The United Nations Global Compact Business Essay

This paper aims to analyse the challenges and chances presented by the United Nations Global Compact ( UNGC ) to corporate leaders. A celebrated economic expert, Milton Friedman, one time said that the chief duty of a concern to the society is to increase the net incomes. This was, nevertheless, about four decennaries ago.

In the transition of clip, companies and corporations likewise have started tilting towards a different position. They now show more focal point in projecting images of being socially cognizant and responsible. The alteration from a financially motivated company to a more human company has affected the manner companies perceive themselves, but besides affects the manner the society at big positions them. Acerate leaf to state, this besides affects the work force a company is able to pull and engage. UNGC helps corporations heighten their images, every bit good as set guidelines which a member corporation can follow to better their patterns. However, this paper will besides reexamine whether the benefits will outweight the challenges a corporate leader will be taking on by take parting in the UN Global Compact.

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Challenges and Opportunities Presented to Corporate Leader by the United Nations Global Compact


The United Nations Global Compact ( UNGC ) is a tactical scheme strategy for companies who commit to aline their operational schemes to the rules outlined by the UNGC whose chief intent for being is to help concerns in pull offing hazards and chances presented to them in certain countries such as the environment, society and governments like authorities divisions and Torahs. This enterprise besides aims to incorporate their 10 rules as cosmopolitan to concerns and societies for common benefits.

It is independent of the authorities which entails that their regulations and ordinances is non authorities mandated jurisprudence though it does support and is in-line with certain authorities policies that chiefly focuses on the societal duties of a corporation. ( UNGC, 2013 )Commerce, as the chief factor act uponing globalisation, plays a major function in societies and economic systems anyplace in the universe. UNGC requires take parting concerns to subject a Communication in Progress ( COP ) study once a twelvemonth, which is deemed by the enterprise as indispensable to show the committedness of their participants to them and to their rules. The COP includes policies which entails being transparent and accountable. By take parting to UNGC, companies are so required to follow the same policies of transparence and answerability which is really of import in guaranting the success of the enterprise. By neglecting to pass on with UNGC, companies might lose their current position as participants, or worse, the enterprise can throw out them. ( UNGC, 2013 )The UNGC is the planet ‘s greatest corporate citizenship conglobation.

The corporate universe can be viewed as the steering manus of globalisation and in this mode ; it can suit the mammoth challenges which influence the incorporation of common wars, ruination and short provinces. The UNGC sets out a lone worldwide criterion that transcends national, sectorial and territorial norms. UNGC ‘s set of aims is positive in and of itself as it begins the conveyance methodological analysis. However, it was ne’er indicated as a study instrument and the UNGC does non hold the ability to study members ‘ legion actions. Voluntary enterprises like UNGC do non acquire in the manner of other enterprises and authorities establishments but efforts to unite concerns with the same ends. By consorting their concern to UNGC, a corporate leader will so hold to stay by the regulations and rules of the enterprise which will be discussed further in subsequently on in the paper.

( Hale and Held, 2011 )

Theoretical Model

With the growing of UNGC as an enterprise, the of all time spread outing comprehension of their rules as a criterion are perceived. This is seen through the enterprise ‘s fast development now with around 10 thousand corporate members and diverse stakeholders from over 130 states, it is the most colossal voluntary association in the planet.As corporate leaders continue to encompass the criterions set by UNGC, it becomes a convenient skeleton for the headroom, executing, and revelation of sensible techniques while taking a shooting at offering the market an extended assortment of work watercourses, authorities appliances and ownerships which are all created to compel with the progresss of reasonable agreements both for employment and for commercialism.

While enterprisers and corporate leaders face societal, political and pecuniary challenges, they make the differentiations between working independently and the demand to work together and join forces with legislative assemblies, civil publically accepted norms, labour and the United Nations. This accounts for the increasing popularity of UNGC in the concern universe. ( Hale and Held, 2011 )


When UNGC was foremost launched, it merely started with nine rules. However, in the 24th of June, 2004, Kofi Annan published the enlargement of the rules into a 10th regulation against corruptness as per the United Nations Convention opposite Corruption received in 2003.Certain testers underestimate the relevancy of utilizing the UNGC rules to do infinites in the concern universe, wherein societal, environmental and human rights issues can head off to the bow of the world-wide footing driven by power. This is wholly immense in the modern-day clip of neoliberalism and unrestricted-market endurance that has appointed societal and biological issues to assist their position.

