The UN and International Agencies Treatment of CSR

Main views of UN's agencies

 MDGs, UNGC and CSR (Big development)

 UN Global Compact
 ILO
 UNEP
 UNIDO
 World Bank

MDGs, UNGC and CSR (Big development)

Does the UNGC, as is stated above: Catalyze actions in support of broader UN goals, including
the Millennium Development Goals (MDGs). The first point is that the ten principles may have a
bearing on some of the MDGs but this is not explicit. Second, the UNGC team may, behind the
scenes, be addressing ‘big’ development issues as desired by the MDGs but this is not, it appears,
in its ten principle mandate. The figure given to the UNGC’s impact on big development is only
1% of its impact on companies themselves.

As to the MDGs, there are at least two further questions. First, do the MDGs promote CSR?
Second, is CSR the appropriate lens through which the MDGs can be addressed?

Before addressing these two questions, it is worth noting that the UN MDGs are part of a
continuum of a long and impressive concern by the UN for socio-economic development. For
instance, the first UN development decade was launched by the General Assembly in December
1961 and called on all member states to support measures to ‘accelerate progress toward self-
sustaining economic growth and social advancement in the developing countries. With each
developing country setting its own target, the objective would be a minimum annual growth rate
of 5% in aggregate national income by the end of the decade‘. Subsequent development decades
emphasized income re-distribution and social issues culminating in the launch of the basic needs
development strategy by the ILO and then the World Bank in the 1970s, followed by the New
International Economic Order (NIEO), the Human Development focus by UNDP in its celebrated
human development reports both global and national, to the MDGs launched at the turn of the
century.

It is worth noting that engagement with the corporate private sector by the UN and its agencies
has mainly been with research on MNCs - notably by the TNC group in New York which was
part of ECOSOC activities and by UNCTAD – until the UNGC came along. The UNGC was the
first major attempt by the UN to actually engage with multi-national companies and, as seen
above, is a step both toward CSR and to address development issues.

The MDGs are, to the UN system, far more important than the UNGC. This is because the MDGs
have a UN General Assembly mandate to encourage them right through the UN system which
means that Governments have to take the MDGs on board and produce reports on their progress
to meeting the MDGs. The UNGC, in comparison, does not have system wide mandate even
though the secretariat is close to the UN secretary general but there is no UN system wide and
consequent Government mandate to pursue the UNGC.
On the first question, do the MDGs promote CSR. The short answer is, unfortunately, no. The
MDGs have laudable objectives where eight development goals are stated and to be achieved by
2015 (woefully behind schedule, but that is another story). Of these MDGs, perhaps Goals 7 and
8 (and their targets) come nearest to direct business interest. In passing, it is worth noting that the
MDGs state ‘goals’ not ‘processes’ although the public sector bias is rather obvious.

But the 'targets' suggested still do not include the ‘process’ of how to do this and how to involve
the private sector. Principle 8 mentions the private sector but then reduces its appeal to only
‘make available benefits of new technologies’. Consequently, the MDGs hardly mention the
private sector (and by implication its new strategic CSR approach), nor do we see a mention of
the UNGC at least at the level of goals and targets.

Turning to the second question, is CSR the appropriate lens through which the MDGs can be
addressed, one must start by replacing ‘the’ with ‘an’ appropriate lens. Then comes the additional
question why should companies be interested in MDGs and, development in general?

The MDGs are the current manifestation of the laudable UN concern with development and, as
such, can be said to be the international development communities' current definition of
development.

