U.N. Global Compact Expels Hundreds for Non-Compliance

2014 was a mixed year for the United Nations Global Compact (UNGC) initiative, which has been working to increase the adoption of sustainable practices in the global business sector.

The organization announced last week that it had expelled 372 companies in the last half of 2014 for not submitting their Communication of Progress (COP) reports, which members are required to submit on a yearly basis. The COP details the member's progress in meeting the 10 goals of the UNGC.  So far, the number of expelled companies for 2014 stands at 657.

"These expelled companies represent 10 percent of the 3,760 participants due to submit a Communication on Progress (COP) within the second half of 2014," said the UNGC, which pointed out that the organization also took on 729 new members in the last half of 2014.

The U.N. Global Compact was established in 2004 to promote sustainable practices in the workplace. Its 10 principles set the framework for the company's adherence to human rights, labor, environment and anti-corruption practices, all of which the UNGC states are necessary components of a sustainable business.

At the end of 2014, the initiative had a total of 8,378 members. According to organization, the majority of these members (4,747) are small-to-medium companies with 10 to 249 employees, while 3,681 comprise large corporations of 50 or greater (including 11 percent that have 5,000 to 49,999 employees and 3 percent that have an employee base of greater than 50,000).

Of the 6,105 that provided financial information about their companies, the majority (71 percent) reported revenue under $50 million, suggesting that small-to-medium companies are currently the largest driving force to the U.N.'s sustainability initiative.

Yet a glance at where the U.N. Global Compact's membership resides suggests that is not always the case: While participation in the European Union outpaced membership in the Americas by more than 2 to 1, large corporations made up the bulk of the membership in both areas.

The disparity between these two groups of statistics (how many small-to-medium businesses are members and where they reside) may be due in part to the fact that even though the UNGC requires reporting on a yearly basis, 3,280 members had not reported by the end of 2014.

There has been some criticism of the UNGC and its reporting requirements in past years. Jette Steen Knudsen, an associate professor from Copenhagen Business School, noted in a 2011 article in European Business Review that some critics have charged that the UNGC's membership is "primarily suitable for larger firms that can use the Compact to fill a governance void as they operate in less developed countries." Small and medium businesses, she said, don't always have the resources behind them to benefit from being members.

Additionally, "firms that produce and sell their goods and services in countries with efficient government regulation" don't always see the benefit of joining this initiative.

In 2011, Knudsen said, the UNGC proposed a new "Differentiation Program with less-strenuous expectations for SMEs." Still, companies are often "left to their own devices in terms of reporting," a problem that may explain why 10 years after the implementation of the initiative, there is still a significant number of companies being expelled for non-compliance.

To be fair, the UNGC allows new members up to two years to submit their first-year COP. But, as Knudsen noted in 2011, the expulsions suggest that even though companies join with a commitment to sustainable principles, the path that is set doesn't always yield compliance. In order for sustainable principles that endorse basic concepts like human rights, labor practices, environmental stewardship and the absence of corruption in a company's operations to be accepted globally, the mechanisms for attaining those goals have to be able to be met by everyone.

 Image credit: U.N. (Wikipedia Commons)