Businesses should work against corruption in all its forms, including extortion and bribery.
What does it mean?
The tenth principle against corruption was adopted in 2004 and commits UN Global Compact participants not only to avoid bribery, extortion and other forms of corruption, but also to proactively develop policies and concrete programmes to address corruption internally and within their supply chains. Companies are also challenged to work collectively and join civil society, the United Nations and governments to realize a more transparent global economy.
With the entry into force of the UN Convention Against Corruption (UNCAC) in 2005, an important global tool to fight corruption was introduced. The UNCAC is the underlying legal instrument for the 10th Principle. Corruption can take many forms that vary in degree from the minor use of influence to institutionalized bribery. Transparency International’s definition of corruption is “the abuse of entrusted power for private gain”. This can mean not only financial gain but also non-financial advantages.
The OECD Guidelines for Multinational Enterprises define extortion in the following way: “The solicitation of bribes is the act of asking or enticing another to commit bribery. It becomes extortion when this demand is accompanied by threats that endanger the personal integrity or the life of the private actors involved.”
Transparency International’s Business Principles for Countering Bribery define bribery in the following way: “Bribery: An offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as an inducement to do something which is dishonest, illegal or a breach of trust, in the conduct of the enterprise’s business.”
Why should companies care?
There are many reasons why the elimination of corruption has become a priority within the business community. Confidence and trust in business among investors, customers, employees and the public have been eroded by recent waves of business ethics scandals around the globe. Companies are learning the hard way that they can be held responsible for not paying enough attention to the actions of their employees, associated companies, business partners and agents.
The rapid development of rules of corporate governance around the world is also prompting companies to focus on anti-corruption measures as part of their mechanisms to express corporate sustainability and to protect their reputations and the interests of their stakeholders. Their anti-corruption systems are increasingly being extended to a range of ethics and integrity issues, and a growing number of investment managers are looking to these systems as evidence that the companies undertake good and well-managed business practice.
Businesses face high ethical and business risks and potential costs when they fail to effectively combat corruption in all its forms. All companies, large and small, are vulnerable to corruption, and the potential for damage is considerable. Business can face:
- legal risks: not only are most forms of corruption illegal where they occur but it is also increasingly becoming illegal in a company’s home country to engage in corrupt practices in another country;
- Reputational risks: companies whose policies and practices fail to meet high ethical standards, or that take a relaxed attitude toward compliance with laws, are exposed to serious reputational risks. Often it is enough to be accused of malpractice for a company’s reputation to be damaged even if a court subsequently determines the contrary;
- Financial costs: there is clear evidence that many countries lose close to $1 trillion due to fraud, corruption and shady business transactions and in certain cases, corruption can cost a country up to 17% of its GDP, according to the UN Development Programme in 2014. This undermines business performance and diverts public resources from legitimate sustainable development;
- Erosion of internal trust and confidenceas unethical behaviour damages staff loyalty to the company as well as the overall ethical culture of the company.
What can companies do?
The UN Global Compact suggests that participants consider the following three elements when fighting corruption and implementing the 10th principle:
- Internal: As a first and basic step, introduce anti-corruption policies and programmes within their organizations and their business operations;
- External: Report on the work against corruption in the annual Communication on Progress; and share experiences and best practices through the submission of examples and case stories;
- Collective Action: Join forces with industry peers and with other stakeholders to scale up anti-corruption efforts, level the playing field and create fair competition for all. Companies can use the Anti-Corruption Collective Action Hub to create a company profile, propose projects, find partners and on-going projects as well as resources on anti-corruption collective action;
- Sign the “Anti-corruption Call to Action”, which is a call from Business to Governments to address corruption and foster effective governance for a sustainable and inclusive global economy. Your company’s participation in this Call to Action underscores your continued efforts to integrate anti-corruption into your strategies and operations. Learn more about the Call to Action and how to sign.