Global Policy Forum

UN Pact with Business Lacks Accountability


By Haider Rizvi

Inter Press Service
June 24, 2004

U.N. Secretary-General Kofi Annan is under fire from the world's leading environmental and human rights groups for his perceived attempts to involve big corporations in shaping the world body's development agenda. On Thursday, Kofi Annan convened a day-long summit on the "Global Compact," inviting more than 400 corporate and civil society leaders to discuss how private business can play a stronger role in making globalisation more "equitable" and "sustainable".

The Global Compact, a U.N. network that persuades private business to endorse nine principles covering human rights, labour and environmental issues, was launched by Secretary-General Annan about four years ago. "You have helped drive globalisation. You have benefited greatly from it," Annan told the chief executive officers (CEOs) who attended the Summit. "Your vision, strategies, and organisation embody it. You have even more to hope from it in the future." His words fuelled civil society's concerns about the growing influence of corporations within the United Nations.

"It is a bit shocking in a way, the idea that these CEOs are going to be taking the place of governments and deciding how things are going to go," said James Paul, director of the Global Policy Forum, a watchdog group that monitors U.N. activities. "It's symbolic of the direction in which the Secretary-General has taken the U.N., which is to give them a certain amount of legitimacy as members of the Global Compact."

A day before the Global Compact Summit, the Forum, along with a number of international NGOs, including Greenpeace, Friends of the Earth and Amnesty International, convened a counter-summit, just a block away from the U.N. Secretariat, denouncing the Compact under the banner "Alliance for Corporate- Free U.N."

U.N. officials say that more than 1,400 companies have now signed the Compact, almost half of them from the developing world. "It has become the largest corporate citizenship initiative in the world," said John Ruggie, architect of the Compact and special advisor to Annan, who believes that "corporate citizenship has become corporate risk management.."

Citing a study carried out by McKenzie and Company, a private consultancy firm, U.N. officials say half of the companies that participated in the Compact "have changed their own policies and engaged in more than 100 partnership projects throughout the world."

Critics say the last few years have shown that voluntary initiatives are not delivering sustainable development. "The Global Compact is being used by companies to hide behind the fact that they have signed up to nine nice principles, but it doesn't enforce these principles in any way," said Daniel Mittler of Greenpeace, the world's largest environmental group, in an interview with IPS.

His scepticism was shared by other leading NGOs. "Voluntary statements mean nothing. We want to see what these countries do on the ground," added Paul.. "They are rather lobbying against more serious regulatory mechanisms. Why are they doing that? Because they don't want to be held accountable."

Legal accountability is not covered by the Compact, since the participating companies are expected to make a "sincere effort" to adhere to the nine principles. (A tenth principle on corruption was expected to be added during the Summit.)

Despite the criticism from civil society groups, Annan asserts that much has been achieved, though he concedes that challenges remain, especially in terms of inconsistent participation. "Our experience has shown that voluntary initiatives can and do work," he said during the Summit. "But we have also learned that they have to be made to work." He did not acknowledge civil society's demand that corporations participating in the Compact be legally bound to take responsibility for their policies and actions in the areas of human rights and the environment.

U.N. officials admit that many multinational corporations accused of committing human rights violations have signed the Compact, including the oil giants Total (France) and Shell (Britain), but they still defend its viability and performance. "It's a journey," says Georg Kell, head of the Global Compact. "It's an ongoing experiment."

But women's rights groups critical of the Compact wonder how long millions of women working for low wages in the world's "free trade zones" will have to wait for the positive outcome of this "experiment".

"Foreign private investment and free trade policies have a detrimental effect on women on the ground," Nadia Johnson of the Women's Environment and Development Organisation (WEDO) told IPS. "The principles mentioned in the Global Compact are not enforced. We are not going to participate in it if it does not have an accountability mechanism, if it continued to operate in a non-transparent way where we do not know all the companies involved in the compact."

Unlike Johnson's group, many civil society groups are still participating in the Compact, though they are no less critical of the way it is working. "The Compact has failed to live up to some basic expectations, such as integrity of its own members," said Irene Khan of Amnesty International, a London-based human rights group. "It has not taken strong enough measures to ensure that those who violate the principles of the Compact are not part of it. It has not taken the leadership position in developing the U.N. norms on human rights for business."

Critics say one reason the U.N. is reaching out to corporations is the pressure it faces from the United States, which rejects any anti-business stance. Of about 1,400 companies that have signed up to the compact, only about 5 percent are U.S.-based. But a different situation seems likely in coming days.

"American firms fear a lawsuit if they sign up to labour and environmental standards, which adversaries might them claim they are not honouring," according to a report by the London-based Economist magazine last week. "That problem is now resolved."

After a three-year effort by the U.N. and the American Bar Association, U.S.. companies can commit to the principles using a letter full of legal boilerplate, which shields them from lawsuits stemming from claims that they have failed to live up to the Compact, the magazine reported. The letter has prompted major U.S. companies such as Starbucks, Gap and Newmount Mining to sign up.

The Alliance for Corporate-free U.N. calls the move "bluewash." "It's perverse that instead of delivering rights for people, the U.N. is delivering a public relations smokescreen for business," says Mittler.

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