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UN's Watchdog Says the General Assembly Needs to Rein in 'Self-Expanded' Global Compact Initiative

EXCLUSIVE: A major initiative currently sponsored by United Nations Secretary General Ban Ki-moon, the U.N. Global Compact, is being challenged by the world body’s own watchdog agency as financially opaque, unwilling to police its membership and only questionably effective at accomplishing its mission of winning private-sector adherence to the U.N.’s anti-corruption, anti-poverty and environmental goals.

The criticisms drew a heated denial from the Global Compact itself, which charged the watchdogs with willfully distorting the evidence to make its case.

In a report issued quietly in January, the Geneva-based watchdog, known as the U.N. Joint Inspection Unit (JIU), charges that the Global Compact, headquartered in the office of the secretary general, presents a potential “reputational risk” for the U.N. as the Compact pursues a “self-expanded” mandate into areas of public-private partnership never envisaged when it was launched in 2000.

The inspectors suggest the Global Compact’s corporate initiative needs to be reined in by the U.N. General Assembly, its finances made more open to scrutiny and its governance overhauled, including the addition of U.N. member states to the list of those scrutinizing its activities.

All of those actions are necessary, the inspectors argue, to deal, among other things, with the “sensitive issue of the use of the United Nations brand by companies that may benefit from their association with the organization, without having to prove their conformity with United Nations core values and principles.”

That process is known among cynical U.N. insiders as “blue-washing” -- laundering bad behavior in the feel-good background color of the U.N. flag. The JIU adds that “the Inspectors cannot confirm whether these allegations are true, but concur that there is a reputational risk which needs to be managed.”

Click here for the complete JIU report.

“Reputational risk” may not be the biggest challenge the U.N. faces in an era of austerity. Critics of the bulky U.N. bureaucracy argue its reputation is already in tatters. A bigger problem is maintaining donor support -- from anywhere -- and other means of carrying out the U.N.’s ambitious agenda of climate change support, international wealth-sharing and other expensive social goals as beleaguered donor governments are tightening their purse-strings. And that means greater involvement with the private sector, as a matter of bureaucratic survival.

The Global Compact’s executive director, George Kell, charged the JIU assessment is “riddled with inaccuracies and misrepresentations,” based on “incorrect or outdated information,” and “raises serious questions about the JIU’s professional standards.” Moreover, he argues, the JIU inspectors willfully ignored evidence that would contradict their case by claiming it fell outside the time-frame of their examination. This is, he said, “as much an admission of the report’s shortcomings as it is an acknowledgement of the JIU’s fundamentally flawed methodology.”

Kell’s broadside came in response to questions from Fox News about the report, which was released on the JIU website shortly after the U.N.’s winter holiday break. The unit, which employs 11 systemwide inspectors, is the only U.N. body specifically charged with examining U.N. policies and practices across the breadth of the U.N. organization. Since its formal inception in 1978, it has issued numerous reports to the U.N. General Assembly that have often been highly critical of the methods, organization and results of the sprawling U.N. bureaucracy. As often as not, however, the JIU criticisms have failed to lead to dramatic changes in the bureaucracy’s behavior.

The JIU inspectors have taken on an organization that is unusually difficult to pin down. The Global Compact is not an entity like other institutions in the sprawling U.N. constellation of funds, programs and agencies. It bills itself as a “strategic policy initiative for businesses that are committed to aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, labor, environment and anti-corruption.” About 6,000 of 8,700 Global Compact members in 135 countries are corporations; many others are business or corporate associations.

The Compact says it offers those businesses, and any others interested in joining, “a unique strategic platform for participants to advance their commitments to sustainability and corporate citizenship.”

What that means, in practice, is that the Global Compact is a highly fluid lobby for the U.N. when it comes to selling some of its policies, like “sustainable development,” to the global private sector, and also a means to garner corporate support for those same objectives when selling them to national governments around the world.

Connections cemented through the Compact have given corporate cachet to being associated with the dowdy and inefficient U.N. bureaucracy, and also to the workaday figure of Secretary-General Ban, who unlike his predecessor, Kofi Annan, has never been seen as anything resembling a charismatic figure.

