What is the UN Global Compact?
Updated for 2023
The UN Global Compact (UNGC) is a principles-based framework established by the United Nations to help businesses adopt sustainable and socially responsible policies.
At its core are ten principles in the areas of human rights, labour, the environment, and anti-corruption. The principles are designed to guide businesses to implement actions that advance societal goals and align their strategies and operations with the implementation of the Sustainable Development Goals (SDGs).
The Global Compact was announced during the 1999 World Economic Forum and formally launched the following year. Currently, it is the world’s largest corporate sustainability programme with over 15,000 member companies in 165 countries. Cities can also take part in the scheme through the Cities Programme.
The Principles for Responsible Investment (PRI) was founded in 2006 by the UNGC and the UN Environment Programme Finance Initiative (UNEP-FI).
The Ten Principles
Source: UNGC
Participation in the Global Compact is voluntary and the principles are not legally binding as the programme serves as a mechanism for collaboration and mutual support rather than a regulatory framework. However, in addition to publicly advocating for UNGC, participants are expected to implement “changes to business operations so that the UN Global Compact and its Ten Principles become part of strategy, culture and day-to-day operations” as well as communicating their progress in implementing the Principles to their stakeholders on an annual basis (via their annual report and on the UNGC website). [2]
Recognising the potential to align corporate investments and finance with the Global Goals, the UNGC has developed a range of finance-related initiatives, tools and campaigns including:
UN Alliance for SDG Finance: a group comprising the UNGC, the UNEP-FI and the PRI, providing a comprehensive set of solutions to mobilize private capital in achieving the Global Goals via three platforms (e.g. UN Global Compact Financial Innovation for the SDGs, UNEP-FI Principles for Positive Impact, and PRI Blueprint & Advisory Group on the SDGs).[3]
The CFO Coalition for the SDGs: a platform aimed at bringing together CFOs with investors, financial institutions and UN agencies to develop ways to integrate the SDGs into corporate finance and develop the SDG investment market.[4]
The Value Driver Model: a tool developed in collaboration with the PRI to help companies assess and communicate the financial impact of their sustainability strategies and help investors integrate sustainability data into their existing investment processes.[5]
The Global Compact 100: a stock index composed of a representative group of UN Global Compact companies, selected based on implementation of the Ten Principles and evidence of executive leadership commitment and consistent base-line profitability. The Global Compact 100 index also allows investors to evaluate potential financial performance through an ESG lens.[6]
The Sustainable Stock Exchanges Initiative (SSE): a platform designed to aid dialogue between the UN, stock exchanges, investors, companies and regulators.[7]
Using the UNGC in ESG
The UNGC has developed mechanisms to help stakeholders within business and the financial sector assess and address a variety of ESG risks and opportunities. With ever growing global support across all industries and countries, participation is increasingly becoming an expectation amongst investors and other stakeholders. Some of the ways to use the UNGC as part of your ESG agenda are:
By signing up to and incorporating the principles of the PRI, which was founded by UNGC.
As a means to publicly communicate your commitment to sustainable investment.
As a guide to help align your investments with the SDGs and to better understand the benefits and practicalities of alignment.
In your investment research, to evaluate companies’ alignment with the UNGC. Evidence suggests that companies who participate in UNGC perform better across a range of sustainability and ESG metrics.
By joining one of the sustainable finance sub-groups and platforms of the UNGC (above).
Joining the UNGC is relatively simple and the benefits are significant.
To find out more about Global Compact as well as other relevant ESG initiatives and how you can take part in them, please feel free to contact us.
Notes:
[1] https://www.unglobalcompact.org/what-is-gc/mission/principles
[2] https://www.unglobalcompact.org/about/faq
[3] https://www.unglobalcompact.org/take-action/action/globalallianceforsdgfinance
[4] https://www.cfocoalition.org/
[5] https://www.unglobalcompact.org/library/811
[6] https://www.unglobalcompact.org/take-action/action/global-compact