Representing at least five percent of world GDP, corruption is a great challenge in general, and especially associated with sustainable business, both nationally and internationally. In this chapter, I reflect on how to address corruption and anti-corruption practices. Typical forms of corruption include bribery, facilitation payments, gifts, hospitality and expenses, political contributions, charitable contributions, sponsorships, voluntary community contributions, trading in influence, and conflict of interest and impartiality. Corruption leads to weak institutions and injustice, less respect for rights, denial of basic services, and several of the world’s environmental damage and tragedies are associated with corruption. Studies show that almost half of the companies have experienced fraud over the past two years. This chapter addresses the corruption challenges, how they are addressed by corporations and key international laws as well as challenges associated with norms and behaviors. How to detect and avoid corruption receives key attention. As anti-corruption is a huge topic and challenge, and only limited space is available in the book, the topic is presented from a more general perspective. Even though anti-corruption is often left out when talking about sustainability, it cannot be excluded from a book on sustainability and responsibility.
- Social norms
- Scandal, petty corruption
Corruption is “the abuse of entrusted power for private gain” (Transparency International, n.d.)
Corruption is a global challenge. Typical forms of corruption are associated with bribery, facilitation payments, gifts, hospitality and expenses, political contributions, charitable contributions, sponsorships, voluntary community contributions, trading in influence, and conflict of interest and impartiality. According to a survey conducted by PWC among 5000 respondents across 99 territories about their experiences over the past 24 months, almost half of those surveyed had experienced one or more frauds such as customer fraud, cybercrime, and asset misappropriation. Almost half of these were internal frauds. It is estimated that the total cost of these kinds of crimes amount to US$ 42 billion (PwC, 2020). It is estimated that 2.7 percent of the global GDP is laundered annually, and corporations seeking tax-free jurisdictions cost governments close to $ 600 billion annually (Financial Accontability Transparency & Integrity, 2021).
The tenth principle of the UN Global Compact (see the next section) states that “Business should work against corruption in all its forms, including extortion and bribery”. One of the reasons behind this is that corruption is a major obstacle to economic and social development and that implies a negative impact on sustainable development especially affecting poor countries.
SDG Goal #16—Peace, Justice, and Strong Institutions includes “commitments to corruption, increase transparency, tackle illicit financial flows and improve access to information”. This goal is thus critical to the entire 2030 Agenda, because corruption undermines progress on all other SDGs.
So how to reduce and avoid such corruption and crime? In this chapter, I will address the corruption challenges, how they are addressed by corporations and key international laws as well as challenges associated with norms and behavior. Anti-corruption is a huge topic and challenge. However, when addressing sustainability, it cannot be left out, but one should rather draw a framework for key issues.
10.1 Key Elements in a Plan for Anti-corruption
One of ten principles in The UN Global Compact, Principle 10, is about Anti-Corruption. The UNGC includes six ways to promote transparency and accountability in companies:
Commit: Make anti-corruption part of your company culture and operations. Show your employees, customers, and suppliers that your company has a zero-tolerance policy on bribery and corruption.
Assess: Know your risks and prepare for them. Recognize opportunities to improve your business by improving compliance.
Define: Define what success means for your company. Develop goals, strategies, and policies and get buy-in from colleagues by clearly showing the importance of these policies.
Implement: Make anti-corruption programs and policies integral throughout your company, including your value chain.
Measure: What gets measured gets done. Monitor and measure the impact of your anti-corruption policies to identify what’s working and what still needs work.
Communicate: Consistently communicate your progress to stakeholdersS, always striving for continuous improvement.
10.2 Anti-corruption Regulations and Corporate Policies—and Effect
Stronger laws and institutions as well as greater transparency, international cooperation, and strong punitive sanctions when breaking laws are all crucial issues to reduce corruption. The UN Convention against Corruption (UNCAC) which entered into force in 2005 is the only legally binding universal anti-corruption instrument. The Convention is signed by 140 countries and covers five main areas: preventive measures, criminalization and law enforcement, international cooperation, asset recovery and technical assistance and information exchange. Bribery, trading in influence, abuse of functions, and various acts of corruption in the private sector are also covered (United Nations Office on Drugs and Crime, 2003).
There are many excellent guides that provide a good framework for anti-corruption as well. The UN Office on Drugs and Crime (UNODC) serves as the Secretariat for UNCAC and has provided a practical guide for business to avoid corruption. This practical guide pinpoints the importance of including among others support and commitment from top management, establishing a clear, visible and accessible program, apply the program, communicate and train stakeholders and incentivize compliance, follow-up, report, and revise the anti-corruption program (United Nations Office on Drugs and Crime, 2013).
There are also a multitude of national laws and regulations to combat corruption, and the number of these is increasing. A good example of how international laws lead to national changes reducing corruption comes from Norway. Until 1995 expenses associated with bribery of foreign officials could be deducted as an expense, entitling tax reductions for the company in Norway, but in 1999 this became illegal. The implementation of the OECD anti-bribery convention was a driver for an explicit section on corruption in Norwegian Criminal Law (Civita, 2013). Today, being involved in corruption can lead to fines as well as jail time up to 10 years (Straffeloven [The Penal Code], 2005§ 387–388).
