Delivering Transparency to align with SDGs

During the UN Global Compact Network UK Annual Summit in Oct. 2023, speakers from compliance and research teams in UK companies shared their most recent processes and frameworks for anti-bribery and corruption due diligence (ABC DD) to align with the sustainable development goals.

The value of collective action:

Companies are trying to raise the standards of managing the complex ABC process along the value chain and supplier tiers by maximizing openness and knowledge sharing at all levels. Below are examples of current initiatives companies are using to improve their internal processes through co-learning.

Examples of best practices to manage third and fourth parties’ risks:

• Create a well-defined risk register.
• Develop a risk-based approach to collect information across supplier tiers about (the ownership structure, owners’ names, how they operate and in which jurisdictions, and who they might interact with at the operational level) Also, request copies of their ABD standards to assess their integrity.
• Support 3rd and 4th parties with training, if needed, to ensure consistency and that they align with your ABC DD processes.

According to Transparency International UK (TI-UK), companies in 2023 have demonstrated strong performance and applied more robust controls in engaging agents and intermediaries to understand issues in their value chain and the wider third and fourth-party ecosystem. Increasing the integrity of the supply chain is of core importance to regulators, enforcing businesses to establish effective processes to ensure supply chains are corruption-free, particularly after seeing recent penalties applied to various organizations for failure to implement sufficient controls on ABC DD.

What needs to improve:

• Don’t tackle all the issues at the same time- quality matters more than quantity. Companies’ risk-based approaches must focus on critical and relevant matters to their industry through a holistic mapping of the 3rd party ecosystem. For instance, retail businesses might have more dealings with 3rd small party suppliers, while tech. companies might do more work with 3rd party partners and resellers.
• Assessments of the overall numbers of 3rd parties and the extent of government and public sector exposure to their businesses. The treatment will be decided depending on the type of risk and the exposure; companies must pay greater attention to parties with a history of non-compliance as regulators place more emphasis on recidivism.
• Jurisdictions also need to be assessed; companies may use systems like TI-UK to look for risk ratings and scan higher-risk countries and their CPI scores.
• Monitoring joint venture partners’ activities and increasing transparency in contracting and procurement to ensure robust ABC DD vendor onboarding procedures.
• When setting up monitoring systems and databases to capture the information and risk assessments, these databases should be annually certified and updated.
• Conduct ABC audits to identify high-risk tiers and perform regular rigors DD.
• Have a clear understating of the scope of the DD (which parties in your ecosystem need to be subject to DD, how often will you conduct it, one-off or regular cadence- are there specific triggers (contract changes, renewals, identifying potential conflict of interest, financial transactions)
• Decide on systems and processes you will leverage to manage this process by external, internal teams, or a combination of both; automation offers various options for configuring and managing these systems.

Data collection and analysis

• Most of your data will be drawn from your 3rd parties through questionnaires, surveys, or interviews.
• Data will also be collected from groups impacted by the supply chain activities and workers in operations teams. Further, data could be collected from external parties with accurate database information about companies’ processes and performance. “The aim here is not to create a blocklist; we are on a journey to collaborate and improve.”
• Using systems will help raise red flags, access quick analytics, and enable the teams to run through the entire intercompany systems and its value chains to tap into large-scale analysis to have an in-depth mapping of all prevalent issues.
• Screening technologies can also provide updates and information on records of unethical behaviors and previous performances. It will enable transparency and knowledge sharing across teams, so if one team finds a red flag, it will trigger other teams to look closely at issues.

Breaking down silos

Companies must have a governance framework to engage internal stakeholders (Supply Chain, compliance, legal, finance, and leadership teams) to work collaboratively to assess all risk areas.

Diversity of representation, experience, and though is essential to have healthy debates and unleash collective thinking, agree on resourcing plans, and invest in digital tools to develop the infrastructure needed for conducting effective ABD DD and benefit from what technology can offer.

Realizing the connections and links between corruption issues and human rights and environmental problems brings us back to the conversation of how ESG is closely interrelated; by understanding these links, companies can find long-term comprehensive solutions to safeguard their businesses from financial and public liabilities. By breaking down silos, teams will feel empowered at all levels to participate and provide critical inputs into the processes, raise awareness of relevant risks and build organizational capacity across teams in operations, compliance, procurement, and sustainability.

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Written By:

Yousra Salem

26 Nov. 2023