Over the last six months Business Fights Poverty has been working with the UK Government’s Business Integrity Initiative, supported by DFID, FCO and DIT, which aims to help SMEs to anticipate and avoid bribery, corruption and human rights risks when doing business in frontier markets.
The Business Integrity Initiative has established an online hub that signposts companies to anti-corruption and human rights guidance and provides support to SMEs on anti-bribery and corruption compliance and prevention. The goal is to encourage companies to put integrity at the heart of their business strategies and practices. This in turn will help developing countries to attract long-term, sustainable investment while reducing the supply of bribes and human rights abuses by UK companies. Bribery and corruption remain major barriers to global trade and development.
Our work with the Business Integrity Initiative has focused on identifying the best ways to engage SMEs with the case for doing business with integrity. Initial research among UK businesses, in particular SMEs, suggests on the one hand, a lack of awareness and understanding of the corruption risks associated with exporting to and importing from frontier markets and the requirements of the UK Bribery Act, and, on the other, the potential business benefits that can arise from doing business with integrity.
Doing business with integrity is essential for all companies, everywhere, but SMEs especially face disproportionately higher risks in frontier markets as they often lack the expertise in house to manage bribery and corruption risks and the ability to influence the behavior of their business partners. Notwithstanding the need to manage the risks, the over-riding message coming out of our research and engagement with a range of companies and business networks is that investing in business integrity builds competitive advantage and delivers tangible business benefits.
Demonstrating business integrity policies and practices, e.g. codes of ethics, anti-bribery and corruption policies is not only becoming standard business operating practice but also essential for building the trust that underpins successful long-term commercial relationships with suppliers and customers. Our research confirms that 72% of UK SMEs who responded to our survey expect the ability to demonstrate strong anti-bribery and corruption policies and practices will become increasingly important to their business over the next 5yrs. 65% of respondents think that customers will be the biggest drivers of this trend. The bottom line is that it is going to get much harder to work internationally with your customers and suppliers if you don’t have a robust integrity policy in place. Our SME survey revealed that 90% of UK SMEs cite doing business with integrity as important or very important to commercial success and 60% said that being able to show strong anti-bribery and corruption track record has created commercial benefit.
Through our work, we have identified a number of companies that are benefiting from doing business with integrity. They include Forensic Pathways, Dints, MLM, and Coltraco Ultrasonics, who are enjoying significant commercial success in frontier markets by putting integrity at the heart of their business model and relationships with commercial partners.
Beyond building more sustainable commercial relationships and avoiding the risk of breaking the law and getting prosecuted, investing in integrity also strengthens brand and company reputation, leads to more motivated employees and eliminates the risk of ongoing uncontrolled costs to the business that hit margins and profits over the long-term.
Another key message coming out of our work is that it is vital that SMEs do not wait for an integrity issue to arise. Companies, especially those targeting opportunities in higher risk markets, need to be proactive in ensuring the company anticipates and is ready to manage an integrity issue before it arises. The companies we highlight above have all taken the time to familiarise themselves with the risks in their chosen markets, to ensure anti-bribery and corruption policies and practices are embedded into business operations, processes and culture. They have also incentivised doing business with integrity among employees and engaged customers and suppliers with anti-bribery and corruption policies and compliance requirements.
And large companies also have a key role to play, especially those that have large numbers of SMEs in their supply chains. It is clear that leading companies are moving away from a “one strike and you’re out” compliance mindset to a more empathetic and supportive approach, which emphasises building the capacity of partner SMEs to do business with integrity, as Alison Taylor, Managing Director at BSR, who has been an adviser to our programme, explains in her article. Anglo American is one such company, and is currently scaling up its training and capacity building initiative for SME partners, which includes a strong business integrity emphasis.
We need to be realistic. Business integrity is just one of many challenges SMEs face when doing business in frontier markets and it’s going to take time to change mindsets and behaviours. But, we hope that over time, SMEs will see that investing in business integrity is not just the right thing to do, it is also good for business.