Tag Archives: UN Global Compact

The Guardian

Responsible investment has a vital role in securing peace post-conflict | The Guardian

A new UN initiative aims to help spur recovery in post-conflict regions by guiding companies to invest responsibly

A Syrian family at a camp on the Turkish border. Even when wars are over, they often leave a pool of underemployed youth and a time-bomb of social unrest. Photograph: Bulent Kilic/AFP/Getty Images

War and peace are linked inextricably by economic development. Often, even when the shooting stops, long-term peace is impossible without economic development. Yet investment will not flow where conflict lingers.

This grim Catch-22 has resurfaced lately with the unfolding catastrophe in Syria. Day by day, the death toll, physical destruction, and refugee displacements mount. The disaster is creating countless long term, chronic woes too. The destruction of 3,600 schools, for instance, in Syria has swelled by two million or so the global tally of young people forced out of school by armed conflict to some 50 million overall.

In Syria and elsewhere this creates a pool of underemployed youth, and a potential time bomb of social unrest.

Once conflict ends, if there are no jobs for young people, rebels and soldiers, “The guns will come back out… In the absence of economic development, peace is difficult to achieve, and harder to maintain,” Sir Mark Moody-Stuart told me. From his tenure as Chairman of Royal Dutch/Shell Group, Moody-Stuart is familiar with the challenges, and opportunities, facing investment in conflict-afflicted regions.

Data on the economic toll of the loss of peace is difficult to come by, but an analysis by the Institute for Economics and Peace (IEP), estimated that had the world been completely peaceful in 2011, global GDP would have been roughly $9tn higher — almost equal to the German and Japanese economies combined.

These days, as vice-chair of the board of the UN Global Compact, Moody-Stuart is working to get the private sector to reconsider these opportunities. “Not so very long ago, divestment from troubled areas was the goal,” he said.

Today, however, former critics are increasingly willing to “sit down with investors and senior management to engage constructively and work together on strategies that both develop business and contribute to peace and development,” he said.

I met with Moody-Stuart in New York at a midtown hotel where he was unveiling a new UN effort to help guide private-sector investment into regions where they can help peace was taking root. The platform, Business for Peace (B4P), will be formally launched today by the UN secretary-general at the UN Global Compact Leaders Summit. B4P builds on a decade’s worth of earlier efforts that are documented in areport, Responsible Business Advancing Peace, also released today.

The cases documented therein — and discussed at today’s meeting — are a reminder that the path peace via development is a highly local challenge, where solutions vary by context.

Peaceful cheese, fewer guns

Cheese is the focus of a long-running effort in the Caucasus. Starting a decade ago, cheese makers from regions spanning Armenia, Azerbaijan, Georgia and Turkey came together under a single brand that has developed strong export sales.

The shared interests prevented the alliance from collapsing during the Russia-Georgia war of 2008. “It was one only regional alliances to survive,” said Diana Klein, conflict advisor at International Alert. Peace and development have their own momentum, she added, “If it’s working, it’s much harder for a single participant to act out.”

Some efforts can run counter to conventional wisdom. In the Philippines’ a subsidiary of Swiss cement giant Holcim set up a plant north of Manila where communist rebel group was active.

In 2005, the group attacked the facility, taking weapons from guards and causing $120,000 of damage. Rather than boost its guards’ firepower, Holcim took a slower, more complex path, meeting with community members to learn more why its plant — a large local employer — was targeted.

Their surprising findings? The guards’ firearms were part of the target. Rather than meet threat with force, Holcim opted for un-armed guards, a change which required careful community education.

“They had to convince their own staff they were safe, to convince the community that the guards are truly not armed,” said Sir Moody-Stuart, otherwise the guerillas may come back. Since this “social fencing” approach began, not a single incident involving firearms has happened.

A marathon effort

Building companies and attracting investors in the wake of conflict is a “very, very hard challenge,” said Klein of Conflict Advisors. “It requires a marathon mentality.” These investment efforts are reaching into some of the most challenging conflicts in recent memory.

