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Raising the Bar on the U.N. Global Compact

<p>For many companies, sustainability goals are complicated by the uncertainty of how to get there in a financially responsible manner. A recent update of the U.N.'s Global Compact Model provides a six-step path to success.</p>

Sustainability's move from the periphery to the heart of business has been shaped by the actions of stakeholders and competitors alike. Governments, including the U.S., are investing in renewable energy and carbon emissions reduction technologies, providing growth opportunities for companies.

Shareholder activists are increasingly petitioning companies to formalize sustainability oversight at the board level, which continues to fortify sustainability's prominence on the corporate agenda. And, some corporations are enacting policies that require value chain partners to document and improve sustainability commitments and results.

In response, a large and growing number of companies are making public commitments to become more sustainable. For example, the Carbon Disclosure Project (CDP) 2009 Global 500 Report revealed that 51 percent of CDP respondents disclosed a GHG emissions reduction target, up from 41 percent in 2008.

For a lot of companies, the desire to become more sustainable is challenged by the uncertainty of how to do so in a financially responsible manner. While many frameworks exist to help companies on this journey, few provide a broad approach to help advance sustainability goals in a meaningful, repeatable way.

Stakeholder demands for companies to adopt a "principles-based" management approach to sustainability will not subside simply because companies are uncertain how to best manage the efforts.

The recent update of the U.N. Global Compact Management Model is designed to help companies translate sustainability into business management principles. The management model is the primary outcome from a collaboration between the U.N. Global Compact and Deloitte Touche Tohmatsu Limited, one of the Compact's founding signatories in 2000, and is based on insights from each organization's commitment to and experience in helping companies improve, measure, and report sustainability performance.

The U.N. Global Compact's experience is personified by daily interaction with the more than 5,000 companies that have committed to the Global Compact principles over the past decade. Deloitte member firms have integrated the Global Compact's ten principles into the way they do business and promoted the Global Compact as an instrument for making corporate sustainability a strategic consideration.

The management model codifies the management processes that companies can employ to integrate the U.N. Global Compact's 10 principles, categorized into four issue areas (human rights, labour, environment, and anti-corruption), into daily operations. The management model uses a set of collaboratively developed guidelines, which informed the development of the management model.

One design guideline of note -- one that is easily overlooked -- is that the challenges that comprise sustainability continue to evolve. Regulations change, buying patterns evolve, reporting requirements grow. As such, employing a process of continuous improvement is critical in helping companies avoid the downside of 'set-it-and-forget-it' sustainability strategies.

This design guideline is at the heart of the management model's circular design, which reflects the fact that sustainability management progress requires an iterative and ongoing process (see the figure below and the sidebar at the bottom).

UN Global Compact Model

As a complement to the management model, Deloitte member firms have also developed a sustainability management maturity diagnostic designed to enable companies to put the management model into action.

The diagnostic poses a series of questions for each of the management model's six steps to enable companies to establish a baseline and to identify areas of improvement and development in sustainability management efforts. Specifically, the questions encourage companies to consider critical yet potentially overlooked activities, such as internal communication of sustainability efforts, depth and breadth of materiality assessments, and frequency of stakeholder dialogues.

Sustainability is a complex management challenge. The management model and accompanying diagnostic provide companies with a way to translate sustainability challenges into good management principles in a familiar language. These new tools and methods bring clarity and direction to companies seeking to create and measure value from their sustainability efforts.


Composition of the U.N. Global Compact Management Model
The management model consists of six steps. Each step is briefly described below.

Commit: During this step, company leadership publicly signals its commitment to stakeholders. Specifically, leadership commits to supporting the Global Compact and making the ten principles part of the strategy, culture, and day-to-day operations of the company, with oversight provided by transparent governance structures.

Assess: Equipped with a commitment to the Global Compact and in support of U.N. goals, the company assesses its risks and opportunities -- in financial and extra-financial terms -- as well as the impact of its operations and activities on the issue areas, on an ongoing basis in order to develop and refine its goals, strategies, and policies.

Define: Based on its assessment of risks, opportunities, and impacts, the company develops and refines goals and metrics specific to its operating context, and creates a roadmap to carry out its program.

Implement: The company establishes and ensures ongoing adjustments to core processes, engages and educates employees, builds capacity and resources, and works with supply chain partners to address and implement its strategy.

Measure: The organization adjusts its performance management systems to capture, analyze, and monitor the performance metrics established in the Assess and Define steps. Progress is monitored against goals and adjustments are made to improve performance.

Communicate: During this step, the company communicates its progress and forward-looking strategies for implementing its commitment by developing a Communication on Progress, and engages with stakeholders to identify ways to improve performance continuously.


Chris Park is the U.S. Practice Leader for Deloitte LLP's Sustainability & Climate Change Practice.

Julie Engerran is the Global Corporate Responsibility Director for Deloitte Touche Tohmatsu Limited.

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