Interview with Constanze Berendts

According to the most recent Bribe Payers Index published by Transparency International, German exporters and exporters from the Netherlands, Switzerland and Belgium are among the least likely to succumb to corruption. But does this also imply that German companies are more transparent than others?

Berendts: First, this result means that senior executives abroad consider it very unlikely that German companies will offer them bribes. There are various aspects to the fight against international corruption – transparency is just one of them. Others include corporate culture, clear internal rules and the quality of criminal prosecution for international corruption.

Of course, it is good to know that German exporters can conduct business successfully abroad without resorting to corruption. But, sadly, German companies have not improved their index score since 2008. It is worrying that the intensified efforts to prevent corruption in recent years have clearly failed to bear fruit. For example, there is still insufficient legislation for the protection of whistleblowers in Germany.

Transparency isn't just a tool for countering corruption, it is a prerequisite for gaining the trust of customers and society. The EU's new CSR strategy aims to improve transparency with regard to social and environmental concerns. Would this type of initiative not be better suited to the more pressing needs in China or Russia?

Berendts: The fact that there is less transparency elsewhere may be a popular argument against transparency, but it is not a good one. The EU Commission emphasizes in its strategy that strengthening CSR commitments and creating more transparency should boost the international competitiveness of European companies, not weaken it. Calls for transparency on ecological and social issues do not stop at EU borders. The European public increasingly expects multinational companies to be accountable for their activities in Russia and in China, for instance.

Given the international dovetailing of supply chains and the communication opportunities offered by the Internet, China is most certainly affected when critical consumers in Europe question the production conditions for their consumer goods. This has been underlined by various scandals and boycott initiatives in the textile industry, for example. Incidentally, I believe that by addressing only “social and ecological concerns” the EU's CSR strategy does not go far enough. What about economic and political concerns? And what about payment flows for the procurement of raw materials or the disclosure of companies' and associations' lobbying activities? We have to demand transparency from our companies on these very issues if we want to create a modern-day understanding of CSR.

The EU has presented a draft Directive for renewable energy guarantees of origin, and a new Directive promoting transparency in energy trading is set to come into force at the end of the year. In which industries do you consider there to be a similar lack of transparency?

Berendts: The risk of corruption is particularly high in those areas where there is a lot of money and where the processes for awarding orders or licenses are not transparent. This makes, for example, the healthcare and the construction industries particularly vulnerable. Meanwhile, energy trading and the origins of electricity are not the only areas where greater transparency is needed in the energy industry. In the debate on alternative energy sources, the ability to influence political decisions is a particularly sensitive area. For example, the 2010 negotiations between the German government and energy groups about extending the life of nuclear plants, which were conducted far from the public eye and parliamentary controls, did not give the impression that an impartial decision was made under due consideration of all relevant interests. Politicians have to make these processes more transparent. But we also expect companies to be held accountable for their lobbying activities.

In the raw materials sector, transparency is becoming increasingly important due to upheavals in the Middle East and north Africa. People in this region want to know what is happening to the money from lucrative raw materials trading if it is not ending up in the public purse. Payment flows in the raw materials sector must be disclosed to stem corruption and ensure that the wealth generated by trade in raw materials goes towards fighting poverty. If western industrialized countries, companies and investors are committed to responsible trading, this is the yardstick by which their activities in such countries must be measured.

In terms of transparency, what requirements does the financial sector now have to meet as a result of the financial crisis?

Berendts: A lack of transparency was one – but by no means the only – cause of the financial crisis. This crisis was triggered by multiple failures – by people, management systems and market regulations. Action must therefore be taken on many levels. First, companies must establish a corporate and management culture that encourages employees to engage in responsible business practices. There must also be a fair and responsible remuneration system. What's more, financial companies should detail their commitments to proper market regulation in their sustainability reports. But better market oversight is also needed. Especially in an environment as highly complex as the financial market, all stakeholders must be able to rely on competent market supervision. We are calling for complete transparency regarding the lobbying activities of financial service providers. Of course, it is important to incorporate the industry's know-how into any reform efforts, but this should always be done in such a way that it is clear whose interests are behind which proposals.

Transparency International is joining forces with other establishments to call for a voluntary commitment from civil society organizations such as foundations and associations to disclose ten key pieces of information. In your opinion, what key arguments support the theory that voluntary disclosures and commitments are not enough for companies?

Berendts: We are committed to improving both internal and external framework conditions in the private sector and in politics, administration and civil society in order to prevent and combat corruption. We welcome initiatives for greater transparency and accountability that stem from various branches of industry or, indeed, the non-profit sector. At the same time, however, we emphasize the need for clear legal frameworks and transparent administration. For the non-profit sector, for example, we are calling for Germany-wide electronic registers of associations that can be viewed free of charge.

In the case of companies, preventing corruption is about finding the right mix of voluntary commitments, compliance management systems, disclosure and statutory regulation. The best disclosure system is no good at all if it is not accompanied by monitoring and criminal prosecution. And the best voluntary commitments will come to nothing if there is no legal protection for whistleblowers. Voluntary commitments are no replacement for sensible regulation by legislators. Ultimately, it is about protecting honest companies – they more than anyone should be interested in ensuring a clear legal situation and consistent implementation.