The internal environment and actions of companies directly affect Estonian society and people. New international companies that want to enter or look for partners and investment opportunities in a country, look for a law-abiding, stable and predictable environment. In making such decisions, the level of corruption and the possibility of conducting ethical business are monitored. It is therefore important that our own companies manage honestly, transparently and ethically.
Corruption is not only a concern for the public sector, but also extends to the business sector. From practice, we can give examples of how a company representative illegally rewards a public authority for a service, and there are more and more cases where a competent person of a company receives benefits from another company for influencing decisions. However, such situations need to be systematically prevented by raising awareness of the dangers and possible countermeasures.
The reasons for addressing corporate governance, business integrity and anti-corruption measures more systematically are to prevent specific risks:
- Risk of litigation. In the case of offences, the company and its representatives can face litigation, which can take years, requires human and financial resources and takes attention away from actual activities and work of the company. Situations at risk of corruption or fraud when operating abroad also need to be analyzed in order to prevent legal disputes in other jurisdictions.
- Reputational damage. Often more important than litigation, is reputational damage, which is caused by negative attention. Restoring trust among partners, shareholders and customers takes time and resources from the organization and in the worst case, the damage to the reputation is so great that the company needs to cease its activity.
- Financial loss. Both litigation and reputational damage usually lead to financial costs, but also reduce the chances of building new and strong partnerships and winning the trust of customers. In criminal cases, participation in procurement, achieving or continuing (international) cooperation agreements and attracting investments can be disrupted. In a society where both employees and customers are increasingly monitoring the values and mechanisms of businesses, such damage can be irreversible.
It is important to manage and effectively prevent risks in order to avoid damages. We consider the following as obstacles to the development of business integrity in Estonia:
- Awareness is low. The line between corruption and fraud needs to be clarified and case-law is still poor. We see that companies that systematically promote business integrity are either subsidiaries or branches (often of Scandinavian origin) of multinational companies, listed companies and state-owned enterprises. These companies, in most cases, practice values prioritized elsewhere or just comply with legal requirements, which indicates that the need to engage in business ethics is not yet valued or understood. However, regardless of the size of the company, these issues need to be addressed, including in start-ups, whose large growth and expansion could lead to a situation where appropriate measures are not developed and the risks materialize.
- The potential and necessity of business integrity are yet to be understood by the state, companies and consumers. While more attention has been paid to responsible and sustainable entrepreneurship, the topics related to business integrity still take a back seat. Companies need to pay attention to issues such as creating and implementing values, ethical and open management culture, promoting whistleblowing, effective risk management, implementing anti-corruption measures, preventing conflict of interest, diversity, data ethics, etc. The state can also guide the field, for example, by legalizing the inclusion of ethical conditions or implementing good practices.
To solve the problem, we have created the Business Integrity Forum, which unites companies that want to prevent business corruption, influence the ethical behavior of their sector and learn from each other. Within the framework of Business Integrity Forum’s activities, workshops and seminars are held and materials on anti-corruption measures and business integrity are created. Read more about the Business Integrity Forum here.