Issues of forced labour, harsh working conditions, child labour and discrimination in the workplace that are infringements of basic human rights are rampant in today’s global workforce. The United Nations Global Compact was drafted in the year 2000, its latest amendment being in 2014 for the purpose of institutionalising corporate responsibility by businesses and putting an end to such irresponsible business practices. In this paper we examine the extent to which these problems run from different dimensions and the benefits and challenges of businesses abiding by the principles of the Global Compact, including the pros and cons of the implementation of possible solutions.
1. The Nature of The Problem
Bari? (2017) describes corporate social responsibility as a concept focused on the stakeholders of a business based on the ethical understanding of an organisation’s responsibilities towards the influence of business activities on the society and the environment in which they operate, which requires a firm to look beyond their financial bottom line. The economics of globalisation and insatiable capitalism is in constant demand of cheaper goods and faster delivery, which rests the onus on businesses and governments to find ways of achieving those goals, appease their shareholders and still make a sizeable profit (Christ and Burritt, 2017). This leads to the conscious employment of irresponsible business practices.
Criticisms of the UN Global Compact
Rasche et al (2013) held that a survey on the Compact’s participation indicated that participation amongst countries in implementing the Global Compact is considerably low. Additionally, adherence is only measured by the annual submission of a progress report which also is not verified. Prakash and Berliner (2014) opined that one of the biggest challenges of the UN Global Compact is corporate hypocrisy, defined by Wagner (2009) as the distance between assertions and performance of a firm. This means that the problems that the UN Global Compact was decreed to combat still remain rampant.
Non-governmental organisations such as Greenpeace have infamously pointed out the Global Compact’s weakness of lacking legal enforceability and viewed it as merely a public relations operation for big corporations (Capdevila, 2007). The Global Compact is praised as the largest international corporate citizenship network and requires commitment of the highest managerial level, but the unwillingness to regulate or monitor participants’ activity is perhaps its biggest loophole (Gonzalez-Perez, 2017).
1. Benefits of Adoption of Responsible Business Practice
The need for companies to engage in socially responsible behaviour grows by the day, as per the interest of and pressures from internal and external stakeholders and adopting the Global Compact helps them to set goals and pave strategies to achieve them. Mani et al (2015) suggests that companies have realised that corporate social engagement can boost stakeholder satisfaction and firm performance. Corporation’s share price, as well as a solid reputation and goodwill, is positively influenced by the supply chain’s social responsibility and accountability, (Hasan, 2013). Mani et al (2018) states that it can also leads to the competitive advantage of a firm and the entire supply chain, and also result in reduced costs and an increased market share.
Unfair discrimination on the basis of sexual orientation is prohibited by Article 1 of the ILO Convention of 1958 (Tebele and Odeku, 2014). Section 15 of the Constitution of Botswana protects citizens against discrimination on any grounds and Section 13(1) provides for the freedom of association and in particular, the association with trade unions for the protection of one’s interests. Moeti-Lysson (2011) holds that unions can boost productivity in the workplace, provided that there are positive industrial relations between management and unions. The UN Global Compact in this instance becomes another pillar for corporate social responsibility and further emphasises the importance of the principles it contains.
2. Challenges of Adoption of Responsible Business Practice
A challenge that developing countries will face in the implementation of the UN Global Compact and ensuring responsible business practices is that developing countries usually rely on the exploitation of their natural resources for economic benefit and in the process, the social consequences of business activity is greatly ignored (Galal and Moneim, 2016). Crane (2017) highlighted that the estimated annual profit per victim of forced labour was US$3,900 and US$5,000 in Africa and the Asia-Pacific region respectively, and that in developed countries it was a staggering US$34,800, highlighting the profitability of these practices. Bales and Datta (2017) gave an example of the cotton industry that one cotton farmer who exploits illegal labour practices would sell his cotton as the same price as his neighbour who is socially responsible. They will both sell their cotton at the same price, but the former will benefit from a higher profit margin than the latter because of the low labour cost. Additionally, because the market price is guaranteed, he has no motivation to sell at a lower price. Jurewicz (2015) found that for over three decades, the government of Uzbekistan had been arranging for mass movement of up to 3.1 million children aged 15 and younger for cotton harvesting every year and compensated cotton farmers for only one third of the yearly cotton crop’s true market value while the rest was enjoyed by top government officials. It was only in 2018 in an ILO report to the World Bank that it was declared that the horrific use of child labour in the cotton harvesting in Uzbekistan was put to an end. Unfortunately for many businesses and governments today, walking away from higher profit margins is a mammoth task.
