corporate governance ifc ungc

8/14/2019 Corporate Governance IFC UNGC

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Co po ate Gove nanceThe FoundaTion For CorporaTe CiTizenship

and susTainable businesses


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Co po ate citizenship a commitment

to ethica behavio in business st ategy,ope ations and cu tu e has been on the

pe iphe y o co po ate gove nance andboa d eade ship, inked main y to co po ate

eputation. Howeve , in todays g oba ized andinte connected wo d, investo s, c edito s and

othe stakeho de s have come to ecognize

that envi onmenta , socia , and gove nanceesponsibi ities o a company a e integ a to its

pe o mance and ong-te m sustainabi ity.

Today, these conce ns he p dete mine p o ts.Fo companies to ope ate success u y and

sustain g owth, boa ds must inco po atethese new dimensions into thei co e decision-

making p ocesses.

The g oba nancia c isis has heightened

the need o co po ate boa ds o di ecto sto p ovide we -in o med st ategic di ection

and engaged ove sight that st etchesbeyond sho t-te m nancia pe o mance.

Doing so p epa es companies to mo e

comp ehensive y add ess isks, by anticipatingpotentia y adve se impacts on peop e and

the envi onment and managing tangib eand eputationa isks. It can a so gene ate

wea th by c eating sha eho de va ue th ough

an inc ease in business oppo tunities andb oade access to ma kets.

A new vision o business is eme ging onewhe e a set o co e va ues, encompassing

human ights, envi onmenta p otection and

anti-co uption measu es, guide the boa dsove sight, e ationship with management,

and accountabi ity to sha eowne s.

Co po ate Citizenship and Sustainab e Businesses

G c t g v c ct c t c m tt v , c , t ct t m k c t

g -t m t t . M t v , w c m

t t c ft w c v g v m t , c , c m c v c t .

raChel KyTe | ViCe presidenT, business adVisory serViCes, iFC


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T fg w w w

t ft m t tct t :

day-To-dayoperaTions

Imp ementation o newpo icies in supp y chain,

ma keting, standa dope ating p ocedu es, andothe business p actices

ManaGeMenTMainst eaming co po atecitizenship ta gets within

company action p ans

and epo ting to boa don p og ess

Feedback omsTaKeholderenGaGeMenT ,

inc uding Ombudsmano Whist eb owe s

boardInteg ation o co po ate citizenship

va ues, sha eowne and othestakeho de inte ests in co po ate st ategy

and isk management

shareoWners oroTher sTaKeholders

repo ting to

a w -g v c m t k g -t m v w t t t g tv m t c t g k ,

c v g t t c t g c t t t t t

w . T c tt w t t c c f c t m k t t .

GeorG Kell | eXeCuTiVe direCTor, un Global CoMpaCT

Boa ds, co ective y and di ecto s individua y,

a e cent a in accomp ishing these objectives,o , as Si Ad ian Cadbu y said, co po ate

gove nance is conce ned with ho ding theba ance between economic and socia goa s

and between individua and communagoa s.

The impetus o this new unde standingo boa d esponsibi ities can be ound in a

g owing numbe o g oba and indust y-

speci c initiatives. Chie among these a e theOECD P incip es o Co po ate Gove nanceand the United Nations G oba Compact.

These benchma ks in o m the wo k o

the G oba Co po ate Gove nance Fo umin its e o ts to p omote good co po ate

gove nance p actices in eme ging ma ketsand ow income count ies.


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Boa d responsibi itiesTodays co po ate citizenship de ned by a c ea ca to envi onmenta , socia and gove nanceesponsibi ity inks di ect y to th ee undamenta unctions o boa ds and thei di ecto s

duties to the companies and sha eowne s they se ve:> Protecting stakeholder rights and interests> Managing risk > Creating long-term business value

The o owing sections exp ain how these aspects ink th ough the OECD P incip es and UN G obaCompact. The examp es o st ategies i ust ate the business bene ts o p oactive eade ship.

proTeCTinG sTaKeholder riGhTs and inTeresTsThe OECD P incip es ca on businesses to ecognize and sa egua d stakeho de s ights,inc uding egitimate inte ests and in o mation needs. These P incip es ca on boa ds to be t u y

accountab e to sha eowne s and to take u timate esponsibi ity o thei ms adhe ence to ahigh standa d o co po ate behavio and ethics.

E ective co po ate gove nance equi es due di igence in a ying the suppo t and commitment

o the b oad netwo k o business stakeho de s, inc uding sha eowne s, emp oyees, custome sand communities. I stakeho de s a e adve se y a ected by a companys actions, sha eowne

va ue wi su e . With the g owth in pension and insu ance unds and othe institutionainvesto s, sha eowne s a e inc easing y a so company stakeho de s, such as emp oyees ocustome s. The e o e, these g oups needs a e inc easing y inte connected.

