Kofi Annan’s Path to Corporate Sustainability

Author: Lukas Herndl | UC Berkeley School of Law | LL.M. Candidate 2019 | Posted October 8th, 2018 | Download PDF.

Today, the idea of corporate sustainability is mainly associated with tech firms like Apple, Google and Salesforce, or with institutional investors like Blackrock or the Yale University endowment, which recently announced it would not invest in retailers that sell assault weapons. Far less focus has been on former Secretary-General of the United Nations and Nobel Peace Prize laureate Kofi Annan, who passed away on August 18.

Kofi Annan is mainly known for his outstanding diplomatic achievements, for reforming the UN bureaucracy and for his fight against poverty, hunger and diseases on his home continent Africa. Yet, he also devoted an essential part of his work to corporate sustainability. Kofi Annan’s remarkable speech at the 1999 World Economic Forum in Davos marked the beginning of his promotion of corporate sustainability on a global scale: Directly addressing business leaders, he proposed “to embrace, support and enact a set of core values in the areas of human rights, labour standards, and environmental practices”. Stating that a corporation’s power “brings with it great opportunities – and great responsibilities”, Kofi Annan appealed to business leaders to promote these core values “directly, by taking action in your own corporate sphere.” In the closing statement of his speech he argued that “we have to choose between a global market driven only by calculations of short-term profit, and one which has a human face”, promoting “a future in which the strong and successful accept their responsibilities, showing global vision and leadership.”

Subsequently, the United Nations Global Compact was launched in 2000 upon Kofi Annan’s initiative in order to encourage businesses to adopt sustainable and socially responsible policies. The mission of UN Global Compact is to mobilize a global movement of sustainable companies and stakeholders to “create the world we want.” Therefore, the initiative supports companies to do business responsibly by aligning with their Ten Principles concerning human rights, labour rights, protection of the environment and anti-corruption. Today, UN Global Compact counts more than 13,000 participants, among them nearly 10,000 companies worldwide.

Besides recognizing Kofi Annan as the initiator of the corporate sustainability movement, we might ask, whether his ideas are still relevant in today’s discussion, nearly 20 years after the speech in Davos. It turns out, that parts of Kofi Annan’s approach are now more relevant than ever. One example is the question as to whether legislatures should force companies by statutory regulation to consider the sustainability of their actions. This issue arose only recently, following a draft by Senator Elizabeth Warren for an Accountable Capitalism Act that aims to introduce several measures to restrict shareholder-centric governance. Other supporters of corporate sustainability, however, oppose legislative measures like Senator Warren’s draft as major incursions into corporate law and argue that sustainability should be left to corporate self-governance.

Kofi Annan took a dual approach to this issue, identifying in his Davos speech two ways to implement the proposed core values: through legal reform and through direct action by companies. He urged businesses not to wait for every country to introduce laws. Consistent with this view, in a speech held 2013 at the Corporate Social Responsibility Awards in Holstebro, Denmark, Kofi Annan stated that “leadership must begin, but not end, on a political level. It is governments who have the primary responsibility to promote development and set regulatory frameworks.” But additionally, “sustainability requires the leadership and responsibility of business alongside the public sector and civil society.” Therefore, “companies should support sustainable development goals (…) in their policies, their production processes and engagement with stakeholders.”

Kofi Annan would most likely have welcomed attempts to implement corporate sustainability through laws like Senator Warren’s Accountable Capitalism Act. But he would argue that businesses’ responsibilities do not end with those laws. Investors, employees, and consumers can follow Kofi Annan’s path to corporate sustainability by continuing to advocate for businesses to be accountable to all of their stakeholders.