UN Global Compact Announces Its Expulsion of Business Participants

Customers and investors are increasingly calling on corporations to follow the 10 CSR principles, which address best practices relating to human rights, labor, the environment, and anti-corruption. Participation requires a genuine commitment, however, as a recent announcement of the UN Global Compact indicates.

On January 14, 2015, the UN Global Compact announced that it expelled 372 business participants (companies) in the second half of 2014 for failing to submit a required Communication on Progress report (COP) for two consecutive years. The total number of companies expelled in 2014 is 657.

Companies that commit to the UN Global Compact are expected to issue an annual COP report. The COP report is a “public disclosure to stakeholders (investors, consumers, civil society, Governments) on progress made in implementing” the UN Global Compact’s 10 principles as part of their “business strategies and day-to-day operations.” The COP also must detail the company’s efforts to support other goals and issues of the UN business partnerships initiative. Companies expelled in the second half of 2014 represented approximately 10 percent of the 3,760 business participants required to submit a COP in that period.

Despite recent enforcement actions, participation in the UN Global Compact remains worthwhile. Participation is voluntary and includes numerous benefits:

• A platform for sharing and exchanging best and emerging practices;
• The opportunity to advance practical solutions in partnership with a range of stakeholders, including UN agencies, governments, civil society, labor, and other non-business interests;
• The opportunity to link various members of the value chain to Global Compact Local Networks around the world; and
• Access to a variety of tools and resources.

Non-business participants in the UN Global Compact should also be mindful of their reporting requirements. According to a new policy introduced in October 2013, non-business participants must submit a Communication on Engagement (COE) to disclose specific activities in support of the UN Global Compact and the results of those activities. Starting October 31, 2015, a non-business participant that fails to submit a COE for two consecutive years may be expelled from the UN Global Compact. Examples of non-business participants include academia, business associations, cities, civil society organizations, labor organizations, and public sector organizations (excluding state-owned corporations or cities).

More and more companies are pursuing social responsibility policies to enhance their reputations in the eyes of potential investors, customers, and employees, who place increasing value on these policies. Promoting these policies can also reduce a company’s potential risks in markets across the globe, which may enhance its long-term value. Companies that incorporate these policies into their planning now can get a step ahead of the curve.