9.1 Introduction
With the end of the Cold War and the revival of international cooperation, the mandates of international organizations have expanded dramatically, requiring more and more funding to sustain the newly developed activities. While originally international organizations were mostly funded through mandatory contributions from their member states, the 1990s saw a sharp rise in voluntary donations, including from private actors.Footnote 1 This trend is particularly notable in the United Nations (UN) development sector, where around 80 percent of the budget consists of voluntary earmarked contributions from governments, private foundations, academic institutions, NGOs, and business enterprises.Footnote 2
In particular, the UN’s cooperation with the business sector has come to be seen as an important instrument in advancing the UN development goals in the past two decades, making corporate philanthropy a widespread phenomenon in the field. Major companies, including Apple, Goldman Sachs, Gucci, IKEA, Mercedes Benz, and others not only contribute frequent one-time donations to the organization but also establish long-term partnerships with various UN agencies aimed at improving access to water, health, and other basic needs in developing countries.Footnote 3 This trend is likely to continue, as is clear from the General Assembly’s adoption of the 2030 Agenda for Sustainable Development, which among its 17 objectives provides for further strengthening of the role of private sector partnerships in the development field.Footnote 4
While cooperation with corporate actors has notable advantages, such as allowing the UN to mobilize necessary financial resources, expertise, and technology for its development activities, it may also lead to serious reputational risks for the organization. Close association of the UN with business enterprises engaged in illegal or controversial activities may run the risk of compromising the organization’s image as an objective and credible actor. In fact, the UN has already been criticized in the past by different civil society actors for its poor judgment in partnering up with notable human rights and environmental standards violators such as Coca-Cola, Chevron, Nike, Nestle, Novartis, Shell, and others.Footnote 5
Against this background, this chapter will take stock of these issues by critically assessing the role and the impact of corporate philanthropy in the UN development sector, with a specific focus on the activities of the UN Development Program (UNDP) as one of the most active UN bodies when it comes to private sector collaborations.Footnote 6 In doing so, this contribution will first provide an overview of the evolution of the corporate philanthropy in the UN system. This will be followed by exploration of different forms of corporate funding at the UN, including direct contributions to the organization; indirect contributions through the establishment of a charitable foundation; and public–private partnerships. The chapter will conclude with an assessment of the mechanisms that were put in place by the UN as a whole and the UNDP in particular to mitigate the reputational risks associated with the business sector cooperation.
9.2 Evolution of Corporate Philanthropy at the UN
Until the late 1990s, the business sector mainly perceived the UN as a hostile environment, due to the claims of a New International Economic Order and the associated neo-Marxist ideas that were prevalent in some UN bodies in the 1960s and 1970s.Footnote 7 This dynamic radically changed when Kofi Annan was elected as the UN Secretary-General in 1997. Many scholars maintained that it was Annan’s business degree and his previous involvement with the business sector that shaped his vision of the organization as collaborating closely with private actors.Footnote 8 Since the very beginning of his tenure, Annan saw close cooperation with the private sector as an essential means to advance the goals of the organization and to revive its image in the era of globalization.Footnote 9 In his report to the General Assembly on the role of the UN in the twenty-first century, he emphasized the urgency of including private actors in tackling the challenges of the new millennium:
Today, global affairs are no longer the exclusive province of foreign ministries, nor are states the sole source of solutions for our small planet’s many problems. Many diverse and increasingly influential non-state actors have joined with national decision makers to improvise new forms of global governance. The more complex the problem at hand … the more likely we are to find non-governmental organizations, private sector institutions and multilateral agencies working with sovereign states to find consensus solutions.Footnote 10
