Key Role for E&C in Promoting Environmental, Social, Governance

In 2015, the United Nations adopted Sustainable Development Goals, with a 2030 target date. The goals are focused on global partnership to end poverty, improve health and education, reduce inequality, and preserve the environment, among others.

The UN Global Compact is the world’s largest global corporate sustainability initiative in support of the goals. The Compact calls upon companies to align their strategies and operations with universal principles of human rights, labor, environment, anticorruption, and to take actions to advance societal goals.

Goal 16 of the SDG focuses on peace, justice, and strong institutions, and is the goal LRN is engaged with as a signatory to the Compact. Goal 16 ties directly to LRN’s emphasis on values, doing what is right rather than what meets regulatory minimums, and for companies to meet the new challenges facing society by address pressing social, economic and environmental issues.

At its core, the Compact is about operationalizing ethics and compliance fully in all aspects of a company’s business, not just through chief executive activism, or environmental compliance.

LRN’s Susan Divers spoke last week at a UNGC Goal 16 meeting in Chicago for general counsels. The meeting took place under the Chatham House Rule, so no other names or affiliations will be mentioned.

The focus of the Chicago meeting was engaging lawyers in the Global Compact, both in-house and at law firms, and taking a broad view of lawyers’ role in serving as an organization’s corporate conscience and guiding ethics and compliance.  

LRN’s participation helped articulate the link between good governance and ethical culture, and other sustainability components such as fair labor, environment, health, and safety. Divers talked about LRN’s research as the basis for sustainable, values-driven governance.  

Divers highlighted results from LRN’s Moral Leadership Report in Business 2019, which found moral leaders achieve business goals, enable innovation, are trusted by colleagues, foster ethical workplaces, and inspire best efforts. The report found 82% of respondents said their organizations are exposed to risks when it fails to consider the ethical and moral implications of its actions.

LRN’s Program Effective Report 2019 found organizations whose strong values form the basis for behavior have more effective ethics and compliance programs than those that rely primarily on rules to mitigate risk.

These values-based programs also excel at meeting the Department of Justice's and other regulators' emphasis on workplace impact–the difference between effective and "paper-only" programs. This matters as the DOJ last month updated guidance for how it evaluates the effectiveness of a corporate compliance program.

The DOJ’s update makes clear organizations will get credit for ethics and compliance programs based on how they work in practice, not how they look on paper, said Divers.

One Chicago attendee said their company is beginning to receive requests for proposals that require membership in the Global Compact as a condition for bidding. Divers said this was seen as a compelling development, and one participants expected would expand.

An executive said their company is requiring its supply chain partners to sign up for and adhere to Global Compact goals, depending on the type of third party. The same executive said the company was working to reduce its environmental footprint, elevate its sustainability reporting to that of its financial reporting, and to embed the culture of ethical behavior into all aspects of the business.

Divers emphasized the best-performing ethics and compliance programs exceed regulatory minimum requirements, and build their culture by promoting and encouraging ethical behavior; directly inform business decisions; forge effective relationships with the other business units and stakeholder groups; hold senior leaders accountable; and take a proactive approach to mitigating risk.

“Membership in the Global Compact Goal 16 is a comprehensive way for business to sign up to a transnational, values-based set of principles...that can focus their efforts in sustainability,” said Divers.

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