What does Target 16.5 mean for businesses?
While there is no universally agreed definition, according to the UN Office on Drugs and Crime (UNODC), corruption is a crime committed by officials (public and private) leveraging their role to procure gain for themselves or someone else with several forms, including abuse of power, bribery, conflict of interest, embezzlement and extortion. Corruption and bribery are among the greatest impediments to social and economic progress, undermining institutions of governance (Target 16.6), including the will of the people (Targets 16.7 and 16.10) and the rule of law (Target 16.3). It corrodes the legitimacy and capacity of Governments to fulfil their core responsibility to provide essential public services, including law and enforcement (SDG 16), health and education (SDGs 3 and 4) and investment and infrastructure (SDGs 9 and 17). While the role of Government officials on the “demand side” of corruption is more likely to consume news headlines, the “supply side” requires equal attention as it is often fueled by businesses and other opaque entities.
Article 12 of the UN Convention Against Corruption (UNCAC) and Principle 10 of the UN Global Compact acknowledge and address the role of businesses in corrupt practices. The UNCAC is the only legally binding international legal instrument and calls for Governments to legislate, regulate, monitor and enforce the conduct of the private sector. As mentioned in Target 16.4, the UN General Assembly Special Session Against Corruption (UNGASS) will convene in 2021 with a focus on the challenges and measures to prevent and combat corruption and strengthen international cooperation. Notably, there has been a significant increase in anti-bribery legislation and enforcement in recent years, including in Australia, Brazil, China, Kenya, the United Kingdom and the United States. And while businesses have been the subject of significant scandals over recent years, they are becoming increasingly aware that corruption is too costly for them and the communities they serve.
Interestingly, many voices including from the business community advocated for the creation of a separate Goal in the SDGs which would solely focus on corruption and bribery. While this did not come to bear, Target 16.5 — together with Target 16.4, to “…significantly reduce illicit financial […] flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime” — sends a strong message that this blight on society can and must be overcome. As foreshadowed, Target 16.5 relates not only to the targets within SDG 16 but also to many of the SDGs. It speaks to accountability, integrity and transparency — all of which are foundational to responsible business conduct and to the enabling environment in which businesses operate.
Corruption impacts every aspect of a business’ operations, from maintaining commercial, financial and legal certainty in transactions to managing human rights, labour and environmental risks. Combating corruption matters to business because:
- It is illegal and therefore, poses significant legal and reputational risks if a business is found to have engaged in or abetted in this conduct.
- It incentivizes and rewards unethical behaviour which presents an unlevel playing field for responsible businesses.
- It harms economic and social development which businesses require in order to thrive.
Corruption and the scale of the problem
- The effects of corruption extend beyond the economic, psychological and sociological effects to undermine the rule of law as well as the institutional legitimacy and capacity of Governments necessary to support thriving business environments (UN Office of Drugs and Crime, Effects of Corruption, 2019)
- Businesses and individuals pay between $1.5 and $2 trillion in bribes each year, amounting to roughly 2 per cent of global GDP (International Monetary Fund, Corruption: Costs and Mitigating Strategies, 2016)
- Bribery, theft and tax evasion cost approximately $1.26 trillion for developing countries per year (World Economic Forum, Corruption Costs Developing Countries $1.26 trillion Each Year, 2019)
- Transparency International’s Corruption Perceptions Index (CPI) ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and business people. The CPI Report 2020 highlights the impact of corruption on Government responses to COVID-19, comparing countries’ performances in the index to their investments in health care and the extent to which democratic norms and institutions have been weakened during the pandemic. (Why Fighting Corruption Matters in Times of COVID-19, 2021)
- The World Economic Forum Corruption Transformation Map is a dynamic knowledge tool that helps users explore and understand the complex and interconnected nature of corruption, including its key driving forces and its impact on other global issues such as human rights and sustainable development.
How should businesses implement Target 16.5?
Businesses have the ability and influence to work against all forms of corruption in a variety of ways. First and foremost, businesses should “do no harm” by adopting a zero-tolerance approach to accepting, engaging or otherwise facilitating any form of unethical or illegal conduct. Businesses can make a “positive contribution” by acting collectively and/or by using their influence to level the playing field, promote greater business integrity and ultimately build trust.
