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by Institute for Global Dialogue


Categories: [in] focus

by Institute for Global Dialogue


Global governance and the role of multinational companies in achieving the Sustainable Development Goals

Through globalisation our world has become more connected and complex. On the political level, global governance is an important part of the globalisation process and continues to be modified according to its challenges and boundaries. The concept of global governance may be used to explain multilevel governance with wide-ranged and complex actors. Alongside the United Nations (UN) that consists of member countries; civil society and multinational companies are also key actors in the global governance architecture. Multinational companies have expanded their role and power in various constellations, which has led to the creation of new institutions such as the UN Global Compact and the Global Reporting Initiative (GRI), in order to increase global standard-settings. Taking into account the growing role of multinational companies in global governance, the following article examines what potential role they can play in achieving the Sustainable Development Goals (SDGs) adopted by the United Nations General Assembly (UNGA) in 2015 as a commitment to eradicate extreme poverty by the year 2030.

The UN Global Compact was founded in 2000 with 50 multinational companies as members. Its founding purpose was to increase the compliance of private actors with human, environmental, labour and social rights, as well as improve the reporting requirements process and record compliance. After 18 years, over 9000 multinational companies have registered from 164 member countries. In addition to these members, non-economic oriented members have joined the organisation and the membership has since grown to above 13 000 registered economic and non-economic members from 170 countries. These members have published a significant amount of public reports so far, in which they indicate the implementation process of the 10 UN Global Compact Principles.

However, the UN Global Compact has been criticised because of its voluntary nature, and currently, sanction possibilities for malpractice or disputes are non-existent. Even though this platform is based on a voluntary membership, the success of the UN Global Compact is seen through the implementation processes and the growing number in membership. Data also confirms the positive impact of the UN Global Compact and its principles on multinational companies and up to 81% of the members recorded progress in sustainable business practices. According to the aligned framework of the UN Global Compact and it’s principles with the agenda of the SDGs this progress has an impact on achieving these goals, too.

Another global standards setter in sustainable management is the GRI, which became a reliable global governance institution. It was founded in 1997 with the purpose of implementing a framework that measures the environmental sustainability of companies and gives investors a sectoral overview in economic, social and management issues. In 2000, the first global framework, which included these aspects, was implemented. The initiative became an official cooperation partner of the United Nations Environment Programme (UNEP) in 2002. In the same year, the GRI received further international acknowledgment through the UN Summit for Sustainable Development in Johannesburg. Four years later, the GRI would strengthen cooperation with the UN Global Compact and Organisation for Economic Cooperation and Development (OECD). Because of that, UN Global Compact members started to use GRI as their reporting standard and the 10 UN Global Compact principles were implemented in the GRI framework. By then, GRI had published their fourth edition of reporting standards, which had become a well appreciated source of international information on global standards-setting and monitoring.

Former UN Secretary-General, Ban-Ki Moon has stated that “Business is a vital partner in achieving the Sustainable Development Goals”, and will continue to be important in creating and achieving the SDGs. In addition, a guide for business action on the SDGs known as the SDG Compass was published in 2015, which assisted in showing the importance of companies in meeting these goals. But it does not only show the importance of companies in meeting the goals, it also provides a guide for companies on how they can help to achieve the SDGs. Furthermore, it offers a wide range of tools to implement the SDGs in business strategy. 

Now the question is why are companies, especially multinational companies crucial for achieving the SDGs? The financial power, number of employees, expertise, global supply chains, global internal policies and Corporate Social Responsibility actions of multinational companies make them important partners in achieving the SDGs. The standards that have been adopted are also a welcome framework for multinationals to stay competitive and sustainable in their practices, as they are monitored by civil society based on their conformity to sustainability reports required by the UN Global Compact, the GRI, and the SDGs.

In Germany, a company survey showed 72% of companies stating that the SDGs are important to them, 52% are already using SDGs as a framework, and 21% are preparing to use it in the future. Furthermore, the survey highlighted that companies anticipate respective governments will assist them in implementing the SDGs. Some examples of multinationals aligning to the SDGs include companies in the food and beverage sector such as Nestlé, Unilever, and the Coca Cola Company. These companies have membership in the UN Global Compact and have aligned their company strategies with the targets of the SDGs. However, they have their own business interests as drivers in achieving the SDGs due to corporate global supply chains and high leverage effects of these multinational companies. Because the SDGs are still relatively new, not a lot of research has been done in this area yet. Companies have thus just started to align their business strategy with the SDGs agenda.

Recently, an analysis conducted by various NGOs and other organisations was published. It discusses if the private sector is hijacking the SDGs for their own interests. One of the findings of this analysis is the fact that business engagement for the SDGs is rising, and implementation of these goals in companies varies. On the one hand, some of them just use them for image and public relations reasons. But on the other hand, the SDGs are implemented in Corporate Social Responsibility and overall business strategies. And this is where the main critique is focused. Companies do not see the SDGs as a whole agenda. This means just certain SDGs, which fits to the strategies, are getting support of the private sector. Nevertheless, the number of companies which refer to the SDGs in their reports has increased, according to KPMG. Most businesses which apply the SDGs as a reference framework are based in Germany, France, UK, Japan and the USA.

It has also become evident through different external evaluations and rankings developed that the SDGs and the norms of sustainable business practices are gaining a larger footprint in the international development landscape. A few examples of this trend includes Oxfam’s Behind the brands report, annual reports from the Oekom Corporate Responsibility Review, the Dow Jones Sustainability Index or Fortune’s  Change the World Ranking. Companies which are longstanding members of the UN Global Compact and actively encourage international standards within the Global Reporting Initiative framework to achieve the SDGs will remain important partners in achieving the SDGs, which can only be achieved with the participation of multiple stakeholders including government, business, and civil society formations.

Jennifer Adam is a master student in International Relations and Development Policy (M.A.) at University Duisburg-Essen, Germany. She holds a Bachelor’s degree in Political Management from university of applied sciences in Bremen, Germany. She wrote this blog while she was an intern at IGD. Her views do not necessarily reflect those of the IGD

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