UN Global Compact
Also written UNGC · UN Global Compact (UNGC)
A UN initiative under which over 9,500 companies commit to ten principles on human rights, labour, environment and anti-corruption, and align their strategies with the SDGs.
In plain language
Some world frameworks give a company a checklist to follow. The UN Global Compact (UNGC) asks for something bigger. It asks a company to say, in public, that it will run its business by a shared set of values.
The workbook says UNGC lets companies match their plans and their work to ten principles. These principles cover human rights, labour, the environment, and anti-corruption. UNGC also points companies towards the Sustainable Development Goals.
UNGC is large. The workbook counts over 9,500 companies. It also counts 3,000 non-business signers. They come from more than 160 countries.
India has its own local group for this. It is called the Global Compact Network India (GCNI). GCNI was formed in 2003. It now has over 500 Indian companies and other groups as members.
How it works
The ten principles (Box 6.1), grouped into four themes:
| Theme | Principles |
|---|---|
| Human Rights | (1) Support and respect internationally proclaimed human rights; (2) make sure the business is not complicit in human rights abuses |
| Labour | (3) Uphold freedom of association and collective bargaining; (4) eliminate forced and compulsory labour; (5) abolish child labour; (6) eliminate employment discrimination |
| Environment | (7) Support a precautionary approach to environmental challenges; (8) promote greater environmental responsibility; (9) encourage environmentally friendly technologies |
| Anti-Corruption | (10) Work against corruption in all its forms, including extortion and bribery |
Where the principles come from. The workbook traces them to four source documents: the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the UN Convention against Corruption.
Scale: over 9,500 companies and 3,000 non-business signatories, from over 160 countries.
India's local network: Global Compact Network India (GCNI), formed in 2003, registered as a non-profit society, with over 500 leading business and non-business participants.
A worked example
Illustrative company; figures are made up.
Sahyog Textiles Ltd, a mid-sized garment exporter, signs on to the UN Global Compact through GCNI, joining the network's over 500 Indian participants.
Under the Labour theme, it commits to Principle 5 (elimination of child labour) by auditing all 14 of its supplier units for age-verification records, and finds one unit employing a 16-year-old in a role classed as hazardous. Under its UNGC commitment, it must correct this, not merely disclose it.
Under Environment, it commits to Principle 8 by switching 40% of its dyeing capacity to a lower-water-use process within 2 years. Its annual UNGC Communication on Progress reports both actions — one corrective, one preventive — against the same ten-principle framework over 9,500 other companies worldwide report against.
Why NISM asks about it
Chapter 6 (Social Impact Assessment Frameworks, Techniques and Standards), section 6.2.3, names the UN Global Compact as a framework introduced by a multilateral development agency, sets out its ten principles in Box 6.1, and gives GCNI's 2003 founding and India participation numbers. Chapter 7's second sample question tests UNGC against IRIS+, GRI and GIIRS as distractor options. Expect a question naming the four principle themes, or asking which body offers the ten principles.
Common exam traps
- Ten principles, four themes: human rights (2), labour (4), environment (3), anti-corruption (1) — the counts per theme are not equal.
- UNGC is not IRIS+, GIIRS or GRI. All four appear together in Chapter 6, but UNGC is the only one built around company-level principle commitments rather than impact measurement or ratings.
- GCNI was formed in 2003 as India's local network — a separate fact from the Compact's own global principles.
- Do not confuse the UNGC's ten principles with the Sustainable Development Goals' seventeen goals — the workbook says UNGC "guides companies in achieving SDGs," meaning the two frameworks work together, not that they are the same list.
Check yourself
1.The ten principles of the UN Global Compact cover which four areas?
- a)Human rights, labour, environment and anti-corruption
- b)Governance, taxation, environment and consumer protection
- c)Human rights, education, health and gender
- d)Labour, finance, technology and anti-corruption
Show the answer
Answer: (a) Human rights, labour, environment and anti-corruption
The UNGC's ten principles fall under human rights (1–2), labour (3–6), environment (7–9) and anti-corruption (10).
The other options mix in areas such as taxation, education or finance that are not UNGC principle areas. Consumer responsibility appears in the Indian NGRBC (Principle 9), not in UNGC.
2.A company discovers that a supplier's factory employs children. Which UN Global Compact principle is most directly engaged?
- a)Principle 1 — support and respect internationally proclaimed human rights
- b)Principle 4 — elimination of forced and compulsory labour
- c)Principle 5 — effective abolition of child labour
- d)Principle 6 — elimination of discrimination in employment
Show the answer
Answer: (c) Principle 5 — effective abolition of child labour
Principle 5, the effective abolition of child labour, sits in the Labour area (Principles 3–6).
Principle 1 is tempting because child labour is also a human rights concern, but the UNGC places it specifically under Labour. Principle 4 covers forced and compulsory labour, and Principle 6 covers discrimination — related, but not the specific principle.
3.IRIS+, the impact accounting system used by impact investors to measure, manage and optimise their impact, is offered by:
- a)Global Reporting Initiative (GRI)
- b)Global Impact Investing Network (GIIN)
- c)UN Global Compact (UNGC)
- d)United Nations Environment Programme (UNEP)
Show the answer
Answer: (b) Global Impact Investing Network (GIIN)
The Global Impact Investing Network (GIIN) offers IRIS+ to support impact investing and to promote transparency, credibility and accountability in the use of impact data.
GRI develops sustainability reporting standards. UNGC sets ten principles for business. UNEP partnered in setting up GRI in 1997, but does not offer IRIS+.
Where this is taught
Free preparation for NISM Series XXIIIRelated terms
- Impact Management ProjectThe framework, used by the GIIN's IRIS+ system, that describes impact in five dimensions — What, Who, How Much, Contribution and Risk — with defined data categories for each.
- NGRBCNational Guidelines on Responsible Business Conduct — nine MCA principles for businesses of every kind, the basis for BRSR reporting by the top 1,000 companies; criticised as not legally enforceable.
- Sustainable Development GoalsThe UN's 17 goals for 2030, adopted in 2015, that India's social sector is expected to advance — and against which India shows a large, workbook-cited funding and performance gap.
- GIIRSThe Global Impact Investing Rating System: an online tool that rates the social and environmental performance of companies and funds, with a methodology the workbook says 6,000 companies have used.
- Global Reporting InitiativeAn international non-profit set up in 1997 with UNEP, whose three sets of reporting standards — Universal, Sector and Topic — let any organisation report its economic, environmental and social performance.