An interview with Sara Krüger Falk, CEO of the UN Global Compact in Denmark
Simon Pitsillides: What is the Global Compact?
Sara Krüger Falk: The UN Global Compact is an organisation within the UN system; businesses and governments working together with shared objectives on some of the challenges we are experiencing in the world. We are working together on ten principles that are within human rights, labour rights, the environment, climate and anti-corruption. It’s a Global Compact of “shared values and principles” so that we are working towards a common course, using the same language.
Country-specific networks such as the Denmark Global Compact are a translation of the principles in a local context: “Making global goals local business”. Business in Bangladesh or in Sudan is different from Denmark. Danish companies have a lot of sourcing from other parts of the world. We draw immensely on global resources and we also have large consumption and production levels here. So, of course, Danish businesses have other challenges than businesses in other parts of the world.
SP: So it’s really about defining those challenges on a local level.
Sara Krüger Falk: One of the broader objectives of our work in the network is to motivate and push companies to take action and make a change. We need change. And we need companies to do it. Actually, do it. And then the other focus area for us is to create community, to get more businesses active in the sustainability agenda, because we believe that’s the future of business. That’s the winners of the future, so we want to give them tools to get started, with the ten principles of the Global Compact as the basic structure framework.
SP: Only one in ten companies which know their impacts, which could potentially follow on to measure-manage-change.
Sara Krüger Falk: Exactly. I believe it will be a very important competitiveness factor for future businesses, but we also still see {very competitive} companies that are not doing it. So, we need a strong push for legislation to make sure that we don’t have irresponsible companies. And that we don’t make it profitable to be irresponsible. Because who is going to clean up after them?
SP: Exactly. So, what are the most significant issues for the near future?
Sara Krüger Falk: I think the picture is changing very rapidly. Five years ago I would not have said global virus outbreaks or a hunger crisis like the one we might be looking at after the invasion of Ukraine by Russia. I also think that our knowledge about biodiversity loss and impact on food systems has increased during the last year. And we have blind spots, things that we don’t know yet. We need to understand that we can experience drastic changes that might change our view on what is the greatest risk. Companies should be aware that there is no fixed “right thing to do”, because it might change in very short periods of time.
SP: Being flexible and having a good identification methodology in place?
Sara Krüger Falk: Being flexible, and agile.
SP: And responsive – identify change swiftly and respond to change swiftly.
Sara Krüger Falk: I think those are the companies that will win in the future, that are very aware of and able to identify the challenges.
For example with the war in Ukraine, we are going to have a crisis on food systems. But it’s going to be a crisis not only caused by that war. It’s also caused by climate change, it’s caused by a lot of different things. So, I think the solution to that is to work together and find new ways of food production, to limit food waste and work together, sectors and countries, to address these issues.
The same with the energy crisis that we are facing. We need to shift from fossil fuels, we knew that. The COVID crisis has really taught us to work in different ways and that we are very, very flexible and that it’s easy for us to change how we do things normally.
{People now working virtually, conferences shifting into hybrid} also affects, for example, the aviation sector.
SP: Things are changing rapidly and companies need to adapt to those changes. I would hate to be in the shoes of the airlines right now.
Sara Krüger Falk: Developments are faster than they have ever been. So, if you have very good, solid, business case, it might not be as good and solid in five years. You need to constantly rethink and rethink the business case for the future needs.
{The other issue is} the constant dynamics companies are faced with. I just talked to a company in food production and they were making a shift from palm oil to sunflower oil to reduce impacts on rainforests in the Amazon. But now with the war in Ukraine they couldn’t access all this sunflower oil from Russia. So, what’s the right thing to do? I think companies will face these dilemmas constantly.
We need to shift away from fossil fuels, we need to build windmill parks, but what are the negative impacts on biodiversity and what’s the right thing to do?
We have to expect companies to perform proper due diligence in these decisions. It’s not always going to be crystal clear what’s the right thing to do. It’s going to be difficult.
We need long-term perspective making company strategy. And the Sustainable Development Goals are this fantastic direction as a leading star or a lighthouse.
SP: The wild card are the people buying those products and services. It’s people on a personal and professional level, they are looking for products – it has been proven over and over again -, products and services which are sustainable.
