Chapter 2: Challenges and Responsibilities

2.1 Corporate Citizenship in a Global Society

Kofi Annan

Over the course of half a century, the Sloan School of Management has built itself into one of the world's academic powerhouses. I say "world", and not just "country," because right from the start, Sloan looked well beyond the confines of this campus, encouraged people from many nations to study here, and was eager to advance the cause of international cooperation, scholarly and otherwise.

Three decades ago, I was fortunate enough to become part of the Sloan community. I recall in particular that Sloan exposed me to some very interesting work in organizational culture and planned change. That may sound like jargon to some, but I can assure you it has come in very handy at the United Nations.

Back in 1982, when I was working with the High Commissioner for Refugees, I invited my good friend Professor Ed Schein^[1] to Geneva to help us improve our internal communications and coordination.

We gathered for what we thought would be a straightforward, hourlong briefing. Three hours later, we were all physically and emotionally drained from what had quickly turned into a frank, soul-searching exercise on our mission: what it means to work for the United Nations and how different people can best work together.

Some frustrations had been bottled up for years. But once the floodgates were open, we found new ways forward and, truly, a new sense of unity and purpose. The session was so successful that in 1990, when I was head of human resources, I asked Ed to come in again—this time with Professor Lester Thurow. About 30 senior officials from throughout the U.N. system, and from 26 different countries, came together and achieved a similar breakthrough.

I like to think we are replicating that exercise on a global level, among peoples and nations, as we strive to build the trust, confidence, and sense of shared responsibility needed to address the urgent issues and threats of our times.

We are all aware that more and more challenges—from environmental degradation to drug trafficking and the spread of diseases such as AIDS—have a global dimension. Through work and travel and trips to the store, we can see that trade and communications are stitching the human family ever more closely together.

These phenomena have also helped to make the early twenty-first century a very troubling time for our global village. Distrust between cultures and religions often leads to violence and has been aggravated by the terrorist attacks of 11 September. Concern is mounting because of global economic uncertainty, and because the benefits of globalization have been shared so unevenly. Confidence in markets has been dealt a further blow with a series of corporate scandals in the United States and the gathering feeling that markets, by themselves, cannot respond to the real needs of society or provide the public goods that humankind needs to survive.

In an age of interdependence, global citizenship is a crucial pillar of progress. In a series of global meetings and conferences over the last two years in particular, world leaders have tried to define just what that citizenship means. They have been trying to build an inclusive, responsive, effective international system, from which all people can benefit—and in which all feel they have a stake.

Shared responsibility was at the heart of the declaration adopted at the Millennium Summit in September 2000. All countries came together—not just to express their general hopes for peace and development in the twenty-first century, but also to give their backing to a set of very specific, time-bound objectives which have since become known as the Millennium Development Goals.

The goals include reducing hunger, providing access to safe drinking water, and ensuring universal primary education. They will be closely monitored and measured—how many kids are in school, how quickly hunger and extreme poverty are being reduced. And we will advertise the results in a way that, we hope, will galvanize politics and policy-making so that the goals can be met by the target date of 2015.

Governments faced a first test of their commitment to these goals last November at the World Trade Organization meeting in Doha. There, trust was the main issue on the table. Developing countries have heard a lot of talk about free and fair trade, but seen far too little of it. They want to know that their products will have an equal chance to compete in the global market. That chance is currently denied them because of tariffs on their goods, and because of subsidies given to their competitors in rich countries—subsidies that also perpetuate unsustainable practices in farming, transport, and energy use.

The new round of negotiations agreed to at Doha offers the prospect that markets will be opened—but it is too soon to say that trust in the trading system has been achieved or will be achieved.

The Monterrey Conference on Financing for Development last March was also an exercise in recognizing shared responsibilities. The Conference generated substantial new pledges of official development assistance, reversing a decade-long decline, and made good progress on issues such as debt relief, investment, and corruption. Just as important, developed and developing countries reached a common understanding on their respective responsibilities in the pursuit of balanced, equitable development.

Finally, in September 2002, at the World Summit on Sustainable Development in Johannesburg, global citizenship took center stage. All leaders committed themselves to a path of development and economic growth that safeguards resources and ecosystems for succeeding generations. Rich-country leaders in particular agreed to reduce their nations' ecological footprint on the planet.

Taken together, these summits and conferences give us a blueprint that puts people—not states, and not GDP statistics—at the center of policy-making. The over-riding challenge now is implementation. And for that we shall need people from different sectors—public, private, and civil society—to forge more and better partnerships.

One of the most welcome developments at the United Nations in recent years has been the steadily growing engagement of the business community—both in policy forums and in projects on the ground.

Although the relationship is not without its difficulties, there is growing recognition that we must move beyond the politics of confrontation, and that solutions to poverty, environmental degradation, and other challenges can only be found if the private sector is involved. More and more businesses are themselves recognizing how much they depend on international norms and standards for the conduct of business on a global scale, and on the U.N.'s wide-ranging work for peace and development.

The Global Compact initiative I launched in 1999 at the World Economic Forum in Davos was based on my belief that open markets and human well-being can go hand in hand. Over the long run, human well-being can be dramatically advanced by well-functioning markets. But markets themselves can be sustained only if they ensure human well-being.

