U.N.'s Corporate Wooing a 'Major Risk,' Watchdog Reports

An update to this article appears at the bottom.

The United Nations, which has aggressively pursued financial partnerships with private businesses over the past ten years, has no conflict of interest rules covering all staffers involved in those relationships, nor does it have any effective way to protect against the corporate misuse of their association with the U.N.’s name, according to a report by an internal watchdog agency.

The U.N. also lacks a common set of procedures across its sprawling array of funds, programs, agencies and other entities—more than 35 in all—for vetting those relationships to decide whether they are in the best interest of the U.N. as a whole.

And in the case of one of the fastest growing U.N. initiatives—the so-called U.N. Global Compact of corporations, unions, civil organization and other groups, which boasts more than 5,200 corporate members -- the Global Compact headquarters can’t be sure that the companies involved are living up to the agreements they have signed, according to the unit that is tasked with monitoring the U.N. on a system-wide basis.

Moreover, once corporations sign up to the loosely defined principles of the Global Compact, other U.N. organizations tend to take their bona fides at face value, despite the lack of verification—a “major risk” for the world organization, according to the U.N. watchdog.

Those conclusions are laid out in a specialized report called a “management note” composed by the Geneva-based watchdog organization known as the United Nations Joint Inspection Unit (JIU), the only U.N. body specifically charged with examining U.N. policies and practices across the world organization.

In this case, the JIU was taking only a brief look at one of the areas most fraught with potential controversy for the U.N.—the marketing of its brand name.

While the little-known JIU makes its reports public, they are not widely read, in part because of their dry and often technical focus and less than scintillating style. The “note” on corporate partnership goes under the ponderous title, “Corporate Sponsoring in the United Nations System: Principles and Guidelines”.


This particular analysis, prepared by one of eleven JIU inspectors, addresses the U.N.’s exploding array of complicated relationships with the global private sector, in which the U.N. is cashing in on the patina of social virtue that attaches to its blue-and-white logo.

The new pairing of the U.N. and the private sector took off in the late 1990s, after CNN founder Ted Turner announced a gift of $1 billion in stock to the U.N. to create the U.N. Foundation, a private charity devoted to boosting U.N. causes and, as the foundation’s website puts it, “connecting people, ideas and resources to help the United Nations solve global problems.”

Along with fund-raising and lobbying, the foundation, together with an internal U.N. counterpart, the U.N. Fund for International Partnerships (UNFIP), also began building ties with the private sector to support the U.N.’s anti-poverty Millennium Development Goals. According to the UNFIP website, the U.N. Foundation has contributed $1.028 billion in grants to the U.N. system through 2007, funding 413 projects in 123 countries.

A welter of other U.N. bridges to the private sector soon followed, most notably the U.N. Global Compact, a so-called “strategic policy initiative for business” that has aimed since “to build a more sustainable and inclusive global economy.”

“Nowadays almost all United Nations agencies, funds and programs are engaging in different types of partnerships with business,” the inspector notes. These offer big benefits, especially in a time of shrinking budgets, starting with the obvious one: “the possibility to generate additional resources.” But aside from financial support, there are in-kind contributions, and what the inspector discreetly calls “different and sometimes more efficient forms of management.”

On the other hand, according to the JIU inspector, both the rapid growth and pell-mell nature of those relationships have produced a “major risk” caused by the U.N.’s lack of knowledge about its varied and expanding list of corporate partners—by implication, that any number of bad actors could take shelter behind the U.N.’s blue-and-white insignia. That concern, the inspector underlined, is shared by “several” unnamed United Nations officials interviewed in preparing the JIU analysis.

The full extent of the U.N.’s partnering blitz around the world is less widely appreciated in the U.S. than elsewhere—largely because relatively fewer U.S. corporations have jumped on the U.N. bandwagon. According to the U.N. Global Compact, for example, of some 5,200 corporations that have signed up to the effort, only 328 are based in the U.S. –little more than half the number that have signed up from France or from Spain, and not that far ahead of Brazil or China.

Nonetheless, Compact officials say that their U.S. network is large and growing.

“The establishment of a reputation for good corporate citizenship is the major reason for corporations to cooperate with the United Nations,” the inspector summarizes. His note cites a survey of variety of corporations by the U.N. Global Compact, showing that “93 per cent of them consider the association with the United Nations either “very important” or “important” for their corporate image.” The current world financial crisis, the inspector adds, will further stress the need for corporations to show a responsible corporate behavior.”

