Ethical Lens February 2016

ETHICAL LENS CIMA ROUNDUP OF RESPONSIBLE BUSINESS ISSUES - FEBRUARY 2016

IN THIS ISSUE

Trends in sustainability reporting Key issues at Davos 2016 Volkswagen: the diesel dupe 2015 UN climate change conference Attitudes toward ethics: new surveys

WHAT ETHICS MEANS TO ME… ‘For me, having a good set of ethics means doing the right thing especially when no one is looking’

1 · www.cimaglobal.com/ethicallens

Timothy Isabirye, Regional Marketing Manager, Africa

NEWS Escaping short-termism In October 2015, CIMA and St. Paul’s institute jointly hosted an event which explored how business models can operate more effectively and overcome the misjudgements often provided by short-termism.

The seminar was chaired by Barbara Ridpath (St. Paul’s Institute) and the expert panel included Anders Bouvin (Handelsbanken), Jane Fuller (Centre for the Study of Financial Innovation) and Edward Houghton (Chartered Institute of Personnel and Development).

How can organisations balance short- and longterm concerns? What does a healthy long-term corporate culture look like and how can it be instigated and communicated? These were some of the questions explored and discussed during the event. » Visit the event page to watch the event and read the summary report

REPORTS & EVENTS Ethics e-tools updated The member and student ethics e-tools give an overview of the CIMA Code of Ethics, the importance of ethics in the workplace and how ethical considerations may appear in CIMA exams.

We’ve recently updated the student ethics e-tool to reflect the 2015 syllabus by adding new sample questions, as well as updating the links and videos. The member e-tool has also been updated to include recent events surrounding business ethics that are more relevant in today’s time.

These e-tools are great resources which can be used as part of your CPD and for students, to help you in your ethical education. » Access the ethics e-tools here

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Integrated reporting in the public sector With increasing demand for greater transparency and accessibility in corporate reporting, interest in Integrated Reporting (abbreviated as <IR>) has grown in recent years. Yet the benefits of this approach extend far beyond the production of user-friendly published accounts. This report highlights the wider benefits of <IR> to public sector organisations, identifying relevant international examples. » Access the report or read about Integrated Reporting <IR> on the CIMA website

Implementing an effective corporate ethics policy

The board and their influence on corporate culture

Businesses that want to succeed in the long term must reflect upon ethical challenges in their own operations and take action to avoid integrity risks.

The Financial Reporting Council (FRC) has launched a market-led initiative to gather insight into corporate culture and the role of boards; to understand how boards can shape, embed and assess culture; and to identify and promote good practice.

CGMA designation holders are ideally positioned to be key influencers within their organisations and can help leadership understand the business benefits of ethical behaviour and identify priorities for action.

This interactive CGMA tool helps you and your business on the way to implementing an effective corporate ethics policy, complete with case studies and supporting questions. » Access the tool from the CGMA website

CIMA is partnering with the FRC for the Culture Project, along with the City Values Forum, the Chartered Institute of Personnel and Development (CIPD), the Institute of Business Ethics (IBE) and the Chartered institute of Internal Auditors (IIA).

A report will be published in June 2016, identifying good practice examples and including resources to help boards across a range of sectors take action on culture. » Read more about the Culture Project

IFAC Latest from the IFAC Global Knowledge Gateway The IFAC Global Knowledge Gateway provides insights, ideas and information from around the globe, related to ethics, governance, sustainability and a range of other areas. You can find out more about the Gateway in this short YouTube animation.

Latest on the Global Knowledge Gateway: learn about how the accountancy profession can play an important role in corporate responsibility and the challenges of climate change, and why it is crucial to “do the right thing even when no one is looking”.

Read an interview with Dr. Stavros Thomadakis, Chairman of the International Ethics Standards Board for Accountants – “Let’s be clear – corruption and bribery are a global problem that affect both developing economies. This is one area where the Code of Ethics for Professional Accountants can make a significant impact in the public interest. By virtue of their obligation to comply with the Code, PAIBs can play an important role in facing up to corruption and bribery.” » Visit the IFAC Global Knowledge Gateway

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REPORTING Investors want more and better nonfinancial information

Global change-makers making the transition to Integrated Reporting

Investors are increasingly enthusiastic about the benefits of integrated reports, according to a global survey of more than 200 institutional investors by Ernst & Young (EY)’s Climate Change and Sustainability Services, Tomorrow’s Investment Rules 2.0.

In November 2015, some of the world’s biggest names in business and investment from 25 countries met in London to set out how they are making the transition to Integrated Reporting <IR>, a new system of corporate reporting based on managing and communicating a broad-based approach to value creation. Over 180 representatives gathered for the 2015 Official Integrated Reporting Convention organised by the International Integrated Reporting Council (IIRC).

There is clear evidence that investors are relying more heavily on non-financial information, with nearly half of investors stating that they would rule out investment based on certain non-financial disclosures. The research also indicates that there is a need for companies to step up on their nonfinancial reporting, with 64% reporting that businesses do not adequately disclose environmental, social and governance (ESG) risks.

