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Remarks on the Global Compact to the NGO Community

Assistant Secretary-General John Ruggie
United Nations, Geneva, 13 October 2000

Thank you for the opportunity of meeting with you this morning. I very much appreciate your interest and look forward to a good discussion.
I'm here today to talk about the Secretary-General's Global Compact, but also more broadly about globalization. Specifically, I want to do three things: First, to describe the GC, briefly and factually, as a concrete initiative what it seeks to accomplish and how. Second, to place the GC in perspective. What is it about, in the broader and deeper context of globalization? And third, I want to address very frankly criticisms the GC has generated in some parts of the NGO community.

1. The Global Compact

The GC is an initiative intended to promote corporate social responsibility and citizenship in the new global marketplace. It seeks to utilize the power of transparency and dialogue as its chief tools. And it is a collaborative effort involving not only the United Nations and corporations, but also international labor and NGOs as core participants.

The GC is not designed as a regulatory instrument. Nor should it be seen as a substitute for any regulatory arrangement that either countries or companies might wish to construct. It represents an altogether different type of organizational activity: an open-ended experiment intended to identify, disseminate and promote good practices based on universal principles.

As many of you know, the GC encompasses nine such principles, drawn from the Universal Declaration of Human Rights, the ILO's Fundamental Principles on Rights at Work and the Rio Principles on Environment and Development. The ILO, OHCHR and UNEP are the core UN partners, along with UNDP to manage the operational dimensions.

The GC asks companies to act on the nine principles in their own corporate domains, moving towards "good practices" as understood by the broader international community, rather than relying on their often superior bargaining position vis-à-vis national authorities to get away with less.

Specifically, we ask companies to undertake three commitments:

  1. To advocate the GC and its 9 principles in mission statements, annual reports and similar public venues;
  2. To post on our website at least once a year the concrete steps they are taking to act on the 9 principles – discussing lessons learned, both positive and negative;
  3. To join with us in partnership projects of benefit to developing countries – either policy dialogues (e.g., the role of corporations in zones of conflict) or operational activities (e.g., the Health InterNetwork, or Ericsson's First on the Ground initiative).

Our labor and NGO partners play essential roles in these endeavors. Their contribution will be particularly important in the on-line dialogue concerning good practices that lies at the heart of the learning experience the GC hopes to promote.

Following a high-level kickoff event at the UN on 26 July, our efforts have been focused on achieving practical results – and letting those results speak for themselves. And we have been devising a recruitment strategy to hit our target of 1,000 major companies within 3 years.

So, that's the Compact itself. What is it about, in the broader context of globalization?

2. The GC and Globalization

The GC is a voluntary instrument promoting corporate social responsibility. It isn't the only way to achieve that aim, but it is one way.

Do we believe that companies all of a sudden have become altruists? Certainly not and I, for one, would be deeply suspicious if any made that claim. They're in business to make money. The issue is how they choose to make their money.

Although the motivations of company participants in the GC vary, I can imagine several reasons for their wanting to join up.

The most encompassing is the protection and promotion of the company brand which accounts for an ever increasing, and in some cases overwhelming, share of companies' market valuation. In that context, it pays for them to be seen to do good things.

Some companies have done bad things in the past, they've paid a price in public embarrassment and perhaps even diminished sales, and they want a new image.

Others have come to view global corporate social responsibility as a natural extension of corporate social responsibility in their home countries, as one of the rules of the game in the new global marketplace.

Still others particularly companies in cutting edge industries, where attracting absolutely the best personnel worldwide is the key to success have found that they can't sufficiently motivate the very best people only with monetary rewards. In such cases, more elevated social purposes are becoming part of corporate culture.

Finally, there may be companies looking to the GC for a free ride mere publicity, or co-branding with the UN, as it were with little intention of doing what we ask of them. If so, they ought to be aware that they are operating in a fish bowl. We are alert. Our NGO and labor partners are watching. And I know that you will share with us your information and suggestions which many of you have done already.

In short, as markets are going global, so, too, must corporate social responsibility and citizenship. The GC is one means towards that end.

But aren't there risks, as some of you have warned? Of course there are. When has anything worthwhile not involved risks?

But is this worthwhile?

On that question, where you stand fundamentally depends on where you sit. If you want to make globalization work for everyone, as we do, then it is worthwhile. But if you reject globalization, global corporations or even the system of capitalism itself, then you won't like what we're doing at all, any more than your predecessors liked social Keynesianism or social democracy because such pragmatic innovations inevitably reduce the social rationale and political support for more polarized rejectionist postures.

The analogy is not entirely a bad one. By means of those heterodox measures, the industrialized countries in the first half of the 20th century slowly learned to embed market relations in shared values, principles and institutional practices at the national level.

The GC seeks to weave universal values and principles into global corporate behavior. And it brings together all the relevant social actors: governments, who defined the principles on which the GC is based; companies, whose behavior we are seeking to shape; labor, in whose hands the process of global production takes place; NGOs, representing the wider community of stakeholders; and the United Nations, the world's only truly global political entity.

