Tougher Standards

October 8th, 2012 - How ethical breaches can have catastrophic consequences

The worldwide economic crisis highlighted the importance of ethics, clearly demonstrating the damage done by irresponsible business practices and the threat they pose to economic development.

In response, regulators and investors around the world are demanding higher standards of ethics and accountability. Companies must now set, monitor and control their own moral compasses and, increasingly, that of their partners and suppliers.

“Businesses have the duty to make sure their suppliers are ethically sound,” says Frédéric Basset-Chercot, head of ethics and compliance for the transportation divisions of Bolloré Group in Paris. “If they choose a supplier that is engaged in corrupt practices, for example, they could be considered as liable and be prosecuted.”

The U.K.'s tough new anti-corruption measures in the form of the Bribery Act underscore the new ethical climate. The Bribery Act addresses acts of corruption, creating two new general offences covering the paying and accepting of bribes, in both the public and private domain.

Crucially, it has also created a new offence of failure by a commercial organization to prevent a bribe being paid for or on its behalf, requiring companies to have adequate procedures and enforcements in place.

The law extends to any persons located in the U.K., any U.K. entity and any overseas entity that does business in the U.K.. Penalties include unlimited fines and imprisonment. The Bribery Act is expected to be implemented in the spring.

In the U.S., meanwhile, the Foreign Corrupt Practices Act (FCPA) has long prohibited U.S. companies from paying bribes to foreign public officers to secure foreign business. Companies are also liable for the acts of their suppliers and vendors, whether U.S. or overseas.

There is clearly the need for such laws as companies increasingly trade with countries and industries with differing standards. According to the latest Corruptions Perceptions Index from Transparency International, perceived levels of corruption are highest in unstable countries such as Somalia, Myanmar, Afghanistan and Iraq.

Basset-Chercot is in charge of ethics and compliance for SDV's network of 520 branches operating in 90 countries. The transport divisions have a code of business conduct focused on five areas: transportation security, occupational heath and safety, the fight against corruption, compliance with competition law and environmental protection.

Measures to combat corruption are high on Basset-Chercot's agenda. “Everyone knows what corruption is but not everyone understands the penalties, and even less procedures and provisions to be implemented to prevent violations,” he says, citing potentially hefty fines and imprisonment.

Just over two years ago, for example, a worldwide industrial group received the largest fine for bribery in corporate history - $1.6 billion.

Other anti-corruption measures initiated by the Bolloré transport divisions include a whistleblower hotline program where employees can report anomalies in areas including finance, accounting and corruption. This programme has so far had little application in Europe, Basset-Chercot says, but its creation complies with FCPA standards.

More generally, Basset-Chercot recommends individuals use a simple question to guard against unethical behaviour: “Will I still feel good about myself if I do this?” If the answer is unclear, he says, that's a sign to seek the advice of a reliable person.

For companies, the consequences of breaking the rules extend way beyond the financial penalties, Basset-Chercot adds. Legal costs, internal investigations and reputational damage both externally and internally are just some of the additional risks. “Ill-gotten gains never prosper,” he says.

Key Figures
  • 20%

    More fuel-efficient for the Boeing 787 and the Airbus A350

  • 70%

    of Urbanisation is expected by 2050

  • 27

    mega-cities are expected by 2050, with at least 10 million people, compared to 1...

  • +18,4%

    of growth for E-commerce retail market in Europe in 2015

  • 82%

    of goods are moved by road

  • 1 billion

    Population in Africa

  • 60%

    of Africa’s population will be urbanized by 2050

  • 7,5%

    of growth for Indian GDP in 2014

  • 4,9%

    of growth for African GDP in 2016

  • 6,1%

    of growth for East Asian GDP in 2015, the world’s fastest-growing region

  • 19 224 teus

    transported by the MSC Oscar, the largest container ship in the world

  • 396 m

    is the size of the MSC Oscar ship

  • 120 h

    is the Non-Stop Flight Record done by Solar Impulse

  • 4,5%

    of growth in 2015 for Global Airfreight demand