Mr Annan used his Davos speech two years ago to advance a deeply-held concern that the global economy was more "fragile and vulnerable" than was generally appreciated.

He argued that unless the global market, like national markets, was held together by shared values, it would be exposed to backlashes from protectionism, populism, nationalism, ethnic chauvinism, fanaticism and terrorism. In addition to the efforts of the UN and other international agencies to promote human rights, acceptable labour conditions and environmental standards, he said, the corporate sector must tackle them directly.

"Indeed, you can use these universal values as the cement binding together your global corporations, since they are values people all over the world will recognise as their own. You can make sure that in your own corporate practices you uphold and respect human rights, and that you are not yourselves complicit in human rights abuses."

The overall message was a familiar, and welcome, one for some of the secretary-general's audience. An increasing number of large companies today take an active approach towards managing their reputations and implementing social responsibility programmes. But the global compact suggested a practical new way of collectively approaching some of the issues involved, and, last July, representatives of multinational companies gathered at the UN headquarters to help make it a reality.

Between Mr Annan's Davos speech in 1999 and last summer's New York meeting, however, an event of dramatic importance took place; it is still giving politicians and business leaders considerable pause for thought. Serious rioting, with global corporations one of the demonstrators' core targets, disrupted the Seattle meeting of the World Trade Organisation.

Mr Annan's Davos warning to international business leaders that globalisation was more fragile than they realised suddenly took on the shape of a prophecy that was coming to pass with alarming speed. And, as unrest at subsequent international monetary conferences has confirmed, the Seattle riots cannot be regarded as a one-off, unrepeatable explosion of opinion. It has become clear that government, international organisations, and businesses all need to consider best how to respond.

The global compact - part of that response - is based on nine principles drawn from the universal declaration of human rights, the International Labour's Organisation's fundamental principles of rights at work and the Rio environment and development principles. Companies supporting it will, among other things, post specific examples of progress on the UN web site.

The internet has rapidly moved to the centre of the social responsibility battleground. Critics of large corporations use web sites to mount attacks on them and call for boycotts and demonstrations, while companies have begun using their own sites to promote examples of positive corporate citizenship.

There is also a growing trend for companies to publish social reports - in which they account for their social, ethical and environmental activities as well as their financial ones - allowing the reports to be verified externally.

Behaving as a socially responsible company, however, is becoming an ever-more demanding challenge. It is no longer sufficient to be good in parts. A company with the most enviable reputation for supporting educational projects in its home market, for example, would soon lose all credibility if its overseas suppliers were shown to be employing child labour in inhumane conditions.

One of the attractions of the global compact - which has already been endorsed by companies including BP, DaimlerChrysler, Unilever, Deutsche Bank, Ericsson, Novartis and Nike - is that is operates from a baseline of clear international standards.

But approaches to corporate social responsibility vary, both nationally and within companies. In the US, social responsibility is rooted in a long philanthropic tradition, while in the UK it is regarded more as part of the overall process of management.

An interesting debate is in progress about which approach will prove more effective in helping multinational companies handle the complexities of exhibiting socially responsible conduct not only in familiar domestic markets, but throughout the world.

The UK government supports the UN global compact, and revised OECD guidelines for multinational enterprises which set out standards for overseas investment policies. It intends to legislate to give the UK courts jurisdiction over British nationals who commit offences of corruption abroad, and a company law review currently in progress is considering what changes might further encourage companies to adopt appropriate social and ethical practices.

The importance the government attaches to corporate social responsibility was reiterated in a white paper (policy document) on globalisation and development published by the Department forInternational Development in December.

In recent years, it said, public interest in corporate social responsibility had exposed trade, investment and supply-chain relationships to issues such as child labour, corruption, human rights, labour standards and the environment.

"By applying best practice in these areas, business can play an increased role in poverty reduction and sustainable development. Many companies have also realised important commercial benefits in terms of reputation, risk-management and enhanced productivity."

While governments and international organisations will continue to have a significant contribution to make, the biggest challenge facing promoters of corporate social responsibility is to increase the number of companies that identify a link between ethical conduct and commercial benefit.