Global Compact has potential problems, not win-win

by Chakravarthi Raghavan

Geneva, 3 Apr 2001 -- Growing partnerships between the United Nations system and transnational corporations (TNCs) is not a pragmatic win-win relationship, but one involving multiple agendas and posing problems and UN agencies pursuing this route face a number of hard choices, warns Peter Utting, Project Leader at the UN Research Institute for Social Development (UNRISD).

Utting’s caution and views in a paper presented at a seminar, ‘Partnerships for Development or Privatisation of the Multiliateral System’, organized by the North-South Coalition and held at Oslo, Norway on 8 December 2000. An abridged version of the paper is the UNRISD Bulletin No 23.

The.UN Global Compact was mooted by Secretary-General Kofi Annan at the Davos symposium of the World Economic Forum, and is being and pushed by the secretariat and the International Chamber of Commerce.

The UN General Assembly has asked the Secretary-General for a report on how the UN and business can work together. And the UN, according to NGOs monitoring the Global Compact activities, the UN has now engaged a consultant from the International Business Leaders forum to write the report!

The Utting paper notes that rationale behind the partnerships, currently in vogue, between UN and TNCs seem clear enough - various benefits in terms of resource mobilisation and promotion of certain values and forms of governance.

Potentially these partnerships are seen as providing an important means of tapping the considerable resources, technology, competencies, creativity and global reach of the business community and employing these for developmental and ethical goals. They are also seen as a way to raise the profile of human rights, labour standards and environmental issues - in a world somewhat fixated on market economics and corporate profitability. They also seem to offer a way to deal with complex global problems by relying not only on state- based institutions, but also private sector and civil society.

However, cautions the Rutting paper, “there is a potential downside to partnerships that is often overlooked.” Varying UN institutions appear to be paying “insufficient attention” to certain risks associated with partnerships, “including conflicts of interest, self-censorship, the poor choice of partners” and the tarnishing of the UN’s reputation. “As the partnership phenomenon takes off, it is useful to bear in mind the tensions and pitfalls involved,” the paper adds.

There are a range of interests and agendas under-pinning partnerships, some of which can be fairly self-centered and give rise to various questions about the supposed ‘win-win’ status of partnerships and their contribution to social and sustainable development.

One such agenda, Utting points out, has to do with the dominance of neo-liberal ideology, which emphasizes, among other things, market liberalization and a reduced role for the state in regulatory activities.

So-called ‘voluntary initiatives’ which include partnerships, have become the preferred way of encouraging business to act responsibly. However, relatively few companies have significantly improved their social and environmental record through a voluntary approach. Legislation and inter-governmental agreements remain important components of a strategy to promote corporate responsibility.

“A key question then, is whether voluntary initiatives in general and partnerships in particular are part of a broader agenda that aims to further weaken the regulatory role of the state and intergovernmental bodies. Rather than comprehensive legislation, are voluntary initiatives attempting to replace it?”

Utting points out that the trend towards partnerships is encouraged by changes in patterns of corporate governance - with some companies responding to the competitive pressures associated with globalization by paying more attention not only to investors and customers, but also a whole group of stake-holders, seeking to minimise confrontations and seeking dialogue.

UN-business partnerships could be part of these strategies, enhancing a company’s relations and reputation with various stake-holders, and boost its profile and image in localities around the world where it is linked to UN agencies or projects. From the perspective of corporations, “the partnerships may have more to do with seeking competitiveness and legitimacy rather than humanitarian or developmental goals of the UN”

Another force underpinning partnerships is the rapid growth of philanthropy and sponsorship among certain sectors of the business community. Philanthropic activities often increase when a company is facing tighter regulation and/or is being criticised for socially irresponsible behaviour.

“To what extent, therefore, are partnerships part of the efforts of big corporations to enhance their public image, irrespective of whether the companies in question merit a good reputation?” asks Utting.

Partnerships, Utting notes, have also been encouraged by the crises affecting both overseas development assistance and UN finances. In the 1990s, restructuring and budget cuts were the order of the day in many UN agencies. In this context, the private sector came to be seen as a potentially important source of alternate funding.

“When considering the pros and cons of partnerships, it is important to ask whether UN agencies are pursuing a narrow financial agenda. If they are doing so, are they compromising their values, standards and conventional agenda for financial reasons?”

What this analysis suggests, Utting says, is that partnerships should not be seen simply as pragmatic win-win relationships where two or more actors or stake-holders come together to work towards a common goal.

“Multiple agendas may be involved, and from these agendas varies problems may arise,” he warns.

Four types of problems, Utting says, appear particularly worrisome.

First, while many partnerships have lofty goals, it is not at all certain whether such goals will be realized. Much will depend on the balance of forces within the partnership and the type of interaction that takes place as the different actors advance their specific agendas.

“The Global Compact, for example, is formally a multi-stakeholder partnership of UN agencies, business entities and civil society organizations, established to encourage business to promote good corporate practices in the field of environmental protection, human rights and labour standards.

“But from the statements made by the participants at the conference that launched the Global Compact in July 2000, it is clear that the different partners want different things. Business wants a soft approach, with no imposition of standards and minimal scrutiny, and with specific companies allowed to go at their own pace.

“Some NGOs and trade union organizations were joined by the UN High Commissioner for Human rights in calling for a ‘price to be paid’, i.e., tougher measures including independent monitoring, public reporting, a faster response on the part of business, and measures against member companies that do not comply.

“It remains to be seen,” comments Utting, “which of these different approaches will prevail.” Second, there is the danger that, through partnerships, private interests will come to exert excessive influence over public interest organizations.

