U.S. firms have been slow to join a U.N. initiative on social and environmental responsibility in business because of perceptions it has no teeth, the head of the Global Compact said Monday.
UNITED NATIONS -- U.S. firms have been slow to join a U.N. initiative on social and environmental responsibility in business because of perceptions it has no teeth, the head of the Global Compact said Monday.
But Georg Kell, executive director of the Global Compact which is holding a summit next month, said it was making progress and he welcomed the participation of firms such as the Coca Cola Co. and Microsoft.
Formed in 2000 in response to major antiglobalization protests at a World Trade Organization meeting in Seattle, the Global Compact brings companies together with U.N. agencies and civil society groups to promote universal principles on human rights, labor, the environment and fighting corruption.
It has more than 4,000 members including around 110 listed on the FT Global 500 list, Kell said. Many will meet for a summit in Geneva on July 5-6 aimed at spreading the message that being responsible makes financial as well as moral sense.
However, there is no enforcement mechanism beyond public scrutiny and the requirement for participants to report annually on progress in meeting commitments to the principles of the Global Compact, which range from banning child labor to allowing unions and protecting the environment.
"Big corporations here (in the United States) were wary," Kell told a news conference at the United Nations, adding that there was a perception that companies around the world could sign up without taking any practical steps to change policies.
"The situation has obviously improved," Kell said.
He added that 600 firms have been delisted, usually because of a failure to deliver any real changes. "Presumably the CEO has signed on light-heartedly," he said.
Kell said the fundamental mission of the Global Compact was to promote stability in global markets as well as inclusivity. One practical aim of the summit is to encourage participants to spread the word to their subsidiaries and supply chains.
Current members account for some 25 million employees, he said, but many more could be drawn in if companies demand the same high standards from those they deal with. The summit also sees the launch of an education program with business schools.
Anthony Ling, Managing Director of Goldman Sachs International which will present stock research incorporating the Global Compact principles, said so-called "ethical funds" had generally proved a poor investment.
However, he said, that was because they tended to use only one analytical tool rather than combining ethical measures with other factors such as governance and sustained competitiveness.
On that basis, a company that rated well on social and environmental factors was also likely to be well managed in other areas and therefore perform well financially.
"Increasingly there's value in engaging, especially in combination with good business models," Kell said.