2003-04-08 17:13:22
Global Compact challenges firms
  Author: PAUL NASH
  Global market forces are bringing to China more than just booming trade and investment capital. They are helping to usher in a new sense of corporate social and environmental citizenship.

Facing a rising tide of consumer scrutiny at home, multinational companies are more often finding themselves vilified for labour or environmental abuses in their overseas operations.

Under pressure to clean up their images - if not their actual practices - many are devising programmes of corporate social and environmental responsibility.

Lending a helping hand is the Global Compact, an initiative sponsored by the United Nations (UN).

UN Secretary-General Kofi Annan first proposed the Global Compact in 1999 during an address to the World Economic Forum.

Annan challenged world business leaders to help put a human face on the new global economy, and to make globalization work to the benefit of all the world's people.

The Global Compact calls upon companies to voluntarily adhere to a set of nine core values in the areas of human rights, labour standards and environmental practices.

Recognizing that change begins in one's own backyard, the Global Compact asks companies to act on the nine principles in their own corporate spheres.

The Compact does not endorse corporations that apply the principles. Rather, it calls upon corporations to endorse the universal values embodied in the Compact by their actions, setting an example for the global community to follow.

"Companies," says Annan, "have great influence, great reach and they can set very good examples."

The Compact was formally launched in July 2000.

Approximately 700 companies around the globe have taken up the challenge, most from Europe, Latin America and Asia - including Beijing-based China Petroleum and Chemical Corp.

"China is beginning to tackle complicated and controversial social and environmental issues as it seeks a more prominent and legitimate place in the world economic order," George Kell recently told Business Weekly.

Kell, one of the chief architects of the Global Compact, serves in New York as the Compact's executive head.

"While the idea of socially responsible business has long been a stream in Chinese thought, measured by contemporary standards of corporate citizenship and corporate responsibility," says Kell, "Chinese business - State-controlled and otherwise - is, in general, far back on the learning and performance curves."

Nevertheless, Chinese companies are also beginning to climb on board.

"Chinese companies see the Global Compact as a bridge to the global marketplace, which they believe will help them gain international legitimacy as they seek to develop new business partnerships with foreign companies and increase foreign direct investment beyond its already sizable levels," Kell said.

The Global Compact held its first official meeting in China in December 2001.

Corporate leaders, entrepreneurs, and representatives of civil society groups got together in Beijing to explore the impact of globalization on China's development, China's entry into the World Trade Organization (WTO), and issues around corporate social and environmental responsibility.

Since the Compact's inception, a broad spectrum of Chinese companies and foreign businesses operating in China have taken part in the initiative - including BP, Shell, Deutsche Bank, Cisco, Microsoft, Nokia, Daimler-Chrysler China, AT&T China, Airbus Industry China, China Petroleum, China Natural Gas Group, Beijing Construction Engineering Group, the Beijing Railway Bureau and China Coal Industry Group.

Siu Kwan So of the UN Development Programme in Beijing is gathering case studies from small and medium-sized enterprises (SMEs) in China to find better ways to engage the Chinese business community with the Compact.

Last December, Hong Kong hosted the First Congress of SMEs in the Global Compact. Selected entrepreneurs were invited to participate in applied training sessions, and were introduced to the Compact's on-line, interactive learning tool kit.

Educational initiatives are crucial because companies must implement the Compact's nine principles of their own initiative - that is, voluntarily.

This arrangement has aroused a storm of controversy, with critics charging some companies pay only lip service to the agreement, exploiting the Compact as a public relations tool or "blue-wash."

They contend the Compact ought to be legally binding.

Supporters, on the other hand, argue the Compact should not endeavour to regulate corporate behaviour, but instead offer a value-based covenant designed to promote good corporate practices based on universal principles.

"For Chinese companies, the voluntary nature of the Global Compact and its nine principles related to human rights, labour and the environment represent a non-threatening framework to experiment with the universal principles and to learn through practice, in contrast to the conditions and strict standards that have been imposed by multilateral organizations in the past," Kell said.

When Annan conceived the Global Compact, he envisioned it as "a partnership in which success depends on mutual respect and a true willingness to co-operate."

Companies are free to publicize their entry into the Compact, but are then expected to follow through with concrete actions.

The Global Compact stresses it is by no means a substitute for effective action by governments, only an invitation to firms to exercise leadership in their enlightened self-interest within their spheres of influence.

According to some, the Global Compact makes good business sense, as adherence to its core values improves a company's risk profile, increases employee morale and offers opportunities to engage with civil society at the local level.

Nestle is one multinational company championing the Global Compact in China.

The world's biggest food company has been trying to improve the quality of life in communities surrounding its factories in Northeast China. To roll back poverty, it has helped improved local cattle breeding, road systems and livestock feed.

Kaimi is one Chinese example.

The chemicals and packaging company started up a social policy of hiring and training people laid-off by large State-owned enterprises. It also initiated cereal grain production in one poor region to boost local employment.

Sinopec, a Chinese petroleum company, has adopted a "safety first" philosophy.

Special committees oversee the design, construction, operation and regular review of facilities to ensure rigorous safety standards are met.

The outcome has been a dramatic decline in accidents - below the average rate.

The author is a Toronto-based economic analyst and a regular contributor to Business Weekly.

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