The Business Case for Putting Ethics at the Heart of Corporate Culture
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.
I had the pleasure of presenting on a panel devoted to managing third party risk on a global scale, moderated by the Director General of Forética Germán Granda, with distinguished co-panelists Catherine Delhaye of Valeo and Peter Harris of IMI plc. As global value chains stretch across national boarders where the quality of governance and enforcement of anti-corruption rules may vary, the ethical behavior of a company’s local business partners becomes of crucial importance. Companies understand this risk and increasingly make efforts to go beyond boilerplate contractual language prohibiting bribes by sharing resources and providing training to their third parties.
From the perspective of the CIPE, I emphasized that these efforts can be multiplied by working with business associations in different countries to help local firms learn best practices on compliance from the ground up.
CIPE has recently launched a guidebook, Anti-Corruption Compliance: A Guide for Mid-Sized Companies in Emerging Markets, to help companies in countries ranging from Kenya to Pakistan think about anti-corruption compliance as a strategic investment and take concrete steps to introduce or strengthen their internal compliance programs. Such programs don’t have to be expensive to be effective as long as local firms understand the basic tools needed to translate their commitment to integrity into daily business operations.
Beyond this company-level focus, CIPE also works with local actors on the policy side to address vague or conflicting rules and regulations that may be contributing to corruption, and to advocate for better enforcement of the rule of law and existing anti-corruption laws. As Sir Mark Moody-Stuart, Chairman of the Foundation for the Global Compact and former Chairman of Royal Dutch Shell, put it at the London Summit, “Alliances between businesses, civil society organizations, and labor organizations are the answer when it comes to changing government behavior.”
Anna Nadgrodkiewicz is Director of Multiregional Programs at CIPE.
Originally posted at CIPE Development Blog