The Urgency of Now: Business Must Do Its Part
Since early 2020, we have experienced a wave of historic crises that have engulfed the world: the COVID-19 pandemic has disrupted families and communities, economies and societies, lives and livelihoods; persistent social, gender and economic inequality has been harshly exposed and exacerbated by the pandemic, with racial injustice highlighted by shocking police brutality; many Governments have been emboldened to act with impunity in defiance of the rule of law, civic freedoms and human rights in what United Nations Secretary-General António Guterres has denounced as “a pandemic of abuses”; global warming has intensified severe weather patterns and set parts of the planet ablaze. Together, these crises have reversed progress towards achieving the objectives of the Sustainable Development Goals (SDGs) at a time when momentum must be accelerated. At the same time, international cooperation through multilateral institutions, already weakened over the last several years, is now further tested by the imperatives of overcoming the pandemic and enabling economic recovery.
Disruption must give way to transformation toward greater security and prosperity, equality and dignity for all.
Since the creation of the United Nations 75 years ago, there has not been a more urgent time to mobilize the international community. This decade — which has begun with the world in crisis — can end differently. Disruption must give way to transformation toward greater security and prosperity, equality and dignity for all; but progress requires determination and ambition. Success requires stronger alignment of Governments and multilateral institutions and, in turn, deeper solidarity with both civil society and business. All actors and sectors must now do their parts, not the least business which has benefited so materially from global cooperation and international standards.
In September 2020, over 1,300 Chief Executive Officers of businesses from over 100 countries came together to sign United in the Business of a Better World: A Statement from Business Leaders for Renewed Global Cooperation. In the statement, leader signatories committed to demonstrating ethical leadership and good governance; to invest in addressing systemic inequalities and injustices; and to partner with the UN, Governments and civil society to strengthen access to justice, ensure accountability and transparency, provide legal certainty, promote equality and respect human rights. The signatories, in turn, called on Governments to protect human rights, ensure peace and security and uphold the rule of law; to create an enabling environment through strengthened international cooperation and national legal frameworks; and to enhance multilateralism and global governance to combat corruption, build resilience and achieve the SDGs.
Peace, justice and strong institutions are beneficial to the long-term viability of our organizations and are foundational for upholding the Ten Principles of the UN Global Compact and achieving the Sustainable Development Goals.
Significantly and pointedly, the statement declared that “peace, justice and strong institutions are beneficial to the long-term viability of our organizations and are foundational for upholding the Ten Principles of the UN Global Compact and achieving the Sustainable Development Goals.” That explicit reference to SDG 16 remains a timely acknowledgment by business leaders that those fundamental conditions are essential to the very viability of their enterprises. This Framework demonstrates why and how business can support and strengthen peace, justice and strong institutions as essential pillars of governance.
Business has a responsibility and opportunity to demonstrate ethical leadership. Even with inconsistencies in how companies have performed and variations in how they have been perceived in recent years, they are now widely seen as a more capable and trusted actor than others through the pandemic. The most recent Edelman Trust Barometer found that “a rampant infodemic is fueling widespread mistrust of societal leaders” and that business is viewed by customers and employees as “the most trusted institution”. While these findings reflect and reinforce expectations that business could and should assume greater responsibility to address societal issues, responsible business cannot replace the role of Governments at the local or global levels. Businesses, Governments and international institutions alike must maintain a level of accountability, integrity and trust in their competence to meet the demands of this decade and beyond.
The Shared Space Under Pressure
The “shared space” is the oxygen that allows human rights to live and civil society to breathe. It is also the oxygen that enables sustainable and profitable business and investment environments to thrive. Those who defend the “shared space” — the human rights defenders, the anti-corruption activists, the environmentalists, the trade unionists and the journalists — are the “canaries in the coalmine” who alert business as well as civil society to the depletion of that oxygen as common threats arise.
Pressures are growing to hold companies accountable if they are seen to be complicit in the harassment of human rights defenders or the suppression of civic freedoms when they have a normative responsibility to respect human rights — consistent with the UN Guiding Principles on Business and Human Rights (UNGPs). At the same time, the responsibility and opportunity to defend the “shared space” are becoming more widely accepted by business. Statements and actions have increased over the last several years, with companies individually and collectively supporting freedom of expression and freedom of association in certain countries often together or in close coordination with civil society.
