Consolidating against corruption

Genevieve LeBaron and Andreas Rühmkorf, in their paper ‘Steering CSR Through Home State Regulation: A Comparison of the Impact of the UK Bribery Act and Modern Slavery Act on Global Supply Chain Governance’,argue that the failure of these CSR measures has led to a global increase in domestic legislation designed to goad multinationals into ensuring good governance of labour standards and anti-corruption measures in the supply chain. In the UK, this legislation includes the Bribery Act 2010 and the Modern Slavery Act 2015 (MSA) – both introduced to address the regulatory gaps that exist in addressing corporate accountability for abuses.

Corruption and modern slavery

Understanding of the intrinsic relationship between corruption and human rights is growing. The risks arising from corrupt behaviour are similar to those posed by adverse human rights impacts, such as the danger of legal liability, reputational and financial exposure. Association with alleged corruption or human rights abuses through business partners is also a growing threat to organisations.

An increasing number of anti-corruption and human rights initiatives are directed at corporate activities, which have put companies under closer scrutiny to fulfil their commitments to both tackling anti-corruption and managing human rights impacts.

Current legislation

The past 10 years have seen a growing body of laws, regulations and initiatives expecting companies to demonstrate corporate commitment to anti-corruption and human rights risk management.The UNGPs require companies to know and show that they respect human rights. The measures expected to be in place are similar to measures addressing anti-corruption, such as due diligence, risk assessment and self-regulation.

LeBaron and Rühmkorf highlight the Bribery Act as an example of a “stringent form of home state regulation that establishes extraterritorial corporate criminal liability and includes binding public sanctions for non-compliance”. The MSA is not as stringent, although it does increase an organisation’s disclosure obligations.

Enforcement mechanisms and impact

In their study, LeBaron and Rühmkorf found that the Bribery Act has resulted in significant changes to corporate policy and practices, while the MSA has not yielded substantive change in multinational company’s policies and practices concerning labour standards in supply chains. This suggests that the Bribery Act is more effective. Reasons cited for this discrepancy in behaviour is the lack of enforcement penalties in the MSA, compared to those in the Bribery Act. They also cite the MSA’s dependence on private governance tools and standards as a contributory factor.

Additionally, the MSA does not create new public standards, whereas the Bribery Act establishes corporate criminal liability for bribery within a company’s global supply chain. There is also a defence if organisations can prove that they have ‘adequate procedures’ in place (Bribery Act, s7(2)). The impact of the legislation’s differing approaches is also noticeable in the way companies discuss both issues in their Codes of Conduct, CSR reports and terms and conditions. According to LeBaron and Rühmkorf, companies afford bribery a more prominent role in their reporting, and the language used in Codes of Conduct and elsewhere is less aspirational than the language used to address forced labour.

The management practices of those companies that are linking anti-corruption and human rights compliance are a good place to start for businesses that are grappling with how to integrate these issues into their business structures and practices.

Recognising these links can result in significant benefits, such as efficiency gains, boosting compliance efforts and through sharing information and learnings. The UNGC does recognise that the advantages of sharing information is key, although complete integration of anti-bribery and human rights compliance efforts is not required, as the same employees won’t necessarily be responsible for both.

Practical steps to take

Organisations will have different compliance programmes in place – but there is consensus on best practice as a result of published guidance by governments and international organisations. The model set out in Figure 1 reflects how many companies arrange their anti-corruption compliance programme around three pillars: policies and procedures; proactive measures; and reactive measures. The aim is to go beyond risk mitigation and promote a corporate culture that promotes positive behavioural change. This model is not dissimilar to the systems prescribed by the UNGPs, although the process involving human rights due diligence is notably different. Identifying human rights risk means going beyond identifying risks to the company itself and considering rights-holders. It is, however, still possible to integrate the process.

Figure 1: Anti-corruption compliance system

Source: Ardea international

Integrating compliance processes

The steps companies can take when considering how to link their compliance processes include:

• Learning from anti-corruption compliance programmes to guide human rights management
• Leveraging senior management support
• Aligning human rights and anti-corruption policy commitments (such as in contract clauses or supplier codes of conduct)
• Integrating human rights and anti-corruption procedures – this can be done through joint training sessions
• Building internal capacity – particularly to ensure that a human rights focus is applied to risk management
• Establishing cross-functional anti-corruption and human rights working groups
• Ensuring business partners are properly screened
• Tying in bonuses to individual staff members’ performances in the area of anti-corruption
• Developing joint internal reporting
• Communicating policies.

Companies should consider the potential benefits of linking human rights and anti-corruption compliance.

Image credit | iStock

Colleen Theron is CEO of Ardea International. Ardea International is a specialist sustainability, human rights and business consultancy with expertise on modern slavery. We support business and organisations meet their legal compliance obligations and develop best practise procedures, leading ‘beyond compliance’.