Ethical lens feb 2014

ETHICAL LENS CIMA ROUNDUP OF RESPONSIBLE BUSINESS ISSUES - FEBRUARY 2014

IN THIS ISSUE

„Ethics newsreel‟ video message – what have we learnt since 2008?

Sustainable business practices in SMEs UNGC post 2015 development agenda Test: perception of global corruption Innovative business models

ETHICS ARE IMPORTANT TO ME BECAUSE...

“They are at the very heart of what we do.

By acting ethically we make the right decisions for CIMA, the right decisions for business and help management accountants to drive sustainable growth.”

1 · www.cimaglobal.com/ethicallens

Steve Brown, Head of Corporate Marketing

NEWS Are you acting ethically?

Are we learning from mistakes leading up to the 2008 crisis? The „ethics newsreel‟ raises important business challenges including bribery, banking scandals and human rights violations. Professionally qualified management accountants have a central part to play in restoring trust in business around the world. Members and students are obliged to uphold the highest ethical and professional standards. This webcast ties professional obligations to wider economic, social and political issues.

» Watch the newsreel

REPORTS & TOOLS CIMA: Risk culture in financial organisations

CGMA: Ten key elements to sustainable business practices in SMEs

Interest in the cultures of organisations and their effects on management practices goes back many years, and there is an extensive body of scholarship on this topic.

This CGMA tool draws together case studies and key lessons from SMEs across the UK, US and Canada. It provides a real life picture of how sustainability impacts the bottom line, and shows how finance can harness sustainability strategy to achieve commercial benefits. With rising energy prices and growing consumer demand, businesses recognise now more than ever the importance of adopting sustainability strategies. Management accountants have a vital part to play in determining strategy and measuring performance.

Yet this interest has increased dramatically since 2008.

Furthermore, a new twist in the vocabulary of culture has taken place, with companies, advisors and regulators now seeming to have a specific focus on something called „risk culture‟.

This report explores and analyses how the risk culture agenda is taking shape in different organisations, based on research involving banks and insurers extending over 18 months. » Access the report

» Access the tool, or read the ten key elements in the Guardian Sustainable Business

2 · Ethical Lens

EVENTS „Beyond the financials‟ CGMA Ethics events hosted in Malaysia and conference focus on sustainable business Singapore In November last year the first European CGMA conference took place. Themed „Beyond the Financials‟ speakers including CIMA‟s Head of Ethics Tanya Barman talked about responsible and sustainable business, and the risks to the recovery of the world economy. Former Barings banker Nick Leeson shared his first-hand experiences from the mid 1990s when he caused the bank to crash.

Tanya, who spoke about ethical leadership and the „value of values‟, noted how the ethical aspect of the CIMA qualification sets our members and students apart, emphasizing the importance of the right attitude to risk management. » Read more in Insight

In November the CIMA SE Asia region hosted a number of ethics events. This included a session with the Institute of Singapore Chartered Accountants (ISCA) on ethical leadership, and a break out session at the Malaysian Institute of Accountants (MIA) Conference on whistleblowing, which gathered an audience of more than 600 people.

Together with the Malaysian Institute of Integrity (IIM) a discussion on reputational risks was facilitated, with participants including IIM signatories from business, public sector and regulators as well as CIMA members. A summary report of the discussion will soon be available.

In 2013 CIMA‟s ethics team delivered sessions in countries around Europe, Africa and Asia, to more than 2000 members, students and other accounting and business professionals. A range of issues from pressures in the workplace, risk and reputation, managing responsible business and whistleblowing were covered.

IFAC Accounting for development MOSAIC (Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration), supported by IFAC and other organisations, recently released the Professional Accountancy Organization (PAO) Development Report. The purpose of this report is to “improve the quality of public and private sector accountancy and financial management with a view toward enhancing the effectiveness and efficiency of donor assistance, enhancing economic growth, and reducing poverty”. It identifies ten key activities, including the strengthening of legal and regulatory foundations, and monitoring and providing support to fragile states. Also don‟t miss the Dec/Jan issue of the IFAC newsletter. » Access the report

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SUSTAINABILITY & INTEGRATED REPORTING New <IR> framework launched In late 2013 the International Integrated Reporting Council (IIRC) released its first full <IR> Framework. <IR> focuses on “bringing greater cohesion and efficiency to the reporting process”. The framework applies integrated thinking in order to reduce duplication, take into account interdependencies, and value and account for both financial and non-financial information to get a fuller picture of how an organisation is doing. The Global Reporting Initiative (GRI) has reported that a guide on how to use the <IR> Framework in conjunction with the GRI Framework will be released in 2014. » Visit the IIRC site, or read more at the GRI