The UN Global Compact has released a number of resources to support businesses in upholding Principle 10, including on conducting an anti-corruption risk assessment, engaging in anti-corruption collective action and fighting corruption in the supply chain, among other useful guidance. A number of Global Compact Local Networks also host anti-corruption or bribery and corruption prevention working groups. These working groups allow businesses to learn and share with their peers and also connect and partner with Governments and civil society with the aim of strengthening ethical practices and the enabling environment. The Organisation for Economic Co-operation and Development (OECD) also released a report on the challenges faced by businesses — especially small and medium enterprises (SMEs) — to develop and implement robust anti-corruption programmes and explore ways to overcome these challenges. In addition, Transparency International developed business principles for countering bribery.
Here are some ways businesses can take action
Culture and board/management oversight
Take steps to clearly communicate a zero-tolerance approach to corruption and bribery from top management and throughout the business’ operations and relationships. See Business Against Corruption: A Framework for Business Action.
Awareness, education and training
Develop and facilitate training that creates awareness to identify and mitigate bribery and corruption relevant to business and/or function, and consistent with local laws and international standards. If the laws are weak in a given jurisdiction, businesses are encouraged to apply the higher standard wherever possible. See The Fight Against Corruption e-learning tool.
Policies and processes
Develop and implement robust anti-corruption compliance and ethics programmes to be applied across functions, operations and stakeholders, including engagement with public officials, clients, intermediaries and suppliers. Businesses are encouraged to incorporate ethical conduct into performance management frameworks. See Incentivising Ethics guide by Transparency International.
Accountability and reporting
Develop, implement and adequately resource internal mechanisms, through which employees and external parties can report any adverse business, client or supplier conduct relating to bribery and corruption. These mechanisms should include anonymous hotlines, whistle-blower protection and providing access to effective remedy. Businesses should also publicly report on anti-corruption compliance and ethics programmes, including beneficial ownership.
Ensure that any risks related to bribery and corruption are accurately identified and reported and, in turn, are effectively mitigated and monitored. Compliance is expected with any national/regional legislation and, wherever possible, other international standards and voluntary benchmarks or frameworks. See A Guide for Anti-Corruption Risk Assessment.
Board/management oversight, culture, strategies, policies, operations and relationships
Lead, promote and support the enactment and enforcement of robust national and international legal frameworks that seek to eliminate corrupt practices and stress the advantages for corruption-free business environments that attract foreign direct investment. For example, such advocacy may focus on greater use of e-government solutions so face-to-face interactions with public officials by businesses and citizens are limited and the risk of demand/supply bribery is reduced.
Support efforts to educate communities and other stakeholders on the possible forms of bribery and corruption. Encourage reporting of any instances to the relevant authorities (where it is safe to do so).
Lend expertise and resources to build the capacity of local governments to develop, implement and enforce laws and regulations to combat corruption in all its forms. Work with law enforcement agencies and civil society organizations to identify, apprehend and prosecute any suspected perpetrators.
International cooperation and partnerships
Engage with the UN and other multilateral organizations and business/industry associations to raise awareness and counter all forms of bribery and corruption. The inherently sensitive nature of these issues compels global cooperation to address them.
Anti-corruption collective action
Work with Global Compact Local Networks and/or other business associations and civil society organizations to strengthen ethical business practices through such mechanisms as business coalitions, declarations, integrity pacts or principles-based initiatives. Such activities can be between businesses/sectors and/or with civil society and Governments, and work to advance ethical behavior. See Join Forces Against Corruption.
