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OECD targets corruption in updated responsible business guidance

Author: ICAEW Insights

Published: 05 Jul 2023

International body’s revised counsel for fostering ethical corporate citizenship includes advice on how to carry out due diligence that will curb improper business practices.

Encouraging global businesses to crack down on corruption is a central theme of updated guidance from the Organisation for Economic Cooperation and Development (OECD) to reflect the increasingly complex and dynamic world in which multinational companies (MNCs) do business.

Issued in response to seismic shifts in factors affecting corporate governance, the 2023 OECD Guidelines for Multinational Enterprises on Responsible Business Conduct mark the first refresh of the recommendations since their last review in 2011.

Competitive forces

The guidelines stress that the operating environment for global trade is undergoing “far-reaching and rapid change” on political, economic, ecological, social, and technological fronts.

“The nature, scope and speed of economic changes have presented new strategic challenges for enterprises and their stakeholders,” the guidelines say. “Competitive forces are intense and multinational enterprises face a variety of legal, social and regulatory settings.”

At the same time, the concept of the MNC has evolved to encompass a broader variety of business arrangements and organisational forms – with new technologies, strategic alliances and closer relations with suppliers and contractors blurring the boundaries of the traditional enterprise.

However, against that shifting backdrop, many MNCs are demonstrating that a respect for high standards of business conduct goes hand in hand with growth and profitability; corporates are increasingly implementing business models that pursue sustainable development and support coherence between economic, social and environmental objectives.

In addition, enterprises have led discussions across society on what responsible business conduct should look like and have worked with peers and other stakeholders to develop their own relevant guidance.

Mitigating harms

To help MNCs navigate change while preserving the positive steps they are already taking, the new Guidelines include significant updates in a range of topical areas, some of which have particular resonance with the accounting and finance community. 

Due diligence on all forms of corruption: The OECD urges MNCs to develop and adopt controls and compliance programmes for adequately detecting and preventing bribery and other forms of corruption.

Relevant controls should include a system of financial and accounting procedures designed to ensure the maintenance of fair and accurate books, conflict of interest registers, records and accounts, with the aim of guarding against engagement with – or concealment of – bribery, or other acts of corruption.

Companies should regularly monitor and reassess their corruption risks to determine the allocation of compliance resources and ensure their controls evolve as necessary.

Due diligence expectations for the sale, licensing and use of technology – including the handling of data: When selling or licensing technology, companies should consider the long-term developmental, environmental and societal impacts of the tools in question.

Enterprises involved in the development of new technology or new applications of existing tools should anticipate and address any relevant ethical, legal, labour, social and ecological challenges, while promoting responsible innovation and engaging in information sharing with local regulators and worker representatives.

At the same time, enterprises should conduct cybersecurity risk management in line with privacy-by-design principles, plus use of strong encryption, permission and access-management protocols and other best practices to reduce threats and mitigate harms. They should also observe additional, relevant OECD standards in the data field.

Expectations for how enterprises should conduct due diligence on adverse impacts related to the use of their products and services: Risk-based due diligence around a product or service should account for known or foreseeable circumstances linked to the use of the offering in accordance with either its intended purpose, or foreseeable misuse, which may give rise to adverse impacts.

MNCs with large numbers of suppliers and other business relationships are encouraged to identify general areas where risks of adverse impacts are most significant and, based on that risk assessment, prioritise those areas for due diligence.

Protection for employees who raise red flags over their company’s conduct: The OECD expects MNCs to promote employee awareness of company policies. It recommends safeguards for bona-fide whistleblowing activities, including for workers who, in the absence of timely, remedial action, or amid a reasonable risk of negative employer action, report to the relevant authorities any practices that contravene the law.

Meaningful engagement

The guidelines also urge enterprises to align with internationally agreed goals on climate change and biodiversity. In a clear nod to the work of finance professionals, they stress: “Communication regarding environmental impacts associated with an enterprise’s operations, products and services, as well as meaningful stakeholder engagement, are a component of due diligence and may also be required by law. Reporting standards, such as the Global Reporting Initiative … provide useful references.”

In addition, the guidelines set out measures for boosting the visibility and effectiveness of OECD National Contact Points (NCPs) for Responsible Business Conduct: a network of special support agencies, backed by the 51 governments that adhere to the Guidelines, that provide MNCs with a range of services – including a non-judicial grievance mechanism.

ICAEW Director, Corporate Governance and Stewardship, Peter van Veen says: “MNCs have a big role to play in leading by example within their sectors, and the updated guidelines will help them to continue to raise standards in key areas, such as climate and biodiversity.”

Van Veen is encouraged by the increased emphasis on due diligence in MNCs’ supply chains, which should promote higher standards across the broader corporate ecosystem. “We also support the expanded due diligence recommendations on all forms of corruption,” he says.

The NCPs for Responsible Business Conduct play an important part in holding MNCs to account and ensuring they comply with the guidelines. “Stronger procedures and increased visibility and effectiveness are therefore especially welcome, as they will help build confidence with all stakeholders in the guidelines and the NCPs,” Van Veen adds.

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