ETHICAL LENS

CIMA ROUNDUP OF RESPONSIBLE BUSINESS ISSUES - FEBRUARY 2017

1 · www.cimaglobal.com/ethicallens

IN THIS ISSUE

Ethical Due Diligence in Recruitment

Promoting Internal Trust

World’s Most Ethical Companies

Edelman Trust Barometer

Better business means a better world

ETHICS ARE IMPORTANT TO ME BECAUSE...

‘They help us decide what is right, and what is wrong. This helps us decide how to act and behave, in both our social and professional lives. Employers place a huge emphasis on ethics, and that’s why it features so heavily in the CIMA syllabus’

Shane Balzan,

Head of Syllabus Development- Management Accountant

2 · Ethical Lens

NEWS

Accountancy plays major role in UN Global Goals

IFAC have identified eight Sustainable Development Goals where the

accountancy profession, professional accountants working in business and the

public sector have the most significant part to play. This new global agenda for

sustainable development and further guidance is laid out in a new report for the

profession.

» Read the full report here

REPORTS & EVENTS

Recruiting Ethically

CIMA partnered with the Institute of

Business Ethics to provide guidance on

ways that businesses can recruit

ethically: Ethical Due Diligence in Hiring

and Assessing Professional

Accountants. This guidance highlights

how there are many stages to

conducting ethical due diligence in

recruitment: some include: identifying

values, involvement of HR, pre-screening, interview process,

and a pre-offer screening. It also includes a case study and

statements from Britvic GB, and Metro Bank.

»Access the full CGMA report here

Promoting Internal Trust

What does trust mean? What are the warning signs of a

breakdown in trust in organisations? What are the roles

of accountants in business?

These were some of the

topics of discussion during

the roundtable hosted by St

Paul’s Institute and CIMA as

part of an ongoing joint

programme on ethical

culture. The discussion report Internal Trust: Building

alliances from within explores the subject of trust and

how to create structures that encourage stronger

working relationships and alliances.

» Access the full report here and see related work here

UN Forum on Business & Human Rights

The fifth annual UN Forum took place in November 2016 in Geneva bringing together

business and human rights practitioners from different sectors to highlight challenges

in implementing the UN Guiding Principles on Businesses and Human Rights.

CIMA Executive Vice President – Academics, Noel Tagoe spoke in a panel discussion on “How accountants can assure

respect for human rights”. The session was chaired by NED, and IESBA member Claire Ighodaro and other panellists included

Paul Druckman; NED and capital market performer, Richard Karmel, Managing Partner at Mazars LLP and Ian Peters, Chief

Executive Chartered Institute of Internal Auditors. The session focused on ways accountants can exercise and increase their

influence to drive for respect of human rights within their organisation. See the CGMA article on what accountants are doing.

» More on the Human Rights forum can be found here

January 2017 · 3

IFAC

Latest from the IFAC Global Knowledge Gateway

The IFAC Global Knowledge Gateway provides insight, 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: read about new IFAC appointed President Rachel Grimes; what will drive accounting in Africa; Financial Accounting Standards Board improvements to revenue recognition; fraud and corruption and the 2016 IESBA Handbook. Also find out about the global events hosted by the European Federation of Accountants and Auditors for SMEs and the Global Ethics Summit.

NOCLAR: In July this year responsibilities responding to the non-compliance with laws and regulations (NOCLAR) will come into force. As this impacts on all CIMA students and professionals you should familiarise yourself on proposed actions.

» Visit the IFAC Global Gateway

REPORTING

Ethisphere 2016: World’s Most Ethical

Companies

In January 2017 the

Ethisphere Institute

published the World’s Most

Ethical Companies 2016:

Special Research Report.

The report looks at three main areas including: processes and

practices of leading companies; the impact of a transparent

and open culture and enabling ethical leadership. These

areas allow a clearer understanding of how leading

companies are gaining competitive advantage. Assessment

of culture and programmes are seen to be increasing.

