What the Global Compact is and is not;

The Global Compact (GC) is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, the environment and anti-corruption. As the world's largest, global corporate citizenship initiative, the GC is first and foremost concerned with exhibiting and building the social legitimacy of business and markets. [1] Business, trade and investment are essential pillars for prosperity and peace. But in many areas, business is too often linked with serious dilemmas, for example, exploitative practices, corruption, income equality, and barriers that discourage innovation and entrepreneurship. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable markets. [2]

The GC is a purely voluntary initiative with two objectives: to make the ten principles part of business strategy, operations and culture everywhere, and promote partnerships in support of the United Nations (UN) Millennium Development Goals (MDGs).To achieve these objectives, the GC offers facilitation and engagement through several mechanisms: policy dialogues, learning, local networks and partnership projects. [3]

The GC is not a regulatory instrument as it does not “police”, enforce or measure the behavior or actions of companies. Rather, the GC relies on public accountability, transparency and the enlightened self-interest of companies, labor and civil society to initiate and share substantive action in pursuing the principles upon which the GC is based. [4]

The GC involves all the relevant social actors: governments, who defined the principles on which the initiative is based; companies, whose actions it seeks to influence; labor, in whose hands the concrete process of global production takes place; civil society organizations, representing the wider community of stakeholders; and the UN, the world's only truly global political forum, as an authoritative convener and facilitator. [5]

GC and the Human Rights Pillar;

The first two principles of the UN GC, which are derived from the Universal Declaration of Human Rights adopted by the UN General Assembly in 1948, are: 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. [6] The two GC human rights principles provide the basis of what we might call an ‘ethical code of conduct’.

Human rights remain one of the most challenging areas of corporate citizenship. In part, this is because human rights have traditionally been the concern of states, and international human rights law has generally been addressed to them only. As more companies come to realize their legal, moral and/or commercial need to address human rights issues within their own operations and activities, they are confronted with a number of challenges. [7] For example, there is the need to come to grips with the human rights framework and how the company’s own activities might relate to it. There is also uncertainty around how to avoid being complicit in human rights abuse and where the boundaries of companies’ human rights responsibility lie.

Human rights make up the first pillar of the GC, as participants have committed themselves to promoting human rights within their sphere of influence and not being complicit in their violation. The commitment to human rights may be particularly beneficial for the purpose of economic and social rights. Through their products, companies can make a vital contribution towards meeting economic and social needs. They have expertise and resources at their disposal, which could efficiently be deployed in implementing human rights awareness. Additionally, it is interesting to note that the UN is starting to clarify the human rights content of the GC by linking it with existing voluntary and legally nonbinding instruments like UN Codes of Conduct. [8]

The necessity for Corporate Social Responsibility in order to support and respect Human Rights;

According to the GC, corporate social responsibility (CSR) [9] means aligning business operations with fundamental and universal values in the fields of human rights, labor rights, environmental standards and anti-corruption/transparency. Human rights are integral to societies based on the respect for the rule of law where individuals and businesses can thrive. Respect for human rights contributes to the realization of the following: Rule of law, Democracy, Equality, Participation, Good governance, Security, Peace and Development. [10]

However, it is clear that in a world where human rights violations occur on a daily basis and where many people do not have access to even the most basic of services, that many countries still do not have established and functioning systems of governance that are respectful of human rights of all people. [11]Often this is accompanied by an inadequate framework for holding those responsible to account.