Referencing the Nestle scandal, Ruehle et al (2017) raised a press release from Nestlé stating that it would be impossible to micro manage the 2 million farms in the Ivory Coast where they source their cocoa with the aim of eradicating child labour. Realistically, globalisation limits the power of the focal corporate body on the supply chain. The greater the supply chain, the more difficult it becomes to ensure transparency of labour practices (Russell et al, 2018). Moreover, if Nestle stopped sourcing their cocoa from Ivory Coast it would lead to disastrous economic consequences for the country.
Another example is Hersheys, a chocolate factory dominating 42 percent of USA’s chocolate market. The company released a statement providing that by the year 2020 all of its cocoa will be sourced only from suppliers that satisfy international labour standards. Its failure to provide proof of its socially responsible supply chain led to the subsequent loss of confidence of its stakeholders (Manza, 2014). The Global Slavery Index of 2016 showed that Asian and Eastern and Central African governments were indicated to be the least responsive to issues of forced labour, which is ironic as the aforementioned issues were indicated to be most predominant in those areas. Companies like Hersheys will suffer if governments fail to acknowledge the complementary function of the UN Global Compact and place the responsibility on corporations alone.
Choppies Enterprises in Botswana resuscitated the age-old debate of living wage versus minimum wage. Employees staged a strike in early 2018 over their low salaries that exactly match the legal minimum wage. The last minimum wage review in Botswana set the amount at P5.14 per hour, which the workers deemed insufficient to live decently (Sunday Standard, 3rd April 2018). Adopting the Global Compact will serve no purpose for an organisation if the government allows the treatment. Botswana Federation of Public Parastatal and Private Sector Unions (BOFEPUSU) then vowed to fight for the rights of the employees and the matter is still ongoing. Since then, the Sunday Standard (October 2018) reports that Choppies share price has fallen by 30.2 percent due to the scandals it has been facing recently. This provides a panoramic view of the impact and consequences of corporate social irresponsibility in the labour aspect and the need for government support for instruments like the Global Compact.
Kadyan (2016) submits that it must be kept in mind that a voluntary initiative such as the UN Global Compact is only complementary to governmental regulation and is in no way a substitute for tight legislation against irresponsible business practice. It was further maintained that the instrument would lose credibility if it was not supported by the governments concerned by enacting labour laws protecting their citizens from exploitation (Rasche et al, 2013). The UK Government in the year 2015 enacted the Modern Slavery Act as a means to combat irresponsible labour practices and forced UK companies to address modern slavery taking place in their own businesses and supply chains (Russell et al, 2018). Australia has also announced that it would introduce supply chain transparency laws in the second half of 2018.
Mani (2018) explains that responsible sourcing and purchasing social responsibility can greatly help with creating a sustainable supply chain. Galal and Moneim (2016) conclude that to ensure a sustainable supply chain, there needs to be coordination between all members of the supply chain and each member must conform to their social and environmental goals, citing that failure in one part of the supply chain ruins progress for all members.
In conclusion, the UN Global Compact serves as a regulatory tool for businesses to carry out their businesses in a socially responsible manner- an initiative that businesses must still take as a signatory or otherwise. Also, it cannot be ignored that this tool requires much needed support to become effective.