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Meltdown shifts corporates' focus to social issues

By Dharam Shourie in New York
December 18, 2008 16:35 IST
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The global financial meltdown and looming economic recession has shifted the focuse of the corporate world on critical non-financial issues like climate change, an important issue for its future survival, a top UN official has said.

The issues of climate change, human rights, anti-corruption and access to water are among the hot topics that are factoring into investment and business decision-making processes,  Executive Director of the UN Global Compact, Georg Kell said.

"It is understood that an obsession with a short-term quarterly share maximisation is not necessarily synonymous with long-term sustainability," Kell said.

The Global Compact, set up in 2000, is a UN-created alliance in which close to 5,000 participating businesses in 130 countries have pledged to align their operations and strategies with 10 universally accepted principles in areas ranging from human rights and labour to the environment and anti-corruption practices.

"Initially the idea of the Global Compact was in essence to call upon business to engage in support of UN goals, to embrace the principles and act upon them," Kell said, as he highlighted current trends and developments in corporate responsibility, particularly in the context of current market turmoil.

A significant development over recent months is the serious damage to public faith and confidence in the private sector, and the growing distrust is 'fanning populist reactions to global economic integration,' according to a Global Compact paper titled the Global Economic Downturn.

"We are convinced, as we have been for many years already, that engagement on non-financial issues is a way to restore and rebuild trust," said Kell, adding, "so we do believe that the Compact can be, at least a part of the answer, by challenging companies, in particular to demonstrate responsibility."

The environment is one direction in which commercial enterprises are turning their attention, said Kell, noting that the Secretary-General has repeatedly suggested a 'Green New Deal' as a way of combining stimuli packages with attention to environmental issues.

"This kind of thinking needs to develop much faster and much more rapidly because the necessity for doing so is clearly out there," he stressed.

The reduction of greenhouse gas emissions by 80 per cent is necessary to avoid disastrous implications, but 'at this point nobody knows how to do this but everybody knows in order to achieve it ultimately fundamental economic and social transformations are required.

"Already 1.1 billion people don't have access to water. So the whole natural resource issue clearly is bound to be amplified in the months to come, and we strongly believe that next year will be the year of sustainability where sustainability of markets will be intimately linked with climate, water and through it also food and related issues."

Kell pointed out that the Compact had also launched an initiative in 2006 at the New York Stock Exchange, with investors in stock markets who are concerned with establishing principles for responsible investment.

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Dharam Shourie in New York
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