Additionally, UNGC restores the “ preparative criterion ” agreed upon at the Earth Summit in 1992. This discriminates the innately bing balance of constructions in being while the design attempts to help in the updating, cultivating and impacting nutriment that can be upheld and used. ( Knigh and Smith, 2008 )Below is the list of the 10 Principles and the classs fall into:PrincipleDefinitionClass1st PrincipleBusinesss Should: Support and esteem the protection of internationally proclaimed human rights ; andHuman Rights2nd PrincipleMake sure that they are non complicit in human rights maltreatments.

Human Rights3rd PrincipleBusinesss should continue:the freedom of association and the effectual acknowledgment of the right to collective bargaining ;Labour Standards4th Principlethe riddance of all signifiers of forced and mandatory labor ;Labour Standards5th Principlethe effectual abolishment of child labor ; andLabour Standards6th Principleriddance of favoritism in employment and business.Labour Standards7th PrincipleBusinesss should: back up a precautional attack to environmental challenges ;Environment8th Principleundertake enterprises to advance environmental duty ;Environment9th Principlepromote the development and diffusion of environmentally friendly engineerings.Environment10th PrincipleBusinesss should work against corruptness in all its signifiers, including extortion and graft.

Anti-Corruption( UNGC, 2013 )UNGC purposes for the two corresponding ends. The first end is to propagate their 10 rules in the concern arenas all over the universe and second is to catalyse activities in backup of broader UN aims, integrating the Millennium Development Goals besides known as MDGs. ( UNGC, 2013 )Because of the aforesaid ends, the UNGC has formed an enterprise that furnishes shared consequences for the most major trials facing both concern and societal orders.

The enterprise aims to consolidate the best spheres of the UN, illustrations of which are ethical power and meeting power, integrated with the private sector ‘s result-finding qualities, and the smoothness and bounds of an extent of nexus stakeholders. The UNGC is world-wide and vicinity ; private and unfastened ; voluntary yet responsible. ( UNGC, 2013 )It is an effortless system to seek association with UNGC. A Corporation or other concern entity must merely supply a Letter of Commitment marked by the Chief Executive Officer to UN ‘s Secretary-General. The missive should show the using entity ‘s willingness to be accountable to UNGC and its 10 criterions by integrating alterations in their current policies in such a manner that the criterions of the UNGC will be portion of the corporation ‘s concern patterns.

Furthermore, the association must foreground their ability to take portion in propagating UNGC aims, progress its investing in the UNGC and consent to subject a twelve-month COP. In proclaiming obeisance to the aforementioned human rights, environmental and anti-corruption political orientations, the corporation will so supply a set of rules that might be utilized by others to test their actions. ( Hale and Held, 2011 )


One of the chief concerns in UNGC is what a corporate leader will stand to derive by seeking association. This inquiry has become progressively pertinent as more and more corporations join international Corporate Social Responsibilities ( CSR ) initiatives such as the UNGC, yet many of these corporations fail to populate up to even basic coverage demands and are later delisted. UNGC, nevertheless, is chiefly suited for larger corporations that can utilize the Compact in order to make full a administration nothingness as they operate in less developed states. Many smaller corporations do n’t hold the resources to run into UNGC demands and the corporations that produce and sell their goods and services in states with efficient authorities ordinance profit small from UNGC rank. ( Hale and Held, 2011 )In today ‘s stockholder publically accepted norms, there is no clear grounds that a UNGC back uping corporation can derive more or less from engagement as compared to a corporation that is non take parting.

Nonetheless, certain associations show that the net incomes may non be assessed fundamentally by shuting the of the twelvemonth figures. The concern society, employment factors in the society every bit good as enlistings of work force are all well impacted by the kind of societal relevancy prescribed by the UNGC. ( Hale and Held, 2011 )A take parting company or corporation bases to derive by encompassing the created and comprehensively distinguished agreement system for the promotion, executing, and disclosure of natural and societal factors, every bit good act upon the corporation ‘s schemes and hone their bing policies. The corporation, through their UNGC association, will besides be a portion of a web which offers and portions the most appropriate patterns while developing patterns which can take to the most matter-of-fact consequences and processs to normal challenges normally faced by corporate entities. ( Knigh and Smith, 2008 )Other benefits includes the propelling of livability consequences in their organisations with a wide range to stakeholders which are integrating UN corporations, disposals, civil societal order, labour, and other non-business entities. UNGC articulation concern units and subordinates together against the quality concatenation with the UNGC ‘s Local Networks, which constitutes a big figure of progressing and developing concerns. By take parting, corporate leaders will be opening themselves to a web of diverse contacts.

