Commitment vs. Practice: A Comparison of CSR Performance of the UN Global Compact Signatories and Non-Signatories

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18 Commitment vs. Practice High- and Low-Risk Countries When defining risk profiles for each country, a number of environmental and social international indicators are taken into consideration, such as the Environmental Performance Index, the Human Development Index, and the Corruption Perception Index. More than 10 indicators are integrated to score each country on a scale from 1 to 10, based on their risk in terms of environment, health and safety, corruption and human rights factors. Countries scoring less than six in this scale are defined as "risk countries" and countries scoring six or higher are defined as "non-risk countries." Countries with lower scores are associated with more operational risks and scored accordingly in the EcoVadis methodology. Companies operating in countries with a lower risk level must respond to stricter regulations within their management system and face more institutional oversight. These companies generally achieve a higher CSR performance than companies in risky countries. Nevertheless, despite the difference in regulatory frameworks and oversight, UN Global Compact participants score, on average, 52 in risk countries, when compares to their nonparticipant counterparts that average a score of 39. This trend is consistent for UN Global Participants in non-risk countries, where they score on average 57, when nonparticipants have an Average Score of 46. There is a larger gap (13 vs 11 points) between participants and non-participants presented in risk countries, which indicates that there is a greater potential to have a positive impact for UN Global Compact signatories in less developed countries. The Ten Principles of the UN Global Compact act as a guiding framework for companies operating in countries that lack the necessary regulations on CSR issues. Not surprisingly, UN Global Compact participants in non-risk countries are, on average, the best performers in the EcoVadis database. These results are consistent with the overall view of the UN Global Compact as a universal framework that can be understood and implemented by businesses around the world, regardless of location. Our findings demonstrate that despite operations in risky regions, companies that adopt the UN Global Compact principles have a more advanced CSR management system in place. EcoVadis Overall Score: Organizations Headquarted in Risk Countries Average Score UNGC Signatory 52 Non- Signatory 39 Total 40 0 20 40 60 80 100 40% 30% 20% 10% 0% EcoVadis Score Range

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