The convention focused on the practical implementation of <IR>, including how embedding a “multi-capitals” approach to value creation contributes to long-term decision-making and investment.

» Access EY’s Tomorrow’s Investment Rules 2.0 report » Read more about the convention on the IIRC website

UNEP: Time to raise the bar on sustainability reporting

Pressures on professionals reported in recent surveys

According to a new report from the United Nations Environment Programme (UNEP), companies need to desperately improve their corporate sustainability reporting in order to align company-level sustainability performance with the ambitions of the 2030 Agenda for Sustainable Development and COP21, the UN climate change conference.

Recent surveys indicate that pressures still remain for professionals to engage in unethical practices at work, which demonstrates the need to further enhance ethical awareness in business.

The report, Raising the Bar: Advancing Environmental Disclosure in Sustainability Reporting, was launched in November 2015 at the Reporting 3.0 Conference in Berlin.

UNEP found that while 95% of the 108 companies researched disclose their greenhouse gas (GHG) emissions, only 8% have established reduction targets in accordance with the science-based target of limiting global warming to 2 degrees Celsius – the central goal of COP21. Other findings of the report include the types of sustainability data disclosed by companies, the key challenges in quality sustainability reporting, and more. » Find out more and download the full report here

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CareersinAudit.com quizzed 1696 accountants around the globe and the results reveal that 48% of them had either been pressurised (or knew someone that had) by a manager or partner to ignore an adjustment that should have been made to a set of accounts.

The research by CIPD, based on a survey of approximately 3,500 business leaders and 2,200 HR practitioners, revealed 29% of business leaders report they have to compromise their principles to meet current business needs and 30% would choose to continue rewarding high-performing individuals regardless of the values they demonstrate. » Find out more about the CIPD research and the CareersinAudit.com survey

RESPONSIBLE BUSINESS Strong anti-corruption standards in Trans-Pacific Partnership Agreement Towards the end of 2015, a historical trade agreement was announced after 7 years of negotiations among twelve Pacific Rim countries, setting a new standard for global trade. The Trans-Pacific Partnership Agreement (TPP), which is likely to impact 40% of the world economy, includes the strongest anti-corruption standards of any multi-lateral (and bilateral) trade agreement in history.

Article 26 of the TPP, covering Transparency and Corruption, requires member parties to have and enforce anti-bribery laws, and to accede to and ratify the United Nations Convention against Corruption (UNCAC). Countries must “increase the training of public officials to take steps to discourage gifts, to facilitate reporting acts of corruption, and to provide for disciplinary and other measures for public officials engaging in acts of corruption”. » Read the Clifford Chance Briefing and access the summary of the Trans-Pacific Partnership Agreement

Volkswagen: the diesel dupe One of the biggest scandals in late 2015 was the Volkswagen (VW) scandal, which has been dubbed the “diesel dupe”. In September, the Environmental Protection Agency (EPA) found that 482,000 VW cars being sold in the US had a defeat device in diesel engines that could cheat emissions tests and were emitting up to 40 times more toxic fumes than permitted. VW has since admitted the cheat affects 11m cars worldwide.

Since the scandal broke, VW’s shares have lost almost a third of their value, or about 22 billion euros ($24 billion US). More recently in January 2016, it was reported that dozens of large VW shareholders plan to sue the carmaker in a German court, to seek compensation for the plunge in its shares. VW chairman, Hans Dieter Pötsch, has since admitted that the scandal was the result of a combination of individual misconduct but also flaws in company processes and a tolerance of rulebreaking. » Access BBC’s article explaining the scandal, the Reuters article regarding the lawsuit and read CIMA Managing Director Andrew Harding’s article on the Huffington Post

$2 trillion laundered worldwide A new report released in November 2015 from Transparency International (TI) has found $2trn (£1.3trn) of dirty money is being laundered every year through the global financial system. The report has found a quarter of the cases came from funneled stolen cash through secret companies.

Out of the G20 countries, 15 were found to have weak or average ownership transparency legal frameworks – with Australia, Brazil, Canada, China, South Korea and the US being the weakest. The UK was found to be the country with the strongest frameworks in place, driven by new legislation that gives immediate access to beneficial ownership information to law enforcement. However, the report indicates that the UK needs to do more to ensure its overseas territories such as the Cayman Islands are not used as a safe haven for corruption. » Access the full report here

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US Supreme Court vs. Nestlé in landmark battle over child slavery

2015 UN Climate Change Conference (COP 21) makes history

In January 2016, Thomson Reuters Foundation reports that the US Supreme Court is refusing to dismiss a lawsuit seeking to hold Nestlé, the world’s largest food maker, accountable for using child slavery in Africa. The case dates back to 2005 and lawyers have claimed that this is set to be a landmark battle over labour used overseas.

Nearly 200 countries came to a consensus on the need to cut greenhouse gas emissions and tackle climate change in a historic, legally binding climate deal that aims to hold global temperatures to a maximum rise of 1.5C above pre-industrial levels.

Nestlé has since made substantial efforts to reduce child labour in its supply chains by training farmers, building schools, monitoring production and other methods.

