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Journal of Public Affairs

Volume 12 Number 4 pp 357–365 (2012)


Published online 18 April 2012 in Wiley Online Library
(www.wileyonlinelibrary.com) DOI: 10.1002/pa.1426

■ Academic Paper

Business, social responsibility, and


corruption
Manuel Castelo Branco1,2* and Catarina Delgado1
1
Faculty of Economics, University of Porto, Porto, Portugal
2
Observatory in Economics and Management of Fraud (OBEGEF), University of Porto, Porto, Portugal

This paper explores the role of corporate social responsibility and the reporting thereof in the fight against corruption.
A special focus is laid on the international endeavors to improve transparency through reporting, and the paper
elaborates extensively on the United Nations Global Compact (UNGC), the Organisation for Economic Co-operation
and Development (OECD) Guidelines for Multinational Enterprises and the Global Reporting Initiative’s (GRI)
Sustainability Reporting Guidelines. Voluntary initiatives, such as the UNGC, the OECD guidelines, and the GRI
guidelines, are considered to play an important role in providing the trust-based informal social norms, without
which markets and societies cannot function. Copyright © 2012 John Wiley & Sons, Ltd.

Keywords: Corporate social responsibility, corruption, sustainability reporting

INTRODUCTION voluntary disclosures of information pertaining to


several economic, social and environmental aspects
Recent initiatives of national and international upon which companies’ activities may have an
organizations and interest by large companies in impact: employee-related issues, community involve-
instruments such as codes of conduct or sustainability ment, environmental concerns, other ethical issues,
reports are evidence of a growth in importance of and so on.
corporate social responsibility (CSR) and the report- Nowadays, the rejection of corruption is an
ing thereof. Some international organizations have integral part of any company’s social responsibility.
launched important initiatives to promote them, such Corruption is deemed incompatible with sustain-
as the Organisation for Economic Co-operation and able development in view of the social, economic,
Development (OECD) Guidelines for Multinational and environmental damages caused by it. However,
Enterprises (first adopted in 1976), the United Nations the fight against corruption has been considered as
Global Compact (UNGC) (officially launched in 2000), a fundamental part of CSR and the reporting thereof
the Global Reporting Initiative’s (GRI) Sustainability only very recently. An OECD survey on codes of
Reporting Guidelines (first issued in 2000), or the corporate conduct showed that in the beginning of
International Organization for Standardization’s this century, less than a quarter (23 per cent) of the
(ISO) standard ISO 26000 giving guidance on social codes covered in the study addressed bribery and
responsibility (issued in 2010). corruption (Gordon and Miyake, 2001; OECD, 2001).
CSR is related to issues such as environmental It was only in June 2004 that the fight against corrup-
protection, health and safety at work, relations with tion was added as the 10th principle of the UNGC.
local communities, and relations with consumers. It Indicators pertaining to the issue of corruption
may be defined as ‘a concept whereby companies were proposed only in the second version of the
decide voluntarily to contribute to a better society GRI Guidelines (GRI, 2002). Countering bribery
and a cleaner environment’ (European Commission, criteria were introduced in the FTSE4Good criteria
2001, p. 5). CSR reporting is associated mainly with only in 2005–2006 (FTSE Index Company, 2006).
Some authors consider that corruption still is a
neglected social issue among CSR priorities (Hills
et al., 2009). Others argue that CSR issues with a
*Correspondence to: Manuel Castelo Branco, Faculty of Economics,
University of Porto, Rua Dr. Roberto Frias, Porto 4200-464, Portugal. potentially large impact on market functioning, such
E-mail: mcbranco@fep.up.pt as corruption, should have a more prominent place

Copyright © 2012 John Wiley & Sons, Ltd.


