EU promises to lead brave new world of transparency in business


New transparency laws will force an estimated 6,000 EU firms to disclose their performance on environmental, social and human rights. Can the moves open up business forever? Giles Crosse reports

In recent years communication has driven development in previously unimaginable ways. Before the internet, huge distances separated nations, making it hard to gain insight into other societies without expensive travel. Now, a child in the UK can learn about the life of a Masai elder from the comfort of a bedroom. A Scandinavian engineer can trace potential solutions for renewable energy from the other side of the world.

Many hope this openness can lead to a truly global society. Yet business still lacks the willingness to speak honestly about itself.  Doing so is vital. If a firm in Asia is pondering their options on employing child workers, but has to match the human rights practices of EU partners to earn entry into European retail markets, a step change is on the cards.

But unless Western businesses lead behaviour on these issues, it is hypocritical of them to judge the rest of the corporate world. Businesses welcome the benefits of internet communications and globalization with open arms. But few are as honest about how they treat their employees, and policies on bribery, anti-corruption and human rights.

The gains of the EU’s ruling are twofold. It will enable a more transparent business landscape, where those businesses that perform well from an ethical standpoint win more business. Second, this will influence improvements across the world. It will penalise companies that fail to embrace the central drivers of equality, honesty and fairness, forcing an alteration in business culture that drips down into the fabric of society.

What are the changes?

Firms with more than 500 employees will be forced to open up non-financial information. The Commission ruled that applying the changes to smaller companies might force nascent businesses into costly reporting requirements. The EU estimates that the new law will affect 6,000 companies.

A number of guidelines already exist to help businesses achieve the requirements, some supplied by the UN Global Compact. Indeed, advice is widely available. Transparency International UK has been working for some time in this arena and in June published new guidance on countering small bribes.

Dealing with bribes is a big part of today’s business. Transparency International research shows that, globally, more than one in four businesspeople paid a bribe in a recent 12-month period. The fact that such behaviour is so widespread illustrates why getting one’s own house in order is a necessity, before asking firms in Africa or Bolivia to crack down on corporate corruption.

“When a company pays a bribe of any size, it reinforces a culture of graft which is exceptionally damaging to the economies and societies in which they are paid,” said Robert Barrington, Executive Director, Transparency International UK. “We have drawn on our experience in working in over 100 countries to provide guidance to help companies eliminate small bribes, at the same time protecting their reputations.”

“Companies, investors and society at large will benefit from this increased transparency,” said the EU’s Internal Market and Services Commissioner Michel Barnier. “Companies that already publish information on their financial and non-financial performances take a longer term perspective in their decision-making.

“They often have lower financing costs, attract and retain talented employees, and ultimately are more successful. This is important for Europe’s competitiveness and the creation of more jobs. Best practices should become the norm.”

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PHOTO CREDIT: Nick Garrod on flickr