In some countries, national laws may exist that ensure the protection of individual human rights, but are not always implemented in practice and there may be no effective method to complain against such inaction. When national laws do protect some human rights, businesses will generally contribute to the promotion of human rights by respecting such laws. However, national laws are not always respectful of human rights, and this fact makes the protection and promotion of those rights even more difficult. [12]

The societal case for human rights is strong but it goes hand in hand with the business case for human rights. If business indeed thrives where society thrives, it is in the interests of business to be proactive and encourage good governance. As the international political landscape evolves, it is becoming increasingly clear that companies do have an important role to play in promoting human rights and democracy. The participation of business in related international policy processes can help to contribute to the realization of the human rights, development, peace and security goals of the UN and other development actors. [13]

There are a number of good reasons for assuming CSR in order to support and respect human rights if national law either is not state of the art or is not consistently implemented:

  • Companies that critically      reflect on the quality of standards relating to human rights, that feel      the pulse of society’s expectations through dialogue with stakeholders,      and that are prepared to be measured by criteria of legitimacy and not      just those of legality reduce their legal, financial, and reputational      risks. Any increased costs that may be incurred as a result of responsible      human rights commitment must be seen as an “insurance premium” against      such risks becoming reality. [14]
  • Companies that reduce the      potential for friction with society on human rights issues by taking a      proactive approach informed by their sense of integrity tend to be seen as      “part of the solution” rather than as “part of the problem”. This provides      a company with its “social license to operate” and safeguards it from      calls for a boycott or from “shaming” campaigns. [15]

  • Finally, the acceptance of      responsibility that is credible by virtue of the fact that it is      verifiable is the best argument against political demands for additional      regulation: freedom, including corporate freedom, is always tied to      responsibility for the common good and here human rights have absolute      priority. [16]

Sphere of Influence and Complicity;

The GC asks companies to embrace, support and enact, within their “sphere of influence”, [17] a set of core values in the areas of human rights, labor 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. These two principles are complementary, the first principle deals with direct actions or omissions by the company and the second principle deals with the relationship between a company and human rights abuses committed by governments or armed groups. [18]

Sphere of influence is about where the boundaries of a company’s human rights responsibilities lie. Each company has its own sphere of influence based on geographic presence, industry, size and particular business relationships. The different components of a company’s sphere of influence include: Workplace (employees), Supply chain (business partners), Marketplace (customers), Community (including broader stakeholder relations), and Government (including public policy dialogue). [19]

The sphere of influence offers a means of addressing the following questions: Whose human rights should a business be mainly concerned about? Which human rights should a company pay particular attention to? The sphere of influence concept implies that the more control, authority or influence a business has over a situation giving rise to human rights abuses or the means to improve respect for human rights, the greater the business responsibility to act. [20]

Furthermore, the more severe the human rights abuse, the greater the likelihood that the business and its stakeholders will experience negative consequences. Ultimately the closer the company’s relationship is with a group of rights holders or perpetrators of rights abuse, the greater the need for an immediate business response. [21]

The concept of ‘complicity’ [22] as used in the GC has both moral and legal dimensions. It is at the cross roads of law both criminal and civil law, social expectations, and human rights. While case law is developing that is clarifying the legal liability of business for complicity in international crimes most of what society, business, and human rights advocates understand as ‘complicity’ is found beyond its narrow legal definition and application.[23]

Complicity, in this context, refers to a company’s involvement in human rights abuses of other actors, such as governments, rebel groups or even other companies. It is generally made up of the following elements:

  1. An action or omission failure      to act by a company, or individual representing a company, that ‘helps’      (facilitates, legitimizes, assists, encourages, etc.) another, in some      way, to perpetrate a human rights abuse;
  2. The company was or should have      been on notice that its action or omission could provide such help. [24]

Three situations illustrate where allegations of corporate complicity may arise:

1. Direct complicity: When the company actively assists, directly or indirectly, in human rights violations committed by others

2. Beneficial complicity: When the company benefits from human rights violations even if it does not positively assist or cause them

3. Silent complicity: When the company is silent or inactive in the face of systematic or continuous human rights violations. [25]

The risk of facing allegations of complicity in human rights abuses is greatest for larger companies who operate in countries where conflict and human rights abuses are prevalent and those in sectors with greatest impacts. The risk of an allegation of complicity is reduced if a company is aware of its sphere of influence and has taken action to integrate a respect for human rights into its core business policies and practice. [26]