I asked business to embrace nine universal principles in the areas of human rights, labor standards, and the environment, and to enact these principles within their spheres of influence. I picked these areas because I was worried by a severe imbalance in global rulemaking: while there are extensive and enforceable rules for economic priorities such as intellectual property rights, there are few strong measures for equally vital concerns such as human rights and the environment.

The compact has since become more than a call to action. Today it involves not only business but also labor federations and nongovernmental organizations. It has promoted the importance of universal values and encouraged investors to look harder at opportunities in the least developed countries, particularly in Africa. The compact has also created a learning forum—a worldwide academic network that examines case studies, trying to determine what works and what doesn't. I am pleased that the Sloan School plays an important role in this forum.

None of this is meant as a substitute for action by governments, or as a regulatory framework or code of conduct. Rather, the compact is a voluntary initiative, a platform for showing how markets can be made to serve the needs of society as a whole.

Businesses may ask why they should go down this path, especially if it involves taking steps that competitors might not, or steps they feel are rightly the province of governments. Sometimes, doing what is right—for example, eco-efficiency or creating decent workplace conditions—is in the immediate interest of business.

Sometimes, we must do what is right simply because not to do so would be wrong. And sometimes, we do what is right to help usher in a new day, of new norms and new behaviors. We do not want business to do anything different from their normal business; we want them to do their normal business differently.

Openness is the emerging hallmark of our time. But we need to make it work. Otherwise, countries and peoples might retreat behind protectionism or, worst of all, reject global citizenship in favor of narrow concepts of national interest not at all appropriate for an interdependent world.

Business is well placed not only to generate employment, investment, and growth, but also to advance global citizenship.

Sloan is well placed to teach more than accounting and finance, and to help define the parameters of corporate citizenship. I am delighted that its program is already evolving in this direction.

And the United Nations is well placed to promote dialogue that will build trust, and to create the multilateral norms and frameworks needed to fulfill our shared responsibilities.

All of us—the private sector, civil society, labor unions, NGOs, universities, foundations, and individuals—must come together in an alliance for progress. Together, we can and must move from value to values, from shareholders to stakeholders, and from balance sheets to balanced development. Together, we can and must face the dangers ahead and bring solutions within reach.

Discussion

• Q. Do you see a link between corporate responsibility and corporate citizenship on one hand and the gulf between haves and have-nots on the other? Do companies have a positive role to play in creating a sustainable future?

• A. I see a very important role for the corporate world. Corporations that respond to norms of sustainability do make a difference in the communities and societies in which they operate. Corporations and their leaders can influence policies of governments and steer decisionmaking in the right direction.

But they also make a difference in the daily lives of individuals. Corporations don't have to wait for countries to pass laws to know that they should not pollute the water that produces the fish for the village. They do not have to wait for government to tell them to pay a decent wage or to train their people.

Take the case of HIV-AIDS. Corporations have done some fantastic things around the world to address this problem. Look at what Volkswagen has done in Brazil. For years it watched its good managers contract this disease. So the company developed a program of education and treatment and then they saw these creative men and women live on and pass on this knowledge on how to protect themselves to their families and communities. So the roles of corporations in development and the health of society are extremely important and some corporations are doing quite a lot.

• Q. What special responsibilities do American corporations have in the global community?

• A. I am extremely happy that U.S. corporations are beginning to join the Global Compact. We have had tremendous response from Europe, Asia, Africa, and Latin America and recently Hewlett Packard and Pfizer have joined, and I expect others to follow in the future.

Today, corporations have become the main motor for the creation of wealth. They have technology, they have money, they have management, and they have global operations. In some ways, corporations understood faster and better than government that we live in a global world. Corporations that operate around the world should see their role not only as headquartered in New York or in Silicon Valley. They should also see it as their responsibility to pass on some of the knowledge, technology, and training to the people and communities where they operate. When they fail to do this, they inadvertently become part of the problem or the conflict.

Let me give you an example of what happened in Nigeria with Shell. Some of the villages around Shell's production sites felt they had seen nothing of the benefits accruing to them from the exploitation of the oil. The money was going to the central government and the profits were going to the shareholders while the people continued to live in squalor. Two or three months ago, women demonstrated and took over one of the sites. Now, Shell has announced that it will put some of the money back into the villages. Even if it is not just the responsibility of individual companies like Shell, they should be pressuring the government and saying, "don't you think we should be doing something for the villages around here?" and pull together and do something for these people. These gestures go a long way. I know some companies are doing this and I would urge others to do so.

• Q. What can we at MIT, Sloan, and our alumni do in particular to advance the Global Compact initiatives?

• A. I think you are already on the right track by training your students and discussing the Global Compact with them and with the many companies you advise. I have had a chance to discuss this issue with the Sloan Fellows and I am struck by how enthusiastic they are about this. And quite a few of your professors are already working on it. These are important ways of spreading the word.

Another thing we can do is to promote the learning forums that we have introduced. These forums are places where companies can come together to discuss what their responsibilities are, what their posture should be if they find themselves in areas of conflict. What is expected of corporations and to whom should they turn for advice and how can they work together? All this will be extremely helpful.

^[1]Edgar H. Schein, Sloan Fellows Professor of Management Emeritus.