CR: Supply chain reporting lagging behind KPMG‟s 2013 report on Corporate Responsibility Reporting trends show growth in reporting rates. 93% of the world‟s largest companies are now producing CR reports. Emerging economies are also growing fast. Dramatically companies operating in Asia Pacific have risen from 49% reporting in 2011 to 71% – nearly a third. The findings suggest that there is still a need for more transparency and quality. Certain topic areas, including supply chain issues, still have some way to go to reach the full potential of disclosure. » Access the report or read the Greenbiz article

Future of sustainability reporting

CR China: Progress or greenwashing?

A new report produced by UNEP, GRI, KPMG and the Centre for Corporate Governance in Africa examines the developments in policies and regulations in sustainability reporting globally. Four main trends are listed: a global increase in policy and regulations for organisational reporting; an increase in the amount of policies inspired by, or based on, a „report or explain‟ approach; reporting frameworks are becoming more developed and harmonized; and organisations‟ approach to reporting is developing.

In early 2013 CIMA published a study examining the way in which companies in China embed corporate responsibility into their management control systems (MCS). The benefits of incorporating CR into corporate strategy are increasingly being recognised globally. Bloomberg Businessweek reports that more than 1700 companies in China produced a CR report in 2012, including almost a quarter of large state owned enterprises.

Although some organisations have been recognised by the international community for their reporting, Bloomberg writes that there‟s still a lot of work to be done for many companies, to increase the overall quality of reports, and the transformation of reporting into real actions and outcomes.

» Read more on the Governance & Accountability site

» Read the article or access the CIMA report

Africa: Sustainability barometer This is Africa, together with the UNGC, have recently released the „Africa Sustainability Barometer‟. This report focuses on one of the fastest growing regions in the world, and showcases some of the work that is being done by organisations across Africa. All signatories of the UNGC have to report on progress, promoting transparency and disclosure of information by businesses. Submitting a report is only the first step towards a truly sustainable business model - this report challenges the quality of reporting and asks which developments need to be made. » Access the report

4 · Ethical Lens

RESPONSIBLE BUSINESS Whistleblowing: only the first step to a successful culture at work

Natural capitalism: when numbers are not enough

The global whistleblowing hotline company Expolink has released their annual whistleblowing report, detailing trends seen in 2013. They have noted an increase in reporting since the UK Bribery Act came to force in 2011. Further they report to have decreasing numbers of anonymous calls, with contributing factors including “increased employee confidence in the whistleblowing process, how the process is presented by the individual client, better protection for whistleblowers, changes in corporate culture and socio-cultural shifts”.

In his blog Jeff Kaye FCMA, CGMA, Chair of Future Brilliance Limited, writes about the challenges and possible moral implications of „pricing the priceless‟.

Highlighting that GDP rose during the BP oil spill, he argues that GDP and numbers won‟t always be a good indicator of how businesses or communities are doing. The issue of pricing of natural capital was also raised recently in the Global Accountant, where they report that global primary processing sectors could have up to US$7.3 trillion per year in unaccounted costs.

In an interview with IBE‟s Research Director Simon Webley, he underlines the importance of ongoing training and follow-up on ethics, policies and standards. A hotline is only the first step on the way to creating a culture where employees will feel comfortable to speak up when observing wrongdoing. » Access the summary

Integrated reporting is one of the ways in which the business community is approaching new types of reporting that includes a much wider spectrum of factors than mere numbers, to provide a fuller picture of where an organisation is heading. » Read the full blog post

Global financial crisis showed us importance of good governance and the impact of reputation The 2008 financial crisis, and catastrophes such as the Rana Plaza collapse and Pakistan factory fire are increasingly making businesses realise the importance of good governance and sustainable practices, experts suggest. Investors are beginning to ask questions and demand transparency, while trust from customers and stakeholders needs to be maintained, for a business to succeed in the long term.

A recent CGMA survey showed that three quarters of financial leaders globally are placing more focus on reputational risks today than in previous years, suggesting that businesses are catching on.

UNGC post 2015 development agenda The UN Global Compact Leader Summit of 2013 took place in September. Chaired

by UN Secretary General Ban Ki-moon, the summit focused on the development agenda and advice from and for business post the 2015 Millennium Development Goals.