Companies are interested in development because of the (at least) five benefits that will both
improve a company's' bottom line and help to resolve the problem of under-development and
poverty:

1. Reputation is improved since it is built around intangibles such as trust, reliability,

quality, consistency, credibility, relationships and transparency, but also about tangible
inputs into what the company is doing on the major issues of the world and, in particular,
on development.
2. Global firms face global challenges and their employees, off-cited in stakeholder dialogue
conversations, urge their company not only to work in the company's best interest but also
in wider social problems such as development.
3. Better risk management can be achieved by in-depth analysis of relations with
external stakeholders even if these factors are not directly related to the company's bottom
line.
4. Working on development positively helps in the building of relationships with host
governments, communities and other stakeholders and can be of vital importance should
the company encounter future difficulties with regard to its investment decisions.
5. There is growing consensus of a Planetary Bargain whereby beggar-they-neighbour
policies of companies through using the cheapest labour, the most polluting industries etc.
are neither in the interests of the companies concerned nor of their consumers.

Increasingly, development activities are included under the umbrella of CSR. Is this the best
model? Probably it is simply because investment in development (sometimes called Corporate
Social Investment – CSI) must feedback to the business case of a company. The business case for
CSI is based upon reputation and intangible benefits to assets such as employee motivation and
satisfaction, and risk reduction. Given that intangible assets these days can be as high as 80% of a
company’s valuation (e.g. its share price multiplied by the number of shares) CSI can be a non-
negligible contribution to them. How big the contribution is, is still, currently, not measurable and
so only best guesses will dictate how much and how seriously a company will take its
involvement in development.
For instance, some describe CSR drivers in developing countries as internal and external. Internal
drivers emanate from pressures within the country and include cultural traditions, political
reform, socio-economic priorities, governance gaps, crisis response and market access. External
drivers which tend to have a global origin include international standardisation, investment
incentives, stakeholder activism and supply chain.

So, of course, there are costs and limitations to the CSR approach, and the idealism behind the
approach can also hinder its spread as hard-nosed businessmen try and squeeze every ounce out
of cost cutting and profit maximization. But, as the classic study Built to Last has shown, CSR
companies perform better for shareholders in financial and market terms, carry less debt, and are
long stayers.

In conclusion of this section, it has been shown that the UN Global Compact is only a partial
CSR approach, even though it may well help companies to head in that direction. Thus it needs
additional principles before it can be anywhere near a full-fledged strategic CSR approach

The MDGs too, are even further from a CSR approach than the UNGCs but they can help in
orientating a company toward development interventions should this be part of a company’s CSR
approach. But more is needed, for instance, business is always interested in the impact they make
on any investment in development.

Clearly next steps for proponents of the UNGC are to explore additional principles to add to the
UNGC to ensure it becomes a system wide full-fledged CSR approach (e.g. add principles
covering all stakeholders such as owners, customers and extend the employee and supplier
principles). For proponents of the MDGs, next steps are to clearly link the MDG goals and targets
to what private corporations can reasonably do under the banner of CSR. Indeed, extending
‘corporate’ to include ‘corporate bodies’ such as NGOs and Public Institutions themselves is also
another route that could be taken and has not received as much action as in the private corporate
sector. The question therefore remains and that is how can all these groups become more
responsible thereby fulfilling CSR for themselves and, at the same time, the bottom billions of the
pyramid?

But, to end on a positive note, it is encouraging that businesses are adopting a strategic CSR
approach, useful that the UNGCs are there and imply support to solid principles for companies
from the UN; and important to know that the development approach of the UN, the MDGs, is
showing increasing interest from companies and associations of companies.

UN Global Compact
What is the Global Compact? The United Nations Global Compact (UNGC) is a strategic policy
initiative for businesses that are committed to aligning their operations and strategies with ten
universally accepted principles in the areas of human rights, labour, environment and anti-
corruption. [see http://www.unglobalcompact.org/]. There are few references to CSR on the UN
GC website, although some companies take the UNGC ten principles as their CSR model.
For instance, Air Greenland who state on their website that "in September 2010 Air Greenland
signed UN’s Global Compact. With this, Air Greenland is the first Greenlandic company to sign
the UN’s Global Compact’s ten principles. Signing UN’s ten principles is a significant milestone
in Air Greenland’s work with corporate social responsibility (CSR), and underlines Air
Greenland’s support for working strategically with corporate social responsibility. UN’s Global
Compact is the most well-known and widespread CSR initiative in the world and therefore it
makes sense for Air Greenland to follow this standard. It is important to us that Global Compact
provides a clear framework for the CSR work and that the initiative is recognised internationally
– it makes it easy to communicate with our international business partners."