( Petersmann, 2002 )Corporation leaders will besides derive by utilizing UNGC disposal setups and assets, and the opportunity to take part in specially designed work watercourse in the ecological, societal and statute law spheres. In add-on, they will be come ining into a group with entree to the United Nations ‘ impressive acquisition tools in different promotion and development issues.Another manner of looking at UNGC is the aid it can give to developing states, in peculiar, wherein the Global Compact can hold influence in raising the heedfulness to concern innovators on issues of corporate societal avocation.

In add-on, such thrusts may hold influence in reinvigorating certain parts of general “ sensitive jurisprudence ” , particularly to the International Labour Organization ( ILO ) Core Conventions and the Universal Declaration of Human Rights. ( Knigh and Smith, 2008 )The UNGC is non a criterion to mensurate endeavors ‘ consistency in resistance to some predefined indexs. It is a standards-based enterprise, and take parting entities are permitted amazing adaptability by the manner they write about their promotion in their COP studies. They should be able to convey issues refering this without any reserve, though criterions have non yet been set in end may be achieved. ( Petersmann, 2002 )


One of the chief challenges presented to a corporate leader by fall ining UNGC is the construct of “ Bluewash. ” This construct pertains to any association between the United Nations and an endeavor that has consented to maintain the UNGC association which pertains to the reduced model which is the 10 criterions the inaugural advertises such as executable patterns, sensible work and human rights. The term itself is on a regular basis acknowledged disparaging, particularly given the state of affairss of the aforesaid kinds of associations ; since there are no showing or mandate constituents to vouch that the endeavor holds fast to the 10 criterions, observers contend that such associations are merely publicizing gambits planned to upgrade corporate images. ( Hale and Held, 2011 )The trial for assorted endeavors, a trial really to corporate leaders themselves, is that the UNGC offers a free-sized perceptual experience of the consequences of Corporate Social Responsibility ( CSR ) coverage.

This is a scenario dependent upon the evidences that assorted endeavors undertake CSR strategy that fit the UNGC criterions alternatively of watching the kinds of strategies that may be overpoweringly good to the partnership and concern elements in which the benchmarks tend to be connected in their ain concern. ( Knigh and Smith, 2008 )On the otherhand, CSR initiatives must most significantly take their beginning phase in the CSR requirements of the association and non in some predefined coverage program or CSR enterprise. Depending on whether a corporation or an entity begins undertaking a CSR system before it has outlined its ground, the result could on a regular basis be disillusionment and wasted assets. It is of great involvement, nevertheless, that a thorough appraisal of an association ‘s demands and wants refering CSR can convey about the corporation ‘s assessing of the kinds of enterprises it needs to be a portion of discriminatingly and the kind of describing it needs to take portion in. It is even plausible that the association may take non to be a portion of certain enterprises and describing programs, such as UNGC. ( Petersmann, 2002 )Merely like with most UN suggestions, sentiments and perceptual experiences of the people are extremely diverse. While a big figure of the corporate population solidly endorse and assist the Ten Principles that UNGC is seeking to propagate, there are cynics who propose that it will merely take to eventual failure, and is a Public Relation ‘s opportunity to react and seek to counter awful histories of corporate foolhardiness.

Others keep up that the UNGC needs teeth as it is non really administrative and binding, but simply engages organisations to encompass their criterions. ( Petersmann, 2002 )The weight placed on tremendous organisations and corporate leaders by developments like UNGC might divide impression in certain ways. On the other manus it is evident that, while the method is at the approach-level of conglobations and organisations, the instigators are the corporate leaders and the prospective employees of the corporation themselves.Numerous low and medium-estimated enterprises ( SMEs ) do n’t see leeway of UNGC engagement.

One alibi for why is that legion SMEs do n’t hold the investing assets to vouch fitting certification and to catch up with every of their providers or license holders.Numerous extended buyers and retail merchants now mandate that western SME providers report that they enough command the societal and ecological exhibition of their peculiar providers in less advanced states. However, SMEs often need political clout refering their providers. They may be merely one of legion buyers, and the motivation force for the provider to heighten the societal and ecological exhibition can consequently be restricted. Positively expansive corporations furthermore whimper about non holding adequate power to alter provider patterns, specifically when they have merely a modest allocation for processing. ( Petersmann. 2002 )In 2011 the UNGC recommended another attack to coverage.

