Why companies and compliance officers need to adopt ESG criteria

6 Mar, 2022 | Noticias-en

From “Governance” and with a focus on anti-corruption.

Environmental, Social and Governance (ESG); impact investing and sustainability are terms that companies may consider to be outside the scope of their compliance and ethics program.

However, ESG principles can help companies, fiduciaries and compliance officers fulfill their responsibilities.

Towards a new governance

ESG governance moves away from the traditional understanding of directors’ fiduciary responsibility, based on a hierarchical control model and the proper management and administration of the company.

Governance means starting to move towards a new style of corporate governance that is reflected in greater cooperation between the board and third parties and regulators, covering multiple aspects, including business ethics and transparency; measures to combat bribery, corruption and money laundering; adequate financial management and tax compliance; control of donations to the private and public sector, including political parties; internal audits and controls on regulatory compliance; and respect and safeguarding of the rights and interests of stakeholders, from shareholders and investors to customers and employees.

Importance of anti-corruption programs

Corruption is one of the main ESG issues that investors and financiers analyze when making their decisions, whether for making contributions or even in mergers and acquisitions. In addition to this, there are demands from all over the world and from all sectors for greater transparency, regardless of local regulations.

Therefore, proper corporate governance must consider the implementation of an effective program to manage bribery and corruption risks that may affect the company. These risks not only expose the company to civil, administrative or criminal liability, but also to operational and reputational risks that nowadays acquire an unprecedented importance under the influence of globalization and the use of new technologies.

From the point of view of shareholders and investors

Companies are beginning to see that proper management and planning of corporate governance could have a positive effect on profitability and productivity in the medium and long term.

These competitive advantages will result in companies that are more attractive to shareholders and investors, who are beginning to identify and evaluate the risks of exposure to ESG factors as one of the fundamental aspects in their decision making.

With the evolution and development of this issue, there is an important opportunity for companies that are working on strengthening their anti-corruption programs within the framework of their ESG policies.

Concrete actions that companies can take to incorporate ESG governance factors are as follows:

Analyze the processes the company has in place to identify where there are opportunities for improvement and what factors may be impeding progress.
Create a risk matrix to identify recurring and residual risks.
Design an anti-corruption program based on the risks detected in order to manage them efficiently.
Design a code of ethics and an appropriate anti-corruption policy.
Conduct due diligence on employees, customers, suppliers and business partners, with emphasis on the ESG factors that the company wants to implement.
Enable whistleblower hotlines within the framework of a process that ensures guarantees and protection to the whistleblower.
Train employees and senior staff.
Conduct recurring audits on the different aspects of the program in operation.


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