In Sudan, still recovering from genocide in Darfur and the subsequent bifurcation of the nation, a team of B4P-affiliated investors with stakes in Sudanese oil services companies find their most difficult issue — company affiliation with human rights violations — impossible to resolve.

But while some strata of the market remain opaque, others are opening. Bit-by-bit the economy is coming back to life. Telecoms provider Sudatel, partially government owned, has emerged as the young country’s first multinational, operating in five neighboring countries. With 60% of Sudan’s population under 20 years of age, the company is focusing on serving young consumers. “To live together, people need to communicate,” said Ehab Osman, Sudatel’s CEO.

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The Guardian

Can new supply chain approaches prevent another Rana Plaza? | The Guardian

Tougher factory and supply chain standards won’t be enough to prevent disasters like the Bangladesh factory collapse. Can development tactics succeed where conventional approaches have failed?

Foxconn factory workers in China's Guangdong province

Foxconn workers in a Chinese factory. Can new industry tactics prevent supply chain disasters? Photograph: Bobby Yip/Reuters

Ideally, tragedy begets reform.

That’s the tale we’ve learned from past industrial disasters, including the 1911 inferno at the Triangle Shirtwaist Co. in Manhattan, which killed 146 and marked the dawn of a fundamental shift in US workplace standards.

The changes took decades, to be sure, but the tragedy spurred the development of fire and building regulations, the creation of labor and women’s unions and a culture of real regulatory enforcement.

What, then, do we to make of reactions to the collapse of the Rana Plaza factory six months ago?

The deaths of some 1,130 garment workers in the Dhaka, Bangladesh, sweatshops drew a storm of public outcry. But in supply-chain circles, the tragedy has revealed more about the limits of our potential to “fix” global supply chains that, in some cases, have grown too big and too complex to avoid human-rights failures.

Facing this reality, a new generation of supply-chain experiments are borrowing tactics from conventional development efforts. These look beyond conventional rules- and business-transaction based approaches to address the root causes of many factory malpractices. In general, they’re working to improve education, health and community conditions in ways that benefit both workers and their employers.

Initial Rana reaction

When Rana Plaza collapsed, the response – among top-tier corporate brands – was rapid. Within a month, a cadre of mostly European fashionchains, including H&M, Zara, C&A, Tesco and Primark, signed a legally binding agreement to help fund and enforce safety improvements in Bangladeshi factories.

US and Canadian retailers took a different path.

Under the umbrella of the National Retail Federation (NRF), key brands backed an alternate agreement reaffirming ongoing efforts to take a ground-up approach, training workers, factory owners, officials and foreign brands in parallel.

The split response led to an unseemly tit-for-tat round of criticism.

The heads of IndustriALL, a global union supporting the European effort, called the rival plan a “pale imitation.” The NRF effort also drew criticism for not requiring its suppliers to allow workers to organize.

The head of the NRF volleyed back, in The Wall Street Journal: “The IndustriALL plan seeks major funding by private business without providing accountability for how funds are spent, as well as binding retailers to specific resourcing requirements without taking into account the impracticality of such a requirement.”

Distracting as it is, the infighting reveals the spectrum of current possibilities – from the EU’s conventional approach to NRF’s ground-up agenda – and many of the limits that circumscribe supply chain efforts circa 2013.

Limits of good intentions

However earnest, corporate efforts to improve supply chain operations have not kept pace with the compounding complexity of globalized supply chains. Links have grown too numerous; buyers’ influence dissipates too rapidly.

Eric Olson, BSR’s senior vice president, walked me through the vexing math facing would-be supply-chain trackers. A typical Fortune 500 company will have hundreds or thousands of first-tier suppliers. But supply chains can easily extend to 15 layers or more.

“There’s almost no company on the planet that has figured out how to cascade their supply chain efforts into the second tier,” Olson said, “let alone the third, fourth and so on, even though 80% of the impacts are happening further out in the chain.”

Meanwhile, a recent survey of some 1,700 UN Global Compact corporate members highlights another limitation. While most companies set goals for their suppliers, only 18% actually help their suppliers set and review goals their own goals – and only 9% take steps to verify the efforts, according to Global Corporate Sustainability Report 2013.

“While companies are making progress in terms of thinking about supplier sustainability and setting expectations, the supporting actions that will drive adherence have shown little or no increase over the past few years,” according to the report.

Wider scope, deeper reach

If conventional supply chain practices are running up against inherent limits, what next?

In some of the world’s least-developed markets, a new generation of more holistic experiments is showing promise.

These experiments stem from the recognition that mandating standards to a factory manager often ignores developing-world realities, such as poorly educated workers, degraded public health, economic insecurity and antagonistic worker-manager dynamics.

If these factors can be improved, the potential to advance more ethical, productive factory ecosystems would rise overall.

As an example, Olson points to HERProject. The program, acollaboration between BSR and 22 multinational companies, is delivering curricula focused on health and financial topics to some 200,000 women workers in 200 factories and farms in Asia and Africa.

Early findings show that when offered to women through their workplaces, the factories benefit via reduced absenteeism and turnover. Greater work-place trust, in turn, is helping managers collaborate with workers on setting conditions. A Levi Strauss & Co. supplier in Egypt reported a four-fold return from the program

There’s no denying this approach is more difficult. Yet it’s clear that, if supply networks continue to stretch and globalize, conventional supply-chain tactics are ill-suited to less developed markets.

If high street brands can cultivate common cause with development goals, a smarter approach to supply chain management will be a welcome byproduct.

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The Guardian

Profiting from sustainability: 5 tips for corporate boards | The Guardian

Whether you call them directors, supervisors or governors, companies’ top overseers must get involved in sustainability. Here’s how

Of all the challenges facing corporate sustainability leaders, a lack of board-level support can be one of the most frustrating. While a chief executive’s top priority is day-to-day operations, directors’ main job is to think big, look out for long-term material risks to shareholder interest and advise on strategic opportunities. By these standards, sustainability should be a natural fit for most directors.

In practice, though, boards have engaged less with sustainability than many CEOs or shareholders would like. A study by EY (formerly Ernst & Young) that looked at all shareholder proxy initiatives found that the largest share, 45%, dealt with environment and social issues – and, in the past five years, shareholders voted to support these initiatives at steadily higher rates.

“Investors see sustainability questions as highly material to company strategy,” says Aron Cramer, CEO of BSR. “Whether it’s the decision to enter frontier markets like Myanmar or how best to operate in a climate-constrained world, these factors materially effect whether a business thrives or not. These are exactly the kind of things boards should be thinking about.”

Sustainability-minded CEOs are looking for some help from their boards, too. A 2010 poll of CEOs conducted by the UN Global Compact concluded that 93% of chief executives wanted their board members to discuss and act on environmental, social and governance issues. Yet that same year, only 75% of CEO respondents reported that their company directors took an active role in “considering and acting on sustainability”.

If both investors and CEOs are pushing for boards to get smarter about sustainability, it’s curious that progress has been so slow. The culprits, Cramer says, are corporate convention and a lack of education. Directors are typically drawn from financial, legal and management backgrounds; thus very few have formal sustainability training.

The UN Global Compact – the world’s largest corporate citizenship and sustainability initiative – hopes to tackle this sustainability-IQ deficit with its LEAD Board Programme, which it’s getting ready to trial this fall. So far, five companies have agreed to trial the [program, which will consist of two half-day sessions delivered by an expert mediator: power and gas utility Enel and petroleum producer Eni (both of Italy); power and gas utility Eskom (of South Africa); chemicals maker Yara (of Norway); and cellular company SK Telekom (of South Korea).

Five best practices for boards

The UNGC has been developing the program since January of 2011, consulting with Cramer and a dozen or so other global sustainability leaders. Some of the top practices the program will emphasize include:

* Define the business case for sustainability. Boards should help define how and why sustainability can benefit shareholder interest by boosting sales, cutting costs and/or enhancing profits. Once directors map out the issues that are most material to the company, they can single out top priorities, which in turn can help the chief executive lead the mission – and get buy-in from employees and business partners.