358 M. C. Branco and C. Delgado

on the CSR agenda (Weyzig, 2009). This would This definition has the merit of relating the
imply restoring the focus to multinational enterprises concepts of CSR and sustainable development.
(MNEs), which have more economic and political These two concepts may be considered as being
power than smaller enterprises (Weyzig, 2009). ‘intrinsically linked’, and CSR can be seen as the
The potential of MNEs in being not only part of the business contribution to sustainable development
problem but also perhaps part of the solution is (European Commission, 2002, p. 7). Companies are
increasingly recognized (Kolk and van Tulder, 2010). seen as contributing to sustainable development
This paper explores the role of CSR and the ‘by managing their operations in such a way as to
reporting thereof in the fight against corruption. It enhance economic growth and increase competi-
focuses on the UNGC, the GRI guidelines, and the tiveness whilst ensuring environmental protection
OECD guidelines. Both the first two of these three and promoting social responsibility, including con-
instruments have recently been considered the two sumer interests’ (European Commission, 2002, p. 7).
most important CSR-related instruments (Chen CSR is related both to what companies do
and Bouvain, 2009). CSR has gained higher profile with their profits (philanthropy) and how they make
and more applicable direction for organizations them (how they manage the economic, social, and
with them (Breitbarth et al., 2009). More import- environmental impacts derived from their opera-
antly, these two instruments are susceptible of inte- tions: mitigating environmental impacts, respecting
gration, and there have been some collective human rights, rejecting and fighting corruption,
efforts to establish such integration (UNGC/GRI, etc.). Nowadays, the latter aspect (how companies
2007). make their profits) is the core aspect of CSR. Some
Although not as widely used, the OECD guidelines authors go so far as to exclude philanthropy from
are also analyzed in this paper given its importance to the notion of CSR (Hopkins, 2007; Heal, 2008).
MNEs. Whereas the OECD guidelines are addressed Whatever the case may be, responsible companies
mainly to MNEs, the UNGC and the GRI Guidelines are supposed to voluntarily integrate social and
are for use by all organizations. The UNGC and the environmental concerns in their operations and
OECD guidelines have been considered to comple- interaction with stakeholders (European Commission,
ment and reinforce each other in many ways (OECD, 2001, p. 8).
2005). The OECD guidelines are also susceptible of The acknowledgement of CSR implies the need to
integration with the other two instruments, and there recognize the importance of disclosure of information
have been some collective efforts to establish integra- on companies’ activities related to such responsibility.
tion with the UNGC (OECD, 2005) and the GRI Although other terms, such as corporate social
Guidelines (GRI, 2004). reporting, social responsibility disclosure, or simply
This work outlines the importance of anti- social accounting, may be used to describe this
corruption CSR policies and the reporting thereof as accounting about companies’ performance in these
a basis for an effective fight against corruption. We areas, the term sustainability reporting (SR) will be
highlight the importance CSR-related instruments, the one used in this paper. SR may be broadly defined
in particular codes of conduct (through the UNGC as the ‘the preparation and publication of an account
and the OECD guidelines) and sustainability about an organisation’s social, environmental,
reporting (through the GRI Sustainability Report- employee, community, customer and other stake-
ing Guidelines). We argue that regulation does not holder interactions and activities and, where, possible,
provide for the trust-based informal social norms, the consequences of those interactions and activities’
without which markets and societies cannot function, (Gray, 2000, p. 250). Thus, it seeks to reflect several
and that voluntary initiatives, such as the UNGC, the economic, social, and environmental aspects upon
OECD guidelines, and the GRI guidelines, can play which companies’ activities have an impact:
an important role in this respect (Kell, 2006). employee-related issues, community involvement,
In the following section, an account of what CSR environmental concerns, other ethical issues, and
and the reporting thereof are is offered. Thereafter, so on.
follow sections on corruption and its consequences The ‘CSR movement’ benefited immensely from
and a discussion of how CSR-related instruments the efforts of several international public and
may help in the fight against corruption. Finally, private organizations, which have launched import-
some conclusions are drawn. ant initiatives to promote CSR and the reporting
thereof. In view of their recent role in developing
CSR, the UN, the OECD, and the ISO are among
CSR AND THE REPORTING THEREOF the most important of such organizations.
In 1999, the UN Secretary General, Kofi Annan,
A much cited definition relates CSR to a company’s proposed the UNGC at the World Economic Forum
commitment to contribute to sustainable economic in Davos. It was officially launched at UN Head-
development, working with employees, their families, quarters in July 2000. The purpose of the GC was
local communities, and society at large to improve the to encourage companies to embrace nine principles
general quality of life (Holme and Watts, 2000, p. 10). of CSR, relating to human rights, labor, and the

