By Khaled Kassar and Philippa Shala - New York - Responsible Business
Mr. Georg Kell, Executive Director of the UN Global Compact (UNGC), gives an exclusive interview to Responsible Business. He discusses the outcomes of Rio +20, the future of the UNGC, progress on sustainability in the Middle East and the challenges and opportunities for businesses seeking to join the UNGC and implement sustainability programs in this region.
The UNGC was introduced to the Middle East in 2004. The chart inside developed by Responsible Business (pg. 57) shows the current membership of the UNGC amongst Arab countries, as of September 2012. It is clear that membership remains low, especially when compared to similar sized economies in Europe. Denmark, for example, has a similar GDP to the UAE, but has 256 participants in the UNGC compared to UAE’s 40 participants.
The level of take-up of the UNGC in the Middle East has been closely linked to the amount of support and active promotion by governments, the UN Development Programme (UNDP) and local partners. UNDP is often the lead partner for promoting UNGC around the world, although in some regions a UNGC office has been established, and local partners are also used to establish networks. It is notable that in Iraq, one of the UNGC’s fastest-growing networks in the Middle East, the UNDP, with official support, was also active in undertaking assessments and building public-private partnerships to promote corporate responsibility. A joint government and UNDP launch in October 2011 resulted in membership increasing from 30 to 90 over the space of a few months!
Unfortunately, the same cannot be said for some countries in the Middle East where similar government support remains minimal, and UNDP as well as business associations and local networks have failed to stimulate the same level of interest. In Lebanon, for example, whilst the UNDP has developed some partnerships with ministries and businesses, their focus fails to address the wider CSR and sustainability remit, focusing mainly on environmental initiatives. And despite research undertaken by the UNDP itself a decade ago (2003) and efforts led by CSR LEBANON and endorsed by the UNGC in 2009 recommending the UNDP to officially launch the Global Compact in Lebanon as a way to enhance business and community relations, this has never taken place to our knowledge.
Although CSR LEBANON signed a Memorandum of Understanding (MoU) on April 15th, 2010 with the former UNDP Resident Representative to develop an integrated national country report in partnership with various parties and engage business community at large, the UNDP in Lebanon failed to measure up to effective corporate governance requirements and fell short of proving its minimum support to organizations that made it their commitment to promote the UNGC principles. The motivation behind this negligence is yet to be known but has indeed hindered the development of fostering a collective action towards raising the standards of ethical business operations.
Responsible Business has identified the slow take-up of the UNGC as being both a symptom and a cause of the delayed development of CSR and sustainability in the Middle East and spoke with Georg Kell about some of its concerns. A key architect of the Global Compact, Mr.Kell has led the initiative since its founding in 2000, establishing the most widely recognized multi-stakeholder network and action platform to advance responsible business practices. Mr.Kell also oversaw the conception and launch of the Global Compact’s sister initiatives on investment and business education, the Principles for Responsible Investment (PRI) and the Principles for Responsible Management Education (PRME).
Many corporations, the public sector and NGO’s still don’t have a clear idea about the outcomes of the Rio+20 Summit. After the many events at the summit, how does the Executive Director of UNGC view the Rio+20 results, especially for our Middle Eastern readers (from the private, public and civil society sectors)? Do you think it was successful in achieving its objectives? What will be the next steps to ensure companies meet the commitments they made at Rio+20?
The Rio+20 Summit marked an important step on the long path towards sustainable development. For us, the true measure of success at Rio+20 has always been the amount of positive change it manages to inspire in the coming years. In that respect, Rio produced some very encouraging signals. One of the most important outcomes of Rio is the realization that governments are no longer the sole drivers of sustainable development. While government action remains critical in a large variety of areas, Rio has shown impressively that business has a critical role to play – through innovation, responsible investment and leadership. With over 2700 participants, the Global Compact’s Rio+20 Corporate Sustainability Forum was a major showcase of business leadership for sustainable development, and more than 200 corporate commitments made in Rio are quite remarkable.
We have developed a process to ensure that these commitments do not remain statements of intent, but actually lead to tangible results. We will follow up and demand transparency about progress made.
Can you tell us how the UNGC has evolved over the past few years and where it is headed? (How will UNGC continue to engage the private sector? Will there be new principles or models in place? What will this mean for Middle Eastern businesses?)
