Today, September 20th, New York is awash with bosses who have painted their company blue, and who want you to do so, too.
I don't mean that literally, of course. But they have all wrapped their firms in the blue of the United Nations by signing the UN Global Compact, a pledge to do business in a responsible and sustainable way. Critics of this marriage of the UN and business call it "blue-washing". The reason these bosses - around 1,000 of them - are in New York this week is the annual UN Global Compact Leaders Summit, chaired by the UN Secretary General, Ban Ki-Moon.
Now you may think the last thing your business needs is to get involved with the UN - and that the Secretary General would do better to spend his time sorting out messes like the civil war in Syria rather than bothering hard-working companies. Meanwhile, those critics of so-called blue-washing complain that the UN should not be lending its credibility (such as it is) as a force for good to nasty, profit-seeking businesses. In fact, both the UN and the more than 7,000 firms from over 100 countries that have signed the Global Compact since it was launched in 2000 may be onto something important: a potential win-win of higher corporate profits and a better world.
"The good news is that the business case for integrating what we call non-traditional financial issues into corporate strategy and operations is very strong now", says Georg Kell, who runs the Global Compact, which he thinks has played a crucial role in raising awareness among business leaders around the world about the business implications of issues such as the human rights of workers and the need to reduce carbon emissions.
Exactly why this boosts corporate performance is much debated, but I think it is likely that there is an effect. Compliance is important: hundreds of signatories have been delisted for falling short. And caring about sustainability and human rights seems to be an indicator that a firm is doing many other things right in the way it is managed. Moreover, by getting firms to publish details of their annual performance on the ten principles in the Compact, the UN has helped foster a "model of continuous improvement" at the companies that have signed up, Kell told me when I spoke to him recently for Newswire.FM at the Nasdaq Marketsite. You can watch a clip from the interview by clicking on the picture below:
To demonstrate the benefit for business, a new stock market index was launched this week based on 100 of the firms that have signed up to the Compact. The Global Compact 100 is up by 26.4% in the past year, compared with a 22.1% increase in the FTSE All World index; it has also outperformed the world index during the past two years, and matched its performance in the past three years. In part, says Kell, "the results may also reflect the fact that sustainability performance is a factor that is receiving increasing interest from investors.” In other words, signing the Compact may signal to investors that yours is a well run, forward thinking company - although Kell is honest enough to admit the results are not (yet) statistically significant.
As I wrote in The Economist a few years ago, a key moment for the Global Compact came when American firms started to sign up, having been reassured that to do so would not expose them to excessive litigation risk. But in recent years, the Compact has had its greatest impact by spreading best practice in the developing world. To that end, this week's announcement of an effort to increase the number of signatories in the Arab world is extremely encouraging.
The latest edition of a survey of Global Compact signatories conducted every three years by Accenture paints a somewhat mixed picture, however. Of the CEOs polled, only 38% said they can accurately quantify the value of their sustainability initiatives, and only 33% said that they think business is making sufficient efforts to address global sustainability challenges. On the other hand, 83% said that further government policy-making and regulation will be critical to progress - which some critics might see as business passing the buck to politicians.
The Accenture report on the study notes that "CEOs express a sense of frustrated ambition as they struggle to make the business case for action", yet also argues that "successful companies are not waiting for government action". So while painting your company blue is a good start, do not see it as an end in itself. It is, as Kell puts it, the start of a journey.
What do you think?