But while the Global Compact has helped to give U.N. causes some corporate sizzle, its actual heft is more problematic. Unlike an actual development agency, membership in the Global Compact is voluntary and much of the commitment it encourages is rhetorical. All Compact funding is voluntary and does not come from the regular U.N. budget; the amounts involved are relatively small -- insofar, the inspectors note, as they can be compiled. The actual number of Compact employees is also small, and the impact of the initiative, as the JIU inspectors underline, is extremely diffuse and hard to measure.

Moreover, corporate adherents to the Compact don’t have to agree to much. Their boards of directors must agree to “embrace, support and enact” ten core principles derived from a variety of U.N.-sponsored declarations, including the Universal Declaration of Human Rights, and formally sign a letter declaring that support. Most of the principles are fairly bland: to “support the elimination of all forms of child labor,” for example, and to “work against corruption in all its forms.” Some may be open to differing interpretation, such as to “support a precautionary approach to environmental challenges.”

What the U.N. has gained as a result is a Rolodex of influential associates loosely attuned to U.N. goals and who can lobby, or be lobbied, if they choose, on the world organization’s behalf. What the corporate members have gained, the inspectors underlined, can often only be guessed at.

But whether all members are worthy of inclusion is another issue. As the Compact itself admits, the “vetting process” for new members is “minimal,” and the process for seeing whether businesses actually conform to the principles they espouse is even less so.

The JIU inspectors’ concern is that the lack of selectivity and enforcement leaves the Compact vulnerable, among other things, to giving some organizations an undeserved free pass, especially when it comes to the corporate malpractice they claim to shun, or the high-minded goals they claim to support. Or, as the inspectors ponderously put it: “There is concern that the Global Compact is being undermined by some companies’ reluctance to meet the challenge of in-depth commitment.”

When it comes to the Compact’s inclusive membership policies, for example, the inspectors note that other, less nebulous U.N. organizations have stricter standards for screening would-be corporate supporters. Among them: UNICEF, where corporate supporters are screened by an outside agency before being accepted by the U.N. organization. Other U.N. bodies, such as the World Health Organization, the inspectors note, set absolute standards for entry that are tougher than the Compact’s: WHO does not accept support from companies selling alcohol, tobacco, or weapons.

“Trust needs to be built on the basis of yardsticks by which performance can be measured,” the inspectors argue.

The JIU also expressed concern over the Compact’s use of a U.S.-based non-profit, the Foundation for the Global Compact, to fund its activities, rather than traditional U.N. funding vehicles that would be subject to the organizations normal accounting procedures. It termed the Compact’s hybrid financing arrangement “unusual,” and noted that it bypassed “existing United Nations rules and procedures.”

The Compact response is a blunt denial that it is doing anything wrong. To the contrary, the Compact’s “actions in building the U.N.’s capacity to better understand corporate responsibility” are helping to “safeguard” the organization from corporate partners who want a relationship with the U.N. without espousing U.N. “values.” As far as funding goes, Kell noted that “it is not unusual for U.N. entities to receive support from non-profit foundations,” and said the Global Compact foundation operates in accordance with U.S. law, is properly audited, and summarizes its funded activities on its website

Kell emphatically continues to reject the selection idea. As he declared in response to Fox News questions: “Monitoring the performance of over 6,000 businesses around the world falls outside the mandate of the initiative and is not practical.” Instead, “the initiative focuses on transparency,” leaving it to others - “governments, investors, employees, business partners, etc.”— to ensure the companies remain accountable.

The Compact’s executive director even suggested tougher entry criteria could itself “imply some kind of endorsement by the U.N.”— which the Compact does not want to hand out.

Kell argues that the JIU inspectors were particularly unfair in ending their assessment research prior to a June, 2010 meeting of some 1,500 corporate, “civil society” government and U.N. bigwigs at a U.N. Global Compact Leaders Summit, which helps set Compact policy direction for the next three years. The session produced a welter of studies, reviews and analyses of such topics as social investment and “corporate sustainability leadership” intended to power even greater corporate-U.N. partnership in the future.

THE JIU analysis is the second bid by the inspectors to spotlight issues with the Compact. The unit made many similar criticisms in a less formal “management note” that was submitted to the Compact roughly a year earlier, and at time, noted that the issue was important enough to the U.N. to merit additional, extended treatment. 

Click here for more on Global Compact.

George Russell is executive editor of Fox News