Copyright © 2012 John Wiley & Sons, Ltd. J. Public Affairs 12, 357–365 (2012)
DOI: 10.1002/pa
Business, social responsibility, and corruption 359

environment. A 10th principle, relating to corruption, CORRUPTION AND ITS CONSEQUENCES


was added in 2004. With more than 6500 signatories
in more than 135 countries in 2008, it is the world’s One of most widely accepted definitions of corrup-
largest corporate responsibility initiative (UNGC, tion is the one adopted by the World Bank: ‘the abuse
2008b). of public power for private benefit’. This definition is
The United Nations Environment Programme, in also adopted by several influential studies, such as
partnership with the Coalition for Environmentally Re- Doh et al. (2003) and Tanzi (1998). However, it has
sponsible Economies, created the GRI in 1997 with the been criticized because it excludes discussion of
mission of develop and disseminate globally applicable corruption taking place solely within the private
guidelines for companies to use when reporting on eco- sector (Habib and Zurawicki, 2001). The number of
nomic, environmental, and social performance. A first studies analyzing corruption within the private
draft of the GRI Guidelines was proposed in March sector is increasing (see, for example, Argandoña,
1999, and a pilot test program was immediately 2005; Aguilera and Vadera, 2008; Gopinath, 2008;
launched. The first official edition of the GRI Guide- Halter et al., 2009; Dion, 2010).
lines was released in July 2000, the second edition of Rodriguez et al. (2006) suggested the replacement
the Guidelines was released in August 2002, and the of the word ‘public power’ by ‘authority’ to include
third version of the guidelines (GRI-G3) was released corruption that arises strictly between private
in October 2006. In March 2011, the G3.1 Guidelines, parties. This has been the solution of the United
which correspond to an update and completion of the States Agency for International Development
G3, were launched. It is arguably the best known and (USAID, 2005). A similar definition is proposed by
most widely used set of guidelines for sustainability the nongovernmental organization Transparency
reporting worldwide (Brown et al., 2009; Isaksson International, according to which ‘corruption is the
and Steimle, 2009). abuse of entrusted power for private gain’ (Errath
The OECD guidelines for MNEs, created in 1976 et al., 2005, p. 7). The International Standard ISO
and substantially revised in 2000, are recommenda- 26000 defines corruption in the same way and expli-
tions by governments to MNEs operating in or citly recognizes that it not only includes bribery (soli-
from the countries that adhere to the Guidelines citing, offering, or accepting a bribe) of or by public
(OECD, 2000; Murray, 2001). They contain voluntary officials but also bribery in the private sector (as well
principles and standards for responsible business as conflict of interest, fraud, money laundering, and
conduct in a variety of areas, including information trading in influence) (ISO, 2010).
disclosure, employment and industrial relations, However, these latter definitions may also be cri-
environment, combating bribery, consumer interests, ticized for portraying corruption as a one-way
competition, taxation, and science and technology. process driven by the greed of corrupt officials
Although observance of the recommendations by (UNDP, 2008). Almost all corrupt transactions have
enterprises is purely voluntary, adhering govern- two players, the person who is receiving the bribe
ments make a formal commitment to promote their and the corporation or individual who is offering
observance among MNEs operating in or from their it, and the balance of power is not necessarily on
territory. The most concrete expression of this the side of the corrupt person with ‘entrusted
commitment is the National Contact Point, often a power’ (UNDP, 2008).
government office, which is responsible for encour- A more complex definition of corruption is
aging observance of the guidelines and for ensuring necessary to address all these questions. A possible
that the guidelines are well known and understood solution is the definition proposed by Argandoña
by the national business community and by other (2005, p. 252): corruption is ‘the act or effect of
interested parties. The Guidelines help ensure that giving or receiving a thing of value, in order that
MNEs act in harmony with the policies of countries a person do or omit to do something, in violation
in which they operate and with societal expectations. of a formal or implicit rule about what that person
The ISO has decided to launch the development ought to do or omit to do, to the benefit of the
of an International Standard providing guidelines person who gives the thing of value or a third
for social responsibility (Schwartz and Tilling, party’.
2009). The process has begun in 2004. The guidance Corruption has characteristics that distinguish it
standard has been published in 2010 as ISO 26000 from other social problems. Unlike children in
and is voluntary to use. It does not include require- sweatshops or toxins being dumped in rivers, the
ments and will thus not be a certification standard. clandestine exchange of cash or property for a
The ISO 26000 guidance standard is intended to favorable decision from someone in power is rarely
complement existing social responsibility instru- photographed or measured (Hills et al., 2009). It is a
ments. It is anticipated that it will have significant phenomenon ‘which by its very definition takes
impact in view of the dominant position ISO place out of sight’ (Fisman and Miguel, 2008, p. 18),
has already established via the widespread use of if both parties involved in corruption are doing ‘a
its 14001 environmental management standard halfway decent job of it, there’s no obvious paper trail
(KPMG, 2008). of what took place’ (Fisman and Miguel, 2008, p.18).

