A Tick-the-Box Approach to Whistleblowing Will Destroy ESG Efforts
Corporate Culture Plays a Role in Whistleblowing and Your ESG Criteria
Whistleblowing is the disclosure or reporting of wrongdoing via mechanisms that employees, clients, and suppliers use to share information on activities that violate a company’s code of ethics, legal and regulatory requirements or international human rights standards.
The one-size-fits-all approach to incorporating a whistleblowing program does not apply to all companies. Some companies are bigger than others. Some companies are more advanced than others. But one thing that all companies should take note of is that a tick-the-box approach to implementing a whistleblower program will not sit well in the eyes of potential partners or investors.
This is because ESG criteria goes beyond checking off a to-do list on paper, but rather incorporates a truly believable corporate culture to back the whistleblower program, and the ESG initiative, up.
What potential investors will do is use the presence, or absence, of a well functioning whistleblower program, along with a believable corporate culture to assess a company's risk management and human rights practices as well as their corporate culture when evaluating ESG criteria.
Employees want to have a voice in fundamental operational decisions and have a voice without any fear of retaliation.
To reduce internal risk and non-compliance to policies, procedures and objectives, company's should create an environment where employees are able to safely speak-up to report on ESG issues when problems arise.
What are Environmental, Social, and Governance (ESG) criteria?
"Environmental, social, and governance (ESG) criteria are an increasingly important set of standards for a company’s operations that socially conscious investors use to screen potential investments to find companies with values that match their own" as said in this post.
Environmental criteria will consider a company's performs as a steward of nature. Meaning the responsible use and protection of the natural environment through conservation and sustainable practices.
Social criteria will look at how a company manages relationships with employees, suppliers, customers, and the communities where it operates. And this is where a whistleblower program will come in that allows anyone to safely speak-up and have a voice.
Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. This covers decision making, and policy making and how it can affect all stakeholders.
And a company's ESG ratings are becoming increasingly important with investors. In fact, investors with over $80 trillion in combined assets have signed a commitment to integrate ESG criteria into their investment decisions. This in turn is making investors more aware and serious about taking ESG issues to heart.
The importance of incorporating ESG whistleblower compliance into your business practices
It's important to maintain a corporate culture that provides a believable and well functioning whistleblower program that allows all stakeholders to efficiently report on ESG progress and violations to meet customer and investor requirements. There are four factors to take into considerations to help move past the tick-the-box approach to incorporating a whistleblower program, and create a program that is driven by truth, belief, and a strong workplace culture.
- How effective is your company’s reporting platform, or mechanism?
If a company should face a legal or regulatory issue, prosecutors will assess the data surrounding the company’s whistleblower reporting mechanism in order to evaluate its effectiveness. This includes the frequency of its use. If employees are unaware of your whistleblower program and don't report any violations, your effort is futile. Prosecutors will probe your employees' awareness of your program and how, and if, it is used.
- Are investigations conducted by properly trained and qualified personnel?
Not everyone is qualified to conduct an investigation. It is important for investigators to have access to the reporting program containing complaints in order to actively respond to allegations. If involved, a prosecutor is going to evaluate how the company determines which whistleblower complaints merit further investigation, who conducts those investigations, and the proper scope of those investigations. As well, further considerations will be taken to determine what steps a company has taken to ensure investigations are independent, objective, appropriately conducted, and documented.
- How timely and effective is the investigation response?
How fast are investigators responding to complaints. Left unchecked, a seemingly simple complaint can quickly take a turn into something seriously harmful to the company. As well, how are outcomes actions of complaints monitored and documented? Keeping a thorough process for documenting all complaints and the investigation behind them will keep a company accountable for the response to any findings or recommendations.
- How strong are the company’s resources, and procedures for tracking results?
Does your company collect, track, and analyze reported complaints in a case management system? What about the company's response to those complaints? Effective receipt and investigation of whistleblower complaints are essential to any effective compliance program. Undocumented whistleblower reports can pose serious legal implications.
Strengthen your corporate culture, and protect your ESG efforts with a whistleblower program
The publications of guidelines, like the DOJ's evaluation criteria to measure an effective compliance program, can be used by companies as further guidance for strengthening their whistleblower programs and internal investigation within the programs. A program that promotes internal reporting and has zero tolerance for retaliation against whistleblowers is important. This is where a believable speak-up culture plays a role in ESG criteria.
A well-functioning whistleblowing reporting system will allow a company to be notified of potential wrongdoing and take action quickly, alleviating the need for potential regulator involvement.
Anonymous reporting should be in place for all stakeholders to report ESG violations, and other wrongdoing. It is just as important what a company does after an allegation is made. Once an allegation is made, organizations should have an efficient, reliable, and properly funded process in place for investigating allegations and documenting response, including disciplinary or remediation measures taken.
Organizations need to develop strategies that focus on ethics and accountability in their place of work. This includes establishing rules and regulations, identifying red flags that may indicate a conflict of interest, and mitigating or completely preventing risk.