The UNGC Differentiation Program arranges concern members dependent upon their degree of divulgement on promotion made in integrating the UNGC criterions and donating to broader UN aims. The Differentiation Program incorporates a less mandating procedure for SMEs. While this is an ascent, SMEs are still abandoned to their peculiar setups every bit far as coverage. What is required is that extended buyers consent to work with their more bantam providers and to back up them in garnering necessities. ( Petersmann. 2002 )For associations that chiefly work locally, a UNGC registration may be discerned as less profitable. Case in point in 2008 the UNGC delisted 98 associations or more than 85 % of the parts of the UNGC in the Philippines.

Most Filipino associations are locally arranged which indicates that Philippine organisations are non exceptionally prone to confront necessities from enforcing clients to follow cosmopolitan CSR necessities for illustration the UNGC. Philippine organisations are, in any instance, highly occupied with CSR enterprises with a provincial centre. Organizations usually build constitutions that keep checks on philanthropic gift or preparation undertakings. Cases of CSR enterprises incorporate the Phinmar Corporation, which sold off its concrete concern and with the returns has acquired private schools so as to perpetrate to heightening the nature of disposal abilities in the Philippines. The Phinmar Corporation has moreover put resources into exceeding value lodging at moderate costs.On the other manus, locally based corporations are non heading off to gain from less mandating coverage necessities. The UNGC criterions are basically non appropriate to the aforesaid corporations. In any instance, the UNGC is a brilliant enterprise for cosmopolitan corporations that wish to work with CSR customizes as a replacement for losing ordinance.

The UNGC may every bit good maintain check on the aforesaid kinds of associations as opposed to look to enlist legion kinds of associations big parts of whom wind up baffled. At long last, while legion western disposals suggest that local corporation studies are consistent with UNGC criterions, this consequence may non be of quality to all associations and disposals.


The development of multi-stakeholder enterprises and voluntary corporate duty alteration for corporations has ended up being a per centum of the most alluring parts of the CSR verbal confrontation over the past few old ages. The greatest of the aforementioned is the association to UNGC with 1000s of members in more than a 100 states.

By any record, that is an huge figure.The UNGC is a good illustration of a CSR enterprise that is non suited for all corporations and concerns. Despite the evident success of UNGC perceived in the figure of members worldwide, there is besides a looming figure of delisting members which underlines a crux issue with CSR describing programs for certain associations: which entails that sing the benefits of a corporation with their ain sufficient authorities Torahs guaranting human rights, Torahs against corruptness, and appropriate labour codification does non needfully necessitate to see association with co-ops or enterprises such as UNGC.However, CSR describing in different signifiers is on the rise fuelled by solicitations from institutional gurus and considerable concern clients which brings about the necessity for CSR coverage. A good illustration of which are certain authoritiess like Denmark and Spain which are now necessitating that big corporations must subject an one-year study detailing their CSR thrusts. While coverage is going indispensable in certain parts of the universe, these are still non being ruled by the UNGC whose capacity to vouch for an endeavor may still be questioned due to the deficiency of existent applications and supervising they can execute. ( Bruno and Karliner, 2000 )Corporate honestness in the place twang is in an of all time spread outing grade when they approach elaboration of their worldwide shop webs and readyings to states like India, Bangladesh or Vietnam.

Clients in the place concern sector will regularly authorization that the organisation should follow suit and act in a socially aware manner in their host states. One representation of this is Nike, which was confronted by solid reactions in the media all over the universe for its labour issues in Indonesia. ( Bruno and Karliner, 2000 )Corporations that can truly derive net income from UNGC engagement are fundamentally corporations that have concern battles in states which are missing in certain ordinances. Get downing with the exhibits in Seattle in 1999 opposite the World Trade Organization agreements, unfastened resistance of globalisation and free market systems have developed. The aforesaid good known dissents are perceived by legion as the instigator of the CSR development. ( Bruno and Karliner, 2000 )In drumhead, there are certain advantages a corporate leader may be able to acquire from an association with UN Global Compact. This, nevertheless, must include factors such as the intent of their purpose to fall in.

These intents includes boosting of public image, current criterions and Torahs in being in their states, the size of their corporation, the market with which they are covering their merchandises to, may it be international or local, and in conclusion, their committedness to stay by the rules set by UNGC.


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