As the UN Global Compact and GRI bask in the glow of their recent summits, Paul Hohnen says it’s time now to ask hard questions about how they can mainstream themselves over the next decade.
As the UN Global Compact and GRI bask in the glow of their recent summits, Paul Hohnen says it’s time now to ask hard questions about how they can mainstream themselves over the next decade.
The UN Global Compact and the Global Reporting Initiative (GRI) have much to congratulate themselves on.
Individually, they have pulled off what were widely seen as high profile and well-attended conferences: GRI with its Amsterdam Global Conference held on 26-28 May; and the Global Compact with its 10th anniversary Global Leaders Summit on 23-25 June.
Together, they announced a ‘new alliance’ – based on a Memorandum of Understanding signed on 28 May - to build ‘a universal framework for corporate sustainability performance and disclosure’ aimed at transforming business practices on a global scale.
The two conferences served notice that both organisations have been successful in securing themselves as the most luminous stars in the sustainability firmament.
This was evident from the high level of speakers (especially at the Global Compact event, where the UN name remains an unbeatable draw-card) and the number and diversity of attendees.
Over the last decade, both initiatives have carved out a pre-eminent role for themselves in the increasingly crowded sustainability space.
The Global Compact, based on its 10 universal principles and network of over seven thousand participants in 130 countries, has become the world’s largest and highest level corporate citizenship and sustainability initiative. And, as is clear from a quick read of the non-financial report of almost any large global company, GRI has become the most widely used sustainability reporting framework.
For many years, the two have sought to emphasize how together they offer a compelling value proposition: the Global Compact offering internationally-recognised principles on what to do, and the GRI on how to measure and report what is done.
Sustainability nice but niche?
However both initiatives are painfully aware that considerable challenges lie ahead. Of most concern are the breadth and depth of uptake, the credibility of the data produced, and the sustainability of their respective business models.
On the issues of uptake and credibility, both the Global Compact and GRI would be the first to acknowledge that the majority of companies in the world are still far from using their guidance. While progress is being made, awareness and use in the BRICs countries is very low, and many large numbers of companies (and public agencies also, for that matter) in the developed world are still unfamiliar with the concept of sustainability reporting.
NGOs and professional commentators have for some time expressed concern that a high percentage of the sustainability reports that are issued as GRI reports or a Global Compact ‘Communication on Progress’ (CoP) fail to address key issues, are light on detail or are downright misleading.
Others have raised the question of who is reading the many reports that are being produced, and with what impact on their behavior? Still others have raised questions about the value of general principles not linked to specific business issues and the considerable transaction cost (not to mention value) of producing such reports.
Ten years on, compelling answers to many of these questions are still outstanding.
Indeed, GRI’s own recent support for a move towards integrated financial and non-financial reporting might be seen in part as an admission that sustainability reporting will not be mainstreamed until it is formally and firmly linked with financial reporting.
Little if any attention was given by the recent conferences to the often heard charge that as long as sustainability reporting lacks independent and careful monitoring of claims, its credibility as a practice remains in doubt in the minds of many.
Talk is cheap
On a related point, it is no secret that both secretariats operate on very tight budgets. With their ‘free for all to use’ business model, both are highly dependent on the financial support of a limited number of donors.
In turn, this places limits on their capacity to offer the awareness building and integration support services which are in high demand around the world.
Looking ahead the next decade, it seems clear things will have to change radically if the Global Compact and GRI are to achieve their goal of ‘transforming business practices on a global scale’. This goal simply cannot be reached with their current resources and without confronting outstanding criticisms head on.
However there are real limits to what the two secretariats can achieve by themselves.
If governments want to harness the full power of the corporate sector to do good, they will have to offer more incentives. Formally and consistently encouraging use of the Global Compact and GRI would be a good start, backed up by support for research into best (and worst) practices.
If CSR is to be mainstreamed, governments will have to get off the side lines. The pressure to ‘prove CSR works, or mandate’ will become inexorable.
For their part, ratings agencies and NGOs will need to engage more deeply in analysis of reporting, naming and shaming non-reporters and sub-standard reporters. Sustainability information deserves more rigorous analysis and attention than it is getting.
Finally, companies will need to be less backward in coming forward on their frameworks of choice. The sustainability agenda is moving from ‘nice to have’ to ‘can’t avoid’. They can use existing frameworks like the Global Compact and GRI, supplement this with the new ISO 26000 standard, or develop their own code. The choices are almost unlimited. However time isn’t.
Paul Hohnen speaks, writes and consults on sustainability and CSR issues. He is a member of the Ethical Corporation Advisory Board. A more detailed version of the views above can be found in ‘The United Nations Global Compact: Achievements, Trends and Challenge’, 2010, edited by Andreas Rasche and Georg Kell, published by Cambridge University Press.