There is no justice or peace without rule of law; no accountable governance without strong institutions; and no civic freedoms without the rule of law, accountable governance and strong institutions.
The shared space concept of the rule of law, accountable governance and civic freedoms and the SDG 16 commitment to peace, justice and strong institutions are inextricably connected and complementary. There is no justice or peace without rule of law; no accountable governance without strong institutions; and no civic freedoms without the rule of law, accountable governance and strong institutions. Peace both within and among nation States is threatened when these foundations are weakened.
These serve as the foundation of global governance at the national and international levels. Businesses, Governments and the international community share a responsibility not to take them for granted, especially as they are increasingly coming under pressure in many parts of the world, including in developed and developing countries.
Peace, Justice and Strong Institutions as Enablers for Sustainable, Profitable Business and Investment
The 17 SDGs are “an urgent call for action by all countries — developed and developing — in a global partnership” focused on “ending poverty and other deprivations”. Since their adoption in 2015, Governments, civil society and businesses have taken forward innovative initiatives and partnerships to bring to life the aspirations and commitments embodied in the SDGs.
Companies must actively seek to avoid causing, contributing or being linked to adverse impacts on human rights and human rights defenders.
Launched in 2000, the United Nations Global Compact remains the universal standard for responsible business and has gained even greater participation amidst the crises of the last year. Its principles-based approach elaborates responsibilities related to human rights, labour, environment and anti-corruption which are underpinned by UN conventions, norms and standards. The UNGPs, adopted in 2011, establish the corporate responsibility to respect human rights alongside the State duty to protect human rights as well as the obligation of both businesses and States to provide access to remedy. Most critically, the UNGPs establish that companies must actively seek to avoid causing, contributing or being linked to adverse impacts on human rights and human rights defenders.
It is essential for business and indeed all stakeholders to understand that the UN Global Compact, the UNGPs and the SDGs build on each other — chronologically and thematically. Commitment to and implementation of one cannot and must not substitute for commitment to and implementation of all. Collectively, they establish an overall global framework for responsible business that is human rights-focused and embedded in international standards.
Peace, justice, and strong institutions, bound together as SDG 16, are the focus of this Framework. That is because they are the vital enablers and the catalytic accelerators to sustainable development — and because they bring together Governments, civil society and businesses in common interest.
Violence, impunity and corruption are the enemies of responsible and sustainable business even if historically such conditions have allowed some to profit amidst repression and exploitation.
But even as the elements of SDG 16 are necessary to advance and achieve all the other SDGs, their relevance to business is not well understood in contrast to most of the other SDGs. Businesses and investors are major beneficiaries of this enabling environment and must be even greater contributors to peace, justice and strong institutions at all levels; yet, at times they appear to take these “foundational” elements for granted even when at risk of engendering conflict, eroding the rule of law and weakening accountable governance. Violence, impunity and corruption are the enemies of responsible and sustainable business even if historically such conditions have allowed some to profit amidst repression and exploitation.
Yet of all the SDGs, the relevance of SDG 16 to business may be the greatest for two reasons. First, peace, justice and strong institutions are the building blocks that enable Governments, civil society and businesses alike to focus on each of the other SDGs. When those factors are in place, progress towards achieving the other SDGs can accelerate. Second, peace, justice and strong institutions themselves are essential to sustainable and profitable environments for business and investment. When those factors are in place, business and investors can spur economic innovation and development, generate jobs and incomes, diminish poverty and expand opportunities.
The willingness to embrace peace, justice and strong institutions as “foundational” can expand and strengthen governance to the mutual benefit of businesses and investors, civil society and workers, Governments and multilateral institutions.
Transformational Governance: Inspiring an Expansive Approach to the “G” in ESG
Corporate purpose and stakeholder capitalism are crystallizing the attention and galvanizing action by businesses to meet rising challenges and expectations. These twin agendas have been gaining traction with a still limited but growing number of companies, mostly large multinationals that have long been committed to corporate responsibility and sustainability. That traction appears to be accelerating amidst a convergence of the aforementioned crises. The question now is whether the views of stakeholders will be heeded and corporate purpose will be demonstrated; whether statements will translate into actions and commitments into impacts towards the business of a better world.
The answer lies in the growing interest of business in SDG 16, pointing to a more expansive approach to the “G” in ESG or environmental, social and governance. Transformational governance is not a new legal concept but rather a prism through which businesses can expand their understanding of the “G” through three interrelated dimensions: Conventional Governance, Sustainable Governance and Global Governance.
