Jennifer Schoeberlein

Much has been said and written about the business case for countering corruption. That is to say, about the long-term benefits of a clean business environment, not only for the economic development of countries but also for individual companies who profit from transparent and reliable business practices.

While this is undoubtedly true, it’s also true that withstanding corruption can be a challenge for companies.

The challenge of advancing SME integrity in high-risk areas

In regions or contexts where bribery is widespread and enforcement of anti-corruption legislation is low, refraining from corruption can be difficult, especially for small and medium sized enterprises (SME).  In the face of resource and capacity constraints as well as limited individual leverage, abiding by strong standards of integrity, when few others are, can seem costly. This results in a dilemma in which the short-term realities of trying to survive in a difficult market can appear to outweigh the long-term benefits of integrity.

This is a situation many companies face when operating in Egypt, where corruption levels have been high overall and enforcement of anti-corruption legislation has been insufficient.

Collective Action as a means to overcome persisting dilemmas in the fight against corruption

Countering corruption in the long-term and in all its facets requires a joint and concerted effort of stakeholders from all relevant sectors. This makes collective action approaches not only suitable but necessary. Collective Action can help raise awareness where it is low, raise and strengthen integrity standards within the private sector, level the playing field for committed companies, and contribute to necessary public debates. Furthermore, some of the features of collective action initiatives, such as access to a network of like-minded companies and possibly to new business opportunities, or increased leverage through the “power of the group”, can remedy some of the challenges companies face when trying to refrain from corruption in high-risk markets and against difficult odds.

However, the dilemma of long-term versus short-term benefits often remains, in that SMEs often face a “first mover problem”. Even with the benefits of collective action initiatives, refraining from corruption, including walking away from a corrupt deal if necessary, can be a seemingly insurmountable challenge.

The Integrity Network Initiative as an example for a combined approach of Collective Action and incentives in Egypt

Acknowledging these challenges, the Integrity Network Initiative was launched in Egypt in 2012 as a business-driven collective action initiative that incorporates a system of support and incentives for SMEs to encourage anti-corruption efforts. It thus aims to tackle some of the issues raised above by using a collective action approach to advance integrity, while simultaneously incentivizing commitment of SMEs.

The overall goal of the initiative is to strengthen anti-corruption standards and practices in the Egyptian business sector, with a focus on the important but under-involved SME sector, as well as tackling some of the most pressing corruption challenges affecting businesses in Egypt.

The initiative is built around an anti-corruption standard for SMEs (‘Integrity Pledge’), which was developed in a consultative process with a group of the initiative’s first pilot companies. It draws on international best practices while reflecting the specific challenges SMEs face that operate in Egypt. SMEs joining the initiative and thus signing on to the pledge, commit to embarking on a journey towards more ethical business practices in ten steps, divided into three consecutive phases – from “Commitment & Policy”, through “Implementation & Improvement”, to ultimately “Assessment & Participation”. To support SMEs in this process of committing to and implementing the standard and its accompanying policies and measures, the Initiative provides a tailored capacity building program. A Guidance Manual along the ten steps of the pledge has been published in 2014 and a Senior Management Training was designed, to be attended by the executive management of signatory SMEs. A first group of companies underwent the first phase of the pledge in the initiative’s pilot phase, which in addition to the Senior Management Training, consists of the appointment of an Ethics & Compliance Manager and the drafting of an anti-corruption policy, and culminated in a public signing in Cairo. During the second phase of the initiative from 2015 to 2018 companies will be supported as they embark on phases two and three with additional capacity building measures forthcoming, such as a Compliance Manager Training and an Anti-Corruption Support Desk.

To support SMEs in their efforts for more integrity, and to build a strong multi-stakeholder platform to advance issues related to integrity, anti-corruption, corporate governance and collective action, the Integrity Network Initiative engages with the public and civil society sectors as well as larger business sector stakeholders. The Network set out to raise awareness of the importance of integrity for the country’s business and economic development. The second phase of the initiative will now see a branching out in this regard, to include expert roundtables and joint recommendations to contribute to public and policy debates.

Some of the non-SME members joining the initiative simultaneously act as incentive providers in that they provide benefits to companies successfully adopting the Integrity Pledge. Such incentives can come in the form of commercial advantages (such as facilitated access to services), reputational rewards (such as public praise), or in the form of operational support (such as training support).

In the coming years the initiative will hopefully see the growth of the network and extension into new activities to join a diverse set of stakeholders who are committed to countering corruption; to successfully use this collective action network to advocate for integrity; and to engage more SMEs, who are so crucial to the Egyptian economy, in the fight against corruption.

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The Integrity Network Initiative is conducted by the Egyptian Junior Business Association in cooperation with the United Nations Global Compact and funded under the Siemens Integrity Initiative. If you want to know more, please visit www.ejb-act.com or write an email to jennifer@ejb-act.com

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