have different agendas and expectations. Some want control. Some fear
infringement of their sovereignty. Some want to level the playing field while others want to use
business to become a partner in development.
3. Civil society organisations come in three camps. They are ambivalent, supportive or opposed to
the Global Compact. Those who are supportive view the Compact as a constructive tool for
positive change. Those who are opposed view it as a futile, if not destructive instrument that could
damage the integrity of the United Nations.
4. Then there is the United Nations itself. The UN machinery is not always ready to embrace an
issue network that functions outside of the organisation's structural parameters. Luckily, we have
Kofi Annan, an innovative leader.

As an initiative of the UN Secretary-General, the Global Compact thrives on leveraging authority and
inspiring others to take action. As a campaign tool, we would like all civil society organizations to advocate
the principles of the Compact. But in order for them to participate we need them to meet the following five
criteria: Ability to act globally, willingness to go beyond a single issue, ability to work with all actors in
society, capacity to make a difference and not only a point, and a minimum of accountability in terms of
being able to show who the members are and who provides financing.

Concerning business participation we employ a set of criteria that are embodied in general guidelines
that we are working to better operationalize. We will soon need to create an instrument to secure the
integrity of the initiative.

Overall, success of the Global Compact will depend upon three things:

1. the extent to which the Compact improves the lives of people;

2. the extent to which business leaders everywhere embrace the Compact and act; and
3. our ability to effectively balance conflicting interests and steer the initiative.

II. Questions For Further Consideration

1. Is the Global Compact able to deliver on the development front?

As a UN initiative, the Compact will succeed only if it makes a positive difference for people in developing
countries. While the nine principles provide a value platform that can motivate business to align with
development and broad UN goals, getting it right remains a daunting challenge. Given that the lack of
business rather than business itself is the problem in the poorest countries, we need fresh approaches
to tackle long-standing problems.

2. Does the Global Compact represent a new form of governance?

As an issue network, the Global Compact is a response to government or governance failure and
institutional imbalances at the international and national levels. It does not have a built-in trajectory to
devise new forms of governance, nor is there intent to appropriate a political role for the private sector.
Instead, it aims to strengthen prevailing governance structures without blurring the lines of division
between public and private responsibilities, which, ultimately, must be drawn by public debate.

3. Voluntary initiatives versus regulation: What are the issues?

The debate about voluntary initiatives versus regulatory approaches is highly polarized and it is often
assumed that the two are mutually exclusive. Indeed, this debate oversimplifies or ignores important
issues. First, there is no reason to assume that the two approaches exclude each other. Second, we
know far too little about self-regulation and how or under what conditions it contributes to public policy
goals. Third, the prevailing idealization of international regulation is not supported by facts. Past efforts to
achieve public policy goals through international regulation have often failed to mobilize enough political
support or taken years to form. Quite often, ratification and implementation were less than satisfactory.

The key questions do not seem to be whether regulation is better than voluntary initiatives or vice versa,
but rather what works under what circumstances for what purposes. Finding answers requires a much
more in-depth analysis of the issues.

4. How are universal principles internalised and what are the micro-drivers?

For the Global Compact to succeed, CEOs must ultimately take up the challenge. But is a business
leader's willingness and readiness to take the challenge based on personality, social and/or economic
pressures, ambition, vision, or a combination of many factors? Secondly, on a broader front, to what extent
can human rights, labour and environmental concerns become a strategic tool to position a company?
Thirdly, how can the Global Compact help business leaders address the challenges of globalisation and
perhaps view the global market as 6 billion people?

Another crucial insight could be gained by better defining the micro-driving forces of corporate social
responsibility by industry sector. Mapping the drivers could reveal much about who is doing what and why.
One might, for example, expect that such a mapping would explain why the public expects pharmaceutical
companies to help provide public health services in Africa whereas nobody makes a similar demand on
the machine tool industry to meet the continent's industrial needs. Clearly, key variables play a part, such
a s relative market positions, product visibility and profitability, public awareness and concerted pressure,
and, probably most importantly, a gap between capabilities on the one hand and needs on the other.

5. How does the Global Compact contribute to the debate linking trade with
social and environmental concerns?

Much of the impetus for the Global Compact centers on trade. As efforts to re-launch trade negotiations
are under way, it is quite likely that the link between trade and non-trade issues such as the social clause,
environment and human rights will again move to center stage.

To make the Global Compact an effective and constructive instrument to build missing social and
environmental pillars into the global open market economy, we need to demonstrate the development
dimension of universal standards. In this regard, a distinction between aspirational principles and basic
principles seems overdue. While some standards seem to be related to technological and financial
capacities or levels of development, others deal with basic human behaviour, irrespective of income
levels or technological prowess.

To ensure fairness, it seems appropriate to propose a differentiation for aspirational principles according
to capacity. Applying the notion, "Behave abroad as you behave at home," as has been suggested by the
esteemed professor of Economics and trade theoretician, Jagdish Bhagwati, would assure that good
practices are spread without undermining comparative advantage laws. It would also ensure that
 developing countries are not punished for lacking the capacity to compete at the same level as rich
countries.

Concluding Remarks

So, in conclusion, I hope I have provided some insight into the Global Compact and its place in today's
highly globalised world economy. The examination of such issues provides the fuel for solutions, which
will determine the well being of millions of people worldwide. I have outlined some open questions that I
hope will aid a little in our common search for a better world. For it is only through questioning that we can
begin to find answers.

Thank you.

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