Ethical Lens February 2013

February 2013

Had a busy end-of-year? Need to catch up on the latest on business ethics and sustainability? Ethical Lens gives you a snapshot of the latest developments in ethical and sustainable business worldwide and directs you to new resources and reports.

Ethics are important to me because… “… they ensure the integrity and trustworthiness of a company, and as most of us prefer doing business with honest business people this also means sustainable financial results for the organisation.”

Sandra Rapacioli, Innovation Specialist

NEWS CGMA ethics animation This animation guides the viewer through an ethical dilemma and explains how the ethical codes of professional accountants can be used to for ethical decision-making. The animation shows that the overarching principles of the CIMA and AICPA codes of ethics are the same and that the overall content of the two codes bear many similarities. This animation can be used as part ethics training/education and CPD, and is relevant for both members and students.

Posting a sale entry without sufficient paperwork: See how Ana approaches this dilemma and the steps she takes in finding a resolution.

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February 2013

REPORTS Global report In October 2012 the last report in the Fact or Fiction series was launched. Fact or fiction? the independent business partner: global summarises discussions between finance professionals from leading companies and consultants based in London, Singapore, Warsaw and Johannesburg between January 2011 and April 2012. Key themes of the discussions included challenges in partnering and pressures from the business, skills and competencies for business partnering, and structure and reporting lines. Go online to find a number of articles and videos produced in relation to the Fact or fiction? roundtable discussions.

EVENTS Ethics: Under Pressure In October last year, CIMA together with the Malaysia Institute of Integrity (IIM) facilitated a number of events in Malaysia, discussing the findings of the 2012 CIMA Acting Under Pressure report. A roundtable discussion attended by signatories of IIM’s corporate integrity pledge was held. A report from this roundtable will be released later in the year. Focus group discussions with students from TAR College and Universiti Teknologi Mara also took place, as well as a CPD Ethics Breakfast Meeting in Borneo. Read more in the CIMA SE Asia newsletter.

Accounting for sustainability In December 2012, A4S held its yearly Forum hosted

by Prince Charles. The Prince also separately addressed the Accounting Bodies Network (ABN) urging the community to act with speed in educating and providing its members with tools to better account for sustainability. Also launched at the event was an A4S ABN Annual Review which showcases the work of the accountancy bodies on sustainability.

Ethics discussions CIMA’s head of ethics, Tanya Barman, was invited to talk at an event by AIESEC, a student-led group with focus on responsible business and leadership. Young business and finance students attended the event with focus on ethics and corporate responsibility.

SUSTAINABILITY AND INTEGRATED REPORTING

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February 2013

Non-financial reporting Despite positive promotion of non-financial reporting in the media and research showing how it adds value to business, a study by Accounting for Sustainability (A4S) suggests senior decision makers are still to be convinced of its benefits. The research indicates that ‘although some decision makers recognised that sustainability drives growth for their companies, there was still scepticism by others over the quality and robustness of many types of environmental and social data, which is preventing more widespread use by senior management’. Read more in this press release from A4S. A4S Integrated thinking and sustainable economy are A4S’s two key themes of 2013, by helping to embed sustainability into decision-making and strategy, and creating a consistent framework for sustainability accounting. In 2013 CIMA will support four A4S-initiated projects. This includes an ‘Emergency Boardroom Meeting’ simulation to get accountants, FDs, and CFOs thinking about incorporating social and environmental risks into Board decisions, and involvement in the development of the course content for the Cambridge Programme for Sustainability Leadership (CPSL). Later in the year we will carry out a survey exploring how sustainabilityrelated impacts are incorporated into capital investment appraisals, and over the summer a City Moment lecture on investor culture and drivers will take place, with the A4S champion of sustainability accounting Prince Charles.

