In the increasingly globalizing market, companies will have to align their business with long-term public interests and sustainable initiatives to survive, the executive director of United Nations Global Compact said Monday.

Georg Kell, the founder and CEO of the world’s largest corporate sustainability organization, stressed that businesses are increasingly forced to demonstrate corporate social responsibility by embracing UNGC principles: human rights, labor, environment and opposition to corruption.

Kell participated in the UNGC Korea Leaders Summit 2015 in Seoul on Tuesday, along with U.N. Secretary-General Ban Ki-moon, Columbia University professor Jeffrey Sachs and former Indonesian President Susilo Bambang Yudhoyono, among others. 

The UNGC is an international policy initiative to promote responsible commerce, finance and innovation. It has more than 12,000 corporate participants from over 145 countries.

“There’s a silent revolution happening in the world. More and more business leaders realize that financial success depends on environmental stewardship and social responsibility,” Kell told graduate students of Sogang Business School, a UNGC participant since 2013.

“Business is no longer a resource extractor, but a stakeholder in society. It wants to be part of the future growth and make long-term investment.”

Kell said business nowadays has an incentive to invest in vocational training, fight corruption and improve the environment. In today’s transparent world, “it makes sense to disclose rather than hide.”

One fundamental trend since the late 1990s has been the globalization of commerce and localization of government. With unregulated markets leading to environmental degradation and social deprivation, popular protests erupted globally to protect diminishing common goods.

Foreign direct investment has also changed dramatically, from accessing cheap resources for reprocessing and remanufacturing, to supporting local development.

“The ‘global compact’ was born out of these circumstances, as citizens understood power and responsibility cannot be separated,” said the executive director. “Increased transparency has put a premium on disclosure, because not doing so can increase the risk of a financial disaster.”

Kell mentioned the German engineering company Siemens, which overhauled its corporate culture following a string of high-profile scandals in 2008 that cost $1.6 billion in legal settlements with U.S. and European authorities. The company now sees sustainability as its core growth strategy.

The sweatshop campaign by American colleges in 2000 contributed to human rights and labor improvement, by protecting freedom of association and collective bargaining, while eliminating forced and child labor, he added.

“A growing number of companies are realizing that their green portfolio is growing faster than their carbon-intense portfolio, and supporting carbon pricing,” Kell said. “Smart CEOs are stepping forward and saying, ‘We want to break with our old practice of blocking climate action, to tell governments to tax externalities on business.’”

Companies that are willing to “internalize” the negative externalities created by their operation will become the industry leaders, claimed Kell. Many companies that were the target of sustainability have now become exemplary models.

The finance industry, which tends to pursue short-term profits, is finally coming to grips with the global trend. Ban Ki-moon has promoted responsible investment since 2005, leading to 1,300 asset owners around the world to incorporate nonfinancial issues into investment decisions.

“I am confident that commerce connects humanity. Commerce allows technology and solutions to travel fast and wide,” Kell said.

“But to channel it in a sustainable way requires a fundamental rethink. We need to internalize spillovers, put a high price tag on carbon emissions, create a circular economy, and reconsider our values and lifestyles.”

Kell stressed the importance of accountable leadership, saying, “Business leaders have to be statesmen. They need to understand the interconnection of politics, development and environment.”

Answering Sogang University professor Kim Yang-min’s question on finding a job and building a career for the students, Kell gave advice based on his 30-year experience at the U.N.

“The most difficult thing in life is finding out what exactly you want,” he pointed out. “Career success does not come from aiming for this organization or company over another, but finding out what exactly it is that you really want to do, then zooming in on it and giving all you got.”

Noting that lifetime employment is diminishing in a post-industrial job market, Kell encouraged students to continually reinvent themselves and make learning their lifelong friend.

By Joel Lee (joel@heraldcorp.com)