The role of business in cracking corruption

We do not need to look further than today’s news to see that corruption is a far-reaching issue throughout the world – from a recent survey in Turkey that estimates corruption increases costs by 10%, to Hong Kong, where the guilty verdict against a billionaire property developer is highlighting citizen anger at the city’s elite, to countless local US corruption charges in Florida, Ohio and Pennsylvania  – and that is just the tip of the iceberg.

We know that bribery and corruption exist across all industries, but the engineering, construction and real estate sectors are particularly at risk, given the size, complexity and strategic importance of major infrastructure and development projects in both advanced and emerging economies. Colliers International was the first commercial real estate firm to sign the World Economic Forum’s Partnering Against Corruption Initiative three years ago. As a leader in the commercial real estate industry, we want to stand up for what’s right and take action to break the corruption chain.

Corruption’s pervasive myths

The recent Organisation for Economic Co-operation and Development (OECD) Foreign Bribery Report finds that in corruption cases involving the construction sector, bribes amounted to about 4% of the entire transaction value (not including indirect costs and negative external costs caused by corruption), which illustrates the burden on the industry – and the potential great benefit if we could eliminate this unacceptable siphoning of critical resources.

The OECD report also reveals that senior business officials, including C-suite executives, often know about and even engage in corrupt practices, debunking a pervasive myth that incidents are typically isolated or committed by a small group of rogue employees.  In a recent industry survey, 92% of respondents believed that corruption impacts the brand of a company, while a similar percentage indicated that it has negative impact on the entire industry. A substantial proportion of business leaders – 86% – said corruption imposes additional costs of business and negatively impacts profitability. Beyond the ethical imperative to address corruption head on, these represent very compelling business reasons for strong CEO-level engagement to ensure that the negative effects of corrupt practices are understood and addressed at all levels of the company.

From ethics to action

Moving beyond organizational ethics and compliance, how can companies unite to address the most critical corruption challenges in their sector? Collective action is the vehicle to do this, bringing together traditional competitors to learn, discuss and drive forward the solutions we need. More than 50 infrastructure- and urban development-related companies are participating in a Forum-driven initiative to create an infrastructure collective action agenda. The effort began in 2014 with the mapping of corruption risks across the life cycle of a typical project to help determine where transparency issues arise and focusing industry-wide engagement on the most important areas.

We have discovered that permitting and licensing processes are some of the most important corruption risks to address, as well as infrastructure procurement reform, which is also a key topic of the B20 dialogue on anti-corruption at this week’s Annual Meeting in Davos. Structured dialogue with government leaders around a common agenda will help to identify ways to share resources and support policies that will prevent corruption risk and drive industry growth for everyone’s benefit.

Our efforts and our commitment to a collective action agenda with governments, other industries and representatives of civil society will provide meaningful benefits in tackling corruption and ensure that the engineering, construction and real estate sectors remain competitive and inclusive, and continue to create growth worldwide. I encourage all business leaders to move in the same direction.

Author: Doug Frye, Global President and Chief Executive Officer, Colliers International

Image: U.S. one dollar bills blow near the Andalusian capital of Seville. REUTERS/Marcelo Del Pozo