The Global Compact has seen tremendous growth over the years, reaching almost 7000 companies in 135 countries. At the same time, we have expelled more than 3,000 companies for failure to report on their progress. This has created a number of strategic challenges, chiefly how to inspire advanced companies to demonstrate sustainability leadership, but also how to ensure that those companies that are not as advanced receive the right kind of guidance. The Blueprint for Corporate Sustainability Leadership and the Global Compact Management Model were developed to meet the needs and aspirations of both groups. I encourage all companies, including those in the Middle East, to use these models as guidance in their efforts.
Is the Middle East an area of interest for the UNGC? How do you describe the sustainability status in the Middle East? What are the main challenges to be addressed?
Since we took our first steps in the Middle East and launched the Global Compact in Egypt in 2004, the initiative has been making steady progress in the region, often in adverse political and socioeconomic environments, such as Iraq or Syria. And while participation has not yet reached the numbers needed, there has been growing attention to the Global Compact and the sustainability agenda in the last few years. Another encouraging sign is that more participants in the Middle East are now reporting annually on their performance.
Challenges remain, of course. SMEs – by far the majority of all businesses in the MENA region – struggle with the implementation of the principles, and also with annual reporting. Some Local Networks have been lacking the structure and resources they need.
It remains to be seen what impact the Arab Spring and the subsequent political shifts will ultimately have on the Global Compact’s work. So far, the signals have been mixed, once again underscoring that the region’s countries are all too often treated as one monolithic political, economic, social, and cultural space. Nothing could be further from the truth.
And yet, there appears to be a widespread consensus among many participants that sensible reform can help improve the investment climate, put an end to decades of bureaucracy and corruption, and better connect the Arab economies to the global market.
On a related note, there seems to be evidence that responsible business in the region is paying off. In Egypt, for instance, some examples suggest that companies with solid sustainability policies and practices are the ones that remained operational and profitable – despite much turmoil.
Aside from the UN, what type of organizations or institutions does the UNGC work with in the Middle East to promote the UNGC? How does it work with these partners?
There is no one-size-fits-all approach to the Global Compact’s choice of partners in the region, also due to the widely differing national contexts. In some cases, UN organizations on the ground, typically the UN Development Programme (UNDP), take the first steps in reaching out to the business community. At other times, we collaborate with NGOs or business associations. In any event, our main objective is to build a critical mass of champions that are willing to join forces in support of the Global Compact’s mission. Ultimately, we seek to build self-sufficient and active local networks that help make a difference in companies’ efforts to become more sustainable.
On CSR: Many companies still haven’t fully understood with the concept of corporate responsibility or corporate sustainability, relying largely on philanthropic contributions without taking a closer look at the environmental and social impacts of their own business operations.
Many national companies based in emerging economies like the Middle East are starting to pay attention to CSR trends. What would you say are some of the main challenges these companies (mostly SMEs) run into when scaling up successful sustainability initiatives? What can governments in these countries do to encourage more sustainable business practices?
This is not just a Middle Eastern problem, but many companies still haven’t fully understood the concept of corporate responsibility or corporate sustainability, relying largely on philanthropic contributions without taking a closer look at the environmental and social impacts of their own business operations. The latter is really the focus of our work. So, part of the challenge is to help companies understand that CSR is about aligning your business with universal values, such as those embodied in the Global Compact principles.
When it comes to SMEs, the challenges are mostly related to resources and language. Few SMEs are able to build sophisticated sustainability programs with a dedicated staff. Instead, they rely very much on practical guidance that shows how to adapt their business without having to make costly investments. The good news is that many of the thousands of SMEs in the Global Compact are showing every day how this can be done. Almost half of our nearly 7,000 participants are SMEs and chances are that no matter what a company’s size or sector, someone in this vast network of businesses has faced a similar challenge and come up with a practical solution. That is one of the Global Compact’s strongest value propositions.
As we develop guidance for companies, language has always been an issue, particularly in emerging and developing markets where English or French are not widely spoken. This is where Global Compact networks have been playing a pivotal role, and many SMEs are actively engaged in our networks.
Governments have a broad inventory of instruments to stimulate and support more sustainable business practices. One is to support the Global Compact and its Local Networks and support our outreach. Another is to provide incentives – think about tax breaks or awards – for more responsible and sustainable companies. And in some places, we actually see governments lead by example – encouraging the adoption of sustainability principles and practices by public-sector organizations.
