1 Department of Management, Aarhus BSS, Aarhus University2 Department of Management - Interdisciplinary Center for Organizational Architecture (ICOA), Department of Management, Aarhus BSS, Aarhus University3 Department of Management, Aarhus BSS, Aarhus University
The Scandinavian countries have been strong supporters of the UN Global Compact (UNGC) since the official launch in year 2000. This is best evidenced by the level of adoption of the UNGC, which is the most widely adopted broad sustainability-reporting standard in Scandinavia (Kjaergaard, submitted - in review). And since the UNGC in 2010 introduced the differentiation framework to their reporting standard, a significant number of Scandinavian corporations has chosen to report on an Advanced Level and self-assess their Sustainability Performance. Hence, in times where international opinion makers like the Economist (2013) turn to Scandinavia as having the solutions to some of the global sustainability-related challenges, it might also be worth reversing the optics. One approach could be to take a closer look at whether this high level of support for the UNGC translates to a high level of Sustainability Performance? And how the current assessment of Sustainability Performance by Best Practice in the UN Global Compact challenge the legitimacy of both the corporation, the UNGC and governments attempting to facilitate sustainability and CSR engagement? Best Practice is a concept frequently used by authorities sources like governments, multi-national institutions etc. to showcase corporate sustainability practices in an attempt to inspire motivate or convince for corporate engagement. UNGC applies this discourse to a great extend and even goes as far as to integrate Best Practices as the core and decisive element in assessing Sustainability Performance with the criteria for Advanced Level reporting in the UNGC differentiation framework. Though, previous empirical research by Kjaergaard (submitted, in review) has demonstrated that although the introduction of this framework generally should be acknowledged, the way it is structured and measures sustainability performance is highly problematic. This has potential to lead to a number of undesirable outcomes for both the corporations and eventually the UNGC. Especially the use of Best Practices as determinants of the self-assessed Sustainability Performance on criterions is problematic when the framework does not weigh the Best Practices individually despite obvious differences in importance. Hence the same assessment score for a criterion can be achieved by adherence to either one of two potentially very different variables. Consequentially, corporations that apply best practices of higher importance are not acknowledged for doing so. Furthermore, since adherence to only one best practice for each criterion is required to be compliant with a criterion, then corporations are also not acknowledged by the framework for adhering to more and maybe more important Best Practices. These issues were identified by assessing the Sustainability Performance and analyzing the sustainability reports of 67 Nordic corporations, whom are signatories to the UN Global Compact. This study applies a theoretical perspective to the empirical findings by Kjaergard (submitted, in review). The study finds the UNGC reporting framework and the widespread support and adoption of it in Scandinavia to be indicative of emerging neoliberal tendencies in governmental approaches to CSR (Shamir, 2008). In a governmentality perspective these tendencies can be seen as unfolding when "government assumes the role of an enabling and empowering facilitator of CSR, not a regulatory enforcer" (Vallentin & Murillo, 2012). Whereas Scandinavian governments influence how widespread the adoption of sustainability reporting is, this study questions government’s success as a facilitator of CSR and sustainability, when viewed in a Sustainability Performance perspective. The empirical findings by Kjaergard (submitted, in review) demonstrate that with only relatively few exemptions, the Sustainability Performance of Nordic corporations in general is not on a high level. Though, that is when assessed towards the Best Practices essentially constituting the UNGC reporting framework, which Kjaergaard also questions the validity of. This study suggests that the Best Practices determining the assessed Sustainability Performance are highly biased towards a discursive frame or institutional logic of “civil regulation” (Levy et al., 2010) focused on corporate sustainability compliance. The 'competing' institutional logic of “corporate social performance” (Levy et al., 2010) and a focus on competitiveness is almost absent in the UNGC reporting framework, which thereby is in sharp contrast to other more classic business performance frameworks. This study suggest that this identified discrepancy constitute a legitimacy issue for both the corporations reporting to the UNGC standard and for the UNGC and it's further institutionalization. This study then examines this potential legitimacy issue by applying the analytical framework developed by Bernstein and Cashore (2007) that identifies a three-phase process through which non-state market driven (NSMD) governance systems might gain political legitimacy. Although acknowledging that the UNGC currently cannot be described as a NSMD governance system, this study nevertheless suggest that the UNGC to an increasing extent share the characteristics of an NSMD. The introduction of the UNGC differentiation framework and the recent significant increase in the number of member expulsions from the UNGC are highlighted as examples hereof. These examples concern the fifth characteristic or feature of NSND systems as they "...possess mechanisms to verify compliance and to create consequences for non-compliance". Although these UNGC mechanisms to some extent are now present, they must be considered weak when compared to e.g. those of full-blown NSMD systems like the FSC. It is suggested that if the UNGC were to follow the path of a NSMD governance system towards political legitimacy, it must strengthen these mechanisms in order to increase legitimacy while fulfilling both official and unofficial objectives and ambitions of doubling the number of signatories by 2020. Furthermore, the study finds that given this status quo of the UNCG, it can be placed in first half of phase II (with a focus building stakeholder support) in Bernstein and Cashore's (2007) three-phase interaction process. Though, further advancement towards the third phase and political legitimacy, would require that the identified compliancy mechanism is strengthened, which then would require the resolvement of the identified sustainability performance discrepancy. If the UNGC reporting framework remains heavily biased towards contested Best Practices solely focused on sustainability compliance, the legitimacy of more pro-active corporations engaged in a sustainability practice with a simultaneous focus on sustainability compliance and sustainability competitiveness might be challenged in the perspective of their stakeholders. If not addressed, these stakeholder concerns can potentially lead to the corporations abandonment of the UNGC standard and alternate subscription to other standards compatible with a more holistic view of sustainability performance. It is noted, that the origin of the Best Practices and the processes leading to their presence in the UNGC reporting framework is unclear. It is suggested that the path towards political legitimacy would also require the UNGC to 'take their own medicine' and increase the transparency and validation of the processes leading to the Best Practices and the structure of the UNGC reporting framework. The UNGC has been and increasingly is the topic of academic research, describing and analyzing both positive and negative aspects of the UNGC. This study adds the perspective that this kind of re-active approach is common in academic research and is also the basis for this study. Though, this study also suggest that academia can play a more pro-active approach in validating the processes leading to the Best Practices and the structure of the UNGC framework. Such a pro-active approach would require academia to engage as a legitimate stakeholder to the UNCG and conduct further research along the lines of the thinking by Vallentin & Murillo (2012): "...more elaborate critical reflection on the mindsets and views of CSR that direct and organize activities, their implications in terms of priorities (inclusions and exclusions) and scope of action, and the conflictual aspects of these developments in general. It is suggested that this kind of research would require an interdisciplinary approach addressing competing instructional logics within the same studies. That is, studies that addresses the proposed duality of sustainability performance as being comprised by both compliance and competitiveness.
Sustainability Reporting; Legitimacy
Main Research Area:
Sustainability in a Scandinavian Context Conference 2013