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Julia Moshkin of EcoVadis points to research showing that companies that have signed up to the initiative’s 10 principles perform significantly better on driving responsibility in their supply chains
Since the United Nations Global Compact (UNGC) released its10 principles more than 15 years ago, nearly 12,000 companies worldwide have committed to adopting the sustainable and socially responsible policies that it calls for around the themes of human rights, labour, environment and anti-corruption.
One reason the initiative has been so successful is the UNGC’s extensive toolbox, which includes action platforms to establish partnerships and solve challenges, an online UN Business Action Hub and other resources, such as a reporting partnership with GRI, which helps businesses share information, engage in open dialogue and take action to accelerate tangible progress toward a more sustainable world.
The UNGC has clearly been an important international initiative for the global adoption of sustainable business practices and, arguably, a proof-point that commitment to clear and achievable objectives works.
In fact, research shows that so far, the UNGC is accomplishing exactly what it set out to do and is producing impactful results. According to the UN Global Compact Performance Report, organisations that have committed to the UNGC’s 10 principles perform significantly better on sustainability measures.
The UNGC’s 10 principles are effective because these goals help companies hone in on the sustainability risks and considerations that should be top of mind for all businesses. For example, the UNGC principles that “businesses should support and respect the protection of internationally proclaimed human rights”and “businesses should work against corruption in all its forms, including extortion and bribery”are two that provide an umbrella for action that reduces risk, improves financial performance, progresses positive brand recognition and helps to create a more ethical, sustainable business.
Organisations that have adopted the 10 UNGC principles perform 12 points better on sustainability measures in supply chains
But, as we all know, it’s not always easy to walk the talk of such commitments: resources are required to research, validate and reasonably assess how a company is following through, and to examine the correlation between commitment to the principles and advanced sustainability performance.
EcoVadis recently examined a sample of 30,000 companies on its database and found that organisations that have adopted to the 10 UNGC principles perform better on sustainability measures throughout supply chains.
Specifically, UNGC participants score, on average, 12 points higher compared to non-participants. And although some folks might think it requires a big business to make a big difference, our findings show otherwise: small- and medium-sized businesses (29-999 employees) demonstrate better performance than larger organisations and act faster when addressing critical sustainability issues.
When looking at performance by theme, results by non-participants were strongest in labour and human rights and the environment, areas where there is strict regulation. They lagged UNGC participants by about 10 points in each category. Ethics and sustainable procurement themes have the greatest gaps in performance between UNGC participants and non-participants, likely due to a lack of executive-level commitment to make investments in these areas. Leadership commitment is an important element of the UNGC: for a business to participate, a commitment from its chief executive (or equivalent, for non-business entities) is required, with support from the board. This top-down support is instrumental in driving initiatives forward.
Participation in the UNGC is not a guarantee of advanced CSR performance in and of itself, since 13% of all UNGC participants in the EcoVadis database perform below the EcoVadis average. But the correlation is clear: companies that follow through on the commitments and use the resources available to them are better-equipped to make stronger progress.
Being held accountable by an entire community of like-minded professionals is key to moving sustainability initiatives forward
Setting goals, making commitments and reporting on progress are proven elements of change, and being held accountable by an entire community of like-minded professionals is key to moving sustainability initiatives forward. Companies that have adopted the UNGC principles are continuously revamping their practices and adopting management systems that help them mitigate CSR risks within their operations and their supply chains – providing a level of visibility needed to ensure sustainable, responsible protocols are being followed.
Add the fact that companies that have publicly endorsed the principles have more advanced CSR management systems, it’s clear that public commitment holds companies more accountable for progress than if goals were only shared internally.
With its extensive toolbox complete with resources, information, action plans and reporting procedures, UNGC members have a rich opportunity to make strategic sustainability improvements with tangible results, especially through leveraging the UNGC’s vast global network.
As a business community, we have the power to make sustainability improvements a reality – and this trickles down to affect the entire world. Participating in initiatives such as the UNGC, GRI, industry-specific programmes and similar efforts can galvanise an organisation’s commitment to sustainability goals, and create a tipping point for sustainability to go mainstream.
Improvements in CSR are shown to impact the bottom line, from hiring to funding: over 70% of US employees are more likely to work for a company that has a strong green footprint, and more than a quarter of assets under management globally are being invested based on environmental, social and governancefactors, which are increasingly being recognised as value drivers. As the reasons to commit to sustainability pile high, now’s the time to get on board.
Julia Moshkin is institutional relations manager and senior analyst at EcoVadis.