Most importantly, however, one of the greatest drivers of corporate sustainability is good governance – an enabling environment that creates a level playing field, eliminates corruption and promotes open and free trade.
Which Middle Eastern countries do you think are currently the most active in applying the UNGC principles?
It is difficult to call one country the “most active” one. At the end of the day, this is about individual companies, and their level of engagement is determined by more than just geographic factors. Of course, government support is key, too, but success stories can be found in almost any country in the Middle East.
Worldwide which sectors are the most active or committed to the UNGC principles?
There is significant variance in the challenges different sectors face. Mining companies are confronted with very different issues than software developers. And in each sector you will find companies that are very advanced in their sustainability practices, while others are lagging behind. This makes it difficult to highlight one or several sectors over the others. Across the board, however, far more sectoral initiatives and collaboration will be needed to bring sustainability to scale.
Do you believe that there is a proper understanding by the private and public sectors of the UN Global Compact guidelines in the Arab region? Do you think that the majority of businesses which join have a dedicated commitment to the principles rather than see membership as a marketing opportunity?
On UNGC Membership: What we need is critical mass for corporate sustainability to really make a difference on a global scale. Thus far, too many companies continue to sit on the fence and put short-term gain over long-term value creation.
Many companies in the region are still struggling to move from philanthropy and community investment to true corporate sustainability, and others continue to treat CSR and participation in the Global Compact primarily as a communications challenge. At the same time, the quality of corporate engagement has increased significantly in recent years, and companies now have a much better idea of the Global Compact’s value proposition for their business. They know that their commitment to the principles has to be backed by action to remain credible. Those that try to cover inaction or questionable practices under the UN flag are easily exposed and will fail.
What role does the UNGC play when it comes to Middle Eastern businesses who want to engage in taking greater responsibility in their society? For example, providing support and monitoring mechanisms as they apply the 10 UNGC principles?
First of all, through dialogue, knowledge-sharing and practical guidance, we try to help companies understand the value proposition for corporate sustainability and develop the right kind of practices and policies. This work continues in the Global Compact’s Local networks, which really help adapt our global mission to local circumstances.
What are your thoughts on companies that join the Global Compact, but are unable to comply with the UNGC principles? COP? What about in cases where the failure may be due to lack of support or infrastructure, as is often a factor in the Middle East? Is there any assistance available for these companies?
Once again, local networks play a pivotal role in helping these companies understand the importance and value of our reporting requirement. Reporting should never be seen as a regulatory burden, but instead as a critical component in a sustainability management process. Once companies understand this distinction, they are often more willing to take the next steps and build the necessary capacities for long-term engagement that includes developing an annual Communication on Progress. Of course, there will always be companies that do not take their commitment seriously, but we have worked hard to offer the tools and solutions companies need to create value through the Global Compact.
On Reporting: Reporting should never be seen as a regulatory burden, but instead as a critical component in a sustainability management process. Once companies understand this distinction, they are often more willing to take the next steps and build the necessary capacities for long-term engagement that includes developing an annual Communication on Progress.
In June 2010, we joined you in celebrating 10 years of the UNGC. It was announced that the UNGC had received 8,000 signatories – 6,000 from business and 2,000 from civil society and other non-business groups, from more than 135 countries. The Secretary-General expressed his hope that the Global Compact would become a “truly transformative movement”, reaching 20,000 participants by 2020. How close are we to achieving this number? What will be the significance of achieving or exceeding this number?
What we need is critical mass for corporate sustainability to really make a difference on a global scale. Thus far, too many companies continue to sit on the fence and put short-term gain over long-term value creation. Our goal of 20,000 by 2020 was a symbolic estimate of what it takes to really transform the private sector. At roughly 7,000 companies, we still have a long way to go, and it requires stimulating the frontrunners to demonstrate true leadership while offering basic guidance for those still in the early stages of their sustainability journey.
While most multinational corporations (MNCs) have well established corporate citizenship / CSR programs, these activities often remain in stand-alone departments or within the communications/marketing units. What in your opinion are some of the strongest arguments for making sustainability part of a company’s core business model? Can you name some specific success stories that can serve as examples for companies seeking a triple-bottom line (economic, social, and environmental)?
