Anti-bribery and corruption measures for ESG compliance
Global consulting firm Kroll has released the 2021 edition of its annual Anti-Bribery and Corruption Benchmarking Report, shedding light on the main trends and developments in the financial crime segment. David Liu, Managing Director and Head of Compliance, Risk and Diligence for APAC at Kroll, walks through the report’s main findings in the area of environmental, social and governance.
Environmental, social and governance (ESG) criteria have risen rapidly up the boardroom agenda in recent years. Increased scrutiny of ESG metrics comes amid growing recognition that businesses have a wider range of responsibilities to the societies they operate in and the people whose lives they touch than simply maximising shareholder value.
Anti-bribery and corruption programmes have long been a part of corporate risk analysis and clearly play a big role in ESG – all aspects of ESG compliance can be undermined by instances of bribery and corruption. The year’s edition, which surveyed hundreds of senior compliance and risk professionals from around the world, offers useful insights into how businesses across Asia Pacific (APAC) are currently managing the “G” of their ESG programmes.
For several years now, APAC stock exchanges have required listed firms to incorporate ESG metrics into their annual reports. The Singapore Exchange introduced sustainability reporting on a “comply or explain” basis in June 2016. The following year, Hong Kong Exchanges and Clearing Limited (HKEX) made aspects of ESG reporting mandatory.
Accordingly, the Anti-Bribery and Corruption Benchmarking Report shows that 57% of investors in the region have largely incorporated ESG issues into their investment analysis, including corporate governance issues like anti-bribery and corruption (ABC) policies.
The region’s early moves in ESG are reflected in levels of adoption and support for ABC programmes. Our report shows that 86% of APAC respondents agree that ABC programs are beneficial for good governance and transparency; this is by far the largest percentage for any region and compares to 54% of respondents in Europe and 48% in the U.S. or Canada. This high figure may be linked to the perceived levels of corruption and complexity in the region.
In Transparency’s Corruption Perception Index, the APAC region had an average score of 45 out of 100 compared to 66 in Western Europe. The APAC figure reflects a wide variety of circumstances across the region – from high-fliers such as New Zealand (scoring 88), Singapore (85), Australia and Hong Kong (both on 77) down to countries with weaker scores such as Indonesia (37), Thailand (36) and the Philippines (34).
Besides tackling bribery and corruption, the demand for ESG compliance is driven by other important regional factors. For instance, business resilience and employee rights are also powerful catalysts in APAC.
While the region has played its part in responding to ESG requirements, the task has not been without its challenges. Our report indicates that while there is support for ABC programmes, as well as an understanding of its role in ESG, many respondents struggle with the implementation of programmes. In APAC, 64% of respondents (compared to 34% in the U.S. and Canada) state that ESG creates more challenges than benefits for the compliance function.
However, we believe that these early troubles will ease. With increasing ESG regulations and the strong performance of ESG funds, the criteria will likely become more standardised and manageable in the future. And our survey respondents acknowledge that there is room for improvement in their ABC programmes: just under half of APAC respondents (46%) would rate their ABC programme as highly effective (a figure that reaches 66% in the U.S. and Canada).
For a region as culturally and economically diverse as APAC, ABC programmes will continue to play a vital role in ESG compliance and safeguarding corporate reputations as per our report findings.