Ethical lens October 2015

ETHICAL LENS CIMA ROUNDUP OF RESPONSIBLE BUSINESS ISSUES - OCTOBER 2015

IN THIS ISSUE

Managing responsible business report 2015 New ethics webcasts and podcasts Japan: Toshiba Scandal Unilever Human Rights Report 2015 New measures to tackle human trafficking and slavery

ETHICS ARE IMPORTANT TO ME BECAUSE...

‘They are part of my personal values and core construct.

Positive values that develop the deepening of mutual trust across all stakeholders are an integral feature of highly successful performing organisations, albeit local or global.’

1 · www.cimaglobal.com/ethicallens

Steven Swientozielskyj, CIMA Professional Standards Committee Chair

NEWS CIMA and ethics webcasts Recently, CIMA released a number of ethics webcasts where CIMA members and students discussed the importance and relevance of ethical business practices within the accountancy profession.

The webcasts, found on CIMA’s website, cover a variety of topics regarding ethics including: how the code of ethics can help add value to your career, the benefits of the updated code of ethics, and the importance of ethics in the accountancy profession.

You can also find videos regarding ethical dilemmas and what to do when facing pressures to compromise ethical standards. Some of the common dilemmas include pressures to overstate profits to deliver desirable results, issues regarding overtime and following reporting standards. » Access the ethics webcasts

REPORTS & EVENTS Managing Responsible Business 2015

New ethics podcasts

Ethical behaviour is vital to running a successful organisation, especially in today’s interconnected world. How much importance is placed on business ethics, ethical performance and ethical management and how has this landscape changed in the last few years?

The new CGMA Podcasts feature Tanya Barman, Head of Ethics at CIMA, who discusses the recent results of the Managing Responsible Business survey and report and the ethical challenges organisations must navigate to succeed.

This new CGMA report drew insight from nearly 2,500 CGMA designation holders and CIMA students working globally to review the ethical challenges organisations are facing today as well as the changes in attitude and understanding of responsible business practices.

Some of the topics discussed are: what businesses can do to operate more ethically and manage any contentious issues and the effect of the open workforce on the ability to manage a responsible business.

» Access the full report or see the slideshare for a summary of the findings

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» Listen to the podcasts here

How to build trust today

Risk and resilience

In honour of Anthony Howitt, past president of CIMA, a lecture took place on 3 June 2015, on the topic of trust in organisations today. Robert Phillips, the keynote speaker of the lecture and the co-founder of Jericho Chambers, believes that powerful forces are radically changing the nature of trust.

What needs to be done by whom to build and secure it, and what does this mean for leaders and organisations?

The risk landscape is constantly evolving and becoming more complex. It is more important than ever to achieve resilience by mitigating uncertainty and managing risks and this has become a priority for all organisations today.

Speakers included PwC partner Charles Bowman; Chief Executive and Registrar of the General Optical Council, Samantha Peters; and Barry Melancon, President and CEO of the AICPA.

A report from Tomorrow’s Risk Leadership, a Londonbased think tank, shows how companies should rethink their risk leadership. It is no longer possible to identify and ‘manage’ all the risks to an organisation, but the discussion has now shifted to how to make the organization more resilient – being able to anticipate change, adapt and recover from risk events.

» See the highlights from the CGMA Website » Access the full report

Becoming a risk leader As the business environment becomes more and more complex and we look to a new approach of managing risk which promotes resilience, it is important to look at what it takes to be a risk leader.

CGMA recently released a guide to risk leadership, which summarises what it takes to be a risk leader and how to develop those skills, as well as the important qualities of a risk leader. » Access the guide here

IFAC Latest from the IFAC Global Knowledge Gateway The IFAC Global Knowledge Gateway provides insights, 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: learn more about integrated reporting and why it matters, blowing the whistle as an accountant and how accountants can become partners in crime prevention & reporting. » Visit the IFAC Global Knowledge Gateway

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REPORTING Stock exchanges promoting transparency

Sustainability reporting in Africa’s economic development

According to the Sustainability Working Group report and survey on Exchanges and ESG (Environmental, Social and Corporate Governance) Initiatives issued by the World Federation of Exchanges (WFE), investors are increasingly considering company sustainability practices and policies as a factor in their investment decisions.

Given the comparatively high levels of GDP growth, the rapid rise of the middle-class, and the scale of investor friendly policy reforms across the continent, Africa is emerging as an exciting area for business investment and growth.

Stock exchanges are playing a significant role in promoting non-financial reporting and provide an important information and regulatory nexus on ESG issues between companies and capital markets.

Some examples of global exchanges developing or amending policies that promote non-financial reporting can be found in the link below.