In some instances, companies will be legally liable for their complicity in human rights abuses. However, it is difficult to state conclusively when a company will be complicit in a manner that will attract legal liability for two main reasons: First, there is no definitive definition and parameters of the concept of corporate legal liability for cases of complicity. The understanding of the concept and its application is evolving, and there have been recent developments in both domestic and international law. Secondly, the existence of legal liability depends on a number of factors that are largely related to the specific context of the abuse. [27]


The GC is with currently over 4, 000 participants the largest corporate citizenship initiative of the world. Although having made much progress towards its goals, the GC still faces a lot of critique. First, GC’s principles are vague and thus hard to implement and secondly, the GC is not accountable due to missing verification mechanisms. Some commentators have argued that these criticisms are based on a misunderstanding of the nature of the GC as well as its mandate and the goals it tries to achieve. [28]

The first criticism that is commonly mentioned is the GC’s lack of clarity with regard to its ten principles. For instance, critics argue that the principles hardly provide concrete guidance to companies about the expected conduct and that requirements like “that action needs to be taken ‘within a firm’s sphere of influence’” miss the precision necessary for a viable code of conduct. In addition, some critics argue that “the language of these principles is so general that insincere corporations can easily circumvent or comply with them without doing anything.” [29]

To address this claim, we should first of all recognize that many of these critics want the

GC to be a clearly structured code of conduct against which compliance can be measured.

But, the very idea of the GC is the creation of a learning network that is used by business and non-business participants to share innovative ideas and best practices as to how the ten principles can be implemented. The ten principles provide a ‘yardstick’ for the exchange of ideas, learning and discussion and are not meant to be a benchmark against which to assess compliance. The goal is to establish consensus and best practices on what, for instance, ‘not being complicit in human rights abuses’ means within a firm’s respective region and sector. [30]

The second criticism, that the GC is not accountable because it does not independently monitor and verify compliance with its principles, is probably the most well known critique that for the last seven years has appeared consistently in the academic and non-academic press. It is in this spirit that critics argue that “accountability, or rather the lack of it, is the crucial issue that faces the GC”. Critics argue that a lack of serious monitoring, sanctions, enforceable rules and independent verification fosters the misuse of the GC as a marketing tool. In the eyes of these critical parties the GC is a public relations ‘smokescreen’ without substance that allows powerful multi national companies/corporations to ‘blue wash’ their damaged image (to associate their operations with the blue UN flag to gain legitimacy). Ultimately, the fear is that such a lack of accountability can lead to ‘adverse selection’, those companies that are most eager to join are the ones in need of a good public image. [31]

To address this claim, one cannot and should not criticize the GC for something it never pretended and intended to be, that is, a compliance-based mechanism that verifies and measures corporate behavior. From its inception, the GC initiative was never designed as a seal of approval for participating companies since this would require an enormous amount of resources that are currently not available. The GC expects proactive behavior from its participants and is thus not about regulation and compliance. [32]

The GC demands its participants to report on the progress they have made in implementing the principles on an annual basis. The abovementioned communicating on progress (COP) policy allows the GC Office to gain an overview of a company’s bottom-line activities. Although the GC has not yet set requirements on how COP reports are supposed to be standardized, it encourages its participants to follow the recently released G3-guidelines of the Global Reporting Initiative (GRI, 2007). [33] Since COP reports are not primarily addressing the GC Office but most of all other stakeholders (e.g., NGOs and Academics), they foster a social vetting mechanism which is intended to increase report content and quality over time. Social vetting, in its most general sense, means that other parties (e.g., NGOs) are asked to use submitted COP reports as a ground to judge corporate behavior and file complaints that the GC can use as a basis for investigations. [34]

If a company fails to submit a COP report within a year it is labeled ‘non-communicating’, while after a second year of non‘reporting the firm is labeled ‘inactive’ and completely de-listed after yet another year of non-communication. This policy has already led to 430 participants being labeled ‘non-communicating’, whereas 809 are currently ‘inactive’. [35] Since this policy was set up in 2004, the GC will start delisting companies by the end of 2007. The case for ensuring accountability by demanding COP reports is a good one since its content needs to be publicized in prominent documents (e.g., the annual report) which usually are approved by a company’s board. [36]