A report in September by the Fair Labor Association (FLA) found growing awareness of child labour in Ivory Coast in response to Nestlé’s broad efforts to increase training and reduce the practice; but the report also indicated that more needed to be done to increase awareness of the code of conduct among its farmers. » Read the full article here and read about child labour issues in Africa

Some of the other key elements included national pledges to cut greenhouse gas emissions in the 2020s, a plan to make countries pledge deeper emissions cuts in the future with a review every five years, and an agreement that requires “developed” nations to help developing countries with the costs of sustainability.

Although climate scientists and activists have cautioned that the measures did not go far enough, it is evident that the agreement will have a strong impact on businesses and investors and the future of corporate sustainability. » Read about the key elements of the agreement and access the latest news on the COP21 UN climate change conference on The Guardian

Corruption of public officials – even in most advanced economies In the most recent December 2015/January 2016 edition of CIMA’s Financial Management magazine, Charles Orton-Jones discusses how the corruption of public officials represents a huge cost to the taxpayer, even in some of the most advanced economies.

Worldwide corruption is immense, with more money lost to illicit financial flows in Africa each year than gained from foreign aid. Even in Germany, doctors were caught taking bribes from a pharmaceutical company for prescribing its drugs – which led passing a new law, costing the taxpayer billions of euros.

The article discusses some of the anti-corruption measures in countries such as Italy, Bulgaria and Romania and also mentions the duty of an accountant in fighting corruption. » Read the article on FM Magazine

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Lack of supply chain visibility According to a recent report, a significant number of organisations are at risk of severe disruption to their supply chains because they are not aware of who their key suppliers are. The report published by the Business Continuity Institute (BCI) and Zurich Insurance Group surveyed 537 organisations in 67 countries.

It was found that 72% of the organisations surveyed do not have full visibility of their supply chains and nearly one in ten said they do not even know who their major suppliers are.

This could have major consequences for managing the supply chain and ensuring disruptions are minimized.

54% of respondents stated cyber-attacks and data breach as a cause of supply chain disruption (2 nd to IT and telecommunications outage). In addition, business ethics incident has been listed as one of the top 10 types of disruptions for the first time. » Read the article here

Davos 2016: Top issues include inequality and climate change Global political and business leaders gathered in January 2016 in Davos-Klosters, Switzerland for the World Economic Forum annual meeting. The four days of discussions and debates focused on eight key themes, including climate change and inequality.

It was the first major meeting of politicians and business leaders since COP21 and the landmark deal to limit carbon emissions in Paris in December. Access the summary of the climate change discussions here.

Global inequality was another important topic of discussion after Oxfam’s new report that wealth is becoming increasingly concentrated in the hands of a small group of billionaires, with the richest 62 people having as much wealth as half of the world’s population.

According to PR Week, income inequality and gender imbalance were underlying issues in nearly every topic of discussion at Davos. » Learn more about Davos 2016 in The Guardian and on the World Economic Forum website

Employee and public attitudes toward ethics: new reports from IBE The Institute of Business Ethics (IBE) has recently released a number of reports to highlight the attitudes of employees in Britain and Continental Europe, as well as the attitudes of the British public regarding business ethics.

According to the main findings of Ethics at Work 2015 Survey of Employees, employee awareness of corporate ethics programmes increases ethical awareness and perceptions of ethical culture. The survey highlighted employees’ attitudes and perceptions of ethics at work from five European countries – UK, France, Germany, Italy and Spain.

From the perspective of the British public, corporate tax avoidance is listed as the primary ethical concern about business behaviour, followed by executive remuneration.

» See the findings from the Ethics at Work 2015 Survey of Employees and the Attitudes of the British Public to Business Ethics 2015 report

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MORE FROM CIMA ETHICS Ethics checklist When facing an ethical dilemma, you need to act quickly. The longer you leave it, the more chance there is for repercussions for those involved. CIMA’s ethics checklist takes you through the steps to take when you are unsure of what to do. » To the ethics checklist

Code of Ethics In January 2015, CIMA and the AICPA launched the code of ethics for CGMAs. The CGMA code is aligned with the requirements contained in the 2015 CIMA code of ethics (Part C) and the AICPA code of professional conduct. Accordingly, CIMA members who hold the CGMA designation and are compliant with the CIMA code will also be in compliance with the CGMA code. » To the code of ethics

HELPLINES AND SUPPORT Global Guidance Line

UK Legal Helpline

This service, aimed at CIMA members and students outside the UK, allows the caller to discuss a concern and get help to decide next steps and other potential areas of support. This is not a substitute for technical or legal advice. Operators speak multiple languages, the service is available 24/7, and the caller will remain anonymous.

LAW Express - for CIMA members and students in the UK and Europe. This service gives access to information online at no charge, and a low cost professional legal advice phone-line. 

Find information about CIMA’s helplines and support at www.cimaglobal.com/helplines

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Access the Code and all ethics resources at www.cimaglobal.com/ethics

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Alternatively, send your ethics query in an email to ethics@cimaglobal.com

CIMA Ethics Helpline This free confidential helpline offers ethical guidance and assistance with applying the Code of Ethics, available to all CIMA members and students.

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