How Clean Is Your Business?
Tanya Barman | August 17, 2015
Available Languages: English | Russian
A new CGMA global survey, Managing Responsible Business 2015, found that 82% of respondents’ organizations have a code of ethics in place. In the largest organizations, those with more than 5,000 employees, this number is even higher—93%. Year after year, it appears that employers are putting in place the ethical architecture, training, speak-up lines, and performance measures to support responsible business.
No doubt the spread of bad news via our ever-increasing e-world and the catastrophic costs of reputational damage have created the impetus to produce such safeguards. How a business conducts itself and how it can impact wider society is high on the global agenda. Corruption is also a critical area demanding a rise in attention across all markets. Record fines are being enforced under the US Foreign Corrupt Practices Act and the introduction of the UK Bribery Act has also led to tightening up of procedures globally as well as, importantly, a better understanding of the true cost of fraud to business and wider society.
Fifty-seven percent of the survey respondents confirmed they had specific guidelines related to anti-corruption, and nearly half of them agreed they had well-understood corruption risk assessment for entering new regions, markets, or projects. Promisingly, 26% engage in collective action, where competitors and other key players join together to fight corruption at market level.
There also has been a rise in awareness of human rights and business. The tragic Rana Plaza garment factory disaster in Bangladesh in 2013 cost over a thousand lives and injured more than 2,500. Child labor, first brought to the public consciousness though campaigns in the 1990s, is still a major issue in a number of sectors, most recently in the technical supply chain.
While 68% of respondents recognized that human rights are a relevant ethical issue to their organization, awareness of the UN Guiding Principles on Business and Human Rights stands at just 14%. These principles were introduced in 2011 as a global standard for addressing adverse impacts on human rights linked to business activity, wherever such impacts occur in the value chain. Positively, of those with awareness of the principles, nearly half were implementing the guidelines in order to proactively take steps to prevent, mitigate, and—where possible—remediate human rights impact.
Just as organizations now routinely conduct corruption due diligence, the need for human rights due diligence in higher-risk markets and sectors is likely to become more widespread. The UK, the Netherlands, Denmark, and Italy are among those governments that have already set out guidance to companies for integrating human rights into operations.
In order to help organizations identify risks as well as the best practice, organizations must have not only the right data but also the ability to analyze it. With only just over a third of respondents (36%) knowing their organization collected ethical management information, we can see a gap in management using data that can lend valuable insight into both threats and opportunities. This can often entail using an ethical “lens” to explore information that is already available. Ethical architecture alone cannot safeguard an organization. To make a difference, leaders must invest resources and effort into embedding the values they articulate, methodically assessing how they are being upheld and understanding the barriers and risks being contravened. The survey showed that 37% of global professional accountants feel pressure from colleagues to compromise their organization’s ethical standards. So the risks remain and accountants everywhere have a specific role to play in ensuring ethical practice by upholding their professional code of ethics.
With weekly reports of high-level cases of ethical transgressions, leadership teams need to identify what data will keep them better informed on the activities deeper within both their organization’s operations and culture. They must act quickly act on what they find, before they become the next global news story of irresponsible business.