10.3 Key Anti-corruption Challenges
Most large companies today have established a code of conduct or ethical guidelines addressing anti-corruption issues. The two key motivators for companies to adopt anti-corruption measures are to protect the company’s reputation and avoid prosecution (OECD, 2020). These come in different forms, including length, focus, and depth. Some have programs to train employees, suppliers, and customers; with regard to other code of conduct manuals, only few employees are aware that they exist, and they are rarely used in practice. Companies involved in the major corruption scandals in the world usually had a well-established internal code of conduct addressing anti-corruption. The two companies involved in scandals, Siemens and Enron both had well-established anti-corruption guidelines and programs (Lemus, 2014; Transparency International, 2019). It is a paradox that major corruption scandals, including environmental and social scandals, are main drivers for a large number of companies to take measures in order to avoid this happen to them. It is a paradox that major social scandals along the lines of corruption actually improve the field in a longer term perspective.
Typical challenges are associated with gifts and other personal offers, fake companies, fake competitions, kick-back, agents claiming fees beyond the value of their actual work, and so on. Corruption is often more prevalant with international business and operations in countries with weak regulations. Corruption is especially a challenge in poor countries, and corruption in fragile and conflict-affected states (FCAS), corruption is not an exception but a rule (Charbatke-Church & Chigas, 2019). New Zealand and Denmark are ranked as the least corrupt countries in the world, Somalia and Sudan as the most corrupt (179). Tanzania is ranked 94th and Norway is in the 7th place (Transparency International, 2020). However, corruption is still a big challenge in countries like Norway with strong anti-corruption regulations and a regulatory framework to follow up.
It is crucial to have an international framework, national laws, and corporate code of conduct established to combat corruption. However, research shows that is not enough to avoid corruption. Maybe the biggest challenge related to anti-corruption is social norms.
10.4 Social Norms and Anti-corruption
Maybe too much focus has been on developing a good set of anti-corruption measures and training people to follow these rules without ever consulting the people this is actually related to. In order to avoid scandals and criticism, companies often require that suppliers in low cost countries abide and train employees in anti-corruption. However, this does not work in the long run if the social norms are not in line with the anti-corruption program (Charbatke-Church & Chigas, 2019).
In many fragile and conflict-affected states (FCAS), corruption and bribery is part of everyday life—both in private lives and business. Corruption is a norm (Chap. 2 on Duty ethics). In these countries, police officers are poorly paid and often accept bribes by drivers, civil servants can expect bribes providing favors to individuals and bribery in many cases is a necessity in order to win government contracts. Corruption is based on mutual expectations and peer pressure in informal groups like family, clans, friends, professionals, religions, and more. Serving and protecting these groups becomes more important than national laws and regulations. If individuals try to withdraw from this norm, it can result in negative consequences like disrespect, exclusion, and punishment.
To address corruption laws which make corruption more complicated may initially seem like a good approach. However, such laws are hard to define and even more challenging to implement and follow up—especially in FCAS. Transparency through digitalization and reducing corruption opportunities has had a positive effect. For example, the paperless port clearing system in Ghana (online service), increased efficiency (reduced clearance time) and reduced the petty corruption opportunities (Wass, 2019).
Even though work on regulations, implementation, and follow-up is important, change in culture and behavior norms might be equally, if not more, important. More focus needs to be on understanding the social norms and what motivates corruption, the drivers. This is a long and complicated process. However, the awareness of the importance of addressing the divers is one important step. Instead of focusing on stopping corruption, the focus needs to shift to avoiding corruption because it is better for individuals and groups (Wass, 2019).
10.5 From the Grand Scandals to Petty Corruption
The major effects of corruption is not associated with the well-known scandals, but the daily petty corruption, money/cash paid to civil servants like police and government employees to get advantages, access, and avoid penalties and fines. Most people face dilemmas in their day-to-day work. Dan Ariely, a well-recognized expert in behavioral science, tested 30,000 people with regard to corruption but found only 12 “big cheaters” who stole a total of $150, while the 18,000 “little cheaters” stole a total of $36,000 (Ariely, 2012). Having good regulations and corporate programs for anti-corruption is important; however, understanding the human psyche, culture, and social norms is a prerequisite or even more important.
Case illustrating the challenge of avoiding corruption in countries with weak regulations
You are an agent for a fishing company. A delivery of fresh fish from your company is arriving at the port on a Friday and you are there to pick up and distribute to customers. However, the local person in charge of the customs process claims that she does not have time to approve the delivery before Monday. You know that on Monday the fish will no longer be fresh and cannot be sold. The customs officer chats about poor wages and no overtime payment, conveying that if you contribute 100 dollars, the person will check out the shipment today. What would you do? Pay the 50 dollars (which is like one-hour work for you) which is illegal or pay the 50 dollars to avoid spoiling the delivery worth 10,000 dollars? Such cases show the dilemma. What people decide in such situations vary.
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Ditlev-Simonsen, C.D. (2022). Anti-corruption. In: A Guide to Sustainable Corporate Responsibility . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-88203-7_10
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-88202-0
Online ISBN: 978-3-030-88203-7