IIRC A Prototype Framework was published in November 2012 to further support the production of integrated reports. The IIRC also intends to publish a series of papers in February, which will include a paper on business models produced by CIMA, IFAC and PwC. CIMA continues to play an active part in the development of the integrated reporting framework through Charles Tilley’s chairmanship of the IIRC’s Technical taskforce, membership of the IIRC Council, and our collaborative work on business models.

Tomorrow’s Value The last Tomorrow’s Value lecture of 2012 was given by Charlie Mayfield, Chairman of the John Lewis Partnership, who spoke to 150 business leaders about the link between employee happiness and an organisation’s bottom line. Videos of the speeches held are available to view online, where you can also find material from all previous Tomorrow’s Value lectures.

Source: Thanks to mckaysavage, Flickr

Sri Lanka: Sustainable business In December AIESEC Sri Lanka organised the Sri Lanka Youth Business Forum. The event, aimed to inspire the leaders of tomorrow, focused on corporate responsibility, entrepreneurship and innovation, with speakers from CIMA and Unilever present. But responsible business in Sri Lanka is not only for the leaders of tomorrow: the Sri Lankan clothing manufacturing company MAS Holdings is a prime example of how production can be made ethical and sustainable today. Read a full case study in the New Economy.

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February 2013 India: GRI In December 2012 the Times of India reported that 80 Indian companies are now producing sustainability reports, using the framework developed by Global Reporting Initiative (GRI). This number has more than doubled since the previous year when 34 Indian companies were using the framework. Business responsibility reporting has recently been made mandatory for the top 100 listed companies in India, however, a study by the sustainability consulting agency Carbon Masters suggest a majority of these companies are not prepared and will struggle to produce a report on time.

IFAC Proposed changes to Code of Ethics The Professional Accountants in Business (PAIB) Committee recently submitted a comment letter to the International Ethics Standards Board for Accountants’ (IESBA) proposed changes to the Code of Ethics regarding Responding to a Suspected Illegal Act. The proposal addresses the issue of where a professional accountant is expected to override their obligations of confidentiality towards employers or clients. The PAIB Committee suggest an ‘apply or be able to explain’ approach which would allow for cultural and legal differences with regards to overriding the fundamental principle of confidentiality, and points out that clarification is needed whether disclosing certain illegal acts to an appropriate authority is a right or a requirement. Find more comments to this proposal here.

IFAC is also currently evaluating Part C of the Code – the section aimed at Professional Accountants in Business. Situations in which PAIB’s are pressured by superiors to violate laws or ethical standards are areas identified as in need of further guidance.

ETHICS AND BUSINESS 2012 Corruption Perception Index Transparency International have released their 2012 Corruption Perception Index. On the top we find Singapore, New Zealand, Switzerland and the Scandinavian countries. Botswana, the highest ranked African country, shares number 30 on the list with Spain and scores higher than both Portugal and Italy. Read the full ranking on Transparency International’s website.

Source: Thanks to US Mission Geneva, Flickr

Role of business in development A recent UNGC UK Outreach Meeting discussed the increasing responsibility placed on businesses to benefit development. The 2015 UN Development Goals are approaching and what in the early 2000 was seen as a challenge for governments and NGOs has now increasingly also become a focus for the private sector. In the meeting Imoni Akpofure, Director – Western Europe International Finance Corporation, explained how the days when development was seen a charity work for a business are gone, and that

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February 2013 supporting development – in particular in a business’ local community – is essential for success.

Globalisation and supply chain issues UNGC UK’s Quarterly Network Meeting highlighted the challenges with sustainable supply chains. The issue was raised that ‘political, environmental and social challenges facing society will also affect [businesses] supply chains, thereby impacting their long term viability’. An increasingly globalised business landscape and nets of supply chains that are ‘notoriously difficult to manage’ makes it hard to guarantee sustainable and responsible business by suppliers. Read Tanya Barman’s comments from the meeting in her latest blog-post on CIMAsphere.

Relevant resources provided by the UNGC are available on their website.

