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Q&A: Responsible Practices Can Have Tremendous Ripple Effects

Kanya D'Almeida interviews GEORG KELL, executive director of the U.N. Global Compact

UNITED NATIONS, Feb 22 2011 (IPS) - As concerns mount about environmental degradation and rising inequalities, many development experts and corporate executives alike are asking whether a business as usual attitude is sustainable in a world of increasingly scarce natural resources.

Georg Kell Credit: UN Photo

Georg Kell Credit: UN Photo

IPS spoke with Georg Kell, executive director of the U.N. Global Compact, which is a platform for business and non- business bodies to collaboratively engage in the realms of human rights, labour, environment and anti-corruption.

The Global Compact facilitates networking and dialogue between corporations in the U.N.’s key areas of interest, to reach the collective goal of building an environmentally sound global economy.

With a membership of over 8,000 entities covering 130 countries, Kell is confident that the Global Compact is well placed to embark on key new initiatives to deal with recent trends and challenges, particularly the burgeoning economies in the global south and the unprecedented strain on natural resources, in the coming decade.

Excerpts from the interview follow.

Q: Since growth in developing countries will be much faster than in developed countries this year, will the focus be shifted to companies and corporations in the global south on issues relating to corporate responsibility and the prudent use of scarce resources? Will this be the beginning of a new trend? A: Many recent advances in corporate sustainability and much of what is considered best practice in a variety of areas is driven by companies from emerging economies. There are several reasons for that. First off, many of these companies have been operating in very complex and difficult operating environments for decades, often learning the hard way how easily instability, poverty, corruption or environmental degradation can disrupt economies and threaten business growth.

So, for many of these companies it has been a struggle on both ends: they had to learn very quickly how to be competitive on the global markets while still bridging gaps in their own backyard. As a consequence, this has helped create very robust and versatile global organizations that are well-positioned to take the lead on sustainability issues.

An illustrative example of this Southern leadership role is our work with global stock exchanges. From Kuala Lumpur to Shanghai, Istanbul, Johannesburg or Sao Paulo – many of the emerging-market exchanges are far more advanced in their integration of long-term sustainability issues than their Northern counterparts, who are often still chasing volume and short-term gain.

Q: What role do you expect multinational corporations to play in global economic development in 2011? And, in this context, where do you see the need for corporate social responsibility? A: Multinationals often sit on top of global supply chains of enormous proportions, with millions of employees across the globe. For better or worse, their decision can have significant impacts on well-being of markets and societies alike. Adoption of responsible labour practices or introduction of low-carbon technologies across these vast supply chains can have tremendous ripple effects.

In fact, in some areas corporations can drive change often faster than regulators, due to the relative immediacy of their decision-making. For instance, Wal-Mart’s decisions to actively promote use of energy-saving light bulbs or to sell more organic produce not only impact consumption patterns, but also have significant consequences for producers.

There are many areas where responsible business is critical to long-term success. On climate change, future efforts to curb greenhouse gas emissions will depend much on the ability of business to bring existing innovation to true scale. Poverty can only be tackled if more businesses realise the potential of pro-poor business models and bring their competencies and strengths to bear in partnership with the U.N. and civil society.

At the same time, we need a greater sense of transparency and accountability, especially in the lobbying arena. It is highly troubling to see how some corporations undermine their own commitments to greater sustainability through direct and indirect lobbying activities.

Q: Do you feel that the outcomes of the recently- concluded World Economic Forum in Davos were satisfactory? Why or why not? A: It is important to understand that the World Economic Forum is not a decision-making body, but merely a forum to discuss global political and economic trends at a very high level. This year’s Forum confirmed that emerging markets continue to go strong. It has also shown that cautious optimism has set in, even though the world economy continues to move at vastly different speeds. There appears to be a keen sense of the uncertainties and risks that lie ahead of us, from natural resource constraints to climate change.

From the Global Compact’s perspective, we were extremely happy to launch Global Compact LEAD, our new platform to take environmental, social and governance performance to the next level and set a new benchmark for corporate sustainability. More than 50 companies have joined LEAD and made a commitment to become true sustainability leaders.

We are also very happy to be among the founding partners of WindMade, the first global consumer label identifying use of wind energy by business. WindMade was introduced to a global audience in Davos and is a direct response to increasing consumer demands for more sustainable products.

Q: Several of your partner organisations have been accused of violating social responsible practices. Can you respond to this charge? A: No company in the Global Compact is perfect. And we have made it very clear from the very beginning that we remain open to those that face serious challenges, as long as they make a sincere commitment to transparency and accountability.

I believe strongly in the power of constructive dialogue and learning as our best hope to stimulate continuous performance improvement in these organisations. That is not to say that we don’t have any recourse to further action in cases of egregious violations. But we prefer active engagement over punishment.

Q: How does the global compact office (GCO) hold its partners accountable for violations of corporate social responsibiliy? Can you give some examples of violations, and the GCOs response? A: A few years ago, we introduced what we call a dialogue facilitation mechanism that is intended to stimulate debate and produce collaborative solutions. It is rather unspectacular, as we don’t talk about individual cases, but it has helped to defuse tensions and bring people and organisations together in a more constructive spirit.

The number of cases brought before is surprisingly small, compared to the total number of companies in the Global Compact. Most cases have revolved around labour issues and related human rights concerns and our first step is always to connect the two sides. We cannot stress often enough that the Global Compact was never intended to be a regulatory body, and we are not a substitute for effective regulation.

While we are actively engaging companies that face serious challenges, we demand that they remain committed to transparency and accountability. That is the reason why we have expelled more than 2,000 companies for repeated failure to communicate on progress made in implementing the Global Compact’s principles.

*This interview is part of a series of opinion articles and interviews about corporate social and environmental responsibility, supported by Anheuser-Busch InBev

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