The Decade of Due Diligence

The Decade of Due Diligence

As we leave the ‘noughties’, when CSR really came of age, what do the ‘Teens’ hold for the future of Responsible Business Practice? A recent survey by IPSOS Mori revealed that 57 per cent of UK captains of industry say that companies will continue to invest in corporate responsibility.

So which areas of corporate responsibility are likely to become more prominent in the coming decade?

Climate Change

With the failure of Copenhagen to secure an international commitment to emissions reduction, the jury is out as to how and if the climate change battle will be won. According to global online research by IPSOS Mori, 89 percent of the public agreed that companies should pay more attention to the environment. Many businesses are already taking steps to reduce the amount of energy they use. Look on the website of almost any UK based company and you will see a section on their steps towards energy reduction.

For businesses the benefit can be twofold. In many instances energy savings deliver cost savings – a no-brainer in the current economic climate. It is also true that green credentials enhance reputations, which can, though not always, drive sales. With the Carbon Reduction Commitment operating the UK’s first mandatory carbon trading scheme, it is unlikely that UK businesses will move backwards on this. The CRC takes effect from April 2010 and we expect to see continued initiatives from business in this area over the coming decade.

Supply Chains

Supply chain scandals hit the headlines many times during the last decade. To date this has been concentrated in the retail and grocery sector, with some scandals associated with extractive industries in third world countries. We expect this problem to emerge in other sectors such as IT, manufacturing, construction and other secondary industries.

To date, an effective and economic solution to verifying responsible supply chain management has not been found. Unless this emerges, we will continue to see more cases as the decade progresses.

Codes of Conduct

As emerging markets gather strength, the rigorous implementation of internationally acceptable codes of conduct will grow in importance. Codes of Conduct will not just be a Western luxury. We expect to see an increasing emphasis placed on vigorous back up to ensure that these codes are in place.

Bribery & Corruption

The good money is on the Bribery Bill becoming law before the General Election, providing it is not called early. While this new legislation will undoubtedly facilitate prosecutions, it will also require companies to demonstrate that adequate procedures have been put in place in order to prevent corrupt practices from occurring within their organisation. To do this, companies will need to show real corporate accountability, implementing bribe tracking, asset recovery and fraud-watch programmes to ensure that anti-corruption policies are genuinely effective.

There will also be an international need for greater governmental transparency. Programmes such as the EITI’s Transparency Initiative, that encourages greater accountability between extractive industries and the countries in which they operate, have a responsibility to succeed.

Scandal

Linked to this more rigorous approach to CSR will be a rise in the number of corruption scandals to hit the headlines, at least initially. Under the new legislation, prosecutors will have greater powers, leading to a growth in exposure of corrupt practices. Companies will react by tightening up their processes. But many of the corruption scandals currently in the news are to do with malpractice that happened several years ago. This is likely to continue until anticorruption practices become firmly embedded.

For the legislation to make a difference, it will be imperative that swingeing penalties are imposed to demonstrate that the new legislation bites and bites hard.

It is without doubt that corporate trust is one of the biggest casualties of the current economic crisis. Whether the recovery comes quickly or more slowly, it will be imperative to rebuild that trust. Businesses that have built corporate responsibility into their overall management strategy and stood by the principles of responsible management will be best placed to capitalise on the recovery.