3. The UN Global Compact

• Companies from any industry sector, except those companies involved in the manufacture, sale, and distribution of anti-personnel land mines or cluster bombs, companies that are the subject of a UN sanction, or that have been blacklisted by UN Procurement for ethical reasons, and those that derive revenue from the production and/or manufacturing of tobacco. Private military companies, often excluded by other initiatives or ethical funds, are allowed to become participants. Companies can be either Participants or Signatories.
• To participate, a company simply sends a letter signed by its CEO, with support from the Board, to the UN Secretary General in which it expresses its commitment to meet fundamental responsibilities in four areas: human rights, labour, environment and anti-corruption. Companies are also required to produce an annual Communication on Progress that outlines the efforts to operate responsibly and support society ⁴ .
• Companies joining the UN Global Compact, are expected to: “Make the UN Global Compact and its principles an integral part of your business strategy, day-to-day operations and organizational culture; Incorporate the UN Global Compact and its principles in decision-making processes at the highest levels; Engage in partnerships that advance the UN Global Compact’s principles and support broader UN goals, such as the UN Sustainable Development Goals; Advance the UN Global Compact and the case for responsible business practices through advocacy and outreach to peers, partners, clients, consumers and the public at large” ⁵ . Moreover, companies need to make an annual financial commitment to support the work of the UN Global Compact Office, depending on their status as Participants or Signatories.
• the Global Compact and its ten principles; (ii) engagement in partnerships to advance broad UN goals; and (iii) the annual submission of a Communication on Progress.
• Other stakeholders can also participate in the Global Compact, including civil society organisations, labour organisations, business associations, cities, and academic institutions.

Although these will not be discussed in detail in this guide, the Global Compact counts on different multi-stakeholder Action Platforms (comprised of NGOs, companies, and other representatives) established to provide advice, and to promote implementation of the principles and the UN Sustainable Development Goals. These platforms draw from the work of the UN Special Representative on the issue of business and human rights, and aim to develop practical tools for businesses.

How to use the Global Compact to denounce human rights violations by companies?

Since its creation, the Global Compact has been criticised by many civil society organisations for offering companies an easy way of “green-washing” or “blue-washing”. Participants are listed on the UN website, can request permission to use a version of the Global Compact logo, and can present their company as acting in accordance with the 10 principles without having to prove that they do so. ⁶ In 2004, as a result of numerous criticisms against the Global Compact for allowing companies which blatantly violate the principles to participate in the initiative, the Global Compact adopted “integrity measures” in order to restore its credibility. ⁷ In December 2008, the UN Secretary General, Ban Ki-Moon encouraged the Global Compact “to further refine the good measures that have been taken to strengthen the quality and accountability of the corporate commitment to the Compact. As we move forward, it will be critical that the integrity of the initiative and the credibility of this organisation remain beyond reproach”.

For its part, the Global Compact emphasises that the initiative focuses on learning, dialogue and partnerships as a complementary voluntary approach to help address knowledge gaps and management system failures. ⁸

Participation may now be questioned in cases of misuse of the UN or the Global Compact logo. Moreover, two procedures by which companies may ultimately be de-listed from the initiative have been introduced, although the Global Compact insists it is not a “compliance based initiative”.

Serious allegations of human rights violations in which a business participant is involved may be brought to the attention of the Global Compact Office to “call into question whether the company concerned is truly committed to learning and improving”. The Office gives some examples of such violations: murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation, serious violations of individuals’ rights in situations of war or conflict, severe environmental damage, and gross corruption or other particularly serious violations of fundamental ethical norms.

The matter should “contain sufficient detail so that the company is able to understand the specific concern being raised and thus be able to respond". ¹⁰

The Global Compact Office “will generally decline to entertain matters that are better suited to being handled by another entity, such as a court of law, local administrative agency, or other adjudicatory, governmental, or dispute resolution entity”. ¹¹

NOTE
The Global Compact Board insisted on using the term “matter” instead of “complaint” in order not to raise false expectations, highlighting that the process relates to dialogue facilitation rather than complaint resolution.

