Ethical Business: Luxury or Necessity? By Andy Gibson*
This is the first of a series of three articles examining the need for a more overtly ethical approach to international business, both by those conducting it – i.e. manufacturers, producers, exporters and importers – and by those supporting trade – banks, forwarders and the like. In this first article, we concentrate on corruption and the processes and laws that control it.
Ethical business is not just a luxury to be paid for by wealthy middle class consumers in the developed world through “labels” such as Fair Trade or Rainforest Alliance, it is a way of doing business that avoids:
- Exploitation of the smaller players in the developing and developed world
- The continuation of bribery and corruption practices around the globe
- The tendency for opaque funding, finance and profit arrangements, often for legitimate tax reduction strategies, but potentially valuable for money laundering: the legitimisation of the profits of serious crime and corruption
- Neglect of the broader societal and environmental impact of the business in favour of short-term profit.
Years of international trade experience across the globe have taught us that there is a potential clash between genuine differences in culture, including:
- Attitudes to the environment
- Roles and responsibilities of political, religious and tribal leaders
- The creation, management and distribution of wealth.
From our experience in international trade, we contend that corruption is not simply a problem for others, not related to us as honest consumers and suppliers of goods and services internationally. It is a fundamental obstacle to free trade and business growth in many countries and to the development of the health and well-being of the world’s citizens. It is therefore part of our corporate responsibility to help reduce corruption at all levels.
We believe that the eradication of corruption cannot be achieved overnight, and we are not proposing some Western cultural imperialism. Nonetheless, corruption, whilst apparently an inherent part of human nature, is not an inherent part of any ordered societal structure, nor is it acceptable under the auspices of any of the world’s great religions.
There have been a number of reports both private and public produced over the last few years into the issue of international financial bribery and corruption.
The OECD report in 2006 set the standard by outlining not just the current situation both globally and country by country, but adding the organisation’s views on how the international community might tackle the problems. More recent reports by Transparency International and the European Union have shown that whilst many countries have a long way to go to score above 50% on the freedom from corruption index, some beacons of good practice do exist. Furthermore, many of the countries having a good record on bribery and corruption are also prosperous world traders, giving the lie to the accusation that tackling corruption especially in emerging economies will slow growth.
The most recent development in anti-bribery and corruption legislation is that the UK and USA have both passed laws whose reach far exceeds their jurisdiction. Persons and organisations with operations in the UK and USA cannot simply “offshore” the problems associated with corruption and can be held to account for the actions of their agents. Clearly this development must be adopted across the EU to ensure a level playing field.
UK legislation means that companies need to take a proactive stance on the issue to protect themselves. A company with policies and procedures on counter-bribery and corruption clearly communicated to their employees and agents is unlikely to face prosecution for minor transgressions. On the other hand a clear breach of procedures involving active bribery or multiple payments will face the full force of the law.
There is more information on this subject and how a company needs to react to it in the full paper we have produced at Segelocum. Other useful sources include HMRC, UK and EU websites, City of London Police and, of course, your own legal advisors.
*Andy Gibson is managing director of Segelocum Ltd, a trade services company. www.segelocum.co.uk