Conventional governance (“G”) has been understood to refer to corporate governance, including the accountability of company management to boards and in turn, of the overall company to shareholders bound by law, regulation and disclosure. This conventional dimension of corporate governance remains inconsistently and, at times, ineffectively observed by companies of all sizes and across all sectors. To be sure, greater emphasis is being placed on the importance of ethical behaviour, not only with respect to board and management oversight but also values and culture, strategies and policies, operations and relationships. Therefore, corporate governance will remain critically important even as the new dimensions emerge and expand.
- Sustainable Governance
Sustainable governance is gaining focus and momentum as a framework to identify risks and opportunities related to social (“S”) and environmental (‘E”) issues, which are distinct but also overlap. An example of the convergence of E and S is the disproportionate impact of the climate crisis on marginalized and vulnerable communities in both developed and developing countries. These impacts exacerbate poverty and inequality and contribute to conflicts and humanitarian crises. This critical convergence of E and S has also given rise to the climate justice agenda which has, in turn, spurred innovative public and private sector initiatives and partnerships and a rise in impact investing.
But attention to E and S issues as priorities — or even as considerations — for corporate governance remains inconsistent and often ineffective as commitments even to basic corporate responsibility and sustainability have lagged or varied widely. These lags and variations are a major impetus for the rapid expansion of mandatory due diligence and disclosure, raising expectations for accountability and transparency. The enactment of mandatory environmental and human rights due diligence will allow for the mainstreaming of E and S governance and embed sustainability across industries and jurisdictions.
A notable development is the European Union Sustainable Corporate Governance Initiative currently being debated that will require businesses to conduct due diligence aligned with the UNGPs and the SDGs. This requirement relates to businesses based in the European Union or businesses that have an interest in or supply to the European Union. The legal framework may also require company directors to consider both the interests of diverse stakeholders and the long-term effects of their decisions. If enacted, E and S will become more integrated with G, with the responsibilities of corporate boards and executive management focused more explicitly on sustainability and in turn, subject to greater accountability and transparency.
- Global Governance
Global governance generally rests with Governments and comprises the standards, institutions and decision-making processes at the international level but are arguably also relevant at the national and municipal levels. While businesses are required to do no harm in their operations and relationships, there are also rising expectations from customers, employees, investors and communities for businesses to contribute responsibly to public institutions, laws and systems at all levels.
To illustrate, Target 16.5 of SDG 16 refers to the fight against corruption and is a clear example of the linkage between public and private interest. Corruption undermines the rule of law and the efficiency of institutions; erodes the trust of businesses and Governments by civil society; entrenches poverty and inequality; squanders natural resources and public revenues; distorts economic and social development; and harms consumers and competition. Combating corruption must be a common cause of governance.
SDG 16 underpins these broader dimensions of governance. Transformational governance captures these dimensions which are inherently complementary and reinforcing and can take many forms. It will deepen company values and strategies, policies and operations and internal and external relationships. It will encompass corporate functions from Government and public affairs to legal and compliance. It will focus on due diligence processes applied to investment risks and opportunities and environmental and social considerations. It will embrace a distinct corporate purpose that reflects and reinforces stakeholder capitalism. It will also strengthen institutions, laws and systems at the national and international levels and better align Governments, civil society and businesses towards a common agenda of leaving no one behind.
This broader approach to the “G” in ESG reinforces that peace, justice and strong institutions, as promulgated in SDG 16, are essential elements of governance that bind businesses to the communities in which they operate and serve.
UN Secretary-General Guterres has called for a “networked multilateralism that links global and regional institutions” and an “inclusive multilateralism that engages businesses, cities, universities and movements”.
UN Secretary-General Guterres has called for a “networked multilateralism that links global and regional institutions” and an “inclusive multilateralism that engages businesses, cities, universities and movements”. This vision of global governance should attract the commitment and engagement of businesses alongside Governments, multilateral institutions and civil society around the world.
This Framework shows businesses why and how a focus on SDG 16 — peace, justice, and strong institutions — can both strengthen corporate governance and inform corporate purpose. Those businesses which take up the challenge will also improve sustainable governance and global governance at this time of historic crises but also epic opportunity for the international community.
- Sustainable Governance