But, is the UNGC really CSR?

In an article on this issue published by Michael Hopkins he argued that, laudable as the UNGC is,
it is only a partial approach to CSR. It is worth noting that other scholars have been more critical:

"Throughout our study, we could not find, at any time, any definition of the Global Compact on
what the Corporate Social Responsibility would mean. In the documents searched, websites or
articles and speeches in the UN or in the articles written by scholars that have studied the Global
Compact, the UN vision of CSR has not been defined nor even tried. We see at this point, a
failure, an interest or an opportunity for Global Compact/ UN and a possibility of analysis and
exploration for scholars." [ http://globalcompactcritics.org]

Nevertheless, the UN Global Compact (UNGC) is a path breaking movement inside the United
Nations to encourage the private sector, across the world, to observe ten principles of good
behavior. Alert readers will note that 70% of the principles are devoted to labour and
environmental issues. They may also wonder why wider principles were not included and also,
why no mention of the UN MDGs? The answer is straightforward.

Clearly, when the principles of the UNGC were being developed compromises were struck so
that something could be put together for the forthcoming appearance of the then UN Secretary-
General, Kofi Annan at the World Economic Forum in Davos in the year 2000. But, the problem
with any statement created in this way is that, should there be success as indeed the UNGC has
achieved, its proponents are stuck with the original declaration and its limited analytical
framework. Thus even though the UNGC claims ‘to motivate business to adopt a responsible
approach to management’ it is manifestly unable to deliver. The UNGC might lead business
down the CSR path as a first step but it may have a hard job to motivate business to adopt
management responsibility. This is discussed in more detail next.

Following our CSR definition above, how many of a business’s stakeholders are actually

addressed by the UNGC? To address that issue we have two graphics. Graph 1 gives a typical list
of stakeholders with which a company is concerned - both internal stakeholders (owners,
shareholders, employees etc.) as well as external stakeholders (suppliers, customers, government
etc.). Of course, depending on the industrial sector other stakeholders could be identified e.g.
media, trade unions etc. Also included is a category called ‘development’ more on that below.
Then percentages are added that best reflect the importance of the various stakeholders to running
a business profitably, what is called the business case. Note that the data are illustrative based
upon best guesses and not based on actual figures – to do that would require data that are not
generally available for instance how much of a business’s current expenditure is devoted to its
various stakeholders?

So, Graph 1 illustrates the model that the most important stakeholders are the Board (16% of total
importance), Managers (14%), Employees (14%) and Customers (19%). While concerns about
development that could be spread in dealings with communities, government, environment, and
suppliers amount to much less and are given 3%. Adding communities, government, and
employees would add more to this total but the government and employees in the home country
are probably more of concern than those in developing countries simply because they are closer
to home and therefore more influential.

Thus the concern with MDGs can be called (see below) ‘big’ development, while the concerns
with communities, government, environment and suppliers are mainly specific to those groups
and not to wider issues of development. Remember that large MNCs probably employ directly up
to 300,000 people (but more like around 75,000 on average) and perhaps 1 million indirectly
(around 250,000 indirectly on average), so the biggest 500 companies employ about 6% of the
world’s employment both directly and indirectly i.e. one cannot expect large corporations to have
a great direct impact on the world’s employment level .

Graph 2 shows the same stakeholders as above but, this time, allocated to the coverage of the
UNGC ten principles.

In Graph 2, each of the ten principles of the UNGC are mapped to the proportion of concerns
each company has to its stakeholders. Thus 14% of a company’s concerns are with its employees
as stakeholders (Graph 1) of which one could say that the UNGC with 4 principles on labour
addresses 10% of these concerns (readers might think this is an exaggeration since the UNGC
isn’t concerned with employee concerns such as wages, human resource policies, training etc.).
As far as ‘big development’ goes the charts show that business is concerned with, say, 3% of big
development issues as a stakeholder, while the UNGC ten principles cover perhaps 1% of these.