Speaking at the World Economic Forum in Davos several years earlier, he stressed in particular that “market forces are essential for sustainable development” and constitute “the dominant engine of growth … and the source of the largest financial, technological, and managerial resources,” warranting a close partnership between the UN and the private sector.Footnote 11 To realize his vision, Annan created the Office of the Assistant Secretary-General for Strategic Planning within the UN Secretariat, charged with the tasks of developing specific initiatives for closer collaboration between the organization and the private sector and generating support for these among member states, UN agencies, and the private actors.Footnote 12 One of the main initiatives proposed in Davos was “a global compact of shared values and principles, which will give a human face to the global market.”Footnote 13 Since then the Global Compact has become the world’s largest corporate social responsibility initiative, which encourages business actors to comply with 10 principles related to human rights, labor, environment, and anti-corruption.Footnote 14 Business entities participating in the initiative are supposed to bring their policies and operations in line with the Compact’s 10 principles, as well as to take strategic initiatives to advance the UN Sustainable Development Goals, by forming partnerships between the UN and the private sector and engaging in other types of corporate philanthropy.Footnote 15
While Annan’s leadership was crucial in bringing the organization and the business sector together, larger factors that made this paradigmatic shift possible were also at play. Among these factors was an ideological shift that occurred with the end of the Cold War, marking the victory of economic liberalism and accordingly, a preference for market-based solutions also in the public domain.Footnote 16 In addition to this, while private finances in the development sector were on the rise, the UN’s own financial resources had been under continuous strain.Footnote 17 After the end of the post-Cold War enthusiasm in international relations, the United States and other major donors started to reduce their contributions to the organization, unsatisfied with its inefficiency in dealing with new societal challenges.Footnote 18 In 1997, the UN suffered the largest budgetary deficit in its history, when the US Congress failed to allocate the annual contribution to the organization, amounting to 30 percent of its budget.Footnote 19 As a response to this, Ted Turner, an American philanthropist and a founder of the CNN and other television networks, decided to singlehandedly compensate for this shortage and donate one billion USD to the organization in the course of 10 years. This unprecedented gesture became a turning point in the history of corporate philanthropy at the UN, giving the Secretariat an opportunity to introduce a number of institutional changes, starting with the creation of the UN Fund for International Partnerships (UNFIP) to act as a liaison between the organization and Ted Turner’s charitable body, the UN Foundation.Footnote 20 While initially created for this purpose, UNFIP became the first gateway for brokering partnerships between the UN and the private sector more generally.Footnote 21 In 2006, UNFIP was incorporated into the UN Office for Partnerships (UNOP) that currently represents the central platform for facilitating partnerships between public and private actors.Footnote 22 In addition, almost every UN agency has a separate office responsible for engagement with the private sector, including the UNDP’s Division for Business Partnerships, indicating the latter’s prominent role in the organization. As cooperation with the business sector has been evolving, new legal arrangements were required to accommodate corporate donations and companies’ direct involvement in UN development initiatives. The respective rules and policies will be discussed in Sections 9.3 and 9.4.
9.3 Modes of Corporate Philanthropy in the UN Development Sector
As a starting point, the UN Financial Regulations and Rules allow voluntary contributions, gifts, and donations from both states and private actors, provided that their purpose is consistent with the policies, aims, and activities of the United Nations.Footnote 23 In addition, the regulations provide that the contribution should not entail any additional financial liabilities to the organization, except when explicitly authorized by the General Assembly.Footnote 24 In all the other cases when the approval of the General Assembly is not required, the receipt of contributions, gifts, and donations by the UN is still subject to the approval of the Secretary-General.Footnote 25
Further, the UN Guidelines on Cooperation between the United Nations and the Business Sector, first adopted in 2000, identify three main modalities of corporate funding in the organization: direct contributions by business partners to the organization; indirect contributions through the establishment of a charitable foundation; and sponsoring a particular project by entering into a public–private partnership with the organization.Footnote 26 Each of these arrangements will be discussed in turn.
