By  on July 17, 2007

GENEVA — Environmental concerns, globalization and higher expectations among consumers for ethical business practices are encouraging major apparel and luxury goods companies to sign the U.N. Global Compact, a voluntary accord to promote good corporate practices.

As United Nations secretary-general Ban Ki-moon summed up at the end of a two-day summit of Global Compact leaders here earlier this month, "You have made it abundantly clear that market leadership and sustainability go hand in hand"

Ban, a former South Korean foreign minister, said commitments made "to engage subsidiaries and supply chains more actively…will provide a major boost for the initiative and for corporate citizenship more broadly"

During the summit, 153 companies, including French luxury goods giant LVMH Moët Hennessy Louis Vuitton, Asian textile and apparel firms Narai Intertrade Co. of Thailand and Sing Lun Holdings of Singapore, and DuPont of the U.S., pledged to increase energy efficiency and to reduce carbon emissions.

A McKinsey & Co. survey of 391 top corporate executives from 230 companies in Europe, the Americas, Asia, Africa and the Middle East participating in the compact concluded that 95 percent "agreed that society has greater expectations for business to take on public responsibilities than it had five years ago"

The study, "Shaping the New Rules of Competition," said 50 percent of chief executive officers expect consumer influence to have the greatest impact on the way companies manage societal expectations, exceeding demands by employees, governments and activist groups in the next five years. The survey noted some ceo's think the ethical consumer "has clearly emerged and is on the rise," but also said businesses were becoming ethical purchasers.

One example sighted is MAS holdings, a Sri Lanka apparel manufacturer that has attracted ethically minded global clothing brands as a result of its reputation for labor programs such as one that provides its 35,000 female employees with a range of courses, including English.

Paul Hohnen, an international expert and consultant on corporate social responsibility issues, also known as CSR, believes the concept of "responsible competitiveness is taking root — the notion that business can build innovation, market and brand based on response to societal values"Sweden's trade minister, Sten Tolgfors, said CSR was being considered less an extra cost and more a vital part of companies' market-building strategies. He said European consumers took great interest in product price and quality, and in how goods have been produced. He also warned that a growing public interest in labor standards and environmental issues could lead to protectionism.

"One way to avoid this is to encourage CSR," Tolgfors told delegates. "Anyone in favor of free trade and market access for developing countries needs to show an alternative to protectionism, which would prohibit economic development where it is most needed. Consumers are increasingly favoring products that are produced in what they consider to be reasonable environmental and working conditions"

The Global Compact, established by the U.N. in 2000, sets forth 10 principles for businesses to follow on human rights, labor practices, environmental protections and fighting corruption. More than 3,000 corporations, along with labor unions and nongovernmental organizations from 116 countries, have subscribed to the compact and pledged to observe its principles.

Irene Kahn, secretary general of Amnesty International, said the compact "is a very powerful initiative because it's backed by the U.N.," but added, "Where the compact falls short is that it has no compliance mechanism"

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