The report includes info-graphics and one highlights that the

top five risks for organisations in 2016 were anti-corruption

bribery; conflict of interest; privacy; gifts and entertainment

and financial integrity and fraud which are key areas for

accountants.

» The full report can be purchased here and the info-graphic

data can be found here

CIMA Centre of Research

Excellence

CIMA’s South African

Research Centre of

Excellence (CoE)

awarded Elmar Venter

with a research grant

which allowed him to

conduct research on

Early Evidence on the Economic consequences

associated with Integrated Report Quality.

The research was sponsored by many companies

including KPMG, Barclays, and Liberty and exemplifies

strong levels of international collaboration.

The study concludes using integrated reporting models

has positive economic benefits. This could lead to

better presentation of information and a considerable

change in organisations decision-making processes.

» Find the summary research paper here and the full

paper here

4 · Ethical Lens

Aligning incentives in creating ethical

culture

Transparency International (TI)

identify some of the risks around

incentivising opportunities to align with

positive behaviours.

Investigating Ethics highlights the

incentives Wells Fargo and

Volkswagen had to miss-sell and miss-

inform.

It explores ways that incentives can be

better managed so scandals like Wells Fargo and

Volkswagen are not repeated. Both organisations decided

that the small minority of people acting wrongly and

unethically were isolated cases with isolated individuals. TI

finds that simply removing the specific people involved in the

scandal does not solve or deter others from doing the same

thing.

The report states that there are five key steps to embedding

ethical behaviour that include:

1) Ensuring strong culture and values 2) Risk assessing 3) Designing ethical incentives 4) Embedding ethical incentives 5) Monitoring and evaluating

» Access the full Transparency International report here

Financial Service managers urged

to be ethical The report Good Leadership launched by Chartered Insurance Institute and Chartered Management Institute investigates the ethical culture of management within the financial services industry. The authors of the report suggest that managers are aware they could do better at defining the ethical position of their organisation. Some of the reasons for poor ethical standards at work are due to: 1. Links between a managers personal background

and ethical behaviours 2. Managers behaving more ethically in their home

life than at work 3. Financial service leaders suppressing empathy

becoming less concerned with outcomes The report calls for financial services to provide good leadership through nine steps. Some of them include:

Developing a culture that engages the spirit of regulation

Rewarding and recognising ethical behaviour

Promoting diversity through recruitment and promotions

Creating an open culture to discuss issues

» The full report can be found here

January 2017 · 5

RESPONSIBLE BUSINESS

Correlation between human rights

and anti-corruption

The UN Global Compact indicate

that companies can benefit from

integrating human rights and anti-

corruption considerations in their

compliance programs in their 2016

report: Linking Human Rights and

Anti-Corruption Compliance.

Both human rights and corruption

pose similar risks to companies

which can have detrimental effects to a business’s reputation

and finances. Some of the common challenges presented

would be detecting misconduct in the supply chain and

compelling due diligence on business partners.

It is very possible to successfully implement human rights and

anti-corruption compliance which will positively contribute to

corporate sustainability and profitability.

» Find more information on it here

Anti-bribery tightened in France

In response to the Organisation for Economic Co-

Operation and Development (OECD) the French

Parliament have introduced new anti-corruption

legislation. It will have an impact on organisations

internationally whom will be forced to act ethically and

conduct fairer business. This will be including French

public officials and those in international organisations.

The legislation aims to protect individuals from financial

fraud and contains elements concerning capital

speculation and bankruptcy as reported by Forbes. As

stated by GoodCorporation the new legislation focuses

on four key areas:

1. French company’s legal obligation in implementing anti-corruption compliance programmes

2. Creating a new anti-corruption agency that focuses on detecting and preventing corruption

3. Extending French authorities power to prosecute and sanction corruption cases outside France

4. Protecting and defining whistleblowers

There are fiscal consequences for companies that fail to

set up compliance programmes, and the anti-corruption

agency can implement fines of up to €1 million.

