The war in Ukraine and sanctions enforced on Russia resulted in many companies having their values tested as they grappled with major business disruptions. Add to this modern-day slavery and other supply chain abuses plus growing compliance expectations whilst budgets are getting trimmed and compliance leaders find themselves facing tough choices. But new data from LRN’s 2023 Ethics & Compliance Program Effectiveness Report shows that program effectiveness reinforces corporate resilience in challenging times.
A recent LRN webinar, moderated by Director of Thought Leadership and Best Practices Susan Divers, asked a global panel of accomplished ethics and compliance leaders about how they have stayed true to course amid this storm. (You can watch the full discussion here.) These guests included:
The panel discussed how organizational values are foundational to mitigating risk and how building a culture of ethics and compliance is paramount to building organizational resilience—correlating with insights from the 2023 E&C Program Effectiveness Report. These were the top three takeaways from the discussion.
This year’s E&C Program Effectiveness Report found that 55% of executive leaders identified and managed new E&C risks and challenges as they arose in the course of business in the past 12 months. The panelists certainly agreed. Bernardeau kicked off the conversation by explaining how Auchan, a French multinational retail group of supermarket goods, was still operating in both Russia and the Ukraine as the war between the two countries pressed on. He explained that at the outbreak of the conflict, Auchan’s top executives and shareholders met and asked themselves not only what the company was going to do, but what the company felt was the right thing to do based on their mission and values. In the end, Auchan made the choice, despite what was happening, to stay in Russia.
“Our company has a mission,” said Bernardeau, “which is to feed the civilian population in every country where we are present. This is our key responsibility. We also have a direct responsibility toward the 30,000 employees that we have in Russia. We have responsibilities also with our suppliers in Russia, who are providing food, who are making food for the civilian population.” Bernardeau added that were Auchan to remove their business from Russia, the prices of their products in Armenia, Poland, France, Spain, and other countries would increase and create additional financial consequences on customers.
From ethics and compliance perspective, the decision to stay in Russia has required developing the right framework to ensure Auchan complied with the international sanctions now applied on the country from the US, Europe, and other countries. It has been a long, arduous process involving multiple conversations with various stakeholders, but Bernardeau feels confident that Auchan made the right decision for the organization by leading with their organizational values. “Everyone at Auchan, wants the war to end as soon as possible...we have responsibilities on both sides. We believe that we should stay in Russia in order to make sure that the civilian population will still have access to their basic needs.”
Villagrán discussed how CMPC leverages their organizational values through data analysis when faced with complex risk scenarios and business challenges. Last year, they worked with LRN to launch a company-wide survey asking detailed questions about their ethical culture. The findings revealed an interesting dichotomy: while 80% of employees said that they believe CMPC acts in ethical ways and balances their ethics with business objectives, another 40% also said they feel pressure to achieve short-term objectives—even if it means acting unethically.
Villagrán went on to share two examples of how this tension has manifested at CMPC. The first involved re-evaluating the company’s M&A strategy, which encountered issues with economic sanctions against Russia and other high-risk jurisdictions. The challenge for the compliance team, he explained, was to move the M&A process away from being considered simply a legal matter and instead emphasize the values and reputational impact these decisions would have on the company. Another example included uncovering cases of modern slavery across industries in the south of Brazil, which were cropping up as a way to reduce operating costs. Again, Villagrán’s team was tasked with quickly intervening to demonstrate how these practices went against CMPC values and could yield significant business consequences.
“Our job as a compliance team is trying to explain to businesses—those that are actually making the decisions—that this can really impact not only a particular jurisdiction,” said Villágran. “Modern slavery as well as economic sanctions can have a global impact on our operations, with our financial institutions, with our network of vendors and key business partners, and even in the way we hire people.” His thinking is shared by many fellow E&C professionals. According to the 2023 E&C Program Effectiveness Report, over half of respondents reported that E&C factors and risks led to their organization substantially modifying or abandoning a business initiative. Villágran concluded by stressing the importance of trusting your organizational values and creating an “agile compliance” environment where teams can test new methodologies for designing, evaluating, and improving E&C programs. “Agile is all about preparing for an environment which continues change.”
Another key finding from the 2023 E&C Program Effectiveness Report was that 40% of E&C professionals indicated their organization prioritized making their E&C program more employee focused—a trend that could certainly use improvement. Sullivan spoke about how Newmont Corporation has been working to make that shift. He notes that while fostering a speak-up culture throughout the company is essential, his compliance team is making a concerted effort to shift the emphasis of speaking up onto more leaders and middle management rather than placing the onus solely on employees. They’ve branded this new approach Ask, Listen, and Act. “We're focusing on empowering and training our leaders to be the ones that intervene and try to proactively reach out to our employee base,” Sullivan explained. “For us, trying to find ways to humanize the process and the personnel involved is really critical to building that rapport and trust in our process, our team, and our leadership.”
Ask, Listen, and Act is just one step in Newmont’s journey towards greater transparency. Sullivan mentioned the compliance function also deploys integrity baseline surveys using their Organizational Justice and Integrity Dashboard (or OJID) to capture culture data in real time. They are also working to share more specifics and outcomes of cases with their workforce. "We want them to understand what happened, what our expectations as an organization are, and also see, feel, and sense the fairness, impartiality, and objectivity of the process,” Sullivan said.
The panel concluded that the challenge now for those committed to values and principled performance is to internalize these lessons and embed them going forward in all decisions, operations, and commitments. Program effectiveness, they agreed, helps organizations stay the course when navigating uncharted waters. To watch the full discussion, click here. And to learn more about best practices in program effectiveness, download a copy of the 2023 Ethics & Compliance Program Effectiveness Report.