There are also significant social, economic and environmental challenges, however, which present risks and barriers for businesses and the continent and its people. The GRI Africa Regional Conference, which took place in May, provided a day of dialogue on how sustainable economic transformation can be achieved.

One of the key conclusions from the conference discussions was that sustainability reporting can play a pivotal role in linking Africa’s economic growth to social development and environmental stewardship.

» Read about the initiatives here » Read the full conference report here

Unilever releases new human rights report: first of its kind

Denmark transposes EU nonfinancial information directive

Multinational consumer goods giant, Unilever, recently released a new report on human rights, the first of its kind to follow the UN Guiding Principles Reporting Framework comprehensively.

The report highlights Unilever’s commitment to respecting human rights and implementing the UN Guiding Principles on Business and Human Rights.

The report – Enhancing Livelihoods, Advancing Human Rights – highlights key areas of progress in the goal to advance human rights across all areas of the business; including the company’s work to empower women, the progress in the fight against sexual harassment, and addressing health and safety issues across the supply chain.

On 21 May 2015, Denmark became the first EU country to implement the new EU Directive on disclosure of non-financial and diversity information by certain large undertakings and groups. The implementation will be effective from 2016 for the largest listed and state owned companies, and from 2018 for all large companies.

John Morrison, Executive Director of the Institute for Human Rights and Business (IHRB), stated in a commentary that this report will be seen as a benchmark for businesses and offers his praises, feedback and advice for future reports. » Access the full report here or read the commentary by John Morrison from the IHRB Website.

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It is expected that the new Directive will result in greater effectiveness of disclosure of non-financial information, as well as harmonise and streamline current reporting practices, while retaining a degree of flexibility. The new requirements will further transparency by requiring large public entities to include in their management report information on environmental matters, social and employee-related aspects, respect for human rights and anti-corruption and bribery issues. » Read the article here

RESPONSIBLE BUSINESS UK: Hefty fines for Britain’s big banks Britain’s biggest four banks have accumulated almost £50 billion in fines and lawsuits since the financial crisis, according to the Daily Mail.

Royal Bank of Scotland, Lloyds and Barclays have announced that they’ve set aside more money to pay for past wrongdoings. HSBC, Europe’s biggest bank, revealed it had put aside more than £900 million in the first half of the year, including a fresh £500 million provision to settle big fines in the US for rigging foreign exchange markets. » Read the article

Japan: Toshiba scandal Japanese electronics and industrial giant Toshiba is struggling to repair its reputation after a £850m accounting scandal and failing to report its results since the scandal broke in July.

After reporting a much-delayed annual loss of 37.8bn yen (£207m) for the last financial year through March, Toshiba is struggling to repair its tattered reputation. The company has revealed that it has overstated profits for the past seven years by 224.8bn yen, roughly triple its initial estimate. It is reported that the president and chief executive Hisao Tanaka and his predecessor, vice chairman Norio Sasaki, were aware of the overstatement of profits. » Read more about Toshiba

Brazil: Petrobras scandal continues to unfold

New measures to tackle human trafficking and slavery

The Petrobras scandal in Brazil continues to dominate the headlines as the investigation continues and more individuals are being charged with involvement in one of the biggest corruption scandals in Brazilian history. A number of directors at the government-controlled oil firm, once named the most ethical global oil and gas company in 2008, are accused of taking lavish bribes from construction companies, in return for awarding them lucrative contracts.

David Cameron recently became the first British Prime Minister to visit Vietnam, one of the main source countries for victims of human trafficking in the UK. Cameron visited the country to offer extra cooperation with the Vietnamese authorities to combat this issue.

In August, two former executives of Brazilian construction giant OAS have been sentenced to 16 years in jail for corruption; and former international chief of Petrobras, Nester Cervero, was sentenced to over 12 years in prison for corruption and money laundering.

Most recently in September, the Brazilian police have sought permission from the Supreme Court to question exPresident, Luiz Inacio Lula da Silva, over the corruption scandal. » Read the New York Times article on the scandal here

The Prime Minister’s new anti-slavery plan will include new measures under the Modern Slavery Act 2015 and will require large companies to publish an annual statement setting out what steps they are taking to ensure slave labour is not being used. The plan will apply to more than 12,000 firms from October 2015.

The British government estimates that up to 13,000 people in Britain are the victims of modern slavery. The UK Modern Slavery Act 2015 was passed earlier this year, the first of its kind in Europe to specifically address slavery and trafficking in the 21st century. » Read the Huffington Post or BBC article, and learn more about the Modern Slavery Act 2015

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Report: Unethical behavior continues to plague financial services industry A new report on the UK and US financial services industry, The Street, The Bull and The Crisis, found that the underlying behavior of those working within the industry has worsened over the years and the attitudes toward corruption have not changed for the better.

