Five key areas companies need to look out for

Transparency is increasingly becoming a norm in the corporate world.[1] More than simply being the ‘right’ thing to do, there is a strong business case for corporate transparency around governance and anti-corruption. Transparency is vital in the fight to reduce corruption risks in business and, what’s more, companies are finding that providing more information than they are legally required to in these areas helps build trust with consumers, investors and employees.

Despite the clear benefits for businesses, meaningful disclosures, particularly around governance and anti-corruption, are limited.[2] In 2019, we asked ourselves why it was that so many companies were failing to capitalise on this business case.

Released today, our Open Business report guides companies on how to capitalise on this business case. This publication has been 12 months in the making, with the research process including a thorough analysis of the current transparency climate, interviews with compliance professionals from major multinationals, and discussions with some of the world’s biggest institutional investors. The result is a report which:

• Demonstrates the business case for corporate governance and anti-corruption transparency which supports assertions that transparency: builds and maintains trust; helps manage reputation; ensures legal compliance; and increases competitive advantage.
• Identifies and provides guidance and principles on disclosure across five key areas that are at high-risk of corporate corruption: anti-corruption programme transparency, beneficial ownership transparency, organisational structure transparency, country-by-country reporting transparency and corporate political engagement transparency.
• Offers responses to some of the challenges that might inhibit companies from disclosing information including: privacy legislation as a potential barrier to beneficial ownership disclosure; the legal risks of publishing alleged breaches of a company’s code of conduct; competition law as a deterrent to the publication of supplier information; the difficulties of managing differing public disclosure requirements across jurisdictions; and practical difficulties of ABC data collation and publication.

As the research and writing of the report progressed, five key areas that companies need to look out for in the future became apparent. Based on our guidance and principles, Open Business calls on companies to:

• Increase meaningful disclosures on their anti-corruption programmes, particularly with reference to the frameworks behind, and implementation of, policies and procedures.
• Improve meaningful disclosures around beneficial ownership and publicly advocate to governments to adopt data standards on beneficial ownership transparency.
• Publicly disclose all fully consolidated subsidiaries and non-fully consolidated holdings, and state publicly that they will not work with businesses which operate with deliberately opaque structures.
• Publicly disclose the nature of work, the countries of operation and the countries of incorporation of their fully consolidated subsidiaries and non-fully consolidated holdings, and publicly disclose country-by-country breakdowns of their payments to government.
• Increase meaningful disclosures on their corporate political engagement, including around their control environment, political contributions, lobbying and the revolving door.

Although some of our transparency principles identified under these five themes are more applicable to multinationals, there are many that are applicable to companies of all sizes. Open Business complements and advances the existing transparency climate, taking into account the most progressive and relevant legislative requirements at an EU directive, UK statute and US federal level, as well as taking into account the increasing demands of responsible investors and the wider public.

We hope this guidance will serve as a foundation for better corporate practice by inspiring companies to become increasingly transparent and demonstrating the commercial benefits of doing so. In addition, this guidance will also help to drive up standards across the business community and level the playing field both domestically and internationally.

Given the clear business case for greater transparency, the question that companies need to start asking themselves is not “why disclose?” but rather “why not disclose?”.

[1] Transparency International, The Benefits of Anti-Corruption and Corporate Transparency: Working Paper (Berlin: Transparency International, January 2016), p.1

[2] Alliance for Corporate Transparency, 2019 Research Report: An Analysis of the Sustainability Reports of 1000 Companies Pursuant to the EU Non-Financial Reporting Directive (Alliance for Corporate Transparency, 2020)