The UN G oba Compacts ten p incip es simi a y ca on boa ds to add ess c itica dimensions o

conce n to stakeho de s. Boa ds that ecognize the va ue o a ho istic app oach to stakeho deengagement, pa ticu a y in the envi onmenta , socia and gove nance ea ms, nd that

sha eowne s a e simi a y committed to such issues. This inc udes ongoing communication with

G c t g v c t g t t t g t ct c , w c t v

w k c m g m t, m k t c t ,v m t t w , c mm t g g m t,

t f c m c . T v m t w w w k w w t t c f c m t

c m c g wt .

Thierry buChshead, priVaTe seCTor deVelopMenT diVision oF sWiTzerlandssTaTe seCreTariaT For eConoMiC aFFairs (seCo)


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stakeho de s about mate ia conce ns, as we as egu a disc osu e

about company pe o mance, idea y inked to pe iodic nancia

epo ting. responding to stakeho de conce ns can have othe di ectbusiness bene ts:

> Widesp ead consensus is that the ong-te m costs o co uption a e

high o both society and business. Anti-co uption measu es canst engthen e ationships with stakeho de s by bui ding a cu tu e o

t ust and co abo ation.

> When companies enact anti-co uption initiatives that inc udeempowe ing emp oyees, this in tu n can cu tivate good efexes on

the pa t o individua s to add ess wo kp ace di emmas.

> Emp oyees who wo k whe e thei ights and needs a e espected

tend to be mo e p oductive, de ive ing highe qua ity wo k thanthose who a e outine y mist eated.

High standa ds o integ ity, t anspa ency and disc osu e can be

infuentia in esto ing pub ic and investo t ust in the p ivate secto .They a e a so a sta ting point o ongoing, const uctive dia ogue with

stakeho de s, such as communities, who a e a ected by and can, intu n, he p dete mine a businesss pe o mance.

The OECD Principles of Corporate GovernanceFi st pub ished in 1999, the OECD P incip es assist gove nments in imp oving the ega , institutiona and egu ato y

amewo k that unde pins co po ate gove nance and u timate y he ps p ese ve nancia and economic stabi ity. TheP incip es p ovide p actica guidance o co po ate gove nance best p actices, inc uding p otection o sha eowne

ights and boa d esponsibi ities, to stock exchanges, investo s, co po ations, and othe s. Updated in 2004,o owing a spate o co po ate scanda s, the P incip es now contain even st onge ecognition o the impo tance

o stakeho de s in co po ate gove nance as we as emphasizing the need o time y, accu ate, and t anspa entdisc osu e mechanisms and communication.

www. c . g/c t

W c tg v c m t t?

Corporate governance refersto the way that Boards overseethe running of a company byits managers, and how Boardmembers are held accountableto shareowners and thecompany. This has implicationsfor company behavior not onlyto shareowners but also to

employees, customers, thosenancing the company, andother stakeholders, includingthe communities in which thebusiness operates.

Research shows that responsiblemanagement of environmental,social and governance issuescreates a business ethos andenvironment that builds botha companys integrity within

society and the trust of itsshareowners.

Learn More


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V t i t t v

Vo unta y initiatives such as the oeCdp c , the un G C m ct, theIFC- edeq t p c (www.equato -p incip es.com), the i t t C tG v c n tw k (www.icgn.o g)and nume ous othe s seek to comp ement

egu ato y amewo ks whi e encou aging

innovation and p oactive management amongcompanies who a e eady to be eade s in good

p actice. In cases o poo gove nance o weakgove nments, vo unta y initiatives can a so he p

set an ethica ba that wou d othe wise beabsent.

iFC, the p ivate secto a m o the Wo d BankG oup, is he ping boa d di ecto s and companymanage s unde stand sustainabi ity- e ated

isks and oppo tunities a ongside othe aspectso co e business decisions and p ocesses. IFC

a so p omotes this unde standing th ough theinte nationa p at o ms o the G oba Co po ateGove nance Fo um and the Equato P incip es,

a nance indust y benchma k o assessingsustainabi ity in p ivate secto investments.

ManaGinG risKNew unde standings o business isk show that boa dshave a ega and ducia y esponsibi ity to manage

envi onmenta , socia and gove nance isks. Di ecto sneed to be in o med and p epa ed to manage these ong-

te m conce ns a ongside typica co po ate di ectives. Byadd essing and managing these isks e ective y, boa ds

can position thei businesses to pe o m we nancia yand secu e a ong-te m icense to ope ate. By ai ing to do

so, boa ds can unde mine thei companys eputation.

Mo e and mo e companies a e extending thei inte na

cont o s to encompass a ange o ethics and integ ityissues. Many investment manage s examine the igo

and qua ity o these cont o s as evidence that companiesa e unde taking good business p actices and a e we

managed:

> P oactive y identi ying possib e human ights conce nsa ows a business to mo e e ective y add ess potentia

isks.

> Initiatives such as the IFC- ed Equato P incip es anancia indust y benchma k used by mo e than 60

nancia institutions wo dwide to dete mine, assess

and manage socia and envi onmenta isk in p ojectnancing and the Dow Jones and FTSE4Good

Sustainabi ity Indexes have made it inc easing yappa ent that socia y esponsib e p actices can

imp ove access to nancia ma kets and educe capitacosts.

> The competitive advantage o isk management gained

th ough anti-co uption inc udes ensu ing a ignmentwith custome expectations, sa egua ding eputation,

and meeting demands o ethica investment unds,

pensions, and othe investo s.


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CreaTinG business ValueCo e to the o e o any boa d is guiding co po ate

st ategy and c eating wea th o sha eho de s. Many

new business oppo tunities a e eme ging to add essco po ate citizenship p io ities. Fo wa d-thinking

businesses a e best p aced to bene t. Immediate bene tscited by eading companies inc ude imp oved eputation,

highe emp oyee etention ates, g eate p oductivity,and cost bene ts th ough ope ationa imp ovements

and innovation in p oducts and se vices.

The most e ective co po ate citizenship and sustainabi ityst ategies a e ed om the top, inco po ate a wide ange

o stakeho de views and a e a igned with the companys

business p io ities. This ensu es a mo e e cient andst ategic a ocation o esou ces to these initiatives,

which may gene ate new business oppo tunities:

> Imp oved abo p actices in supp ie ope ations cant ans ate into imp oved p oductivity and educed

eputationa isks. Bette wo king conditions imp ovethe e ciency o the supp y chain.

> Human ights st ategies, such as p eventing

disc imination in the wo kp ace and p omoting gende

and ethnic equa ity in business p ocesses, have beenshown to secu e dive sity and inc ease innovation in

p oducts and se vices. A dive se wo k o ce and widecustome base guide deve opment within new ma kets

and p evious y untapped custome demog aphics.

> Envi onmenta p og ams can p ovide nanciabene ts, such as educing ope ating costs, eading to

new ma kets and techno ogies, imp oving emp oyeemo a e and inc easing emp oyee hea th.

> Good management o envi onmenta , socia and

gove nance pe o mance has been shown to

st engthen eputation and b and va ue, impo tantbusiness assets.

The Ten P incip es o theUN G oba Compact

The UN G oba Compact asks companies toemb ace, suppo t and enact, within thei sphe eo infuence, a set o co e va ues in the a eas ohuman ights, abo standa ds, the envi onment,and anti-co uption:

huMan riGhTs

PrINCIPlE 1: Businesses shou d suppo t andespect the p otection o inte nationa y

p oc aimed human ights; and

PrINCIPlE 2: make su e that they a e not comp icitin human ights abuses.

labor sTandards

PrINCIPlE 3: Businesses shou d upho d theeedom o association and the e ective

ecognition o the ight to co ective ba gaining;

PrINCIPlE 4: the e imination o a o ms oo ced and compu so y abo ;

PrINCIPlE 5: the e ective abo ition o chi dabo ; and

PrINCIPlE 6: the e imination o disc imination inespect o emp oyment and occupation.

enVironMenT

PrINCIPlE 7: Businesses shou d suppo t ap ecautiona y app oach to envi onmentacha enges;

PrINCIPlE 8: unde take initiatives to p omoteg eate envi onmenta esponsibi ity; and

PrINCIPlE 9: encou age the deve opment

and di usion o envi onmenta y iend ytechno ogies.

anTi-CorrupTion

PrINCIPlE 10: Businesses shou d wo k againstco uption in a its o ms, inc uding exto tionand b ibe y.


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The un Global CoMpaCT is the largest corporate citizenshipand sustainability initiative in the world. More than 5,000corporations and 1,500 civil society organizations from 130-plus countries are working together to help align businesspractices with ten universally accepted principles in the areasof human rights, labor, environment and anti-corruption. Localnetworks in more than 70 countries, and three working groupsat the global level in the areas of human rights, labor, andanti-corruption all formed by representatives from business,government, civil society, and labor are deepening policyrecommendations and collective action to advance the GlobalCompact and its 10 principles.

www. g c m ct. g

Established in 1999, the Global CorporaTe GoVernanCeForuM is a multi-donor trust facility located within IFC, theprivate sector arm of the World Bank Group. Through itsactivities, the Forum aims to promote the private sector as anengine of growth, reduce the vulnerability of developing andtransition economies to nancial crises, and provide incentivesto corporations to invest and perform efciently in a sociallyresponsible manner. The Forum sponsors regional and localinitiatives that address the corporate governance weaknessesof middle- and low-income countries in the context of broadernational or regional economic reform.

www.gcg . g

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un G C m ct

United Nations2 United Nations P aza, DC2-621New Yo k, NY 10017, USA

T +1.917.367.3421F +1.212.963.1207

www.ung oba compact.o g

G C tG v c F m

2121 Pennsy vania Avenue, NWWashington, DC 20433 U.S.A.

T +1.202.458.1857F +1.202.522.7588

www.gcg .o g 2009 U.N. G oba Compact and the Inte nationa Finance Co po ation. A ights ese ved.

d d

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