Institutions, laws and systems at the international, national and municipal levels
Here are some ways businesses are taking action
Anti-Corruption Collective Action through Global Compact Local Networks
Since 2010, the UN Global Compact, in collaboration with Global Compact Local Networks and partner organizations, has launched Anti-Corruption Collective Action projects under the Siemens Integrity Initiative's First Funding Round and Second Funding Round and, currently, Third Funding Round. These projects have focused on efforts in Brazil, Egypt, India, Japan, Kenya, Nigeria, South Africa and Ukraine and have been instrumental in engaging with key stakeholders and strengthening collaborations in the fight against corruption. The projects have also contributed to raising awareness on the benefits of ethical business practices. (Source)
- Anti Corruption Pilot Programme in Ecuador
Nestlé launched a tailor-made programme for small and medium-sized enterprises (SMEs), focused on the prevention of bribery in the business value chain and based on international standards from Transparency International, among others. The programme, executed together with the “Project Ecuador 2030” platform, provides a toolkit and guidance to strengthen transparency and integrity in SMEs that are part of the value chain of “anchor businesses” (larger enterprises). Following the pilot, the Transparency Enterprise Network will roll out the initiative on a larger scale through a new interactive eLearning tool. (Source)
- Building an Ethics and Compliance Culture
Neoenergia has developed a compliance system that works to strengthen a culture of integrity based on its Code of Ethics, Anti-Corruption and Crime Prevention Policy and Governance and Sustainability Policy. The company provides communication and training for its employees; maintains efficient and effective control systems; has a specific channel for employees to reports concerns about integrity that is anonymous and independent; conducts investigations and applies disciplinary measures; conducts periodic internal reviews of ethical culture, including evaluation processes of suppliers; and conducts compliance risk assessments and improvements consistent with ISO 37001 certification. The system is fully integrated to ensure that ethics is part of the employees’ daily responsibilities and also part of the company’s commitment to integrity in the environments in which it operates. (Source)
- Business Integrity Policy
AngloAmerican’s Code of Conduct sets out standards and expected behaviours which guide how it does business. The Policy sets out bribery and corruption risks and the consequences of non-compliance with the policy, including disciplinary action, specific sanctions and summary dismissal. Business partners, contractors, employees, suppliers and other external stakeholders are encouraged to report any breaches to YourVoice, a facility designed to receive concerns in a confidential and secure way. It provides telephone and website intake channels operated by independent companies in the regions where AngloAmerican operates and is available 24 hours a day, seven days a week in any language. (Source)
- Bribery Prevention Network
Hosted by Global Compact Network Australia, the Bribery Prevention Network is a public-private partnership that brings together business, civil society, academia and Government with the shared goal of supporting Australian businesses to prevent, detect and address bribery and corruption and promote a culture of compliance. It offers a free online portal of accessible, relevant and reliable resources, curated by Australia’s leading anti-bribery experts, to support Australian businesses in managing bribery and corruption risks in domestic and international markets. (Source)
- Global Integrity Education Project
UNODC, under the new Siemens-funded Global Integrity Education Project, brings together business and academia to develop and implement an innovative integrity education programme in universities and companies. The project will establish and implement an effective integrity education programme that fosters ethical decision-making in the private sector and empowers employees to serve as “ethics ambassadors” in companies. The three-year project will be implemented in Pakistan, Kenya and Mexico. (Source)
- Extractive Industries Transparency Initiative (EITI)
A global standard to promote the open and accountable management of oil, gas and mineral resources. The EITI Standard requires the disclosure of information along the extractive industry value chain, from the point of extraction to how revenues make their way through Governments to benefit the public. This disclosure of revenue payments is intended to enhance the transparency and accountability of the management of these natural resources in order to diminish corruption, improve governance and contribute to sustainable development. There are 67 companies from the oil and gas industry, mining, commodity trading and financial industries supporting the EITI. See the EITI’s private sector support here. The EITI also engages both implementing and supporting Governments as well as civil society on a global and country-specific basis. (Source)
- The Integrity App
This open-access application was developed by the Alliance for Integrity, a multi-stakeholder initiative between the private sector, civil society, political organizations and international institutions. The application helps small and medium enterprises self-evaluate compliance programmes and provides an integrity action score and resources to support capacity building. Further, the application allows large enterprises to evaluate and improve the compliance capacities of potential suppliers. (Source)