The first obvious form of corporate philanthropy is the direct donations from a business enterprise to a UN agency. In terms of legal arrangements, the UN financial regulations distinguish between earmarked and non-earmarked contributions: while the former are set as trust funds or special accounts, the latter are treated as miscellaneous revenue.Footnote 27 The overwhelming majority of the direct contributions fall in the first category, being allocated for a specific project or a thematic priority chosen by the donor. An illustration of this is a three million USD donation from Coca-Cola to the UNDP to one of the organization’s thematic priorities in 2020.Footnote 28
The second modality is when a business partner donates money to the UN indirectly through the establishment of a charitable organization or to an already existing one. The primary example in this regard is the United Nations Foundation, which, as mentioned in Section 9.2, was created by Ted Turner in 1997 as a public charity body in domestic law to channel his one billion dollars donation into the organization. The interaction between the UN Foundation and the UNFIP, which represents the organization, is regulated by a special agreement, laying out the terms of the projects’ financing, the use of the UN’s name and emblem, privileges and immunities of the organization, liability of the parties, and settlement of disputes.Footnote 29 In particular, when it comes to the procedure for the identification of the projects that receive funding, the agreement stipulates that the UNFIP will submit grant proposals to the Foundation from different UN agencies and programs, with the Foundation having a final say on which projects to sponsor in line with its thematic priorities.Footnote 30 The thematic priorities are identified in consultation with the UNFIP and have most recently included global health; women empowerment; climate change and environment, data, and technology; and peace, human rights, and humanitarian causes.Footnote 31 The agreement between the UN Foundation and the UNFIP has been renewed twice, most recently in 2014 for the period of another 10 years.Footnote 32 The 2014 agreement also established the Joint Coordination Committee, co-chaired by the UN and the UN Foundation, to ensure an effective coordination of common initiatives.Footnote 33
The Foundation made its mission to not only dispense Turner’s gift but also to mobilize further resources for the UN and to advocate for the organization’s cause in both US political and business circles.Footnote 34 Among the contributors to the UN Foundation are Amazon, Barclays, Chevron, Coca-Cola, Ericsson, Google, Goldman Sachs, Mastercard, Nestle, Proctor & Gamble, and other corporate giants.Footnote 35 Overall, the initiative proved very successful as in the period from 1998 to 2020, the UNFIP received 1.47 billion USD from the UN Foundation, including 0.45 billion USD from Ted Turner’s original gift and other additional funds mobilized by the UN Foundation from corporate actors and private individuals.Footnote 36 These funds allowed for implementation of a total of 676 projects in 128 countries, involving 48 UN partners.Footnote 37 The two main recipients of the Foundation’s grants within the UN system were UNICEF and the WHO, having secured more than 500 million USD each in the period between 1998 and 2019.Footnote 38 While prominent, the UN Foundation is not the only example of the corporate philanthropic foundation in the field of development. To illustrate, among the 10 top private sector contributors to the UNDP are such philanthropic organizations as the Bill and Melinda Gates Foundation, the Nigerian Aliko Dangote Foundation, the Palestinian Paltel Group Foundation, the Swiss Stiftung Auxilium, and other entities whose funding derives from corporations or wealthy business owners.Footnote 39
The third funding modality is when a business enterprise enters into a partnership with the UN. What separates this form of funding from other types of contributions is that a business entity not only finances the project but is also frequently involved in its design and implementation by providing staff and expertise or serving as a forum for UN goals advocacy. The UN defines partnerships as “collaborative relationships between various parties, both public and non-public, in which all participants agree to support a common cause or to achieve a common purpose, and to potentially share risks, responsibilities, resources and benefits.”Footnote 40 UN-business partnerships in the field of development vary in their composition, scope, and objectives. Some comprise only the UN agencies and business entities, whereas others also include governmental institutions and civil society actors. Partnerships can be time-bound or without a specific end-date; they can be local, regional, or global in their reach.Footnote 41 When it comes to their governance structures, they can be based on a formal or an informal agreement (normally a memorandum of understanding), operate as a project, or even be constituted as a distinct entity.Footnote 42 To provide a few examples, the Angola Enterprise Program that took place from 2002 to 2007 was a public–private partnership co-funded by the UNDP (one million USD) and ChevronTexaco (five million USD).Footnote 43 The program, set as a UNDP-managed project, aimed at promoting the development of the small