The conclusion these rough calculations give is that the UNGC ten principles covers only around
34% of stakeholders concerns and, thus, only partially covers CSR issues. On the one hand it is
helpful that the UNGC covers at least some of the concerns of CSR, while on the other the
UNGC should not be seen as an all encompassing CSR effort. To cover all the majority of CSR
stakeholder concerns it is clear from even glancing at the ten principles that the UNGC needs to
add principles to cover owners, investors, board members (i.e. company governance), managers ,
customers, suppliers, communities etc. And, to cover ‘big development’s issues…this is
discussed next.
ILO

The ILO defines CSR as a way in which enterprises give consideration to the impact of their
operations on society and affirm their principles and values both in their own internal methods
and processes and in their interaction with other actors. CSR is a voluntary, enterprise-driven
initiative and refers to activities that are considered to exceed compliance with the law. CSR is:

 Voluntary – enterprises voluntarily adopt socially responsible conduct by going beyond

their legal obligations
 An integral part of company management
 Systematic not occasional
 Linked with sustainable development
 Not a substitute for the role of government or for collective bargaining or industrial
relations

Further, ILO says that it can play an important role in CSR because labour standards and social
dialogue are key aspects of CSR and this is the core business of the ILO. Most CSR initiatives,
including codes of conduct, refer to the principles deriving from international labour standards,
developed by the ILO. The ILO plays a role by helping to promote dialogue between
governments, workers’ and employers’ organizations and by providing assistance and tools to
better understand the labour dimension of CSR.

See: http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/---multi/documents/
publication/wcms_116336.pdf

UNEP
In UNEP, a business case approach is followed i.e. one that focuses on ensuring companies are
profitable. In UNEP’s view ‘CSR is about doing business differently, through a values based
approach that understands the close interaction between business operations and the societies
within which they take place. This approach is not one of viewing “social responsibility” as being
about philanthropy or humanitarian activities. Rather, it is about integrating environmental and
social considerations in core business operations. It is the approach we follow as core UN agency
in the UN Global Compact (see our CER training package online
at: http://www.unep.fr/outreach/compact/trainpack.htm).

An environmentally responsible company that improves its resource efficiency is also one that
performs better and has better financial performance in the long run. Evidence is growing of
socially responsible listed companies showing better stock performance in the medium to long
term.

The business case approach also requires, says Cornelius Lugt of UNEP, thinking of
environmental and social issues not only as “risks” but also presenting “opportunities”. More and
more companies are for example today taking action on climate change with a more pro-active
approach. Some early leaders are introducing climate strategies, seeing short and longer term
market opportunities by introducing for example climate friendly products and services. Take for
example how many food retail companies today promote organic food, how many electrical
appliance companies promote energy efficient products, how many car manufacturers are
introducing higher fuel efficiency and alternative fuel cars, how many power generators are
saying things about providing green electricity. We are only seeing the early steps in what are still
niche markets in a number of countries, but these environmental or sustainable product and
service ranges are slowly moving towards the mainstream. And whilst some companies are doing
superficial green marketing on what they see as the flavour of the month, aware consumers are
challenged to expose this and change their own consumption behaviours. We also need to look
more closely at the role of reporting, standards and product information in providing investors
and consumers with reliable information on the social responsibility of the process behind the
product.