» Read more about the GoodCorporation here

Edelman Trust Barometer

Edelman Intelligence released their annual trust and credibility survey, 2017 Edelman Trust

Barometer. Concerningly findings revealed the largest-ever drop in trust across institutions of

government, business, media and NGOs.

The percent of trust in business institutions has decreased since 2016. Trust in government and

media is still considerably low by comparison. The Barometer reveals that in 12 of 28 countries,

business is distrusted. Developing internal trust within organisations will be imperative in order for the

public to develop trust for business organisations.

The Barometer also reveals that the public want to see “increased regulation for business and [are] largely supportive of a

number of anti-business policies”. In particular 53% of respondents do not feel “financial market reforms have achieved their

intended effect of increasing economic stability”, this further reinforces the pressure on businesses.

The report indicates that businesses can take actions that both increase its profits as well as improve the economic and social

conditions in the community of where it operates. This can be best achieved by some of the following: treating employees

well; practicing ethical business; responsibly addressing issues and communicating frequently and honestly.

» The full press release can be found here and the report can be found here

6 · Ethical Lens

Better business means a better world

The past 30 years has seen significant global social improvements and

technological progress noted by the Business and Sustainable

Development Commission.

The Commission released the report Better Business, Better World

suggesting that our current model of development is deeply flawed and

in need of great change.

The report offers a positive alternative for businesses where they will

set their business strategy and transform markets in line with the UN Sustainable Development Goals (SDGs).

Some of the goals include: no poverty, zero hunger, good health and well-being, quality education and gender equality.

Achieving these goals would create a world that is “comprehensively sustainable: socially fair, environmentally secure;

economically prosperous; inclusive; and more predictable”.

The research conducted highlights how there is a dependency between business and Global Goals; how one will not be able

to develop without the success of the other. The Commission state that achieving the “Global Goals would open up US$12

trillion of market opportunities in four economic systems” and whilst it will involve risk, it will open up new opportunities,

drive innovation and enhance reputation.

The Commission highlight six actions business leaders can take to transform markets, some include:

Building support for Global Goals

Pushing for a financial system oriented towards longer-term sustainable investment

Rebuilding trust between businesses

» Access the executive summary and the full report here

See also IFAC’s new report on the accountancy professional’s role in the SDGs (page two). CIMA has also worked with the

UN Global Compact UK outlining the important of human rights issues business.

Rachel Grimes; IFAC President

In an interview with Acuity Magazine, the newly

appointment IFAC President, Rachel Grimes

highlighted that one of the main of the main challenges

facing the accountancy profession globally is the

acceptance of the accounting standards.

During her tenure, the president wants to also focus on

holding onto and attracting talented people. She aims

at making accountancy acknowledged as ‘the most

ethical profession around the globe and one that even

more people want to be part of’.

» Read the full article here

January 2017 · 7

Can your organisation declare itself conflict-free?

Do you how easy is it for organisations to declare they have a conflict-free

supply chain?

Surprisingly difficult. Research conducted by Harvard Business Review found

that global companies and those that have a dispersed supply chain are less

likely to declare their products conflict-free.

Many companies rely heavily on outsourcing as a way to save time and money.

This reliance on a globally dispersed supply chain means that companies can

struggle to definitively identify where certain products come from.

In 2010 the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in order

mandate companies on the American stock market to disclose whether their products contain conflict minerals. The Harvard

Business Review analysis of the reports submitted found that ‘1% of the companies were able to declare that their products

were conflict-free beyond a reasonable doubt’, of the remaining ‘19% declared that they had no reason to believe their

products contained conflict minerals, and 80% admitted that they were unable to determine their [products] origin’.

Transparency in the supply chain is more important than ever, every management accountant plays an important role in

protecting human rights.

» Read the full Harvard Business Review article here

Purpose can drive business profit

This was the conclusion of the event held by Blueprint for

Better Business looking at whether businesses can be

purposeful and successful.