Copyright © 2012 John Wiley & Sons, Ltd. J. Public Affairs 12, 357–365 (2012)
DOI: 10.1002/pa
360 M. C. Branco and C. Delgado

Although the act of bribery itself is not directly Investors typically avoid environments in which
damaging to lives or the environment, the resulting corruption increases the cost of business and
outcomes can have devastating effects on competi- undermines the rule of law (Hills et al., 2009).
tion and human development (Hills et al., 2009). Johnson et al. (2000) found that corruption increases
On the other hand, issues such as human rights or the incentive to divert activities underground.
fighting corruption do not readily generate report- Third, in societies where bribery persists and
ing information and data in the way environment corrupt officials are not held accountable, citizens
or health and safety issues do (Wilkinson, 2006). lose faith in their government (Hills et al., 2009). A
Hills et al. (2009) contended that managers of lack of public trust undermines the rule of law,
companies operating in developing countries have which can lead to increased crime, reduced safety,
always been concerned about negative PR from and further instability (Hills et al., 2009).
corruption. However, they are increasingly becoming Finally, some authors argue that corruption reduces
aware of the additional costs and risks they face, the legitimacy of the market economy (Tanzi, 1998)
including (Hills et al., 2009) and perhaps also of democracy (Tanzi, 1998; USAID,
2005). In particular, it undermines both the legitimacy
• Operational costs: Corruption adds additional
and effectiveness of new democracies (USAID, 2005).
expense throughout the corporate value chain
[current studies suggest that corruption adds
more than 10 percent to the cost of doing business
CSR AND THE FIGHT AGAINST
in many countries (Errath et al., 2005)].
CORRUPTION
• Legal risks: Consequences of engaging in corrupt
business conduct include large fines and disquali-
There are authors who find some kind of ethical
fication from future government procurement.
justification for corrupt actions. Linder and Linder
• Competitive risks: Companies that refuse to pay
(2008) argued that corruption does not always
bribes may be at a competitive disadvantage and
equate to a moral problem. They distinguish two
lose business to less ethical competitors who
kinds of corruption: one that leads to personal
are willing to pay to influence the procurement
enrichment and another which aims to increase the
process.
competitive ability of the company. In countries
In addition to having consequences to businesses, where corruption is a common phenomenon and
corruption is an obstacle to social, political, and there is no penalization for it, a company must act
economic development (USAID, 2005). There are in accordance with existing conventions. In these
significant costs to society associated with corrup- situations, corruption may be considered as a com-
tion, namely those pertaining to (USAID, 2005; Hills petitive requirement.
et al., 2009) Nevertheless, firms are dependent for their
success not only on the existence of a functioning
• reduced government services;
market system but also on a state that facilitates
• constrained economic growth;
market activity and maintains order and stability
• decreased trust in government;
(Rose-Ackerman, 2002). Because firms are benefi-
• reduced legitimacy of market economy and
ciaries of the market system and the normative justi-
democracy.
fication of markets rests on their efficiency, they have
First, corruption leads to reduced government an obligation to act in ways that improve the efficient
services, particularly for the poor. Corruption skews functioning of the market (Rose-Ackerman, 2002).
public investment choices away from service deliv- Fighting corruption is an important part of CSR.
ery, such as health and education, toward areas Because they are the typical source of bribes,
where opportunities to collect bribes may be more corporations are a significant part of the problem
abundant, such as large construction and infrastruc- and could benefit measurably from progress toward
ture projects (Mauro, 1998; Tanzi, 1998). The general solutions, namely in terms of reduced costs, greater
environment of scarcity in public services may even operational efficiency, and improved reputation
create incentives for providers to demand payments (Hills et al., 2009). Therefore, the fight against
for services that should be free or low cost to the poor corruption offers a major opportunity for strategic
(USAID, 2005). Some studies suggest that in many CSR programs to address an issue that is inherently
countries, corruption adds as much as 25 per cent to linked with both corporate and societal interests
the cost of public procurement (Errath et al., 2005). (Hills et al., 2009).
All this is likely to result in lower-quality services, Nowadays, the rejection of corruption is an
which also become more expensive and often integral part of any company’s social responsibility.
unaffordable for the poorest citizens (Hills et al., 2009). Corruption is deemed incompatible with sustainable
Second, corruption constrains economic growth, development in view of the social, economic and
namely by distorting public investment, deterring environmental damages caused by it. Rodriguez
foreign direct investment, and encouraging firms et al. (2006, p. 739) argue that ‘CSR practices that
to operate in the informal sector (USAID, 2005). promulgate anti-corruption norms hold promise for

