Peter Wilkinson

Many businesses struggle to embrace anti-corruption in business practices despite a growing number of tools and resources. A KPMG survey¹ in 2005 found that only one in five corporate reports included policies against bribery or corruption, and few elaborated on how such commitments are put into practice.

Global Compact participants have also indicated that the initiative’s 10th Principle on anti-corruption is the most challenging issue area to implement. In 2007, the 10th Principle was among the least addressed principles in the “Communication on Progress”²  reports submitted by Global Compact participants describing their efforts in the areas of human rights, labour, environment and anti–corruption.

With contributions by Robert Barrington, Director of Governance & Sustainable Investment at F&C Management Ltd, and Jayn Harding, Senior Advisor on Responsible Investment at FTSE Group.

There are various reasons why reporting progress against corruption is challenging:

• Outcomes cannot be measured directly for activities which are preventive, and when corruption occurs it may remain undetected;
• Countering corruption is complex and related issues are often technical;
• There are many forms of corruption;
• Companies can find it difficult to discuss countering corruption publicly for fear that raising the topic may generate suspicions of problems; and
• Differences exist in reporting practices across cultures and business sectors.

Nonetheless, reporting is critical. It can support deeper integration of anti-corruption into business operations by establishing an external accountability mechanism and further stimulating companies to improve systems. Quality reporting enables a company to understand and communicate the business relevance of an anti-corruption programme, as well as express the company’s contribution to and impacts on society.

What should companies consider when reporting their practices to combat corruption? Five main reporting components are suggested.

Meeting stakeholders’ expectations
Companies should focus the content and scope of their reporting on matters of material interest to stakeholders.

Disclosing polices and management systems
Whatever the size of company, there must be an anti-corruption policy supported by implementation systems.

Reporting on effectiveness of implementation
As direct measures for effectiveness of anti-corruption activities are not possible, proxy measures should be used, such as employee and associate training. These should provide information about the depth and quality of the approach rather than just bare measures of inputs, such as hours of training given.

Making external reporting credible
Surveys consistently show suspicion by the public with regard to corporate reporting. How can companies build credibility? Steps can include: reporting the issues faced, describing the risk management approach and consequent actions taken, publishing results of stakeholder consultation, reporting results of self-assessments, and using an external assurer. Additionally, good practice can be shown by aligning with voluntary codes, such as the Business Principles for Countering Bribery or the Wolfsberg Anti-money Laundering Principles for financial institutions.

Standardizing reporting frameworks and indicators
By providing content in an easily accessible and comparable manner, companies can better inform stakeholders on their actions. Following are examples of relevant indicators, guidelines and frameworks:

• The Global Reporting Initiative Sustainability Reporting Framework sets out principles and indicators for organizations to report on economic, environmental and social performance.
  
• Transparency International encourages corporate anti-corruption implementation and has created a range of implementation tools and indicators to support the Business Principles for Countering Bribery. TI collaborates with anti-corruption initiatives to build consistency of reporting indicators and is working with the Global Compact to further develop reporting indicators for the 10th principle on countering corruption.
  
• The FTSE4Good Index Series, produced by the FTSE Group for use by responsible investors, is designed to reflect the performance of companies that meet global standards of environmental and social practice. Approximately 2,400 listed companies from 23 countries are screened against environmental and social criteria. Following extensive development work with TI, the FTSE4Good Criteria for Countering Bribery were introduced in February 2006.  Set at a level to be challenging but achievable, the criteria have been applied initially to companies classified as high-risk which have had to meet specific requirements in policy, management systems and reporting categories over a specified time period. 
  Two years on, 40 percent of companies now meet the criteria but 50 percent still fall short and are taking part in a FTSE dedicated engagement programme, while 10 percent have been deleted. FTSE Group’s experience is that companies often struggle with the reporting requirements, and it has directly helped many high-risk companies accept the importance of reporting on their management of countering bribery.
  
• The International Corporate Governance Network (ICGN) has recently adopted new anti-corruption guidelines developed by a group of institutional investors and pension funds led by F&C Asset Management. This is an important development because, for the first time, the global corporate governance community has acknowledged that: anti-corruption procedures are an integral part of good corporate governance, irrespective of where a company is domiciled; corruption is detrimental to shareholder value; and robust preventive systems can contribute to securing a lower cost of capital. F&C has developed a 10-point guide to good practice reporting³ and encourages companies to publish comprehensive details of policies, procedures, communication and engagement against a range of key performance indicators.

Reporting on actions to counter corruption presents challenges, but there are a growing range of tools and initiatives to assist companies in implementation of anti-corruption programmes and a range of standardized indicators are being formulated to further assist.


Peter Wilkinson is senior adviser to Transparency International on countering bribery in the private sector. He has been responsible for project managing the development of the Business Principles for Countering Bribery and a suite of supporting implementation tools for use by the private sector. He recently completed a three year project as a member of an international consortium of leading European research institutions carrying out an EU funded study on CSR entitled "Rhetoric and Realities: Analysing Corporate Social Responsibility in Europe". The project included examining the impact of CSR in relation to countering bribery.

ENDNOTES
1. KPMG International Survey of Corporate Reporting 2005
2. Companies that participate in the UN Global Compact are required to produce an annual “Communication on Progress” (COP) to their stakeholders which details progress made in implementing the ten Global Compact principles and, where appropriate, in supporting UN goals through partnerships.
3. A full version of F&C’s 10-point reporting guidelines is available at: www.fandc.com