* Establish or approve targets. Just as they do for sales, market share growth, and other key indicators, boards should help establish or approve sustainability targets – both in the short- and long-term – for their companies’ sustainability performance and include them in the business strategy. A wide range of metrics is available, from mature standards such as the Dow Jones Sustainability Index to more industry-specific measures, or early-stage metrics can be developed in house.

* Set clear standards for performance and recruitment. Boards should align annual performance reviews of incumbent executives with criteria that make sustainability a priority, just as they do with stock price, sales growth and other conventional performance indicators. When hunting for a new executive, boards should include sustainability in the search criteria. Candidates should be able to demonstrate clear understanding of – and a commitment to – their industry’s best sustainability practices.

* Link remuneration to long-term goals. Executive bonuses have long been linked to short-term financial targets. Given that sustainability stabilizes growth over the long term, but must be implemented in the near term, it follows that CEOs should be rewarded along both timelines. For example, progress toward long-term interests can be rewarded by linking part of pay to stocks, bonds or reserve payments released a decade or so in the future. For near-term rewards, boards can link a share of CEO’s regular cash compensation to the achievement of year-to-year sustainability objectives.

* Take responsibility for implementation and communication. Communicating sustainability achievements to shareholders is also vital, whether in a separate sustainability report or integrated into the financial reporting. Directors should also formally sign off on the company’s sustainability report. Although this is not legally necessary in most jurisdictions, director signatures send a high-profile confirmation to stakeholders that sustainability and transparency are company priorities.

Required reading

If all goes according to plan, the curriculum will be tweaked according to feedback from the pilot companies and then rolled out to all comers in 2014.

In time, these voluntary lessons may become required reading in some markets, Cramer notes. South Africa was the first country to mandate an integrated reporting standard, including sustainability metrics, for listed companies. Trading exchanges in Hong Kong, Shanghai and Sao Paolo are moving in a similar direction, he says.

As the sustainability reporting standards spread, more corporate directors will want to get up to speed, before they’re obliged to do so.

To learn more about the nuts and bolts of the curriculum, start here: LEAD Board Programme. Deeper details aren’t yet available, but will surface in coming months.

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http://www.theguardian.com/sustainable-business/un-global-compact-leaders-summit-leadership

The Guardian

Are bottom-up sustainability initiatives filling gap left by Rio+20? | The Guardian

Small, grassroots sustainability efforts have proliferated since Rio+20, but a status report signals some challenges and limitations

A woman carries freshly formed earthen lamps for drying outside her home in Mumbai, India.

In the absence of a meaningful global agreement at the Rio+20 Earth summit last summer, expectations collapsed – but didn’t disappear. They shifted from big to small, from global to local.

In response, sustainability leaders recalibrated their attention to the potential for local and regional initiatives to fill this leadership vacuum. After all, while climate change remains an immutably global problem, many of the most immediate environmental and developmental challenges – toxic pollution, education and public health and water and land degradation, to name a few – must be dealt with at a local or regional level.

A year or so on, the question remains: is this bottom-up, smaller-scale approach working? With more than 1,000 sustainability leaders from businesses, NGOs and their allies set to converge in New York next month for a leaders’ summit of the UN’s Global Compact – the world’s largest corporate sustainability membership organisation – it’s a good time to take stock.

It’s premature to come to any sweeping conclusions, to be sure. Too little time has passed to expect even the best executed of the blizzard of plans to have achieved major gains. Yet a recent special report, surveying the portfolio of UN bottoms-up initiatives, makes for decidedly mixed reading.

Grand scale

On one hand, the tally of efforts – totalling 1,382 – offers impressive quantitative evidence of a wide and deep groundswell of initiatives across the globe. On the other hand, the survey shows a worrying fuzziness and lack of progress in key areas.

Though still faint, these signals beg critical questions. Is it possible to distribute a clear sense of direction across thousands of initiatives? Has progress been stymied by the lack an over-arching development goal?

For a sense of the scope and scale of the proliferation of initiatives following Rio+20, flip through the July 2013 special report, Sustainable Development in Action, prepared by the United Nations’ sustainable development division. Synthesizing listings across a handful of databases, the report surveys the accretion of voluntary initiatives that support the goals of Rio+20.