Process

Upon receipt of a matter, the Global Compact Office will:

• Filter out prima facie frivolous allegations. If a matter is found to be prima facie frivolous, the party raising the matter will be so informed and no further action will be taken by the Global Compact Office.
• If an allegation of systematic or egregious abuse is found not to be prima facie frivolous, the Global Compact Office will forward the matter to the company concerned, requesting:
  • written comments, which should be submitted directly to the party raising the matter, with a copy to the Global Compact Office;
  • that the Global Compact Office be kept informed of any actions taken by the participating company to address the situation which is the subject matter of the allegation. The Global Compact Office will inform the party raising the matter of the above-described actions taken by the participating company.
• The Global Compact Office will be available to provide guidance and assistance, as necessary and appropriate, to the company concerned, in taking actions to remedy the situation.
• The Global Compact Office may, at its sole discretion, take one or more of the following steps, as appropriate:
  • Use its own good offices to encourage resolution of the matter, ask the relevant country/regional Global Compact network, or another Global Compact participant organisation, to assist with the resolution of the matter.
  • Refer the matter to one or more of the UN entities that are the guardians of the Global Compact principles for advice, assistance, or action.
  • Share information with the parties about the specific instance procedures of the OECD Guidelines for Multinational enterprises and, in the case of matters relating to the labour principles, the interpretation procedure under the ILO Tripartite Declaration of Principles concerning Multinational enterprises and Social Policy.
  • Refer the matter to the Global Compact Board, drawing in particular on the expertise and recommendations of its business members.

Outcomes

• If the concerned participating company refuses to engage in dialogue on the matter within the first two months of being contacted by the Global Compact Office, it may be regarded as “non-communicating”, and would be identified as such on the Global Compact website a dialogue commences.
• If the continued listing of the participating company on the Global Compact website is considered to be detrimental to the reputation and integrity of the Global Compact, the Global Compact Office reserves the right to remove that company from the list of participants, and to so indicate on its website. To this date, this situation has never occurred.
• A participating company that is designated as “non-communicating” or is removed from the list of participants will not be allowed to use the Global Compact name or logo if such permission had previously been granted.
• If the concerned participating company has subsequently taken appropriate actions to remedy the situation, it may seek reinstatement as an “active” participant in the Global Compact, and in the list of participants on the Global Compact’s website.

The procedure in action

Activists and CSOs, including FIDH, demand the removal of Vale from the United Nations Global Compact in light of the dam collapse in Brumadinho (Brazil, Minas Gerais State) ¹³ .

In February 2019, an international group of organisations formally requested the United Nations Global Compact to delist the company due to the bursting of the tailings dam in Brumadinho (MG) that happened on 25 January, resulting in approximately 245 deaths dozens missing and homeless. The organizations claimed that “Vale has violated the Global Compact’s principles on human, labour and environmental rights, by not carrying out adequate risk assessment, not taking the necessary measures for prevention and mitigation and by failing to adopt measures of non-repetition after the 2015 collapse of the Mariana dam.” ¹⁴

The organizations asked for Vale’s delisting from the Global Compact, for the company to “submit regular reports on measures being adopted to remediate environmental damage of both the Brumadinho dam Mariana dam bursts” and they call upon the Board of Directors of the UN Global Compact to “require that Vale demonstrate its commitment to change its corporate culture, policies and procedures, through concerted actions that would make it a company that truly respects human and environmental rights.” Ibid.

In May 2019, following the pressure from CSOs, Vale withdrew from the UN Global Compact. ¹⁵

Activists demand the removal of Petrochina from the list of Global compact participants - Global compact says the complaint is not suitable for further action.

In December 2008, Investors Against Genocide (IAG) and the Centre for Research on Multinational Corporations (SOMO) submitted a formal “matter” to the Global Compact Office requesting that it formally apply its “Integrity Measures” against PetroChina, and that the company be removed from the list of participants if no satisfactory resolution of the issues raised was found after three months. ¹⁶ The groups alleged that PetroChina, through its investments in Sudan, contributed to grave human rights violations in Darfur, amounting to genocide.

On 12 January 2009, the Global Compact Office refused to accept and act on the complaint of “systematic or egregious abuse” of the Global Compact’s overall aims and principles by PetroChina. Georg Kell, Executive Director of the Global Compact Office, stated that the UNGC “decided not to handle this matter as an integrity issue of an individual company, PetroChina”. He noted that “the matters raised could equally apply to a number of companies operating in conflict-prone countries”. In his response to the NGOs, Kell further asserted that the “Global Compact’s approach to business and peace emphasises engagement rather than divestment, and the power of collective action rather than focusing on any one individual company”. He further stated that “handling this matter as an integrity issue of one company would run counter to the Global Compact’s approach of looking for practical solutions on the ground”.

Following the refusal by the Global Compact Office to accept and act upon the allegations against PetroChina, a participant in the Global Compact, the complainants decided to write a letter to all the members of the Global Compact Board, asking them to reconsider the ill-advised initial response. This approach had a positive impact. The group of complainants received a letter from Sir Mark Moody-Stuart, Vice-Chair of the Global Compact Board. In the letter, Mr. Moody-Stuart said that the Board would discuss the matter “fully” at its next meeting, and that it would “review the processes described” in the Global Compact’s Integrity Measures. ¹⁷

In July 2009, the Board finally decided to maintain PetroChina as a participant in the Global Compact. The Vice-Chair of the Board stated that CNPC, PetroChina’s parent company, “…has been active in supporting sustainable development in [Sudan] and engaged in the newly formed and embryonic Local Network, although not itself a Global Compact signatory”. The Board also took note that CNPC “had engaged in Global Compact learning and dialogue activities on conflict-sensitive business practices”.

