Volume Two of the Insight Series Highlights How Companies are Expanding Due Diligence and Increasing Monitoring and Assessments of Ethics and Compliance Risks

The Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices, today announced the launch of volume two of its 2020 World’s Most Ethical Companies® Insights Report series.

The report covers the topic of Third-Party Risk Management and offers insights into how World’s Most Ethical Companies honorees are addressing the selection and onboarding of third parties and ongoing compliance oversight. It covers due diligence, third-party codes, communications and training, monitoring, and auditing, performance evaluation, and sustainability. The report is available at https://www.ethisphere.com/2020wmeinsights.

Through the World’s Most Ethical Companies process, Ethisphere annually recognizes a select group of companies with exceptional programs and practices. Grounded in Ethisphere’s proprietary Ethics Quotient®, the World’s Most Ethical Companies assessment process includes more than 200 data points on culture, environmental and social practices, ethics and compliance activities, governance, diversity, and initiatives to support a strong value chain. In 2020, 132 honorees were recognized, representing 51 countries and 21 industries.

“This is the first time we have shared our data highlighting how leading companies are engaging with third parties. Given the importance of partners in global value chains–and the risks that they can impose–we expected to see, and the data confirms, that most have robust due diligence and codes of conduct in place,” said Erica Salmon Byrne, Executive Vice President, Data and Services, Ethisphere. “We were impressed that honorees are moving beyond the basics and taking additional steps to assess controls and build capabilities that benefit both companies and third parties.”

Key Findings
Expanding areas of focus in pre-contract due diligence: Historically in the due diligence of third parties, companies consider ownership information, use of subcontractors and the third party’s ethics and compliance track record. These factors remain core, however, companies are expanding the scope of risks in assessments:

  • 88 percent are now assessing data security and controls
  • 80 percent are considering human rights and labor conditions
  • 74 percent are reviewing environmental performance

Communication and training are part of the regular course of business with any partner that could pose a material risk:

  • 55 percent target communications initiatives at third parties
  • Six in 10 go further and provide third parties with ethics and compliance training assistance and resources

In addition to monitoring for business performance, honorees are increasing considering ethics and compliance metrics:

  • 93 percent perform an assessment to determine whether a third party has the capability and controls to meet the ethics and compliance requirements in their contracts for at least some risk areas
  • Nine out of 10 report that they perform formal, risk-based audits

Social responsibility is increasingly being incorporated into supply chain strategies:

  • Nearly 90 percent communicate with third parties on sustainability
  • 97 percent are taking additional measures to manage third party sustainability risk, ranging from requiring compliance with third-party sustainability policies, to including sustainability in due diligence and auditing third-party sustainability performance
  • Six out of 10 honorees engage in capability-building to help third parties develop a sustainability or social responsibility program

“The majority of all U.S. Foreign Corrupt Practices Act enforcement actions over the past 40 years have included some form of third-party misconduct, making third-party risk management not just a leading practice, but something that can impact a company’s reputation and bottom line,” stated Leslie Benton, Vice President of Ethisphere and co-author of the report. “Our data shows that companies are definitely going beyond communicating expectations in contracts. Most now are including ethics and compliance metrics in monitoring, increasing communications, and providing training. It’s a positive trend.”

All companies that participate in the annual World’s Most Ethical Companies process receive an analytical scorecard that provides a holistic assessment of where their programs stand against the demanding standards of leading companies. Ethisphere has compiled this valuable information for several years.

All Ethisphere research, content, and expertise, such as a recent special report about digital innovation, can be found on the Business Ethics Leadership Alliance (BELA) member hub, which is made available to global members of BELA. To request guest access, please contact Executive Vice President Jonathan Whitacre at jonathan.whitacre@ethisphere.com.

About Ethisphere 

The Ethisphere® Institute is the global leader in defining and advancing the standards of ethical business practices that fuel corporate character, marketplace trust, and business success. Ethisphere has deep expertise in measuring and defining core ethics standards using data-driven insights that help companies enhance corporate character. Ethisphere honors superior achievement through its World’s Most Ethical Companies® recognition program, provides a community of industry experts with the Business Ethics Leadership Alliance (BELA), and showcases trends and best practices in ethics with Ethisphere Magazine. Ethisphere also helps to advance business performance through data-driven assessments, benchmarking, and guidance. More information about Ethisphere can be found at https://www.ethisphere.com.​

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Media Contact
Aarti Maharaj
Director of Communications
Aarti.maharaj@ethisphere.com
@Ethisphere