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Which Companies Benefit Most from UN Global Compact Membership?

November 24, 2011 • Global Business, OPERATION, Social Impact, STRATEGY & MANAGEMENT, SUSTAINABILITY & ETHICS

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By Jette Steen Knudsen

In this article I examine a key business question: which kinds of companies are most likely to benefit from joining international corporate social responsibility (CSR) initiatives and how should they proceed?

In this article I examine a key business question: which kinds of companies are most likely to benefit from joining international corporate social responsibility (CSR) initiatives and how should they proceed?

This question has become increasingly pertinent as more and more firms join international CSR initiatives such as the UN Global Compact, yet many of these firms fail to live up to even basic reporting requirements and are subsequently delisted. I argue that the UN Global Compact is primarily suitable for larger firms that can use the Compact to fill a governance void as they operate in less developed countries. Many smaller firms don’t have the resources to meet UN Global Compact requirements and the firms that produce and sell their goods and services in countries with efficient government regulation benefit little from UN Global Compact membership.

I argue that the UN Global Compact is primarily suitable for larger firms that can use the Compact to fill a governance void as they operate in less developed countries.

The UN Global Compact is the largest CSR initiative in the world with more than 9,000 business and non-business participants in more than 130 countries. The UN Global Compact started out as a speech by then-UN Secretary-General Kofi Annan at the World Economic Forum in Davos in 1999. Mr. Annan challenged business leaders that they should do their part to fill the governance voids that had been brought about by globalization as more and more firms were moving production to low wage countries with inadequate regulation. The UN Global Compact quickly became very successful. However, during the first six months of 2008 the UN Global Compact had no choice but to delist for the first time 630 firms for failing to submit the required Communication on Progress (COP), in which a member must explain what it has done in order to improve its performance in four areas including human rights, labour rights, the environment and anti-corruption. Today more than 2,000 firms have been delisted, which is equivalent to about 15 % of UN Global Compact members.



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