Copyright © 2012 John Wiley & Sons, Ltd. J. Public Affairs 12, 357–365 (2012)
DOI: 10.1002/pa
Business, social responsibility, and corruption 361

dealing with corruption’s frustrating persistence’. Public reporting is a formalization of transpar-


Over the last two decades, there has been a signifi- ency, and transparency is a first-line defense
cant growth in the development of CSR-related against corruption (UNGC, 2009). Reporting on
instruments that consider the fight against corrup- the efforts on countering corruption does not have
tion as an important aspect of corporate social such a rich history as environmental reporting has
performance. The OECD guidelines for MNEs, the (Wilkinson, 2006). Corruption is by its very nature
UNGC, and the GRI Guidelines are examples of secret, hidden, and viewed as sensitive by compan-
such instruments (OECD, 2001). ies, and its scope is wide (including such areas as
The OECD guidelines, created in 1976 and bribery, conflict of interest, and money laundering)
substantially revised in 2000, state that companies (Wilkinson, 2006). In addition, from the perspective
should not ‘directly or indirectly, offer, promise, of the general public, the topic is complex and does
give, or demand a bribe or other undue advantage not carry the same emotive weight as human rights
to obtain or retain business or other improper (Wilkinson, 2006).
advantage. Nor should enterprises be solicited or Several reasons have been adduced to explain
expected to render a bribe or other undue advantage’ why the reporting progress against corruption is
(OECD, 2000, p. 21). These guidelines also encourage challenging (Wilkinson, 2008):
companies to communicate social, ethical, and
environmental policies, codes of conduct, and • Outcomes cannot be measured directly for activ-
material information concerning governance struc- ities which are preventive, and when corruption
ture and policies and employee and stakeholder occurs, it may remain undetected.
relations (OECD, 2000, pp. 15–16). However, there • Countering corruption is complex, and related
is a relatively limited awareness by companies of issues are often technical.
their existence (van Buiren, 2008), which limits • There are many forms of corruption.
severely its implementation. • Companies can find it difficult to discuss counter-
The UNGC and the GRI Guidelines are probably ing corruption publicly for fear that raising the
the two most important CSR-related instruments. topic may generate suspicions of problems.
Williams (2004) argued that for the UNGC to be a • Differences exist in reporting practices across
significant force, either the GRI or something similar cultures and business sectors.
to it will be a necessary complement. Isaksson and
Nevertheless, the credibility of CSR initiatives that
Steimle (2009) considered that in the context of a
address corruption requires companies to commu-
comprehensive CSR approach, it can be seen as
nicate and be more transparent about their efforts
strength that GRI guidelines are compatible with
pertaining to the fight against corruption with
the principles of the UNGC.
internal and external stakeholders (Côté-Freeman
The original nine principles of the UNGC cover
and Fagan, 2010).
topics in human rights, labor, and environment
Hills et al. (2009) argued that corporate responsi-
(UNGC, 2008a). A 10th principle relating to anti-
bility reports should include a section on anti-
corruption was added in 2004, providing that ‘busi-
corruption activities. Companies should discuss
nesses should work against corruption in all its forms,
what they are doing and track evidence of success
including extortion and bribery’ (UNGC, 2008a).
(Hills et al. (2009)). Furthermore, they exhort orga-
The UNGC suggests to participants to consider
nizations such as the UNGC to encourage corpora-
the following three elements when fighting corrup-
tions to include standard anti-corruption reporting
tion and implementing the 10th principle (Errath
frameworks in their annual communications.
et al., 2005):
Wilkinson (2008) suggested that companies should
• Internal: as a first and basic step, introduce anti- consider five main reporting components when
corruption policies and programs within their reporting their practices to combat corruption:
organizations and their business operations.
• Meeting stakeholders’ expectations: Companies
• External: report on the work against corruption
should focus the content and scope of their report-
annually and share experiences and best practices
ing on matters of material interest to stakeholders.
through the submission of examples and case
• Disclosing polices and management systems:
stories.
Whatever the size of company, there must be an
• Collective: join forces with industry peers and
anti-corruption policy supported by implemen-
with other stakeholders.
tation systems.
The UNGC has been criticized mainly for the inex- • Reporting on effectiveness of implementation:
istence of verification and independent monitoring Given that it is not possible to offer direct measures
and of penalization for infractions, being used in for effectiveness of anti-corruption activities,
many cases as a marketing tool and providing proxy measures should be used, such as em-
legitimacy for some of the violators of the princi- ployee and associate training. However, these
ples (Ruggie, 2002; Williams, 2004; Deva, 2006; proxy measures should provide information
Nason, 2008). about the depth and quality of the approach

