Analysis: Global Compact responds to a new age of ‘hyper-transparency’

Proposals aimed at transforming the world’s largest corporate sustainability body

As we report today, the United Nations Global Compact is looking at introducing measures to exclude tobacco companies – but this is really the tip of the iceberg for the world’s largest corporate sustainability body as it responds to a new world of what its head Lise Kingo calls ‘hyper-transparency’.
The Global Compact currently consists of c.9,000 companies from 166 countries that commit to universally accepted principles on human rights, labor, environmental protection and anti-corruption.
But, increasingly aware that companies use it as a shield of respectability, the Global Compact has made a set of proposals that will see it no longer automatically accept companies, increase its scrutiny of “high risk” companies, and introduce an automated review process for companies’ reporting (the so-called Communication on Progress, or COP). Hitherto, the initiative has said it doesn’t have the mandate or resources to monitor or measure participants’ performance.
It will also enhance its screening of speakers, sponsors and other commercial partners.
And it will also introduce a new “mandatory contribution 
business model” from the start of next year. This was all thrashed out at a board meeting in New York on July 18-19, attended by UN Secretary General António Guterres.
The tobacco decision, which could impact names like Philip Morris International, was taken in line with the World Health Organization Framework Convention on Tobacco Control, though not as a “direct result” of it. This could prove significant as the Global Compact’s principles are used by ESG investors in norms-based exclusions.
The WHO has said that tobacco’s “ruling barons have cloaked themselves as good global citizens” via membership of the bodies like the UNGC. Philip Morris, making a big push in e-cigarettes, joined in 2015, with CEO Andre Calatzopoulos writing to Ban Ki-moon saying the Marlboro maker is committed to making the Global Compact part of its day-to-day operations. The company has not commented to Responsible Investor on the latest developments.
But beyond tobacco and the other exclusions on controversial weapons, arguably of greater long-term significance is the proposed development of a de-listing and re-joining policy as part of a wider review of its ‘Integrity Measures’.

And, according to a report of the board meeting seen by RI, it is acknowledged that the organisation’s governance structure is “in need of a refresh as it has not changed since its founding 17 years ago”. There was consensus that the board should be slimmed down and that board sub-committees should be established to help support its varied work.Final recommendations will go to Guterres’ office for review by year-end, the report adds.
It all adds up to a sweeping set of changes to the world’s peak corporate sustainability body that be transformative.
It comes on the watch of Lise Kingo, the former Novo Nordisk executive who took over from Georg Kell as head of the initiative in 2015. She told the meeting the UNGC needed to react to increased political and social instability, the demands for “hyper-transparency” and budgetary pressures.
The UNGC has de-listed companies before, and some have voluntarily withdrawn. In November 2015, for example, at the height of the diesel emissions scandal, VW left and has yet to re-join.
A key element of the new-look UNGC is helping to unlock finance for the 2030 Agenda – the Sustainable Development Goals (SDGs).
It sees this happening, in part, via its sister initiative the Principles for Responsible Investment (PRI) as well as “expanding offerings dedicated to sustainable finance, and by making financing the theme of this year’s UN Private Sector Forum to build awareness”.

PRI Managing Director Fiona Reynolds attended the board meeting. The PRI and the Global Compact have been looking at closer alignment over the last few years. In 2015 PRI Chair Martin Skancke told RI that it should look at making more use of its links with the UNGC to improve investor-corporate engagement. In April this year, for example, the PRI and UNGC together called on companies to ensure that their corporate pension plans mirror their own sustainability values in a joint report called ‘Aligning Values’.
Carnstone Partners, the advisory firm that helped the PRI’s governance review in 2014, has helped in the UNGC’s governance review process, and the July meeting featured a presentation from the group’s Jacqui Boardman and Christian Toennesen. Late last year, Carnstone’s Peter de Graaf joined the PRI as Chief Operating Officer.
Next on the agenda for the UNGC is its Leaders Summit in New York later this month while the next UNGC board meeting is in Geneva in late November, timed to coincide with the annual United Nations Forum on Business and Human Rights.
It certainly seems from this evidence that there’s a greater sense of integration amongst the UN-supported bodies as they push to deliver the Sustainable Development Goals and broader change. The moves in the works at the UNGC are clearly to be welcomed by all those with an interest in corporate sustainability.