“If institutions such as governments or UN agencies are to serve the public interest, they must keep a certain distance from the private sector. This is because an organization like the UN is driven, at least to some extent, by a set of ethical principles and aims to promote development for all, while big corporations are largely driven by the profit motive and the interests of shareholders. Tensions and conflicts of interest, therefore, are likely to arisen when private interests exert undue influence over the decision-making processes of public-interest organizations.”

There are concerns that this is happening in some UN agencies as a result of partnerships, which can provide a company with greater access and influence, says Utting and cites in this connection a recent WHO report identifying the various ways tobacco firms have attempted to influence that organization.

“If pariah firms such as these have gained influence, it is not difficult to imagine how much easier it might be for others in, say, the pharmaceutical or food industries.”

Third, says Utting, there are concerns that the agendas of UN agencies are changing as they get closer to business, and that the doors to certain legitimate fields of inquiry and analysis are gradually being closed. “This is apparent, for example, in relation to the issue of regulation of TNCs. Critical analyses of TNCs also seem to be frowned upon in certain agencies.”

Self-censorship, Utting says, may be on the increase. Instances have already occurred when consultants, hired by a particular specialized agency, were invited to present their findings at a conference and were informed by agency officials that they were not to refer to specific sections of their reports that criticize the TNCs.

“Once self-censorship occurs, it is likely to undermine the capacity of UN agencies to fulfill their role as independent advocates for human rights and development for all, and as professional bodies that can raise the level of debate on development issues and facilitate the search for alternative approaches..”

Fourth, some UN agencies appear to be going into partnerships in a somewhat naive way, assuming that almost any relationship constitutes a partnership and that any company can be a worthy partner.

Genuine partnerships involve not only different actors or stakeholders coming together to pursue a common goal, but also mutual respect, transparency, balanced power relations, and the equitable distribution of benefits, responsibilities and risks. Furthermore, in the UN context, the common cause being pursued should have a societal or ethical dimension to it.

“When we speak of UN-business partnerships, this should presumably refer to a specific type of relationship that aims, among other things, to promote corporate responsibility and accountability.”

The criteria used to select corporate partners can be very weak. Furthermore, although various parts of the UN system have recently drawn up, or are in the process of formulating, guidelines on interaction with the business sector, such guidelines rarely spell out the risks associated with such interaction. Neither is there much attention to key questions of evaluation and independent monitoring of partnerships.

“Given the actual or potential problems and conflicts of interest involved, it is important that UN-business relationships be subjected to closer scrutiny,” says Utting.

The urgency being displayed by some agencies and officials in engaging corporations as partners may also lead to guidelines being ignored, he warns.

In July 2000, he notes, the UN Secretary-General issued a formal set of guidelines for cooperation with the business community. These said, inter alia, that ‘business entities that are complicit in human rights abuses... are not eligible for partnership’ and that ‘private enterprises should have demonstrated a commitment to meeting or exceeding the principles of the [Global] Compact by translating them into operational corporate practice.’

Yet, says Utting, some UN institutions appear to be ignoring the letter and spirit of such clauses. “The criteria they adopt for selecting partners seem quite lax.”

In certain other areas, the guidelines appear somewhat broad or vague. For example, those relating to the use by business of the United Nations name and emblem have led to confusion in some UN quarters as to when their use should be authorized.

Although an agency might have a policy stating that only companies with a good environmental., social and human rights record will be considered as partners, often this record is not examined in any depth.

“This has led to situations in which specific partnerships incur the wrath of NGOs aware of abuses that have been committed by the companies involved. The demise of the United Nations Development Programme’s Global Sustainable Development Facility followed in the wake of NGO opposition to the inclusion of companies such as Rio Tinto and Dow Chemical Corporation.”

Both the Global Compact and the involvement of the UN High Commissioner for Refugees (UNHCR) in the Business Humanitarian Forum, have come in for similar criticism, partly for the inclusion of companies such as Shell and Nike, and Nestle and Unocal respectively.

WHO’s involvement in the World Alliance for Community Health, which includes mining companies like BHP, Placer Dome, Rio Tinto and WMC, may run a similar course.

All of the above companies are targets of NGO campaigns.

“A more serious evaluation of the track record of each particular company involved in a partnership would seem to be in order. There are various ways in which this could be done. Individual agencies could follow the example of UNICEF and establish an office to screen companies and periodically review corporate performance. UN organizations could also undertake a broad-based consultation with NGOs, trade unions, ethical investment firms and research organizations with knowledge of the company in question.

Another possibility which might avoid duplication would be to establish a UN entity that could gather the information required, perhaps something akin to the UN Centre for Transnational Corporations which existed prior to 1992.

If UN agencies are to pursue the route of partnerships with TNCs, they face a number of hard choices.

Do they choose, for example, to work with the ‘good guys’, or do they collaborate with companies with tarnished reputations who now say they want to change? A key question is whether the latter firms can be trusted.  “Unfortunately, the history of corporate social responsibility is littered with cases of companies making exaggerated claims and engaging in window dressing.”

It can be argued therefore that trust should not be taken for granted - it needs to be earned. UN agencies may also have to decide whether they want to be a party to corporate strategies of ‘reputation management’ or an ally of global corporate accountability movement that is demanding more fundamental improvements in corporate social and environmental performance.

The path of ‘civil regulation’ - where pressure from civil society organizations serve to reform business practices - may be one of the most effective routes to promoting corporate social and environmental responsibility.

“Various features of the UN-business partnership approach, however seem to be undermining the possibility of such an alliance. For, they are straining relations between the UN and an important sector of NGO community that is part of this movement.” – SUNS4869

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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