Ethics and compliance officers have to perpetually scope the environment to draw out emerging trends impacting organizations. as a result your ethics and compliance program cannot remain static and it must evolve with those emerging trends.
We have identified a non-exhaustive list of 4 trends in ethics and compliance impacting business: –
1. The rise of ESG
Sustainability reporting continues to evolve. In the past, ESG reporting was left to corporate HQ, investor relations and communications teams of regulated entities.
That has changed.
With changes in legislation and ongoing litigation around ESG / Climate change matters, the risk profile of organizations on the issue has also evolved.
The Central Bank of Kenya issued guidelines to regulated entities to report on climate change matters base don the TCFD framework.
That framework has since been adopted with modifications by the International Sustainability Standards Board who are expected to release the final version of the standards at the end of June 2023 for implementation in 2024.
As firms make sustainability commitments, they have to go beyond reporting to provide verifiable assurances around commitments and data as these feed into the risk profile of the organization.
This requires auditing information and statements published.
Green-washing is therefore a key area where work by ethics and compliance teams is needed. They should be involved in the discussion around what metrics are chosen and how they are reported.
a) are commitments real and achievable?
b) are measurement and reporting robust to avoid the risk of material misstatement?
2. Corporate & tax transparency
Corporate
Clients investment in better systems for raising concerns and protecting whistleblowers stems from many factors to include, the requirements of the Bribery Act, 2016, the rise of Diversity, Equity & Inclusion and the proliferation of social media as a preferred method of communication.
Social media can never be the whistleblower forum of choice for any organisation. The impact of bribery allegations to the reputation of an organization cannot also be ignored.
Companies without whistle blow programs leave the management of a potentially damaging issues to the public. Firms must instead take charge of this process and present a secure anonymous mechanism for reporting matters.
This will be accompanied by a greater effort to push these systems outwards to contractors, suppliers and other third parties to help firms to find out what is going on and to help spot problems before they become serious.
Effectively managed whistleblower programs drive improvements in corporate behaviour by activating accountability mechanisms
Tax
Economic pressures impacting governments invariably extend to stricter tax measures as governments scramble to resolve budget deficits and a constrained lending environment. A scan of our local environment illustrates heightened efforts directed at tax collection and pressure from multilateral agencies to seal tax loopholes e.g pressure from the OECD to move against countries and territories that have no minimum corporate tax rate.
The register of beneficial ownership of firms in Kenya is another interesting example of the direction of transparency. At the click of a button opaque ownership structures become immediately transparent.
These measures help societies in the fight against money laundering. They will benefit corporate that move towards simplified tax structures.
3. Complex change in supply chains
The sanctions resulting from the war in Ukraine and the COVID-19 related shutdowns in China war are also driving changes to supply-chains. Some companies are taking a compliance-led approach to ensure they are legally covered in what they do.
These shifting global patterns are driving changes to supply chain locations and leading to new waves of investment in countries such as Indonesia, Vietnam and Mexico which may present new corruption, human rights and wider code of conduct risks that may not have been foreseen.
4. Climate changes everything
Connected to 1 above, the impact of climate change means discussions around a transition away from fossil fuels and towards renewable energies are gathering steam. The need for a global baseline for climate change reporting is also gathering steam with countries increasingly being encouraged to adopt ISSB's two sustainability reporting standards set to commence in 2024.
The high energy prices resulting from the Ukraine war have also prioritized the need for energy independence and in renewables.
Companies will continue to be under pressure to understand their role in the energy transition and to report on it clearly and transparently.
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