The corporate craving for social approval , the inspector notes in the JIU’s customary dry prose, is “an opportunity” for the U.N.—but there are also temptations and pitfalls—including “reputational risk” of associating its name with bad, or badly chosen, corporate partners.

The trouble is, the inspector continues, that while there are “some” existing guidelines and rules for choosing corporate partners, they are not applied or adopted consistently.

Translation: some U.N. organizations may not look as closely into the motives and behavior of corporate partners as others do, with the result that bad actors can undeservedly burnish their reputations, and profit from them, in one part of the U.N. after establishing only minimal credentials in other parts—a problem that the inspector diffidently calls “incoherent situations.”

In the case of the U.N. Global Compact, which the inspector calls a “major milestone” in U.N.-corporate partnership relations, the JIU emphasizes that the initiative “does not ‘police’, enforce or measure the behavior or actions of those companies” that participate.

Instead, they are largely judged on how they self-report their adherence to ten “universally accepted principles in the areas of human rights, labor, environment and anti-corruption.” They include such promises as “businesses should make sure that they are not complicit in human rights abuses,” and “should work against corruption in all its forms, including corruption and bribery.”

Only in 2007 did the Global Compact, which started in 1998, systematically begin to weed out members who did not file the required self-reports. (So far, some 1,730 corporate entries have been kicked off the roster, according to figures the Compact supplied to Fox News.)

But whether the network members are as virtuous as they claim to be is another question: the JIU inspector underlines that the Compact’s central office “is not in a position to ensure compliance with those same principles upon which the Global Compact is based.”

Neither, apparently, are other U.N. organizations, who, the inspector says, often uncritically accept Global Compact membership as a U.N. equivalent of the Good Housekeeping seal of approval. “Some United Nations entities consider that the affiliation of a given company to the Global Compact initiative is sufficient guarantee to enter into a partnership with or to accept a corporate sponsoring proposal from that company,” he concludes.

Translation: they do no due diligence of their own.

Faced with its fast-growing array of private-sector entanglements, the JIU inspector concludes, the U.N. need to develop common criteria for selecting corporate partners is “a must” for the worldwide organization.

The U.N. also needs to create a new “information exchange mechanism” that would include an “effective monitoring” of how the U.N. was doing at updating the varied U.N. organizations on information about their partners and their doings.

Finally, there is the issue of how U.N. organizations and staffers deal with the temptations of conflict of interest. As the JIU puts up the issue, “It is not rare that the United Nations might participate in a partnership with companies that serve as authorized contractors in different contexts.” Hence the recommendation for broader personal financial disclosure standards that match the growing opportunities for conflict of interest.

But that recommendation has not been warmly welcomed everywhere. One notable dissenter: the $5 billion United Nations Development Program, which rejected the watchdog unit’s recommendation for broader financial disclosure arrangements with the argument that it was “unnecessarily extensive,” even as it “welcomed” the watchdog report.. According to UNDP, its rules, which call for mandatory financial disclosure by top managers are “already harmonized” with other U.N. organizations.

UNDP is the U.N. organization most actively involved with anti-poverty programs on the ground in 162 or 192 nations around the world, where it also usually operates as the lead agency for the remainder of the U.N. bureaucracy in each country.

UPDATE: After this article was published, the U.N. Global Compact objected to it. The Fox News article was based on a Joint Inspection Unit report issued in March 2009, and, the Compact said,  “at that time over 30 U.N. organizations were in the process of finalizing the U.N.-Business guidelines, which the Secretary-General issued on November, 2009.”

The November guidelines, the Compact said, “address the issue of selecting partners, lay out general principles for engaging the private sector, contain specific protocols on the use of [the U.N.’s] name and logo as well as best practices on modalities for partnerships with the private sector. Moreover, the guidelines address the critical issues of institutional capacities required to exercise due diligence.”

Additionally, the Compact said, the guidelines “reinforce the importance” of an existing network of U.N. contacts “which on a regular basis share information” on relations with the private sector

The guidelines are available at http://business.un.org/en/documents/guidelines

George Russell is executive editor of Fox News