The Global Compact for Sustainable Entrepreneurs and Impact Investors

The United Nations Global Compact, often referred to simply as the “Global Compact”, is a voluntary initiative launched in 1999 that is based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals.? As of January 2024, there were over 17,000+ signatories to the Global Compact in over 160 countries, both developed and developing, representing nearly every sector and size, making it the world’s most popular multi-stakeholder sustainability and responsible business initiative.? Originally developed with larger companies in mind, since January 2020 all companies, regardless of the number of employees, have been eligible.? Therefore, startups can and should consider becoming a signatory to the Global Compact as part of their efforts to establish themselves as sustainable and responsible businesses.

Becoming a signatory to Global Compact means accepting and following ten principles which were derived from standards in four areas: human rights (the?Universal Declaration of Human Rights, labor (the?International Labour Organization’s Declaration on Fundamental Principles and Rights at Work), the environment (the?Rio Declaration on Environment and Development), and corruption (the?United Nations Convention Against Corruption).? Sustainable entrepreneurs should begin with an overarching commitment to conduct their business in a manner that respects and supports internationally proclaimed human rights and take all reasonable steps necessary to ensure that their company’s operations and business practices do not contribute to human rights abuses.? Thereafter, attention should turn to the pillars of the Global Compact and related initiatives such as the Sustainable Development Goals (“SDGs”):

• Labor: Startups generally do not engage in collective bargaining with their employees, and it is not common for employees of a startup to be unionized; however, circumstances may change as the company grows and in the meantime the startup may engage in business relationships with companies that do work with trade unions on the terms and conditions of employment for their workers.? As such, sustainable entrepreneurs should acknowledge and commit to all the principles relating to labor in the Global Comact: upholding the right to freedom of association, recognizing the right to collective bargaining, and committing to eliminating all forms of forced, compulsory and child in supply chains.? Of immediate relevance to startups, applicable from the moment the first employee is hired, is eliminating discrimination in respect of employment and occupation, and creating and maintaining a diverse and inclusive workplace.
• Environment:? Regardless of the activities of their companies, sustainable entrepreneurs should commit to supporting a precautionary approach to environmental challenges and undertake initiatives to promote greater environmental responsibility that are consistent with their available resources and business operations.? Startups directly involved in the development of environmentally friendly technologies should commit to their diffusion in their operations and in the wider community.
• Anti-Corruption:? Foundational to responsible business conduct is working against corruption in all its forms, including extortion and bribery, and sustainable entrepreneurs must commit to implementing robust procedures, for the very beginning of their ventures, to prevent, detect, and address corruption among their officers and employees and in their business relationship (including, of course, relationships with government officials). ???
• Sustainable Development Goals:? By definition, sustainable entrepreneurship focuses on developing and distributing products and services that advance the achievement of the SDGs.? While progress toward reaching the SDGs is the primary responsibility of States, entrepreneurship is the engine for innovation that drives social change and sustainable entrepreneurs should align their business strategies and operations with global priorities.?

Sustainable entrepreneurs should take notice of the initiatives and resources of the Global Impact that have been developed to guide companies and other stakeholders to action-oriented platforms and tools that support SDG implementation.? See How Your Company Can Advance Each of the SDGs (UN Global Compact).? Beyond the SDGs, the Global Compact has published management tools to assist companies going through the process of formally committing to, assessing, defining, implementing, measuring, and communicating a corporate sustainability strategy (see, e.g., UN Global Compact Management Model).

In addition, sustainable entrepreneurs can align their commitments with other guidelines and standards developed and promoted by the Global Compact to promote business’ accountability for human rights. ?For example, the Global Compact collaborated with UNICEF and Save the Children in 2010 to develop the Children’s Rights and Business Principles as the first comprehensive guide to businesses on the full range of actions they could take in the workplace, marketplace, and community to respect and support children’s rights including, among other things, eliminating child labor, improving health and safety conditions, and providing decent work for young workers and their parents.? Startups can demonstrate alignment with these principles in the way that their products are designed and produced, in the manner in which their products are marketed, and by focusing their community investment and engagement initiatives on programs that improve the lives of children and their caregivers.

For their part, impact investors may mirror these commitments of sustainable entrepreneurs in their own investment policies by affirming that they will act in a manner that is ethical, sustainable, and responsible.? For example, impact investors will scrutinize potential investees to determine their commitment to diversity and inclusion in their workforce, integration of climate action into their business operations, and presence and effectiveness of ethical business processes.? In addition, many impact investors specifically focus their investment activities on sectors working to solve problems aligned with SDGs such as clean energy, sustainable cities, responsible consumption, and quality education.

To assess compliance with the spirit and word of the Global Compact, regardless of whether their organization is a signatory, sustainable entrepreneurs and impact investors need to continuously ask and answer the following questions for each of the four substantive areas of the Global Compact:

Human Rights

1.????? Have we established a human rights policy that is consistent with international standards?

2.????? Are we actively identifying and addressing any adverse human rights impacts resulting from our business activities?

3.????? Do we provide training to our employees on human rights issues relevant to our operations?

Labor Standards

4.????? Have we implemented policies and procedures to uphold freedom of association and the effective recognition of the right to collective bargaining?

5.????? Are measures in place to eliminate all forms of forced or compulsory labor?

6.????? How do we ensure that child labor is not used in any of our operations?

7.????? Do we have a non-discrimination policy in place, and is it effectively communicated and enforced?

Environment

8.????? Have we integrated environmental protection policies into our business strategy?

9.????? Do we measure and track our environmental performance, including energy use, waste generation, and water consumption?

10.?? Are we taking steps to increase environmental awareness among our employees and stakeholders?

Anti-Corruption

11.?? Do we have a clear anti-corruption policy, and is it communicated to all employees and partners?

12.?? Are there procedures for employees to report corruption, and are these procedures well-known and trusted?

13.?? How do we ensure that our business partners and suppliers adhere to our anti-corruption standards?

Overall Compliance

14.?? Do we regularly review and update our policies to ensure ongoing compliance with the UN Global Compact?

15.?? How do we engage with stakeholders to improve our sustainability performance?

16.?? Are we transparent in our reporting?

To learn more about the Global Compact and strategies that sustainable entrepreneurs can use to align their activities with global sustainability standards, see my recently updated book on Sustainability Standards and Instruments.