Corruption is a word that encompasses many negative deeds. Yet unfortunately, many countries still face it on a daily basis. According to the International Finance Corporation (IFC), corruption “is among the greatest obstacles to economic and social development.” (1) The people who suffer most from corrupt activities such as bribery and fraud are the poor, usually to the benefit of richer groups. Sadly to this day, corruption is still in effect in most countries in the world.
What does this mean for the extractive industry?
For companies operating in the extractive industry, corruption represents one of the critical issues they must deal with. Considering that numerous extraction companies are based in richer countries and that many projects are located in poorer countries, their business processes must be transparent, clear and traceable. To prevent corruption, companies must involve many people in the decision process and generate institutional memory. When the opposite happens and only a few persons are consulted, risks of corruption dramatically increase. Institutional memory allows past events, previous situations as well as people to exist within a company, even a long time after they have occurred or left the organization.
The Corruption Perceptions Index ranks countries and territories
based on how corrupt their public sector is perceived to be. (2)
When companies fail to handle the corruption risk effectively, they are exposed to irreparable damage, including: difficulty to access to new projects, tainted reputation, loss of social licence to operate, loss of credibility, and repercussions on financial revenues.
Real life example
In 2005, a Canadian oil and gas company bribed the Bangladesh Energy Resources Minister with a luxurious vehicle. Six years after the events occurred, the company’s lawyers had to sit in front of Canadian court and pleaded guilty to charges of bribery. The company was charged with a $9.5-million fine, not to mention irreversible damage to their reputation. To this day, these events represent a breakthrough in terms of white-collar law enforcement. The RCMP’s message to Canadian multinationals was clear: the fact that you do business overseas does not mean that bribery and shadowy business processes are an option. The company now took corrective measures and created a Chief Compliance Officer who reports to the Board, in order to avoid that such events happen again.
Tools to facilitate transparency
As mentioned above, the best way to avoid corruption is to involve as many people as possible in the decision process, at various levels. In addition, data must be registered in order to ensure transparency and generate institutional memory. This allows tracing all actions. An Information Management System, or IMS, allows companies to demonstrate their transparency by identifying clear processes which do not include a limited number of people. Elements like payments, contracts, meetings and other activities are registered and therefore available for consultation. In other words, if some elements rise questioning and seem somewhat suspicious the system allows to quickly identify them and take the necessary corrective actions. Furthermore, training of staff through existing toolkits and best practices is necessary. Such tools allow corporations to implement ethics codes and to transmit key values and principles to all employees. By doing this, companies provide the necessary information to sensitize staff about the benefits of avoiding, recognizing, and denouncing fraud and bribery. At the same time, they become aware of the severe consequences of entering falsified or distorted information into the system.
The Boréalis Application offers various modules that allow users to register information and collected data in order to generate institutional memory, demonstrate transparency and produce reports. This facilitates both internal and external audits by third parties like lenders, governments, etc. Here are a few of these modules.
- Stakeholder Engagement module: It enables the registration of all stakeholders, whether they are individuals or organizations, and the meetings, issues, grievances and commitments related.
- Social Investment module: It traces how funds and donations are invested, which projects benefit from them, who are the stakeholders touched by the investments. It also ensures that numerous people are engaged in the decision process.
- Local Business Development module: It registers all the local companies, the contracts given, the trainings provided and the audits realized by third parties. Statistics such as percentage per activity sector for a specific region can then be calculated and analyzed for any purpose.