Sara Krüger Falk: You are right in one sense that demand for sustainable products is increasing. But I still think that we have a challenge. Consumers want sustainable products but they are confused on what to buy and sometimes they say they want a sustainable product but still tend to choose the cheapest. So, there are a dilemma for businesses – you know the right thing to do but you also need to address the market. Maybe the demand for those products is not quite there yet. But we expect it to come.
SP: In the last couple of years there has been an increase in sustainability action which was driven primarily by regulation. What we do need mostly is having the regulators of the world putting down in very specific ways what companies should be doing. Do you agree with that?
Sara Krüger Falk: I agree that it would be much easier to be a company if there was a common ground on what you had to deliver. Of course, we need a level playing field, so there shouldn’t be national legislation that is very different in Denmark than the UK or Latin America. That’s where the Global Compact comes in very handy, because it’s a common language, it’s a common framework and you can benchmark.
But, we can also see that some very large companies are also driving change in their supply chain, cutting agreements if their suppliers do not correspond to their requirements. It’s “hard law” – that’s legislation, but it’s also a Code of Conduct from one of your main suppliers. You have to do it if you want to keep that engagement open.
I can also see the financial sector is a very big driver for this. Large investors are being active, {diverting investments from companies} if they don’t have the proper ESG ratings.
It’s also very different if you are in the food sector, if you are in the fashion sector, if you are in construction. The demands and the standards that you use are different. It makes it complex for businesses sometimes to navigate it. I see companies using a lot of resources on living up to those separate requirements.
There would be a lot of good energy in working more together on common standards and a common way of addressing climate, human rights. I think that’s where the collaboration both with the UN Global Compact comes in, but we have a close collaboration also with GRI and other frameworks, so that we can align. I think that’s what companies need right now. Clarity and alignment.
SP: Absolutely. The UN Global Compact and GRI joined forces sometime ago to build a universal framework for corporate sustainability performance and disclosure. How are you seeing this work in practice among your members in Denmark?
Sara Krüger Falk: We don’t have that many Danish companies that are using the GRI Standards. I agree on having global standards. But we have mainly been working with the Global Compact and saying you can use whatever framework you want. I think the GRI Standards are really good {with human rights}, they have very good questions. So, it is a very good supplement to the Global Compact. We have the new COP requirements that are also totally aligned with GRI with sixty questions.
SP: Thank you. GRI and the European Financial Reporting Advisory Group Project Task Force announced that they will be collaborating to co-construct the EU sustainability reporting structures, commonly known as the CSRD. How will this impact companies in Denmark? Have you identified how many companies this will impact in Denmark?
Sara Krüger Falk: Around 1,400. I am expecting that there will be some requirements and some demands that we haven’t experienced before, but I also think that Danish companies are used to reporting and used to having requirements. So, it will not be so hard for them to live up to those requirements. Of course, I don’t think that the SMEs that will be the suppliers in the supply chains of the companies that are affected by the new legislation are ready. That’s a very big job for us, to make them ready to be suppliers that can deliver information that their customers – the larger companies – will be needing (and the financial institutions as well).
SP: What developments are you hoping to see in the next one to three years to help advance the UN Global Compact goals?
Sara Krüger Falk: If you look at the UN Guiding Principles on Business and Human Rights you will understand that you also have the responsibility to open your eyes. Understand that if you are not actively trying to make a change or understand your supply chain, you might be supporting adverse human rights impacts in some ways. {We need to raise} awareness about the responsibility of all companies to also better understand their supply chain.
I can say that I have been working in the area of sustainability for many years. What I can see is that the awareness and the urge and the purpose in people I meet in all business sectors is very strong. So, I think there is a movement going on, there is a massive movement going on, and I feel it’s stronger and stronger from many different areas of society, which is great, because we need action desperately. We need to make changes all over consumers, governments, businesses, municipalities. Everyone has to work together and I think that if we manage to join forces, we can really make a change.
It’s always good to use a framework to also document what you do. So, it’s not only empty words but, really, action that you can track and document.
SP: It’s action which, once you have identified, is measure, manage and change. And then continue with that circle.
Sara Krüger Falk: And then increase. Work more. Do more.
SP: Absolutely.
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