and medium enterprise sector in the country. In addition to financing the bulk of the project, Chevron was actively involved in the implementation of the project through its participation in the Partnership Board and the joint Management Committee, which met on a regular basis to provide the direction and oversight of the joint project.Footnote 44 A more recent example is a multi-stakeholder partnership between the governments of Japan and South Africa, Toyota South Africa Motors, and the UNDP for training and re-skilling young South African men and women in the post-COVID economic recovery in the country.Footnote 45 In this case, the UNDP and Toyota signed a memorandum of understanding in December 2021, providing for the opening of a company-led manufacturing academy in one of the local colleges.Footnote 46
9.4 Managing Reputational Risks in UN–Business Partnerships
As is clear from the examples in Section 9.3, an obvious positive side of partnering with the private sector is that it allows the organization to mobilize the necessary financial resources, as well as technology and expertise to achieve the UN development goals.Footnote 47 In addition, the other often cited benefit of closer cooperation with the private sector is an opportunity for the UN to promote its goals and values in business communities, thereby raising the organization’s profile in wider circles.Footnote 48 At the same time, such cooperation raises a number of concerns. The main issue often expressed by the UN member states and civil society actors is that a close association of the UN with business partners – especially those with a controversial reputation – may compromise the image and credibility of the organization.Footnote 49 This may happen, for instance, when the organization chooses to partner up with a business entity that has been involved in human rights violations or other dubious activities. In particular, allowing that business partner to use the organization’s logo and other symbols for the duration of the partnership may give an impression to third parties that the UN endorses the company’s actions and policies.Footnote 50 Other reputational risks may be associated with granting a business partner precedence or exclusive access to information on an organization’s procurement opportunities and other cases of conflict of interests.Footnote 51 Finally, other concerns relate to the lack of accountability and effectiveness in the design and implementation of the UN–business partnerships that could cast a shadow on the convening power of the organization in the future.Footnote 52
In light of the above-mentioned considerations, there was a shared understanding among the UN member states and the Secretariat that proper rules and policies were required to mitigate the potential risks to the UN reputation. To this end, in 2000, the Secretariat presented its first “Guidelines on Cooperation between the United Nations and the Business Sector,” which were subsequently revised in 2009 and 2015.Footnote 53 The guidelines introduced the conditions on the use of the UN’s name and emblem by organization’s partners, as well as the criteria for their selection.Footnote 54 As to the former, the document states that a business partner is allowed to use the name and the emblem of the organization on a non-exclusive basis as long as its main objective is to promote the goals and activities of the UN. This includes mobilizing funds for the organization, even if it involves incidental profit-making for the business entity.Footnote 55 Furthermore, the guidelines provide that the use of the name and the emblem in each single case should be authorized in writing by the UN Office of Legal Affairs.Footnote 56
When it comes to the choice of the business partners, the document contains various criteria that have been continuously revised as a result of pressure from the General Assembly and civil society actors for greater care and transparency in the selection process.Footnote 57 As the first condition, the guidelines provide that the UN will only engage with business entities that “demonstrate responsible citizenship by supporting United Nations causes and core values as reflected in the Charter and other relevant conventions and treaties.”Footnote 58 In addition, the document states that the organization will not cooperate with businesses that “contribute to or are otherwise complicit in human rights abuses, tolerate forced or compulsory labor or the use of child labor, are involved in the sale or manufacture of anti-personnel mines or cluster bombs, or that otherwise do not meet relevant obligations or responsibilities by the United Nations.”Footnote 59 Since 2009, the guidelines have also stated that the UN will not collaborate with corporations that violate the UN Security Council sanctions.Footnote 60
In addition, the guidelines designate the UN Global Compact as the main point of reference for choosing a business partner.Footnote 61 As previously mentioned, the UN Global Compact is currently the world’s largest corporate social responsibility initiative, which endorses 10 principles related to human rights, labor, environment, and anti-corruption that companies are invited to follow in their policies and day-to-day operations.Footnote 62 The UN guidelines state that the organization will “not partner with business sector entities that systematically fail to demonstrate commitment to meeting the principles of the United Nations Global Compact,” except for the cases where the partnership in question specifically aims at improving business actor’s compliance with the initiative.Footnote 63 Instead, to be chosen as a UN partner, a company “should have demonstrated a commitment to meeting or exceeding the principles of the Compact by translating them into operational corporate practice.”Footnote 64
