Environmental, social and governance (ESG) risks, in particular bribery and corruption and human rights risks, are often managed by different business functions within an organisation. But the advantages of harmonising approaches to ESG risks with common touchpoints are significant.
By aligning processes for reducing and mitigating the impact of integrity and human rights risks, organisations can strengthen their broader compliance culture and, ultimately, build stakeholder confidence in their approach to ESG matters.
The recent increased focus on improved accountability for ESG risks is encouraging organisations to consider the potential impact of their activities on stakeholders and other third parties, and to embed appropriate ESG risk management and compliance into decision-making and operations.
ESG risks are often managed by different business functions, but there is significant advantage in aligning the approach to risks that have common touchpoints. A compelling example is the connection between human rights and bribery and corruption. Poorly identified or inadequately addressed, corruption risks can leave organisations exposed to serious criminal findings, punitive penalties and reputational damage, and can lead to criminal convictions for individuals. Corruption also has far reaching human rights consequences. It enables the violation of human rights and diverts public funds, leaving governments with less resources to meet their obligations to deliver services and improve standards of living.
What can organisations do to harmonise their processes for reducing and mitigating the impact of integrity and human rights risks?
Commitment from the top
Effective leadership is critical to establishing a culture of compliance. By taking a strong, explicit and visible stance against bribery and corruption, the board and senior management can set the tone from the top and embed expectations of zero-tolerance compliance.
The UN Guiding Principles on Business and Human Rights (UNGPs) encourage organisations to commit to respecting human rights at the highest levels, and send a message throughout the organisation that identification, prevention and mitigation of human rights impacts are required of all.
Clear and holistic policies and procedures
From principle to practice, the UNGPs and key guidance on anti-bribery and corruption (ABC) measures 1 require that commitments to integrity and human rights are effectively operationalised into policies and procedures. Organisations adopting best practice ABC compliance will produce an enterprise-wide code of conduct in clear language that provides guidance on how to achieve the organisation's expectations of its people to avoid bribery and corruption. This should be accompanied by comprehensive, user-friendly policies and processes that put the guidance into effect, such as obligations to keep accurate books and records, requirements for approval for higher risk activities, prohibitions on offering improper benefits and indications that any concerns must be reported.
By taking a holistic approach to the implementation of policies and procedures it is possible to link conduct which may breach ABC laws and the potential adverse human rights impacts if that conduct is established. These policies and procedures should therefore incorporate human rights protections. Codes of conduct must demand respect for co-workers and the broader community, require safe and secure working conditions and build in accountability for misconduct. Alternatively, where stand-alone human rights policies are preferred (which the UNGPs recommend), they should incorporate integrity obligations to emphasise that corruption is not a victimless crime and the adverse human impacts of corruption can be significant.
Identifying and understanding the risks
Promulgating tone from the top and developing appropriate policies and procedures will only be effective if ABC and human rights risks are identified accurately and the potential impacts are understood. This requires, in the first instance, an assessment of the risks in the context of the organisation's operations, including its supply chain.
Effective measures to identify and assess corruption and human rights risks will be tailored to specific industries and geographies. There is also a further opportunity to underscore the link between corruption and adverse human impacts if they are considered concurrently during risk assessment processes. This approach inevitably requires a review of a broader range of risk scenarios, which is likely to identify potential issues that may not be apparent if these risk assessments are conducted in isolation.
Training and communication
Strong training and communication programs are central to ensuring ABC and human rights commitments are understood and put into practice throughout all levels of an organisation.
Key ABC guidance and the UNGPs acknowledge that to operationalise high level anti-corruption and human rights commitments, it is imperative that staff be trained to understand and identify how issues might arise, the applicable compliance obligations and the company's response procedures.
It is also essential to reinforce these important messages periodically, ideally through targeted communications addressing the parts of the entity and activities that create the greatest potential risk. Such communications also provide a further opportunity to highlight the link between conduct that breaches ABC laws and potential adverse human rights impacts.
Grievance mechanisms and remediation
Accountability is central to protecting against human rights and corruption risks, and a confidential reporting mechanism 2 to receive and manage complaints is a critical element of a compliance program designed to mitigate both. Many companies have established procedures to encourage whistleblowing and confidential reporting of suspected improper or illegal conduct (including bribery and corruption), as well as human rights concerns connected to the entity's operations.
Where corruption or human rights issues are identified it is appropriate to consider remediation in any response. While the response to corruption will necessarily be different to adverse human rights impacts, a robust response (including remediation where relevant) that is communicated appropriately will also promote a stronger compliance culture and stakeholder confidence in the organisation.
By harmonising processes for reducing and mitigating the impact of integrity and human rights risks and embedding appropriate ESG risk management into their decision-making and operations, organisations will go a long way towards building a stronger compliance culture.
1 See Criminal Division, US Department of
Justice, Evaluation of Corporate Compliance Programs
(Guidance Document, June 2020) 10–11; Australian Trade
Commission, Anti-Bribery & Corruption (ABC): Due Diligence
in 12 Steps (Guidance Document, 2019) 3; UK Bribery Act
Guidance from the Department of Justice and Serious Fraud Office
2 In a human rights context, this is called a grievance mechanism, see UNGP 29.
This article is part of our publication Continuity Through Crises: Perspectives on business risk, resilience and recovery in uncertain times. Read more here.
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