So that's what the Global Compact is about.

3. Some Areas of Disagreements

The GC has attracted an enormous amount of attention in the world's press, most of it supportive, and in the NGO community, some of it quite negative. My favorite assessment in the press, it won't surprise you, was an editorial in the Christian Science Monito no free-market apologist describing the GC as Kofi Annan's "most creative reinvention yet of the United Nations.

Certain criticisms by activist groups I won't dignify with a response; they're the one's that question Kofi Annan's motivations. The Secretary-
General is doing what he's doing because he believes it to be the right thing. If the GC turns out not to work as intended we will adapt it, and if it's a flop it will be dropped.

A larger number of NGOs and activist groups are genuinely concerned about the risks involved to the image and reputation of the United Nations. In turn, we genuinely appreciate their concern. We, too, are aware of those potential risks, as I've indicated, and will do our best to manage them. I hope we can count on your assistance.

A third area of disagreement is the most profound and, therefore, the most difficult to resolve. It concerns differing attitudes toward globalization.

When Secretary-General Annan first proposed the Global Compact in January 1999, he stated categorically that globalization, as we knew it, was not sustainable. Indeed, he predicted precisely the kind of backlash that hit ten months later at Seattle and in various venues since.

A backlash against globalization, the Secretary-General explained, would be fueled by three of its attributes. First, its benefits are distributed highly unequally, both within and among countries. Large parts of the developing world are left behind entirely; these are the countries where 1.2 billion people strive to survive on $1 a day, or nearly 3 billion on $2 a day.

Second, globalization is characterized by an imbalance in global rule making. Those rules that favor global market expansion have become more robust and enforceable in the last decade or two. Rules intended to promote equally valid social objectives, whether poverty reduction, labor standards, human rights, environmental quality or the control of transnational criminal activity, lag behind and in some instances actually have become weaker.

And third, there is emerging what we might call a global identity crisis. Who is us? is being asked with growing shrillness all over the world. Who is in control of the unpredictable forces that can bring on economic instability and social dislocation, sometimes at lightning speed? The answer, no one, serves only to feed fear and even paranoia apart from the fact that it is not, strictly speaking, accurate.

The Secretary-General committed himself, and the United Nations, to help reverse these adverse attributes and consequences of globalization.

But we do not reject the very phenomenon of globalization. And therein lies the major difference between us, and some of our friends in your community.

The world needs open markets. They are required to sustain prosperity in the industrialized world. And they provide the only hope of pulling billions of poor people in the developing countries out of abject poverty.

This view has nothing to do with the so-called Washington consensus and it is not an endorsement of laissez-faire economics. It implies acceptance neither of unfettered growth nor the commodification of everything under the sun. It is just a plain, irrefutable fact of life in our world of 6 billion people, half of them poor – soon to become 8 billion, with 9 out of every 10 newcomers born into extreme poverty.

Poverty has been exploding in Africa but it is hardly because of too much globalization. According to the latest UNCTAD figures, the share of direct foreign investment allocated to Africa has now shrunk to 1.2% of the global total 1.2% for a continent that accounts for more than ten times that fraction of the world's population. In contrast, poverty is declining in East Asia, and more modestly in South Asia, where much of the direct foreign investment destined for the developing countries has been heading.

You have been honest with us about your concerns regarding the Global Compact. Let me be equally frank and end with a grave concern of my own. I fear that the rejectionists of globalization in the North are on a collision course with the needs of the poor in the South however unintended it may be. Nurtured and sustained by the greatest accumulation of wealth the world has ever known, northern rejectionists are driven by a cultural alienation from the institutions and practices that generate this wealth. And that is their prerogative.

But the life-shaping force haunting the world's poor is not Disneyfication; it is not McWorld. Nor is it a Nike or a Shell, whatever its other sins may have been. Nor, indeed, is it the WTO, the World Bank or the IMF, though each has committed egregious policy errors over the years.

The stark reality facing the world's poor is the absence of economic opportunity, a deep-rooted inability to generate equitable and sustainable economic growth, and a scarcity of the political, economic and social institutions conducive to that outcome.

This root problem is compounded by an insufficient sense of global solidarity in the form of faster and deeper debt relief, greater market access for the exports of developing countries, especially the least developed, and vastly expanded programs of outright grants to poor countries, targeted for poverty reduction programs.

Rejectionism will not solve a single one of those problems. Globalization can help do so a globalization that is embedded in universal values and principles, and one that is better managed by good governance" at national and international levels alike.

That is our agenda expressed, most recently, in the United Nations Millennium Declaration, adopted by our heads of state and government at the Millennium Summit in September, and reflecting the priorities laid out by the Secretary-General in his Millennium Report, We the Peoples.

We invite all of you to work with us in making this agenda a reality.

Thank you