The sheer scale of efforts is encouraging. Out of the 1,382 efforts, more than 700 commitments were announced as part of Rio+20. UN programmes have seeded hundreds more in recent years, including Sustainable Energy for All, United Nations Global Compact, Every Woman Every Child and others.

A closer look

Read a bit more closely, though, and fractures appear. Take, for example, one of the eight high-priority areas examined by the special report, higher education sustainability initiatives (HESI), While 272 organisations in 47 countries had made commitments related to higher-education sustainability as of June, a lack of centralised coordination is impeding progress (emphasis added):

Since HESI was established as an ad hoc initiative by several UN organizations and external stakeholders, this action network relies on a more informal organizational structure, typical of a network of stakeholders rather than a top-bottom organization. Therefore, although the organizational capacity to implement the network goals is rather limited and thus a bit challenging, it can also be seen as strength. (p. 20)

Improved energy efficiency and renewables are widely supported. Yet under the “Sustainable energy for all” category, the special report finds that scaling remains a barrier:

Ensuring adequate support to facilitate action across the many partner countries and thematically driven high impact opportunities, while at the same time collaborating with thousands of stakeholders over the course of the next 17 years, remain a key challenge for the initiative. Without proper follow-up and engagement, many commitment makers may not be fully engaged, which means that they would be left with little direction on how to contribute to the initiative in a tangible way. (p. 26)

To be fair, the problems highlighted in the special report extend far beyond the business-focused mandate of the Global Compact. However, the fuzzy goals and lack of guidance that UN programs face mirror some of the obstacles dogging private sustainability efforts as well.

The sheer number of different sustainability initiatives is a rising source of confusion for individuals, companies, consortia and even entire sectors. Even the most pro-sustainability business leaders can find themselves overwhelmed by well-intentioned, often overlapping agendas, collaborations and standards. The Global Initiative for Sustainability Ratings has uncovered more than 1,500 sustainability indicators spanning almost 600 issues.

And small, uncoordinated efforts come with added costs and missed opportunities. In a recent conversation with GSB’s Jo Confino, Mars Inc. CSO Barry Parkin estimated that 125 cocoa sustainability programs exist, each with high startup costs and affecting hundreds – at most, thousands – of farmers. “If we were to align behind programmes, it would be much more efficient,” he said, “and we could really scale up our impacts.”

Signs of success

That said, there are certainly some promising signs, too. Cities of varying sizes, with varying resources, are proving that a common set of interests, abilities and incentives can yield real gains.

Some 4,700 projects have been registered with C40 Cities, which links the mitigation efforts of scores of megacities together with many smaller innovative burgs. The group is on track to cut more than 1bn tonnes of emissions by 2030. In another city-focused program, the carbonn Climate Cities Registry, 302 cities from 42 countries, together responsible for some 1.5 gigatonnes of carbon-dioxide annually, have filed more than 3,600 commitments, inventories or mitigation plans.

What’s behind these metro-successful stories? Municipal climate efforts can yield self-sustaining benefits, such as boosting energy savings, health and the economy, according to a 2013 survey of 110 cities conducted by the Carbon Disclosure Project (CDP), C40 and the sustainability-engineering firm AECOM.

The gains are especially encouraging given that cities are the battleground for a growing share of the climate challenge. Urban centres account for a bit more than half of the world’s population today, but generate 75% of the globe’s greenhouse-gas emissions – and they’re expected to grow to contain 70% of the population by 2050.

What’s next?

Whether they take the form of rules requiring big buildings to track and publicize their resource use or water-savings standards on plumbing fixtures, successful city-scale efforts share some attributes: they benefit stakeholders, they’re clearly defined – with timelines – and are pushed from the top down.

When sustainability leaders meet in New York next month, they should realize they have a rare opportunity to give helpful structure and greater urgency to business’s role in the post-2015 world. Without clearer marching orders and deeper institutional support, though, the risk is that the post Rio+20 bottom-up approach will simply bottom out.

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