Words of a fraudster ‘Cover up’, ‘write off’, ‘illegal’: these are the three most common words and phrases found in emails by employees engaged in fraud according to a study by Ernst & Young’s Fraud Investigation and Dispute Services Practice (FIDS). Read the full list in this article on ComputerWeekly.com.

Increasing number of cheaters The New York Times reports that studies show a majority of students in one way or other ‘violate the standards of academic integrity to some degree’, with no exception for high achievers. Behavioral economist Dan Ariely explains his research on stealing and cheating in this TED-talk, and concludes that, it is a misconception that some people cheat a lot, rather, many people cheat a little when given the chance. A recent case heard by the Disciplinary Committee involved a student cheating in exams, the upheld decision can be read in Financial Management.

UK Bribery Act In October last year the Serious Fraud Office (SFO) issued new guidance to the UK Bribery Act. Earlier guidance had ‘indicated that companies could avoid criminal penalties in favor of civil settlements by self-reporting violations’. After facing criticism for potentially allowing companies off the hook, new guidance now clarifies that self-reporting is only one factor to take into consideration, and that it has to be part of a ‘genuinely proactive approach adopted by the corporate management team’. Cases to date have not yet challenged the more complex parts of the new Bribery Act concerning ‘adequate procedures’.

UK SMEs unaware of UK Bribery Act New research from Ernst & Young’s Fraud Investigation and Dispute Services (FIDS) reveal that less than half small or medium size businesses are aware of the UK Bribery Act. The research also shows that bigger companies (£50 million+), are better prepared for the Bribery Act. As the Bribery Act puts new and increased responsibilities on businesses it is a cause for concern that such a large percentage of SMEs are not properly informed about what the legislation means for them. Read more in Business Matters.

Ethics or Profits? A recent event at Institute of Business Ethics (IBE) explored the relationship between ethics and profits in business and what type of new

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February 2013 expectations there are on businesses to uphold certain standards. A case was made that companies that are perceived to be ethical, with a good reputation, ‘enjoy better relationships with their stakeholders and [in return get] high levels of customer recommendation’. New research by the Reputation Institute show that the two main drivers for support of a business in the UK, apart from the product or service it provides, its governance and corporate citizenship: i.e. their transparency, integrity and honesty.

Interview with former Olympus CEO In December 2012 Financial Management interviewed the former CEO Michael Woodford about blowing the whistle on a billiondollar fraud and the role of management accountants in business. Woodford expressed how management accountants can impact positively on organisations as a whole and specifically pointed to the preparation of data. ‘The key thing is that data needs to be legitimate and accurate because only then can an external audit be robust. For capitalism to work, for capital markets to work, you really do want to believe a company’s accounts are what they say they are.’

CIMA ETHICS AGENDA Case studies On the CIMA Global ethics pages we offer a wide range of case studies and ethical dilemmas which could be used for employee training or students.

Not only do these case studies give you a dilemma based on real cases, it also guides you through the Code of Ethics and suggests a plan of action to resolve the issue. Access all case studies here.

Quiz Would you know where to turn in an ethical dilemma? Or which are ‘adequate procedures’ that should be in place to prevent bribery? Take this ethics quiz and access information and guidance on how to uphold the highest ethical standards.

Find us at www.cimaglobal.com/ethics CIMA ethics helpline This free confidential helpline offers ethical guidance and how the code of ethics can be applied to CIMA members and students: 0800 358 7663 +44 (0)20 8849 2303 ethics@cimaglobal.com

Global Guidance Line Expolink – free from any telephone in your country 24 hours a day, 7 days a week: +(xx*) 800 3838 4000 *insert your country’s international access code +44 (0)1249 661957 www.cimaglobal.com/helplines

UK Legal Helpline LAW Express - for CIMA members and students in the UK. Gives access to information online for no charge and a low cost professional legal advice line: 0800 092 1980 www.cimaglobal.com/helplines

Please contact us with feedback or any ethics and sustainability stories you wish to highlight: camilla.hedborg@cimaglobal.com

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