Copyright © 2012 John Wiley & Sons, Ltd. J. Public Affairs 12, 357–365 (2012)
DOI: 10.1002/pa
362 M. C. Branco and C. Delgado

rather than just bare measures of inputs, such as • the measurement of outcomes or expected out-
hours of training given. comes using, as much as possible, indicators or
• Making external reporting credible: for example, metrics such as the GRI Guidelines.
by publishing results of stakeholder consultation,
Numerous companies communicate their CSR
reporting results of self-assessments, and using
programs and performance by using the GRI
an external assurer.
Guidelines to produce their sustainability report.
• Standardizing reporting frameworks and indica-
According to KPMG (2008), 79 percent of the top
tors: By providing content in an easily accessible
250 companies from the Global Fortune 500 issued
and comparable manner, companies can better
separate corporate responsibility reports, and 77
inform stakeholders on their actions.
percent of these companies use the GRI Guidelines
The UNGC originally required that participating to produce the report.
companies submit an annual ‘net report’ to show GRI Guidelines propose a set of indicators that
their commitment towards the Compact principles. may be used by companies to communicate their
Nowadays, since January 2003, companies are economic, environmental, and social performance.
expected to communicate publicly on their progress In the first version of the GRI Guidelines (GRI,
through a document entitled Communication on 2000), the issue of corruption was not treated. In
Progress (COP). This COP may be included in their the second version, only one indicator related to
sustainability or annual report (or other media, such corruption was proposed: description of the policy,
as websites, press releases, official statements, procedures/management systems, and compliance
company notices). A failure to provide the COP mechanisms for organizations and employees
may result in that corporation being listed on the Com- addressing bribery and corruption (including a
pact’s website as a ‘non-communicating’ participant. description of how the organization meets the require-
Since 2005, when the UNGC introduced the ments of the OECD Convention on Combating
policy for enforcement of the COP, more than 1000 Bribery) (GRI, 2002). In the latest version, the
companies have been listed as non-communicating, importance of this issue has increased and five
which indicates that they had failed to develop indicators are now proposed (GRI, 2006; GRI, 2011).
a COP by the relevant deadline, and more than Corruption-related indicators are considered
250 have been labeled as inactive participants, indicators of social performance. They include
suggesting a failure to submit a COP within explicit measures (such as the percentage and total
three years of joining the UNGC (Jamali, 2010). number of business units analyzed for risks related
These events are considered to magnify the to corruption) and implicit measures (such as the
importance of transparency and accountability total value of financial and in-kind contributions to
(KPMG, 2008). political parties, politicians, and related institutions
The COP is expected to include three elements: by country) (Table 1).
GRI has made an initial effort to provide guidance
• a statement of continued support for the UNGC on integrating the OECD guidelines with the GRI
from the Chief Executive Officer, Chairman, or guidelines, offering a guide to help organizations
other senior executive; communicate their use of the OECD guidelines using
• a description of practical actions taken to imple- the 2002 version of the GRI guidelines (GRI, 2004). It
ment the principles during the previous year; seems to have been a one-time-only effort instead of

Table 1 UNGC 10th principle, OECD guidelines for MNEs, and GRI indicators

GC principles OECD guidelines for MNEs GRI – G3 indicators

GC10 Businesses should work VI. Enterprises should not, SO2 Percentage and total number
against corruption in all Combating directly or indirectly, offer, of business units analyzed for
its forms, including bribery promise, give, or demand risks related to corruption
extortion and bribery a bribe or other undue SO3 Percentage of employees trained
advantage to obtain or in organization’s anti-corruption
retain business or other policies and procedures
improper advantage. SO4 Actions taken in response to
Nor should enterprises be incidents of corruption
solicited or expected to SO5 Public policy positions and
render a bribe or other participation in public policy
undue advantage development and lobbying
SO6 Total value of financial and in-kind
contributions to political parties,
politicians, and related institutions
by country