If taken seriously and applied strategically, corporate sustainability is one of the most powerful value propositions for long-term business success. There are many reasons, but a proactive stance on environmental, social and governance issues helps anticipate and minimize risks while also creating new opportunities. For instance, many companies had to learn the hard way that failure to anticipate certain environmental or labour risks can have very costly consequences. At the same time, there are plenty of examples of companies that have built strong and profitable business models that build on increased consumer demand for more sustainable products and services – from hybrid cars to organic food, to name just a few examples.
Multinationals in our region are accused to be underperforming in terms of CSR and sustainability in comparison to their home countries or other parts of the world. Does the UNGC make sure that multinationals that are members of the International Organization are fulfilling their commitment to the principles in every country they have presence in? How so?
It is true that many corporations still struggle to extend their sustainability commitments to country organizations or subsidiaries, but depth of implementation is a question of the right strategic approach. Whenever a multinational joins the initiative, we expect the corporate commitment to be a global one. And indeed, many companies have found the Global Compact’s principles to offer a great and universal organizing framework for their sustainability policies, possibly even leading to cost savings, as there is no need to reinvent the wheel for every market of operation. On a practical level, it requires taking the global commitment and adapting it to local circumstances, setting priorities and developing the right performance indicators. We support this by inviting multinationals to engage in our Local Networks in all their markets of operation. The exchange with local peers has helped many of our companies to better understand local challenges and opportunities.
What is the current relation between UNGC and Global Reporting Initiative (GRI)? Is it necessary for all companies to implement GRI guidelines in their annual sustainability /CSR reporting? What are the similar guidelines required or recommended by UNGC? Are there any other policies you can advise for corporations in the emerging countries?
For many years, the Global Compact has had a strategic alliance with the Global Reporting Initiative, and we encourage our companies to use the GRI reporting framework. The complementarity between the ten principles and the GRI framework has long been established, so it is really a natural fit and a very meaningful exercise for companies of all sizes and sectors. Of course, every company moves along its own trajectory towards greater sustainability, and we recognize that. Consequently, GRI reporting is not a requirement of participation. Ultimately, we want companies to understand the value of disclosure for their own business, and the GRI Framework is a very useful tool on that path.
We Support The Ten Principles of Global Compact
The UN Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption:
• Principle 1: Businesses should support and respect the protection of internationally proclaimed
human rights; and
• Principle 2: Make sure that they are not complicit in human rights abuses.
• Principle 3: Businesses should uphold the freedom of association and the effective recognition
of the right to collective bargaining;
• Principle 4: The elimination of all forms of forced and compulsory labour;
• Principle 5: The effective abolition of child labour; and
• Principle 6: The elimination of discrimination in respect of employment and occupation.
• Principle 7: Businesses should support a precautionary approach to environmental challenges;
• Principle 8: Undertake initiatives to promote greater environmental responsibility; and
• Principle 9: Encourage the development and diffusion of environmentally friendly technologies.
• Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
Georg Kell Urges Corporations to Join the UNGC
CSR has recently grown exceptionally and is an essential investment for business worldwide, including the Middle East region.
I would like to invite Lebanese companies to join the UN Global Compact. The United Nations Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles and to take action in support of UN goals including the Millennium Development Goals.
Since its inception in 2000, the initiative has become the largest voluntary corporate responsibility initiative in the world with over 8000 participants from more than 130 countries organized in more than 90 country networks. The values advocated by the UN Global Compact are increasingly also embraced by investors and companies in all regions of the world.
CSR LEBANON, under the guidance of Mr.Khaled Kassar, is building momentum for sustainable business practices in Lebanon and the region, and its mission is to support companies seeking to develop their strategies in this area. UNDP and CSR LEBANON recently signed an MOU in order to cooperate in preparing for a Lebanese CSR Country Report and move towards a national CSR agenda.
The UN Global Compact sees this as a great opportunity for Lebanese banks and corporations to join this growing movement and participate in the upcoming report of the National CSR Agenda.
I wish you every success and hope that the Global Compact will grow in Lebanon.
Mr. Georg Kell
UN Global Compact
* This message has been delivered during the First CSR LEBANON FORUM on May 18th, 2010. You can access the Video on CSR LEBANON website: www.csrlebanon.com
Source: Responsible Business Magazine