[1]Is the time ripe for a common international anticorruption standard?
At a recent World Bank panel discussion regarding “Corruption and PPPs: Challenges and Solutions,” all four panelists – including leaders from the World Bank Group and major international companies – expressed support for such standards. Some proposed precedents that could serve as models. If there is traction for this idea, it could significantly impact the way companies address anticorruption issues. It might even reduce the incidences of corruption.
There has been convergence around international anticorruption laws issues for some time – the FCPA standard is mirrored by the OECD Convention. These principles (and many others) are incorporated into the United Nations Convention Against Corruption. But the ideas proposed during the World Bank’s panel discussion suggest an appetite for something different: a voluntary standard with market, rather than enforcement, consequences.
Mr. Rashad Kaldany, Vice President and Chief Operating Officer of the International Finance Corporation (part of the World Bank Group,) suggested that a global standard regarding transparency would help both governments and private sector entities. He discussed the Equator Principles and the Extractive Industries Transparency Initiative as possible models. Other panel members said they would welcome such standards, and Roger Bridges, President of Knowles Consultancy Services, proposed an ISO-type standard that would result in a rating from a third party agency.
Does this apparent, albeit informal, consensus suggest that such standards are the next evolution in anticorruption? If so, what might such standards look like? The models cited are a good place to start:
- The Equator Principles [2] are voluntary standards for managing social and environmental risks in project finance. They were developed by ten large private-sector banks in 2003, and have since become the de facto standard by which banks assess environmental and social risks in major infrastructure projects around the world.
- The Extractive Industries Transparency Initiative [3] (EITI) seeks transparency in government revenues received from private entities in the extraction of natural resources, especially hydrocarbons. Countries apply for certification as EITI compliant. This gives a signal to extractive industry corporations, potential donors, and investors that the country is committed to transparency, good governance and accountability for the wise use of those revenues.
- The International Standards Organization (ISO) is an international organization that develops and publishes international standards. These standards benefit from input from national standard-setting bodies, and cover a wide variety of topics. Companies can apply to be certified as compliant with an ISO standard, and the certification has to be updated periodically. For example, a company applying for certification as ISO 9001 (a standard that addresses quality management systems) undergoes a thorough audit and sampling of its products, services, and processes by an independent certification body. If it passes, it earns the right to claim that certification, which has value in the marketplace.
All of these models are voluntary – countries or companies choose whether to pursue certification. They are all market-enforced – applicants generally seek certification because it has value in the marketplace, not because they fear prosecution. But these precedents suggest a range of possible roles for state and private actors: the Equator Principles were developed by banks and are used by them; the EITI is a “good governance” certification for states; ISO standards use independent certification bodies.
What would be the best model or models for an international anticorruption standard? Key threshold questions include: What would be the benefit of complying? How would market demand for certification be established? How would the standard be monitored? What would compliance failures (i.e., bribes) mean for a company meeting the standard? What would be the elements of the standard? Who would decide?
It is possible that the panelists did not mean their comments as serious proposals – they were informal comments to an apparently friendly crowd. But the idea of a voluntary, market-enforced international anticorruption standard is one that deserves to be taken seriously. Corruption creates vicious circles. It undermines the institutions intended to regulate it, and tempts companies into a race to the bottom. Depending on its design, an international anticorruption standard could support national institutions and encourage companies to establish and maintain a level playing field. The devil is in the details, but it is a conversation worth having.
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