The talk illustrated how many organisations are at the start of

their purpose journey, figuring out the ‘why’; why the firm exists

why it does what it does, and why it deserves to exist. Some

of these businesses include, PwC, BT and easyJet. The

discussion illustrated that in order for businesses to be

purpose driven it will require time, vulnerable leadership and

strong middle management.

A business with a purpose is not only an investment

opportunity but also a valuable key performance indicator

(KPI) as supported by academia from the London School of

Business.

» Read the full article here

8 · Ethical Lens

Can you beat the corruption test?

Better your knowledge about bribery

and the risk of corruption with this

five question quiz by the Journal of

Accountancy. It’s a key global issue

that makes up 35% of reported fraud

cases according to the Association

of Certified Fraud Examiners.

With ever increasing communication,

it’s very easy to be misinformed, but as management

accountants you have a duty to know right from wrong. Also

access further CIMA ethics resources to help develop your

wider knowledge.

» Take the quiz here and read our anti-bribery guidance

Davos 2017: Role of reporting in

reversing trust failures

Given the dramatic global changes in 2016, much of

delegate discussion at the World Economic Forum

meeting in Davos this year was how businesses can

respond to the challenges from the growing loss of

trust, anti-globalisation sentiment and its political

consequence.

According to Richard Howitt, CEO of the IIRC, it

reinforced the belief that the current corporate reporting

system has to change, if the growing trust deficit is to

be reversed. He also highlighted the salience of a new

World Business Council for Sustainable Development

report that shows risk management fails to properly

address wider long-term risks. Entitled ‘First Steps to

Integration’ the headline finding was that in more than

one-in-three companies, none of the risks identified in

sustainability reports were contained in the risks

registered and addressed in their annual reports.

This reflects CIMA’s recent findings that there has been

a dramatic fall in specific human rights reporting in

FTSE100 annual reports, whilst platitudes have

increased in light of the growing concern around

business’s role in human rights abuses.

» Read the Integrated Reporting here

Corruption is rising globally, fuelling populist movements and risk

Transparency International warn that the world in 2016 showed how systemic

corruption and social inequality reinforce each other, leading to popular

disenchantment with political establishments and providing a fertile ground for

the rise of populist politicians.

The interplay of corruption and inequality also feeds populism. When traditional

politicians fail to tackle corruption, people grow cynical. Increasingly, people are

turning to populist leaders who promise to break the cycle of corruption and

privilege. Yet this is likely to exacerbate – rather than resolve – the tensions that

fed the populist surge in the first place.

In its report Corruption Perceptions Index 2016, released in January, Transparency International (TI) says that 69% of the

176 countries scored below 50, on a scale from zero (perceived to be highly corrupt) to 100 (perceived to be very clean),

exposing how massive and pervasive public sector corruption is around the world. This year, more countries declined in the

index than improved, showing the need for urgent action.

» Read the full Corruption Perception 2016 and linkages between corruption, inequality and populism here

January 2017 · 9

What do you think about Ethical Lens? Share your thoughts in our feedback survey or contact ethics@cimaglobal.com

MORE FROM CIMA ETHICS

Overview of the Code of Ethics

For a quick overview of the CIMA Code of Ethics, watch our animation here.

It outlines the importance and value of the Code, and provides an outline

of the three parts, including what the Code means for CGMA designation

holders.

» Watch the full animation here

Ethics e-tools

Use the ethics e-tools to better understand what to do if presented with an

ethical conflict.

The student e-tool has been updated in line with the 2017 Cert BA syllabus,

which includes practice sample questions for the BA4 paper, Fundamentals

of Ethics, Corporate Governance and Business Law.

» Find both of the e-tools here

HELPLINES AND RESOURCES

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.

Ethics Webcasts

Access all CIMA webcasts and responsible business

videos. They include interviews, animations, seminars

and guidance on ways that CIMA members have dealt

with ethical dilemmas.

UK Legal Helpline

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

Access the Code and all ethics resources at

www.cimaglobal.com/ethics

Alternatively, send your ethics query in an email to

ethics@cimaglobal.com