Written by Nicole Di Schino, PRINCIPAL consultant at spark compliance
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Where does compliance start and end when it comes to ESG?
After all, isn’t Compliance typically responsible for much of the “S” with modern slavery response and third party/supply chain due diligence?
And what about the “G”? Governance has been in the compliance remit since compliance was born as a function.
As the corporate focus on sustainability grows, ethics and compliance departments can benefit by demonstrating that they are a fundamental part of the company’s sustainability efforts. But articulating the thread between these efforts to an audience accustomed to thinking about sustainability in terms of economic development and environmental impact can be tricky.
Why It Matters
While ethics and compliance departments are getting more respect today than they have in the past, many still view compliance as an impediment to their businesses.
Sustainability, however, is in many ways an easier sell.
While some executives turn a blind eye to sustainable development and environmental impact, more investors, employees, and customers are looking to do business with companies whose values match their own.
Helping people understand the connection between these “sexier” sustainability efforts and the company’s ethics and compliance program can help increase compliance program buy-in.
Five Ways Compliance Contributes to Sustainability
Compliance As the Foundation
An effective ethics and compliance program is not just a “nice to have” when contemplating corporate sustainability efforts.
Rather, it is the bare minimum required - or putting a more positive spin on it - a foundation.
Without a clear understanding of corporate values and a means to encourage behavior in keeping with those values, a company cannot hope to establish sustainable business practices.
The guardrails that compliance puts around a company’s decision-making are the first step toward ensuring that the company is operating in a sustainable way.
Combatting Global Corruption
Corruption is widely viewed as one of the biggest barriers to sustainable development.
Data collected by Transparency International demonstrates that “corruption and abuse of civil liberties go hand-in-hand.”
In its press release accompanying the 2021 CPI results, the organization observed that “Complacency in fighting corruption exacerbates human rights abuses and undermines democracy, setting off a vicious spiral. As these rights and freedoms erode and democracy declines, authoritarianism takes its place, contributing to even higher levels of corruption.”
Mature anti-corruption controls and accompanying ethics initiatives drastically decrease the risk that a company will find itself mired in corrupt business activities. Due diligence efforts, for instance, decrease the risk that the company may unwittingly partner with unethical counterparties.
Similarly, third-party management holds companies and their partners accountable for conducting all business above-board.
Decreasing Human Rights Violations
Like corruption, corporate violations of human rights negatively impact sustainable development.
The same controls that help a company avoid corruption can also help it avoid contributing to human rights violations. Additionally, the increasing focus on supply-chain risk and companies’ efforts to combat modern slavery in their supply chains is directly and positively impacting working conditions for people around the globe.
Harmonizing Incentives
Organizational efforts to conduct business ethically often fail because a company, while publicly promoting good behavior, is privately or accidentally encouraging employees to make bad choices.
For example, when employees are pressured to meet production quotas when doing so without cutting environmental corners would be nearly impossible, they are more likely to forego sustainability efforts in favor of higher outputs.
Similarly, when ethics and compliance behaviors are not a part of a company’s review process, managers are less likely to focus on necessary improvements in these areas.
The review of incentives and employee discipline activities that is involved in operating an ethics and compliance program helps companies to get all of their employees rowing in the same, ethical direction, making it easier to meet sustainability goals.
Tracking and Aiding Sustainability Efforts
An effective compliance program has many processes and procedures that can be used to amplify a company’s sustainability initiatives.
For instance, compliance officers are already skilled at measuring and monitoring the impacts of their departments’ efforts. These skills are easily transferable to monitoring progress toward sustainability goals.
Sustainability efforts can also be folded into a company’s existing compliance communications and training. Many company codes, for example, now focus on sustainability in addition to historical focuses like responsibility and integrity.
Sustainable practices can also be communicated through a company’s annual compliance training.
How To Use This Information
Armed with this information, I hope you can head out and win over some additional compliance believers.
A heightened understanding of the alignment between sustainability and compliance can be incorporated into:
· Code of Conduct
· Compliance Policies and Procedures
· Requests for Compliance Budget
· Training Exercises
· Executive Onboarding
· Compliance Communications
· Board Reporting
By clearly articulating how compliance and sustainability work together to make the company stronger, each initiative can be strengthened.
