The COVID-19 pandemic has uprooted almost every aspect of our professional lives, and supply chains have been especially chaotic. Companies that rely on globalized supply operations have been compelled to enter unfamiliar markets, to rush to find new partners, and to remain agile in order to navigate supply and demand shock.
But in tandem with the immediate need for an effective crisis response, any company that relies on a supply chain must also consider risks that could extend well into the future. Every prudent COVID-19 response playbook should include strong ethical leadership and a clearly articulated culture of compliance to guard against corruption risk.
It’s no secret that transnational corruption has long plagued supply chains across industries. Corruption enables human rights atrocities—human trafficking, child labor, slave labor—and facilitates illicit financial flows, while driving goods into the wrong hands. Whenever goods are moved across borders, government licensing, customs clearance, unvetted vendors, suppliers and local agents all provide opportunities for graft that contribute to the trillions of dollars lost to corruption annually.
Environmental, social and governance (ESG) considerations are increasingly viewed as key factors by investors. But it’s not just investors: Regulatory and consumer demand for supply chain transparency continues to grow. Legal enforcement agencies including the Department of Justice (DOJ), the main U.S. agency that prosecutes transnational bribery cases, have repeatedly emphasized the importance of ensuring that a “compliance program is well-integrated into the company’s operations and workforce.”
While this may seem difficult to quantify, there are steps companies can take to underscore their commitment to compliance and ensure that anti-corruption is woven throughout all supply chain operations.
A Culture of Compliance
Top and middle management must lead by example, set high standards and expectations, and demonstrate a genuine commitment to the ethical principles they put forth. While we often hear about the significance of “tone from the top”—from company executives and boards of directors—middle managers also play a key role in reiterating anti-corruption principles throughout the organization and eliminating any gray area by maintaining open channels of communication within and across their teams.
Companies should promulgate a message of zero tolerance for corruption and consistently enforce disciplinary measures for any lapses. Some companies have found that in addition to disciplinary measures and disincentives for non-compliance, positive incentives that celebrate a culture of compliance can be effective.
Training
A strong ethical culture requires regular training for all employees and partners in the company’s operations, including third-party intermediaries and business partners that present legal risk for the larger enterprise. Decisions on the ground happen quickly and often across different time zones, so one of the best defenses against complicity in corruption is equipping staff and contractors to make the right calls in the first place. Effective anti-bribery training at the outset of the onboarding process, and at regular intervals thereafter, sets and reinforces the compliance message.
Protecting Whistleblowers
Compliance programs are much stronger when personnel are confident their employer will back them if they speak up about wrongdoing. Protection for whistleblowers must be woven into the company’s cultural standards and made widely known throughout the organization. Everyone across the supply chain should have a clear path to anonymously—or confidentially—report suspected violations of company policy, and it should be bolstered by comprehensive anti-retaliation measures.
Anti-Corruption and the Future of Supply Chains
The pandemic has challenged us to explore new solutions to old problems. The future of global supply chains will look different for most industries. There has been lively debate about the need to shift production closer to home, about moving away from more concentrated and just-in-time models, and about redistributing and diversifying operations. Warehouse, transport and retail functions are likely to take a different shape.
But some things won’t change. There will always be opportunities for unscrupulous actors to take advantage of compliance gaps, and legal enforcement agencies around the world will be watching. Companies and industries bailed out by federal tax dollars will be examined more closely, and their books will be scrutinized for years to come.
Emphasizing ethical business practices as part of your crisis response strategy and ensuring that message permeates all levels of the organization—and its extended operations—will help your company avoid inadvertent illicit activity. Employees are typically a company’s greatest asset. Empowering them is the first line of defense against corruption and the financial, legal and reputational damage that inevitably follows.
Alexandra Wrage is president and founder of TRACE (www.traceinternational.org), a globally recognized non-profit business association dedicated to anti-bribery, compliance and good governance. She is the author of Bribery and Extortion: Undermining Business, Governments and Security (Praeger, 2007).
