As procurement professionals, it is our duty to ensure that our supply chains operate with the utmost integrity, transparency, and adherence to ethical standards. The 2014 report by Transparency International, “Code of Ethics for Companies: Good Practices and Resources,” provides invaluable guidance on establishing and enforcing robust codes of ethics, particularly in sectors prone to corruption like the energy industry. This article summarizes the key points from the report, highlights best practices, and offers insights on leveraging these guidelines to enhance corporate integrity.

The Importance of code of ethics in the Energy Sector

According to Transparency International’s report, an ethical code serves as a central guide and reference for employees, managers, suppliers, and other stakeholders. It clarifies the company’s objectives, the norms and values it upholds, and the conduct it expects from its leadership, employees, and business partners. This is especially critical in the energy sector, which is prone to corruption due to high-value contracts, complex supply chains, and the involvement of numerous third parties.

Key Reasons for Ethical Codes:

1. Mitigating Corruption Risks: The report highlights that energy companies often operate under tender processes, where the risks of bribery and corruption in contract awards are significant. Ethical codes help mitigate these risks by setting clear guidelines for acceptable behavior.
2. Enhancing Transparency and Accountability: Ethical codes promote transparency and accountability in business practices, ensuring that all transactions are conducted ethically and legally.
3. Building Trust with Stakeholders: Adopting and adhering to a robust ethical code builds trust with stakeholders, including consumers, shareholders, employees, and public officials.

Components of Effective Ethical Codes

Transparency International’s report emphasizes that an effective ethical code typically includes the company’s mission and vision, core values, responsibilities toward stakeholders, and detailed standards and rules for employees and managers. A comprehensive ethical code should cover the following areas:

1. Zero Tolerance Policy to Corruption: Clearly stating the company’s stance against all forms of corruption, including bribery and facilitation payments.
2. Gifts and Hospitality: Establishing rules for the acceptance and offering of gifts to prevent conflicts of interest.
3. Conflicts of Interest: Providing guidelines to avoid situations where personal interests could conflict with the company’s interests.
4. Political Contributions and Lobbying: Outlining the company’s policies on political contributions and the use of lobbyists to ensure transparency and integrity.
5. Employee Conduct: Setting standards for employee behavior, including the use of company assets, confidentiality, and the prohibition of illicit activities.

Case Study: Statoil’s Code of Ethics

The report by Transparency International cites Statoil, a Norwegian energy company, as a benchmark for good practice in the energy sector. Statoil’s code of ethics includes:

• Accurate Reporting: Emphasizing the importance of accurate and full communication of business information both internally and externally.
• Fair Competition: Committing to compete fairly and ethically within the framework of anti-trust and competition laws.
• Combating Corruption: Prohibiting all forms of corruption, including bribery and trading in influence, and requiring third parties to adhere to the same standards.
• Supplier Relations: Expecting suppliers and partners to adhere to ethical standards consistent with Statoil’s requirements.
• Personal Conduct: Outlining expectations for personal conduct, including the use of company assets, confidentiality, and the prohibition of substance abuse and the purchase of sexual services.

Implementing and Enforcing Ethical Codes

For ethical codes to be effective, the Transparency International report stresses that they must be more than just documents; they need to be embedded in the company’s culture and operations. Key steps for implementing and enforcing ethical codes include:

1. Stakeholder Involvement: Involving internal and external stakeholders in the development of the code to ensure it addresses real-world challenges and creates a sense of ownership.
2. Training and Communication: Regularly communicating the content of the ethical code and providing training to managers and employees to ensure they understand and can apply the guidelines.
3. Monitoring and Enforcement: Establishing systems to monitor compliance with the code, including anonymous helplines and clear reporting mechanisms for ethical violations. Ensuring that violations are addressed promptly and fairly.
4. Continuous Improvement: Treating the ethical code as a living document that evolves with the company and the industry. Regularly reviewing and updating the code to reflect new challenges and best practices.

International Standards and Guidelines

Transparency International’s report references several international standards and guidelines that support the adoption of ethical codes in the private sector, including:

• United Nations Convention against Corruption (UNCAC): Recommends that companies develop codes of conduct to ensure the correct performance of commercial practices.
• United Nations Global Compact’s 10th Principle: Encourages businesses to work against corruption in all its forms and to develop policies and programmes to address corruption, including the establishment of ethical codes.
• Transparency International’s Policy Position 04/2009: Highlights the importance of adopting and enforcing global ethical standards that bind businesses and employees to shared principles and practices.

Conclusion

As procurement professionals, we play a crucial role in ensuring that our companies and supply chains adhere to the highest ethical standards. By understanding the importance of ethical codes as outlined in Transparency International’s 2014 report, learning from best practices like those of Statoil, and actively implementing and enforcing these guidelines, we can help build a more transparent, accountable, and ethical energy sector.

For further reading and resources on developing and implementing ethical codes, please refer to the following publications highlighted in the Transparency International report:

• United Nations Global Compact’s Reporting Guidance on the 10th Principle against Corruption: Link
• Transparency International’s Policy Position on Building Corporate Integrity Systems: Link
• OECD’s Anti-Corruption Ethics Compliance Handbook: Link
• Ernst & Young’s Managing Bribery and Corruption Risks in the Oil and Gas Industry: Link

By integrating these best practices into our procurement processes, we can significantly contribute to the ethical conduct and integrity of our organizations.

Learn more in Learn How to Source’s course about Supplier Code of Conduct. Procurement departments are responsible for sourcing goods and services from suppliers that meet the organization’s requirements for quality, cost, and delivery. However, in addition to these basic requirements, procurement professionals must also consider the ethical and social implications of their purchasing decisions. This is where a Supplier Code of Conduct comes in.

Note: Illustration to the blogpost “Implementing Effective Codes of Ethics in the Energy Sector” is an extract from the report.