Without doubt, the GC has not yet achieved all of its goals. However, we should give credit to the fact that neither its goals nor its underlying structure exist in a stable environment and thus reflect steady solutions. Being in its seventh year of operation now, the GC has achieved a lot in a rather short period of time, it not only is the largest corporate citizenship initiative in terms of size, but also the most inclusive one bringing together a diverse set of business and non-business stakeholders. In addition, and this may be one of the most valuable side effects of the set up of the GC, its dynamic and flexible network-based governance structure can promote human rights awareness and necessary reforms of the UN system from within.

[1] What is the UN Global Compact? http://www.unglobalcompact.org/AboutTheGC/index.html accessed 20th December 2007.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6]Human Rights http://www.unglobalcompact.org/Issues/human_rights/index.html accessed 20th December 2007.


[8]For example, the U.N. Code of Conduct for Law Enforcement Officials, available online at

http://www.unhchr.ch/html/menu3/b/h_comp42.htmaccessed 20th December 2007, is referred to by different Global Compact publications.

[9]Different organizations have framed different definitions - although there is considerable common ground between them. My own definition is that CSR is about how companies manage the business processes to produce an overall positive impact on society.

[10]UN Global Compact E-learning Module Outlinehttp://www.unssc.org/web/hrb/details.asp?mod=1&sec=3&cur=1 accessed 20th December 2007.


[12]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=1&sec=4&cur=1 accessed 20th December 2007.

[13]UN Global Compact E-learning Module Outlinehttp://www.unssc.org/web/hrb/details.asp?mod=1&sec=3&cur=1 accessed 20th December 2007.

[14]Klaus M. Leisinger, Special Advisor to the Secretary General on the Global Compact., ‘On Corporate Responsibility for Human Rights’http://www.reports-and-materials.org/Leisinger-On-Corporate-Responsibility-for-Human-Rights-Apr-2006.pdf) pg. 17 accessed 20th December 2007.


[16]Ibid, pg. 18.

[17]The concept of sphere of influence is not a legal one, it is has been developed as a tool for use by individual companies seeking to understand their human rights responsibilities. As a result, it has not been exhaustively defined.

[18]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=2&sec=1&cur=1 accessed 20th December 2007.

[19]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=2&sec=3&cur=1 accessed 20th December 2007.

[20]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=2&sec=1&cur=1 accessed 20th December 2007.


[22]A company is complicit in human rights abuses if it authorizes, tolerates, or knowingly ignores human rights abuses committed by an entity associated with it, or if the company knowingly provides practical assistance or encouragement that has a substantial effect on the perpetration of human rights abuses.

[23]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=3&sec=3&cur=1 accessed 20th December 2007.

[24] Ibid.

[25]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=3&sec=7&cur=1 accessed 20th December 2007.


[27]UN Global Compact E-learning Module Outline http://www.unssc.org/web/hrb/details.asp?mod=3&sec=5&cur=1 accessed 20th December 2007.

[28]Andreas Rasche, Helmut-Schmidt-University, University of the Federal Armed Forces, ‘A Necessary Supplement' - What the United Nations Global Compact Is and Is Not, pg. 2

http://www.unglobalcompact.org/NewsAndEvents/articles_and_papers/GlocalCompact_Supplement.pdf accessed 20th December 2007.

[29]Ibid, pg. 16.


[31]Ibid, pg. 18.

[32]Ibid, pg. 19.

[33] For more information visit http://www.globalreporting.org/ReportingFramework/G3Guidelines/ accessed 20th December 2007.

[34]Andreas Rasche, Helmut-Schmidt-University, University of the Federal Armed Forces, ‘A Necessary Supplement' - What the United Nations Global Compact Is and Is Not, pg. 19

http://www.unglobalcompact.org/NewsAndEvents/articles_and_papers/GlocalCompact_Supplement.pdf accessed 20th December 2007.

[35]Ibid, pg. 20.


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