The survey, involving over 1,200 finance professionals in the UK and the US, found that 47 percent of respondents believe it’s likely that their competitors have engaged in illegal or unethical activity to gain an advantage (up from 39% in 2012). Approximately one third of respondents who made more than $500,000 annually reported to having witnessed or had firsthand knowledge of wrongdoing in the workplace.

As chartered management accountants, CIMA members and registered students have a duty to uphold strong ethical standing and abide by the CIMA code of ethics. » Read the Business Ethics article here

Future of whistleblowing hotlines The new CGMA Managing Responsible Business 2015 report noted a significant increase in the provision of internal hotlines and helplines to help report ethical issues (speak-up lines) from 49% in 2012 to 59% this year (83% in larger corporations).

Expolink, the Whistleblowing Hotline, recently celebrated 20 years of delivering global whistleblowing services. In the last few years alone, there were many changes in the attitudes toward whistleblowing and anti-bribery legislations; such as a 112% increase in whistleblowing reports since the UK Bribery Act 2010. So what is the future of whistleblowing hotlines?

It is, of course, impossible to know exactly what the developments would be but some of the predictions from Expolink include: further enhancement of whistleblowing technology, legislative developments in whistleblowing and an increase in protection and anonymity of whistleblowers. » Access the Expolink article and view the UK Bribery Act 2010

Global code of conduct for currency traders by 2017 After the discovery of price rigging at some of the world’s largest banks resulting in a series of multibillion-dollar fines, central banks say they are on course to publish a global code of conduct for currency traders in 2017.

Guy Debelle, the assistant governor of the Reserve Bank of Australia, told a briefing at the Bank of England that huge developments in foreign exchange trading in the last five years, following the introduction of high-frequency trading and a blurring of the role of market-making banks, had increased the urgency for a comprehensive set of principles for all participants.

Critics have accused regulators of failing to adopt measures that tackle the culture on trading floors which might lead to the scandals. » Read the article here

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‘If ethics are poor at the top, that behavior is copied down through the organisation’ Robert Noyce

How assessing compliance culture can raise ethical standards

Child labour in chocolate producer’s supply chain

The new 2015 Compliance Trends Survey, drafted by senior Compliance Week editors and Deloitte, showed that only 24% of chief compliance officers (CCOs) oversee cultural assessment. Organisations often face challenges on how to assess their ethics and compliance culture.

The challenges of responsible business management across the wider supply chain are evident in the case of Nestlé, where children younger than 15 continue to work at cocoa farms connected to the Swiss food company.

A cultural assessment is an opportunity for the organisation to enhance its compliance program and hotline experience, as well as its training programs and code of ethics. Maureen Mohlenkamp, Deloitte & Touche LLP, discusses in a video interview the importance of this information collected as part of the assessment to CCOs seeking to enhance their ethics and compliance programs.

Recently, Samantha White, Senior Editor of CGMA Magazine, wrote an article discussing the importance of internal audit and how it can help assess and support corporate culture. » Read the Deloitte Article and the CGMA Magazine article

In a new report by the Fair Labor Association (FLA), commissioned by Nestlé, researchers visited 260 farms used by the company in Ivory Coast from September to December 2014. Researchers found 56 workers under the age of 18, of which 27 were under 15 years old.

Though Nestlé’s code of conduct prohibits the use of child labour in its supply chain and researchers found the company had made substantial efforts to inform farmers about its code of conduct, awareness of the code was too low among farmers. » Access the article here and read about child labour issues in Africa

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MORE FROM CIMA ETHICS Ethics e-tools Would you know what to do when a situation arises that conflicts with the CIMA code of ethics? CIMA ethics e-tools will give you an overview of the CIMA code of ethics, the importance of ethics in the workplace, and how ethical considerations may appear in the CIMA exams. They can be used as part of your continuing professional development or if you are a student, it will help you in your ethical education. » To the ethics e-tools

Code of Ethics In January 2015, CIMA and the AICPA launched the code of ethics for CGMAs. The CGMA code is aligned with the requirements contained in the 2015 CIMA code of ethics (Part C) and the AICPA code of professional conduct. Accordingly, CIMA members who hold the CGMA designation and are compliant with the CIMA code will also be in compliance with the CGMA code. » To the code of ethics

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, the service is available 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 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

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Access the Code and all ethics resources at www.cimaglobal.com/ethics

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Alternatively, send your ethics query in an email to ethics@cimaglobal.com

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.

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