Copyright © 2012 John Wiley & Sons, Ltd. J. Public Affairs 12, 357–365 (2012)
DOI: 10.1002/pa
Business, social responsibility, and corruption 363

an ongoing project. Although the third version of the According to Kell (2006), the role that voluntary
GRI guidelines exists since 2006, the 2004 document business-led initiatives, such as the UNGC, may
has not been updated until now. have is primarily related to the provision of the
On the contrary, the project on making the trust-based informal social norms, without which
connection between the GRI guidelines and the markets and societies cannot function. These
UNGC seems to be ongoing. An important effort voluntary initiatives will certainly help to make the
to provide guidance on integrating the COP with case for good corporate performance and, thereby,
sustainability reports elaborated in accordance can provide an impetus for broad-based change,
with the latest version of the GRI Guidelines has especially if good performance is rewarded and
been published (UNGC/GRI, 2007). In May 2010, established as a de facto behavioral norm (ibid.).
UNGC and GRI announced an agreement to align The CSR practices referred in this paper may be of
their work in advancing corporate responsibility great assistance in the fight against corruption, in
and transparency and further developing their particular because they will make it easier to hold
combined strengths (the GC’s strategic advancement firms and those who work within them accountable.
of key sustainability issues and GRI’s reporting The engagement of a company in the fight against
framework). Under the terms of the agreement, GRI corruption and the reporting thereof makes it
will develop guidance regarding the UNGC’s 10 easier to hold it and those who work within them
principles and issue areas to integrate centrally in a accountable for acts of corruption.
next iteration of its Sustainability Reporting Guide- According to Hess (2009), including anti-
lines. At the same time, the UNGC will adopt the corruption indicators in sustainability reports should
GRI Guidelines as the recommended reporting serve multiple purposes, which includes internally
framework for the businesses that have joined its directed goals and externally directed goals. Regard-
corporate responsibility platform. ing internally directed goals, the disclosures will help
More recently, in its report on corporate respon- to ensure that the corporation is committed to anti-
sibility indicators in annual reports, the United corruption. The disclosure process will assist com-
Nations Conference on Trade and Development panies in implementing the necessary changes and
(UNCTAD) has also recognized the importance of ensure their effectiveness over time and also assist
this issue and proposed as single indicator the members of the organization to hold each other
number of convictions for violations of corrup- accountable. Second, the disclosures have an external
tion-related laws or regulations and amount of purpose of holding leaders of companies accountable
fines paid/payable (UNCTAD, 2008). to the public and improve the understanding of what
In spite of all these developments, few studies on works in combating corruption and developing
anti-corruption reporting practices have been made better risk assessments.
thus far. Gordon and Wynhoven (2003), Novethic/ However, reporting on the fight against corruption
SCPC (2006), and Transparency International (2009) is clearly an underdeveloped practice. The absence of
are among the most important studies published on detail of corporate anti-corruption reporting depicted
the matter. These studies show that, overall, such in the few studies made thus far weakens the credi-
reporting is not satisfactory, whether in annual or bility of such reporting and can throw into question
sustainable development reports or in corporate company commitment to broader corporate responsi-
website postings. bility efforts towards internal and external stake-
holders (Côté-Freeman and Fagan, 2010). Although
the rejection of corruption is now an integral part of
CONCLUDING REMARKS any company’s social responsibility, it appears to
remain a neglected social issue among CSR priorities
It is a widespread belief that the sustainability of (Hills et al., 2009). There is still much work to be
business depends on free and fair competition. Cor- performed, both in the development of practices,
ruption in all its forms, such as extortion and brib- which will lead eventually to the eradication of cor-
ery, not only undermines business success but also ruption, and in the development of reporting instru-
contributes to poverty, inequality, crime, and inse- ments, which will allow companies to adequately
curity. It is an obstacle to political, social, and eco- communicate their anti-corruption efforts.
nomic development (USAID, 2005).
There are situations in which the costs of corruption
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DOI: 10.1002/pa