However, despite the central role given to the Compact in the selection of UN business partners, the nature of the initiative makes it ill-suited for this purpose. This is because, in the words of the UN Secretariat, the Global Compact is a “learning network,” as opposed to a robust corporate code of conduct accompanied by an effective enforcement mechanism.Footnote 65 In fact, as emphasized in the Compact’s policies, its main raison d’être is to “facilitate the adherence to the principles of the Compact through openness and enhanced communication.”Footnote 66 To this end, the initiative aims to be all-encompassing, with very minimal entry requirements. To clarify, any company that is not involved in the production of landmines, bombs, or tobacco manufacturing, as well as not present on either the UN Ineligible Vendors or the UN Security Council sanctions list may join the Global Compact.Footnote 67 In order to do so, a company simply needs to send an official letter to the UN Secretary-General pledging its commitment to implement the 10 principles of the Compact and to report on its progress by submitting an annual “Communication on Progress” (the “CoP”).Footnote 68 The CoPs are then published on the Global Compact website and are accessible to media, civil society, and the wider public to facilitate dialogue and social vetting.Footnote 69 Yet, according to the 2020 Global Compact “Building on Twenty Years of Progress” report, two-thirds of the Compact’s participants maintained that the CoP reporting mechanism has had no real-life impact on how the issues of human rights, labor, environment, and corruption are implemented on the ground.Footnote 70 The main reason for this outcome, as repeatedly emphasized by the Compact’s critics, is the fact that there is no effective monitoring system in place that would ensure compliance with the 10 principles.
This is notwithstanding the fact that, in 2005, the Global Compact Board adopted the so-called integrity measures precisely to mitigate this criticism and to protect the initiative’s reputation.Footnote 71 The measures introduced included de-listing the participants who failed to submit the CoP for two consecutive years, as well as a mechanism for handling the allegations of “systematic or egregious abuses” of the Compact’s aims principles. However, the latter procedure has little impact, being reserved exclusively for very grave violations, such as murder, torture, deprivation of liberty and forced labor, serious environmental damage, and blatant corruption.Footnote 72 Moreover, the mechanism does not amount to a legal remedy for such violations but is rather focused on dialogue facilitation between the company and a third party.Footnote 73 If the company refuses to engage in the dialogue within a two-month period, it may be considered “non-communicating” and in the case of a prolonged inactivity, eventually removed from the Global Compact.Footnote 74 In addition, the Global Compact Office – after consulting the Global Compact Board – may de-list the company in question as the measure of last resort when it has admitted to having committed the abuse or has been found guilty of doing so by a court of law.Footnote 75 According to the Global Compact Annual Report, in 2021 there were only 10 instances in which a third party raised an allegation of the abuse of the Compact principles (compared to 13 in 2020), out of which only two were deemed acceptable for the dialogue facilitation process.Footnote 76 While no further reasons were provided in the report, it appears that the Global Compact Office frequently uses its right to refuse the claims on the ground that they are better suited to being resolved by another entity, such as a court, an administrative organ, or any other dispute resolution mechanism.Footnote 77
In light of the inefficiency of the Global Compact to mitigate risks to the UN’s reputation, it is essentially up to the individual UN agencies to conduct a proper due diligence check on the potential partners.Footnote 78 While there is a significant disparity between different UN agencies, a few have developed their own rules and policies to regulate their cooperation with the private sector, in addition to the UN Guidelines and the Global Compact standards.Footnote 79 UNDP is one of these agencies, having several detailed regulations on the private sector partnerships, including a designated due diligence policy and a risk assessment tool.Footnote 80 In a nutshell, the UNDP’s due diligence procedure is based upon differentiating between three risk levels: the “highest risk,” “significant risk,” and “lower risk.”Footnote 81 In the “highest risk” category are the business entities falling within the UN-wide and the UNDP-specific exclusionary criteria. The former include enterprises that manufacture and sell weapons and tobacco; those that are complicit in human rights abuses, use forced or compulsory labor, or child labor; and those that violate UN