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When U.N. Secretary General Kofi Annan stood up on the stage at last week's World Economic Forum of the world's economic and political elite at Davos, Switzerland, he made a pitch that would have been laughable a few years ago.

Annan was selling the idea that major multinational companies should sign the Global Compact, a set of nine principles in human rights, labor standards and environmental protection. The idea is not to regulate companies, but to encourage them to set higher standards in their own operations. These standards would then serve as global examples in the developing world.

Nongovernmental organizations (NGOs) like those that protested at Seattle call this "bluewash," the chance for multinationals to wrap themselves in the U.N.'s blue flag while doing zip. But the Global Compact is more than that - it reflects a growing awareness by international organizations and business leaders that the downside of globalization must be addressed.

They're still debating how. That debate was evident inside the conference hall at Davos, where a thousand CEOs of major corporations were in attendance. Never before has the schedule been so top-heavy with panels on corporate social responsibility, with titles such as "Redefining Corporate Responsibility" and "Business and NGOs: From Diatribe to Dialogue."

Davos founder Klaus Schwab has pushed the theme of globalization's discontents for years, but at a more muted level. This year's heavy dose annoyed some corporate heavies and didn't always fill the sessions. But the presence of major CEOs on the panels indicated how corporate interest is rising.

So did the presence of the leaders of many NGOs that have been protesting corporate policies but were now inside the conference. The new interest in the social role of business has been fostered not just by the demonstrations at Seattle and after. There is a growing realization that increasing income disparities in the age of globalization threaten to spawn a political backlash that could undercut the expansion of free trade.

"CEOs of the big global companies now find themselves in an excruciating bind," I was told at Davos by Jeffrey Garten, author of a fascinating new book, "The Mind of the CEO," based on interviews with 40 CEOs around the world. "They know their operations and brand could be affected by protest groups and NGOs about something they are doing which isn't socially correct - like environmental issues, workers' rights, issues about science and values, including the biotech revolution, or the distribution and pricing of vaccines. These issues, which three to four years ago were "politically correct,' are now very close to the bone."

But what to do about them can be very confusing. The message from NGOs is cacophonous and contradictory. Some seek to stop the march of free trade and flow of information and have little interest in dialogue. But other NGOs, more focused, have started intense talks with corporations with some interesting results.

British Petroleum, Ford Motor Co. and Royal Dutch Shell have pledged to make big cuts in greenhouse-gas emissions and will work with NGOs and permit third-party audits of the results.

The Fair Labor Association has grouped several leading apparel companies - including Nike, Patagonia and Liz Claiborne - with human rights groups, consumer groups and universities to address violations of labor rights and promote a code that prohibits child and forced labor. The inspection system isn't perfect, but this model is an example of how NGOs and business can work together to raise standards in the developing world.

Which brings us back to the Global Compact Can a voluntary set of global standards really change the way corporations work, or help the poor? So far, Annan has recruited only around 300 companies, of which 60 are multinationals. Only a handful of the signatures come from American companies, whose lawyers discourage them from signing. But the United Nations aims to enlist 1,000 companies, including 100 major multinationals, by 2002.

The concept - setting global standards for best practices - may be the only way to draw attention to the identities of companies that meet them and companies that ignore them.

"The compact is a first step," says Garten. "It does show that global companies are aware these social pressures won't go away."

Philadelphia Inquirer

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