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Keeping you in-the-know on environmental, social and governance developments

Kroll just issued their 2021 Anti-Bribery and Corruption Benchmarking Report, which points out that because ESG investments can be undermined by instances of bribery & corruption, ESG compliance and anti-corruption compliance are closely linked. The report was based on a survey of 200 senior risk professionals across the globe. In summarizing the findings specific to ESG, Kroll found:

Despite ESG becoming a buzzword in recent years, ESG continues to suffer from a lack of standardization, lack of data and lack of transparency regarding its criteria. This ambiguity may lead respondents to believe that (for now) the workload to implement ESG outweighs the rewards of an ESG program… while there is overwhelming support for the integration of ESG into ABC [anti-bribery and corruption] programs, as well as an understanding that understanding ESG relative to bribery and corruption is important, many respondents struggle with the implementation of ESG programs. 

There are several interesting aspects to this conclusion – but one of particular interest to me is that it supports my own experience that it’s rare for environmental, health, safety and social auditors to have training & expertise in “fraud detection.” Where this type of training has been provided, I have found it to be very general and not particularly useful.

When I worked at a small audit firm, we developed an advanced auditor training program for EHS & sustainability auditors that incorporated elements of fraud detection based on programs of the Association of Certified Fraud Examiners, and interviewing skills using updated FBI and CIA interrogation techniques. Part of that was new information on reading non-verbal cues from interviewees. When developing this training, I was shocked to learn that essentially everything I had been taught in auditor education sessions over the years about reading body language was wrong. That was eye opening. To be fair, at least some of this type of training is likely more prevalent for financial auditors.

That curriculum may sound extreme, but it was borne out of experience in the field. The need for fraud expertise is even more compelling in the context of social auditing. One well-known leader in the field frequently talks about social auditors needing to “know when you are being lied to” during supplier audits. He is right, but there is more to it than that.

What You Can Do

Anti-bribery & corruption (ABC) and ESG professionals can mutually benefit from working together, but they first must be on the same page. While the Kroll report implies the onus is on ABC staff to plug the gaps, I suggest a better approach is to make it a shared responsibility between ABC and ESG functions, coordinating the skills and function of each.

  • ESG staff (including the auditors/consultants they engage) can be site-level eyes and ears for the ABC function to some extent. They can help ABC staff navigate the lack of consistency in ESG standards, data, and importance of certain topics and information. However, they need detailed and practical training on fraud detection, updated interviewing techniques, updated information on reading non-verbal cues and other company-specific relevant matters.
  • ABC staff can providing this training to ESG staff, as well as educating them on how to respond if an issue is discovered or at least suspected.

There may be minor growing pains in this relationship, but the benefits and efficiencies gained from it should be worthwhile.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile