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Business ethics

Business ethics

Overview

Cultural engagement at all levels within an organisation is increasingly important, as a result of prevalent themes such as #MeToo raising ethical issues to the top of the corporate agenda.

As well as ethical/moral obligations, the legislative and regulatory framework is increasingly forcing change upon the business community, with enhanced transparency obligations, and far-reaching legislative requirements aimed at the prevention of bribery and tax avoidance, and enforcing a culture of respect for human rights across the entirety of the company’s operations, including its supply chain, and treating suppliers fairly. Organisations and senior leadership within them are increasingly accountable and attracting greater scrutiny in this area. The various issues which fall under the “ethical business” banner are summarised on the pages which follow.

Anti-bribery and corruption

The UK Bribery Act 2010 introduced a new era of “long arm” legislation targeting the increasingly complex governance and trading operations of corporate groups and their business associates (wherever located). The penalties for non-compliance with the Bribery Act are potentially significant, but the Serious Fraud Office has more commonly opted for a Deferred Prosecution Agreement in recent high-profile bribery investigations, often in collaboration with enforcement bodies in other jurisdictions. The use of DPAs is designed to foster a cultural shift in the UK business community by rewarding a proactive approach to rooting out bribery offences.

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Modern slavery and supply chain management

Respect for human rights as regards workers across all jurisdictions, including those involved in the supply chain is now recognised as a core part of corporate compliance and accountability, taking the lead from the UN Guiding Principles on Human Rights: "The responsibility of business enterprises to respect human rights applies to all enterprises regardless of their size, sector, operational context, ownership and structure.” Recent legislation, such as the UK's Modern Slavery Act and non-financial reporting regulations, is designed to drive increased transparency at corporate group level, and, the courts in the UK seem increasingly willing to hold global organisations liable for ethics breaches by overseas subsidiaries and even its suppliers.

Companies are also now under an obligation to treat suppliers fairly under Regulations which came into force in 2017, requiring all large UK companies and LLPs to publish information on their payment practices and performance twice a year. A key aim of these measures was to tackle the problem of late payment of SMEs by promoting transparency around large businesses' payment terms with suppliers and the timeliness of payments to those enterprises.

Responding appropriately to these legal developments amidst new social dynamics is key to successfully managing a company's brand, investor relations, access to finance and litigation risk.

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Ethical taxation

Ethical taxation increasingly features on the business agenda across all sectors, driven in part by legislative focus in recent years on anti-tax avoidance measures and increasing public scrutiny, but also by a desire from within businesses to “do the right thing” when it comes to taxation matters.  There has been a raft of new anti-avoidance and tax compliance legislation in a short timeframe, including a range of new reporting regimes, backed up by a marked increase in HMRC enquiries, and we expect this trend to continue.

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Ethical workplace

This topic covers a wide range of issues, from National Minimum Wage obligations to Working Time issues, from employee engagement to “speak up” and from #MeToo to pay reporting.  In addition to the self-evident moral and social reasons why employers should promote an ethical workplace, we regularly advise our clients on their legal obligations in this regard and the issues which may arise if they fail to do so.

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Contacts and further reading

Sustainable business

Visit the Sustainable Business Hub to read more about ESG and Sustainable Business.

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