Battling corruption with collective action

With the Millennium Development Goals (MDGs) set to expire in 2015, the United Nations is undertaking the process of determining its future development framework. The private sector has an enormous stake in achieving sustainable development, as healthy societies and healthy markets go hand-in-hand. In this respect, it is crucial that governments integrate good governance and anti-corruption into the post-2015 agenda to achieve development that is enduring and sustainable.

Healthy markets are grounded on sustainable and ethical principles. Where corruption and other forms of poor governance are pervasive, economies cannot function properly, efficiently or fairly. In societies with high levels of corruption, unethical business practices often go unpunished. Impunity reigns; there is no level playing field.

Corruption distorts markets, undermines development and makes business unsustainable. According to the World Bank, corruption adds up to 10% to the cost of doing business globally. And, in response to the 2012 Global Compact Annual Implementation Survey – the largest survey on corporate sustainability practices with input from over 1,700 businesses – 39% of respondents ranked corruption as a major obstacle to sustainable development. Sustainability and market growth cannot be attained as long as corruption is prevalent. With corruption, everyone loses in the long term.

To address this issue, a growing number of companies worldwide are introducing measures to prevent corruption and respond more proactively to incidents, including through zero-tolerance policies, training for employees, supplier policies and whistle-blower programmes.

Yet, the gap in action between small and medium-sized enterprises (SMEs) and large companies is enormous. While 76% of large companies that responded to our Implementation Survey adopted anonymous hotlines, only 10% of SMEs had such systems in place. This indicates that smaller firms – the main economic engine of developing and emerging markets – are highly vulnerable to corruption risks that undermine their potential and competitiveness.

How can SMEs be more actively engaged in anti-corruption efforts? What more should be done to tackle the hydra-headed problem of corruption? While a number of sanctions and incentives by governments and other market actors have been proposed, this widespread challenge is too large and complex for any segment of society to solve alone. Simultaneously, while corruption is a global endemic affecting all societies, it is also a highly localized issue.

Collective action among multiple stakeholders at the country level can serve as an important mechanism to address corruption. India, where the UN Global Compact will convene a joint session with the Forum’s Partnering Against Corruption Initiative this week, is one of several countries where Global Compact Local Networks bring businesses, governments, civil society, academics and investors together to identify and enact solutions to corruption in the private sector.

Collective action that unites like-minded actors helps to protect vulnerable individual actors from being punished for simply doing the right thing – conducting business with integrity. It helps to level the playing field and build trust among various stakeholders – a key enabling factor in the push for economic growth and sustainability.

Author: Olajobi Makinwa is Head of Transparency and Anti-Corruption and Coordinator of Senior Civil Society, United Nations Global Compact, New York

Image: Businessmen walk down a staircase in an office building REUTERS/Toru Hanai