This post originally appeared on the SCCE Compliance & Ethics blog.
I was truly honored to attend this year’s Compliance and Ethics Institute (CEI) in Las Vegas, and to present with my colleague Frank Brown, CIPE’s experience with motivating mid-sized businesses in emerging markets to launch compliance programs. Our session was one of the opening ones scheduled at 9am on Sunday morning (did I mention we were in Vegas?) so it was abundantly clear to us that everyone who attended was truly dedicated to the cause!
As we’ve heard throughout the event, emerging markets pose many compliance risks, especially in the area of anti-corruption. Local enforcement may be lax and bribery remains common in business transactions. What is more, under laws such as the U.S. Foreign Corrupt Practices Act or the UK Bribery Act, it is not just the behavior of a company’s own employees but also the conduct of it suppliers, agents, and other business partners that’s of concern.
“If a company’s goal is to stay in business for a long time, why take the shortcut and pay bribes, which can damage the company in the long term?” asked Sammy Hamzah, president of Indonesian Petroleum Association, at the launch event of CIPE and International Business Links (IBL)’s new Anti-Corruption Compliance guidebook for mid-sized companies in Indonesia’s oil and gas industry.
“When a company commits a corrupt behavior, it takes on average 20 to 30 years to bring back the company’s credibility.”
Corruption is a major problem in Indonesia. According to a Gallup poll, more than 8 in 10 Indonesians say that corruption is widespread throughout the nation’s government and businesses. The oil and gas sector is particularly susceptible to corruption because of the multiple steps in the procurement and licensing processes, as well as the sheer amount of the money involved.
That’s why CIPE and IBL produced the guide. It’s intended to help mid-sized companies looking to become suppliers of local or international oil and gas companies to understand the business case for anti-corruption compliance and instruct them on how to create an internal compliance system.
Loss of profits and market share, diminishing brand reputation, and costly fines threaten companies that do not meet the international standards of ethics. As evident in the wake of scandals involving top brands such as Apple and Nike for example, today’s consumers are becoming better educated about overseas working conditions and the unfair treatment of workers.
As corporate social responsibility (CSR) has risen as a top priority in operations and supply chains, Software Advice, affiliated with Garner – one of the world’s leading information technology research and advisory companies – investigates “which link in the [supply] chain consumers claim to care about most.” In this report examining how corporate social responsibility impacts purchasing behavior, Software Advice assessed consumers’ willingness to pay more for ethical products. Three separate phases of surveys polled a nationally representative dataset of approximately 385 respondents.
In one survey, Software Advice asked three different groups of consumers how much more they were willing to pay for a product, normally priced at $100 that was produced more ethically with respect to a particular link in the supply chain: raw materials, manufacturing, and distribution. Respondents indicated that they would pay an average of $18.50 more if the raw materials were ethically sourced and as much as $27.60 more for a product that was made in good working conditions.
This post originally appeared on Corporate Compliance Trends.
Ethics is an increasingly important component of doing business for both small and medium sized enterprises to multinational corporations in today’s globalized world. The Center for International Private Enterprise (CIPE) has long been an active advocate for better business practices with its focus on anti-corruption initiatives and promoting corporate social responsibility.
Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices, recognized CIPE leaders and partners for their contributions to advancing business ethics. Ethisphere magazine listed CIPE’s Executive Director John D. Sullivan and Michael Hershman, member of CIPE’s board of directors, as the top 100 most influential individuals in business ethics in 2014.
Corruption is a destructive tax on business that hampers entrepreneurship and economic development. In the last two decades significant progress has been made in making the fight against corruption a top priority for governments and businesses worldwide.
Yet many challenges remain, including spreading best practices in anti-corruption compliance beyond large companies to smaller firms in global value chains. The launch of CIPE’s new guide on anti-corruption compliance for mid-sized companies in emerging markets, held yesterday in Washington, DC, at the OpenGov Hub, focused on ways to boost third party compliance in difficult environments.
With bribery amounting to an estimated $1 trillion per year globally, corruption is now recognized to be one of the world’s greatest challenges. The costs of corruption affect the entire scope of international value chains – with the extra financial burden estimated to add at least 10 percent to the costs of doing business.
To comply with international anti-corruption norms and regulations, such as the Organisation for Economic Co-operation and Development (OECD) Anti-Bribery Convention, the U.K. Bribery Act, and the U.S. Foreign Corrupt Practices Act, the private sector must take greater responsibility in working to eliminate corruption. Companies that operate internationally must therefore pay attention not just to ethical conduct of their own employees, but also to how their suppliers, distributors, and agents behave in countries where they work.
In turn, local companies that aspire to join global value chains need to understand the importance of anti-corruption and how to move from commitments to action. To support the private sector in this challenge, CIPE created Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, geared specifically at helping local firms introduce practical, yet effective anti-corruption compliance programs. In the latest Economic Reform Feature Service article, CIPE Director of Multiregional Programs Anna Nadgrodkiewicz highlights the strategic investment for local firms in anti-corruption compliance as well as key elements of effective compliance programs.
Participants at Ethisphere’s 2014 Europe Ethics Summit.
In today’s global business environment, corruption poses a risk that companies with operations around the world must understand and manage effectively. Those that do reap the benefits. As the Ethisphere Institute points out, the business case is clear: the five year annualized performance of the World’s Most Ethical (WME) Companies Index was 21 percent, beating S&P 500’s 18 percent. Similarly, the ten year annualized performance of the WME Index is, at 11.4 percent, significantly higher than that of S&P 500 at 7.4 percent.
The key to success in ethical business is placing ethics at the center of corporate culture and building strong compliance programs that can mitigate corruption risks. That was the overarching theme of the recent 2014 Europe Ethics Summit: Leadership through Ethics and Governance, hosted in London by the Ethisphere Institute and Thomson Reuters. The Summit was Ethisphere’s first such event in Europe and gathered nearly 150 compliance experts, professionals, and stakeholders.