Ethical Performance
inside intelligence for responsible business


Compact offenders are given one-year reprieve

May 2010

Developing world companies that fail to report properly on their adherence to the United Nations Global Compact principles will escape punishment for 12 months.

The Compact board has announced a one-year moratorium on de-listing businesses that are not based in OECD or G20 countries, after what it says has been ‘the recent removal of a disproportionate number of companies in these countries’.

Most have been de-listed for failing to produce annual communications on progress (COPs) on what they have done to fulfil Compact requirements.

A statement from the board said the measure ‘was deemed necessary pending a further review of the COP mechanism and its suitability for companies in emerging and less developed economies’.

The moratorium will be backdated to 1 January and will last until 31 December. As a result, 347 companies de-listed earlier in 2010 have now been reinstated.

Although businesses from developing world nations have always featured heavily among de-listed signatories, the board, which is the Compact’s highest-level advisory body, said it had become especially concerned about the number being excluded since the recent introduction of stricter integrity measures. These rules now give participants only one year, not two, from their joining date, to submit their first COP. If they default, they are now de-listed immediately, not labelled as ‘inactive’ as before.

The board has asked the Compact office to present a ‘long-term solution to the COP process’ next month. This throws into doubt plans announced last year to de-list participants automatically from July 2011 if they fail to issue a COP for more than one year.

De-listed companies are removed entirely from the Compact’s database, but the door is kept open for those willing to return. The Compact’s most recent figures show there are 5911 business participants and 2219 non-corporates.  The number of organizations de-listed so far – excluding those reprieved this year – totals 1411.

Some critics of the Compact, including Elaine Cohen, founder of the Beyond Business consultancy, and Bart Slob, a senior researcher at the Netherlands-based Centre for Research on Multinational Corporations (SOMO), have formally pressed the Compact board to change the rules so that companies can be accepted only when they are ready to publish their first COP.

However, one corporate supporter of the Compact told EP: ‘The Compact office is walking a tightrope on this one. On the one hand it wants to keep some kind of discipline going, but on the other it is particularly sensitive to supporting companies in emerging markets and doesn’t want to see them disappearing in great numbers.’

United Nations | Global | Codes of conduct

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