At a separate event by the UNGC, business called corruption to be part of the post-2015 development Better disclosure, transparency and enforcement corruption laws and regulations will work in favour of and businesses alike.

for antiagenda. of antisocieties

» Read the full article » Read the Leader Summit report, or access the anti-corruption paper

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Innovative business models

Test your perception of global corruption

The Guardian Sustainable Business has, ahead of a panel discussion, published an article about innovative business models that cut out waste. As the real value of natural resources is unfolding, the price tag for the earth‟s raw materials will rise. Some companies have already caught on to this and are re-working parts of their business models to save both money and natural resources. Dell, for example, are currently investing in recycling of e-waste in Kenya, and the Californian brewery Lagunitas is installing an environmentally friendly water treatment system to save its waste water.

Transparency International (TI) has released their 2013 Corruption Perceptions Index. This index examines how citizens perceive the levels of public sector bribery and corruption in their country. With the Scandinavian countries, New Zealand and Singapore at the top, we also see Botswana, Uruguay and Chile retaining their higher positions from 2012.

Some of the countries that were hit by the Euro crisis, including Greece and Spain, are still scoring relatively low. TI has created a quiz to test your perception on corruption around the world. Try it out and also review the full 2013 results on the TI website.

» Read the article » Try the quiz or review the findings

More investment in ethics – but insufficient training IBE‟s annual Business Ethics survey found that although there is increasing investment in corporate ethics, there is still a lack of training, with a fifth of companies offering ethics training only once to general employees. This survey was shared with companies in the UK and continental Europe. The findings show that whilst in the UK the main purpose of an ethics programme is to help guard reputation and provide guidance to staff, in continental Europe the main purpose is rather to guide contractors and business partners and as a public statement.

UK Bribery Act: investigations underway It is now two years since the Act came into force. The first case to be brought by the Serious Fraud Office (SFO) in 2013, was a charge against four individuals in connection with an alleged £23M bio-fuel investment fraud. The company is in administration, and the testing of the corporate offence related to "adequate procedures" in order to prevent bribery, is yet to be played out.

However, a number of cases are under investigation and no doubt when brought to trial new precedence will be set on an organsiation‟s accountability, highlighting the importance of building an ethical culture. » Read more

» Access the survey report

Cheating and organisational culture – learning from the Armstrong scandal?

When economic growth slows down, what happens to ethics?

In Harvard Working Knowledge, Professor Clayton S. Rose discusses leaders, team-mates and followers in his recent case study on the cyclist Lance Armstrong. Rather than looking to Armstrong, this study focuses on his teammates.

Where did they go wrong, and why didn‟t they speak up? This case study also applies in business settings - at what point should you distance yourself from a leader? Last year CIMA arranged an event headlined „Good People‟ where the very same issues were raised. On the CIMA website you can access a case study to practice ethical decision making on your own or in groups.

CGMA Magazine reports that as growth is slowing down in the BRICS, the economic climate is becoming more challenging. This is based on findings from a global survey from EY. This is also evident in parts of Eastern Europe, the Middle East and North Africa. In countries with less enforced anti-bribery laws, there were reportedly more pressures on employees to cut ethical corners and needless to say there was also less support from government and standard setters to support good practice. Chris Fordham, managing partner at EY, said in the article that both local application of policies and standards of global organisations are key enablers.

» Read the report or access the „Good People‟ tool

» Read the full list of recommendations

6 · Ethical Lens

MORE FROM CIMA ETHICS Ethical decision making e-tool Created with input from members globally, and available to the wider business community, this interactive tool allows you to practice ethical decision making through seven scenarios of global scope, loosely based on real events. Considering your ethical commitments according to your Code of Ethics you have to decide what steps you would take. » Try the e-tool

Risk and reputation radio interview Listen to CIMA's Head of Ethics speak about reputation and sustainable success with Freda Liu at the Resource Centre show on the business news radio station BFM in Malaysia, referring to recent CGMA research on reputation and the impact of social media. » Access the interview

» www.cimaglobal.com/ethicallens

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, it is open 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 for no charge and a low cost professional legal advice line.

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.

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 query in an email to ethics@cimaglobal.com

What do you think about Ethical Lens? Share your thoughts in our feedback survey or contact camilla.hedborg@cimaglobal.com February 2014 · 7