- Internal Crime Prevention System
Grupo VAPF has established an internal crime prevention system that includes the development of robust policies and procedures that set a zero-tolerance approach to bribery and corruption and sets standards on responsible codes of conduct. The Corporate Regulatory Compliance Committee has oversight of the programme which includes standards setting, implementation, control and monitoring. The Committee has the necessary mandate and acts independently of both Grupo VAPF´s board of directors and executive committee. The programme includes a claims channel and a suggestions box so the employees can report any breaches of the code of ethics, policies, procedures and other internal rules. The programme is also audited by a credible and independent external party for quality assurance. (Source)
- Maritime Anti-Corruption Network (MACN)
MACN is a global business network working towards the vision of a corruption-free maritime industry that enables fair trade to the benefit of society at large. Established in 2011 by a small group of committed maritime companies, MACN has grown to include over 140 companies globally and has become one of the pre-eminent examples of collective action to tackle corruption. MACN and its members work towards the elimination of all forms of maritime corruption by raising awareness of the challenges faced; implementing the MACN Anti-Corruption Principles and co-developing and sharing best practices; collaborating with Governments, non-governmental organizations and civil society to identify and mitigate the root causes of corruption; and creating a culture of integrity within the maritime community. (Source)
Developed by the Office of the Comptroller General (CGU), Pró-Ética is an initiative that encourages the voluntary adoption of anti-corruption compliance programmes by private companies operating in Brazil. The project, which has already evaluated more than 600 compliance programmes, aims to encourage, through a positive recognition bias, the voluntary adoption of integrity mechanisms and procedures focusing on the prevention, detection and remediation of acts of fraud and corruption. Pró-Ética is an important tool to improve relations between the public and private sectors and to promote a more honest, ethical and transparent corporate environment in the country. It has been internationally recognized by the Organization of American States (OAS), OECD, UNODC and, more recently, by the Society of Corporate Compliance and Ethics (SCCE). (Source)
- Scoring High on Transparency International's Defence Companies Index
The fight towards corruption is paramount for the Aerospace & Defence industry especially when engaging with Governments and public institutions. Building trust with stakeholders and adopting a zero tolerance approach toward corruption are ethical principles followed by Leonardo. Moreover, it requires any entity or person it has any relationship with to act in accordance with the same ethical principles. Leonardo recently undertook a group-wide effort to reinforce its disclosures system and enhance accountability, controls and transparency. The strong commitment by top management and the involvement of 18 diverse business functions enabled a deep cultural change in Leonardo and enhanced transparency across the group. This effort was recognized by Transparency International with Leonardo scoring very high on its Defence Companies Index on Anti-Corruption and Corporate Transparency (DCI). (Source)
- World Economic Forum Beneficial Ownership Transparency Advisory Group
Beneficial ownership transparency (BOT) has become one of the leading topics in the international agenda for financial reform and is seen as a critical tool to fight illicit financial flows related to corruption, money laundering and tax evasion. The World Economic Forum’s Partnering Against Corruption Initiative (PACI) team alongside other partners from civil society, including the Tax Justice Network, OpenOwnership, Global Financial Integrity, the B Team and Transparency International, has set up a multi-stakeholder advisory group to promote the implementation of short-term pilots to verify beneficial ownership information. The group is working with several Governments to identify and help improve verification of beneficial ownership information at the country level. (Source)
- World Economic Forum Tech for Integrity (T4I)
The World Economic Forum’s Partnering Against Corruption Initiative (PACI) launched the T4I platform to accelerate anti-corruption efforts through thought leadership, networks and impact based on the premise that “technology has emerged as one of the greatest allies of transparency and a critical tool against corruption”. The T4I platform explores the role that four nascent technologies — artificial intelligence, big data, blockchain and e-governance — can play in addressing vulnerabilities and building trust. (Source)
Some industries that could/should contribute to achieving Target 16.5
Similar to Target 16.3, “…to promote the rule of law at the national and international levels…”, the reduction of corruption and bribery is inherently relevant to all industries. As long as corrupt practices are able to survive, businesses cannot function and societies cannot thrive.
Some intersections with Target 16.5 and the Ten Principles, UNGPs and SDG16+
Corruption and bribery in all forms adversely affect all aspects of responsible business and international development and are, therefore, inherently relevant to all aspects of the Ten Principles and Sustainable Development Goals.
- Anti Corruption Pilot Programme in Ecuador