After ten years of much CSR debating, people today want to see practical application and
communication of results. This implies use by the company of internationally recognized
performance indicators such as those found in the Global Reporting Initiative (GRI) Guidelines.
The GRI today is an active UNEP Collaborating Centre based in Amsterdam. UNEP encourage
companies to complement their voluntary action with accountable and transparent reporting on an
annual basis. Similar to annual financial reporting by companies, this requires a consistent and
systematic approach as promoted by the GRI. A growing number of public institutions are also
starting to do sustainability reporting, including the Bretton Woods institutions. Donors
and stakeholders generally are challenged to recognize and use these reports, and ask questions
about areas for improvement in their use-ability. 
UNIDO
UNIDO addresses the issue of CSR head-on, together with a useful graphic (see below). In a
section on their website asking “What is CSR?”, they define the concept as: ‘a management
concept whereby companies integrate social and environmental concerns in their business
operations and interactions with their stakeholders. CSR is generally understood as being the way
through which a company achieves a balance of economic, environmental and social imperatives
(“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of
shareholders and stakeholders. In this sense it is important to draw a distinction between CSR,
which can be a strategic business management concept, and charity, sponsorships or
philanthropy. Even though the latter can also make a valuable contribution to poverty reduction,
will directly enhance the reputation of a company and strengthen its brand, the concept of CSR
clearly goes beyond that.

Thus the UNIDO definition and approach is very close to the one advocated here. One might
quibble with the continuation of their digression on CSR with the inclusion of the ‘triple-bottom
line approach. They continue that ‘promoting the uptake of CSR amongst SMEs requires
approaches that fit the respective needs and capacities of these businesses, and do not adversely
affect their economic viability. UNIDO based its CSR programme on the Triple Bottom Line
(TBL) Approach, which has proven to be a successful tool for SMEs in the developing countries
to assist them in meeting social and environmental standards without compromising their
competitiveness. The TBL approach is used as a framework for measuring and reporting
corporate performance against economic, social and environmental performance. It is an attempt
to align private enterprises to the goal of sustainable global development by providing them with
a more comprehensive set of working objectives than just profit alone. The perspective taken is
that for an organization to be sustainable, it must be financially secure, minimize (or ideally
eliminate) its negative environmental impacts and act in conformity with societal expectations.‘

Unfortunately, few if any calculate a triple bottom line, due to its inherent complication e.g. what
portion of profits comes from economic, social or environmental considerations. No-one knows.
The issue is best treated as one of ‘How’ profits are made, not the disaggregation of profits into
three components. Perhaps a better issue to address is the question of the timing of profit
reporting. Financial markets force companies to report every three months and share prices are
affected accordingly. Yet longer-term issues such as skill training, environmental control,
satisfying labour standards etc do not show up so quickly. Most CEOs resent the market concern
with the short-term and is something that needs to be addressed and revised to ensure CSR is
properly part of the ‘business case’ for companies.

See: http://www.unido.org/index.php?id=o72054
World Bank
There is no easy way to find out the World Bank’s definition of CSR. On the World
Bank Institute’s website use is made of the US based ‘Business for Social Responsibility (BSR)’
definition which is ‘CSR is defined as operating a business in a manner that meets or exceeds the
ethical, legal, commercial and public expectations that society has of business. CSR is seen by
leadership companies as more than a collection of discrete practices or occasional gestures, or
initiatives motivated by marketing, public relations or other business benefits. Rather, it is
viewed as a comprehensive set of policies, practices and programs that are integrated
throughout business operations, and decision-making processes that are supported and rewarded
by top management."

From the perspective of this course the definition, unfortunately, makes little sense since the law
changes, some parts of CSR need to be legislated for, others not, and there are many laws on the
books that are not respected. For instance, in China whose law should they respect US law and
vice versa? This is unlikely as we can see from such articles as this one
(see:http://www.bbc.co.uk/news/world-asia-pacific-13027427) where China has been reported to
say that "The US should stop using the issue of human rights reports to interfere in other
countries' internal affairs." This occurred after the US State department's annual report criticized
human rights in China. The same report also accused other countries of perpetrating serious rights
violations and named Iran, Iraq, Burma, North Korea, the Ivory Coast, Zimbabwe, Ukraine,
Russia and Belarus.

Videos showing adverts in the 1950s

1. John Wayne 1950s 
2. Beer and sexism 1954

3. https://classroom.globethics.net/mod/page/view.php?id=190&forceview=1