Security Council sanctions or are found on the UN Ineligible Vendors list.Footnote 82 To these criteria, common to all the UN agencies, the UNDP also adds companies that are involved in gambling, the production and distribution of pornography, as well as entities that sell phase-out substances and endangered species of fauna and flora.Footnote 83 The second risk level, “significant risk,” includes companies that are involved in “significant controversies” concerning governance, labor issues, environment, and others, as evidenced by the court cases against them or criticism expressed by media, governments, or civil society actors.Footnote 84 In addition, the UNDP guidelines identify several high-risk sectors where such “significant controversies” are most likely to occur, prompting for extra caution in the company’s assessment. These sectors include oil and gas; metals and mining; utilities provision; large infrastructure construction; production of timber, pulp, and paper; the alcohol industry; manufacture of chemicals and pharmaceuticals; production of clothing, toys, and domestic electronic appliances; and the fast food and high sugar drinks industry. Finally, the third level, “lower risk,” comprises all the commercial enterprises that do not fall under the exclusionary criteria or the “significant controversies” category.Footnote 85
With these three levels of risk in mind, the UNDP country office that is considering a partnership first conducts a pre-screening to establish whether the potential business partner falls under the exclusionary criteria.Footnote 86 If this is the case, then the UNDP will abstain from entering into a partnership, subject to a few exceptions.Footnote 87 If the opposite is true, the unit proceeds with the second stage, which is identifying if the company is involved in any “significant controversies.” If major controversies are found in several areas, the local unit should not engage with the company.Footnote 88 If there are issues but they are regarded to be of a lesser concern, the business entity may still be eligible for partnership but the case needs to be referred to UNDP headquarters.Footnote 89 If no major controversies are found, the local UNDP office continues with the last stage of the screening process, which involves the evaluation of the company’s performance in the UN Global Compact, the Environmental, Social, and Governance (“ESG”) indices, as well as various sustainability certifications.Footnote 90 This is followed by the assessment of the business entity’s commitment to human rights, labor, environmental, and good governance standards. Lastly, other risks, together with the benefits of the potential partnerships, are examined at this final stage. Based on this comprehensive three-stage assessment, if no exclusionary criteria and major controversies are found, and the company’s ESG commitments are deemed adequate, the UNDP can make a positive decision regarding the partnership. In situations where the company’s ESG commitment is found to be satisfactory but some controversial issues have been identified, the decision regarding the partnership is reviewed by the inter-bureau technical committee that, based on all the due diligence information available, makes a recommendation to the senior UNDP management who makes the final decision.Footnote 91 Overall, it seems that the UNDP managed to develop its own thorough due diligence process to protect the agency from reputational risks associated with partnerships, in light of the shortcomings of the UN Secretariat efforts in doing so.
9.5 Conclusion
To sum up, the analysis undertaken in this chapter demonstrates how in just over two decades the role of the private sector at the UN has evolved significantly, making business entities prominent actors in the organization’s development initiatives. The cooperation between the two progressed from occasional one-time donations to elaborate partnership schemes involving their own budgets, governing bodies, and innovative forms of business involvement. A further scaling-up of the UN and private sector collaboration is expected with the adoption of the 2030 Agenda for Sustainable Development, which, in the words of the UN Secretary-General, “presents a historic opportunity for the United Nations … to unlock the full potential of those partnerships.”Footnote 92
However, as UN–business partnerships increase in numbers and complexity, the organizational rules and policies that regulate this interaction remain inadequate, especially when it comes to managing risks to the organization’s reputation. As illustrated, in the absence of proper due diligence mechanisms, both the Secretariat’s Guidelines on Cooperation between the UN and the Business Sector and the Global Compact fall short of ensuring that all the UN’s business partners adhere to accepted human rights and environmental standards. While these shortcomings are partially compensated by proper due diligence procedures set up by some UN agencies, including the UNDP, this is not the case with other UN entities with less resources and fewer manpower.Footnote 93 In order to counter this discrepancy, the organization needs a coordinated approach to cooperation with the private sector, including viable operational tools that would safeguard the integrity and impartiality of the UN as a whole.Footnote 94
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