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North America, Europe Include Top Business Performers in Anti-Corruption Efforts

01/07/2019 By

As companies become increasingly aware of their own corporate social responsibility (CSR) obligations, various watchdog groups are beginning to take stock of these indicators.

While some companies might look the other way as conflict gold passes through their supply chains, others might be making efforts to do positive things with their power, such as donating to charitable causes.

In a new EcoVadis study, “The Fight Against Corruption: Insights Into Ethical Performance in Global Supply Chains,” the company considers the issue of corruption and how prepared companies are to address it.

EcoVadis defines corruption as any kind of abuse of entrusted power in the workplace for private gain, including bribery, conflict of interest, fraud and/or money laundering.

The EcoVadis methodology aligns with that of the United Nations Global Compact principles, the company said, adding that such guidelines suggest that companies should avoid all forms of corruption and develop policies to address corruption internally and within their own supply chains.

According to the study, North American companies perform better (45.7/100) than those in other regions. However, EcoVadis said the maturity of such companies’ anti-corruption management systems can be explained by the fact that they are under more scrutiny and are subject to more penalties than companies in other regions.

The study states that the Greater China area — which includes China, Hong Kong, Macau and Taiwan — is the lowest-performing region (32.6/100).

“Chinese companies show little formalization of an anti-corruption management system,” the study said. “This is a concern given the high corruption risks present in that region.”

EcoVadis evaluates nearly 20,000 companies annually regarding their environmental, human rights and ethical performance, according to Sylvain Guyoton, senior vice president of research.

“All around the world, we see players who strive to create a responsible international business community,” Guyoton wrote in the study. “One of the major topics we assess is how businesses address anti-corruption risks and fight against fraud and bribery. Academic and management research has shown there is a huge cost associated with corruption.”

Guyoton said corruption is described by many as a cancer that wears away at an organization’s development potential.

The best-performing industry sector, finance and insurance, is also the sector that is most frequently exposed to penalties and fines relating to corruption, the study said. It has important disclosure obligations, and as a result, companies that operate in this field have commonly implemented, formalized anti-corruption programs.

On the flip side, the worst offenders include sectors that are most often exposed to corruption risks, such as the transportation and construction industries.

“Despite these increased risks, their anti-corruption management systems are less formalized than those in other industries,” the study explained.

The most recent Transparency International Index on Corruption Perception, published annually by Transparency International, revealed that “the majority of countries are making little or no progress in ending corruption, while further analysis shows journalists and activists in corrupt countries risking their lives every day in an effort to speak out.”

Additionally, the study found broad disparities regarding the implementation of best practices.

“While whistleblowing procedures are the most common best practice implemented by companies, other anti-corruption measures are still rare,” the study said.

Although third-party due diligence procedures or anti-corruption risk assessments are seen by experts as fundamental actions of any solid anti-corruption program, the study said such procedures remain exceptional for most companies, regardless of the region they are based in.

The top-performing regions include North America and Europe, while the worst performing region is “almost systematically” Greater China, the study said.

Guyoton said EcoVadis intends to help businesses fight corruption by improving visibility, data and statistics regarding corruption in global supply chains.