The Global Compact Board explained that “the Board agreed that the operation of a company in a weakly-governed or repressive environment would not be sole grounds for removal from the initiative and that the Global Compact, as a learning platform, cannot require a company to engage in advocacy with a government. Given this, and the fact that the matter did not involve a Global Compact participant, the Board unanimously agreed that the matter had been handled appropriately by the Global Compact Office, and was not suitable for further action”. It was also noted that CNPC “has been willing and prepared to engage in learning and dialogue activities on conflict-sensitive business practices and that positive efforts are being made through the Global Compact Local Network to embed good business practices in Sudan, which is all that could be expected in the situation”.

Call for Nestlé to be expelled from the UN Global Compact ¹⁸

In June 2009, a report was submitted to the Global Compact Office alleging that Nestlé’s reports were misleading, and that Nestlé used its participation in the initiative to divert criticism so that abuses of human rights and environmental standards could continue. Concerns raised by the International Labour Rights Fund, trade union activists from the Philippines, Accountability International, and Baby Milk Action included:

• aggressive marketing of baby milks and foods, and undermining of breastfeeding, in breach of international standards;
• trade union busting and failing to act on related court decisions;
• failure to act on child labour and slavery in its cocoa supply chain;
• exploitation of farmers, particularly in the dairy and coffee sectors; and
• environmental degradation, particularly of water resources.

The report claims that Nestlé used the Global Compact to cover up its malpractice so that abuses could continue.

The Global Compact Office dealt with this matter under its integrity measures dialogue facilitation process. The matter was forwarded to Nestlé and both Nestlé and those raising the matter exchanged correspondence. According to the Global Compact Office, Nestlé has indicated that it remains willing to engage in further dialogue about the matters raised and therefore it has not been designated as “non-communicative”.

Companies under review are unfortunately not listed on the Global Compact website. Although the process is outlined in the Integrity Measures Policy and FAQ, the extent to which other stakeholders may access and comment on the allegations made against a participating company remains vague. The decision to bar a company belongs to the Global Compact Office, which may seek advice and guidance from a variety of sources including Global Compact local networks and relevant UN agencies. Nevertheless, de-listing companies from the initiative is perceived as a last resort, and the criteria that are applied by the Global Compact – apart from a failure to communicate on part of the company – to finally de-list a company remain unclear.

Annual Communication on Progress (COP) ¹⁹

A Communication on Progress (COP) is a disclosure on progress made in implementing the ten principles of the Global Compact, and in supporting broad UN development goals. ²⁰

Since 2005, business participants are required to annually submit a COP on the Global Compact’s website and to share the COP widely with their stakeholders. Non-business participants are required to produce an annual Communication on engagement (COe) that describes the ways that they advance the initiative. The absence of a COP will result in a change in a participant’s status, which can be considered as “non-communicating” and, after a lapse of a year, in the de-listing of the participant.

In 2010, the Global Compact Board introduced a one-year moratorium on de-listing companies from non-OECD and non-G20 countries, following the recent removal of a high number of companies in these countries. ²¹ According to the Global Compact Office, the purpose of the moratorium was to give the Global Compact Office time to undertake further capacity building efforts so that participants could fully understand what is required by the COP.

The total number of businesses that were removed for failure to meet the Global Compact’s mandatory annual reporting requirement stands at over 13.000 ²² . Companies are de-listed after one year of being identified as “non-communicating”. To re-join the Global Compact, companies must send a new commitment signed by their CEO to the UN Secretary-General, and submit a COP to the Global Compact database.

As of April 2021, the COP process was under review, and the new version is intended to enhance the minimum requirements of disclosure, and will revise the non-communication and delisting policies, among other changes. ²³

Investors write to companies not living up to Global Compact commitments

An international coalition of investors, including Aviva Investors, Boston Common, and Nordea Investment Funds, have been encouraging companies to comply with their commitment to submit a COP to the Global Compact. In 2010, the coalition sent letters to 86 major Global Compact participants which had failed to produce an annual COP on the implementation of the ten principles of the Global Compact. In 2008, the engagement resulted in 33 percent of laggard companies subsequently submitting their progress reports. In 2009, positive responses increased to 47.6 percent (50 out of 105 companies). ²⁴