Why fighting corruption is key to addressing the world's most pressing problems

Author: Marlen Heide, Houssam Al Wazzan

“Why Fighting Corruption Is Key to Addressing the World’s Most Pressing Problems.” World Economic Forum, 5 Dec. 2022, https://www.weforum.org/agenda/2022/12/why-fighting-corruption-is-key-to-addressing-the-world-s-most-pressing-problems/.

This Friday, International Anti-Corruption Day is a time to recognise that corruption is at the centre of many of the world’s most pressing problems. Economic, political, social, and environmental challenges can only be solved with good governance. The World Economic Forum’s Partnering Against Corruption Initiative (PACI) serves as the leading business voice on anti-corruption and transparency. This year’s PACI Community Meeting is organized in conjunction with the International Anti-Corruption Conference (IACC) and will focus on the role of anti-corruption in mitigating current crises.

“Tackling today’s global challenges requires concerted and systemic action involving all stakeholders. It is vital that our response is built on components of good governance – such as accountability, integrity and effective risk management. This will facilitate responsible decision-making thus enabling long-term business success and positive impact on people and planet.” Nicola Port, Chief Legal Officer, World Economic Forum

Corruption and the food crisis
The world is expected to soon face the largest food crisis in modern history. Food price inflation remains high in almost all countries and the number of those facing acute food insecurity has soared. Corruption will make food insecurity worse. For instance, corruption in land and water services affect small-scale farmers in developing countries, which constitute the majority of agricultural providers. On the consumption side, households in low-income countries with high levels of corruption might need to reduce their food consumption to accommodate the costs of bribery.

Corruption might even affect programs that set out to remedy the effects of the current food crisis. The efforts of national and international bodies to combat famine and hunger could be undermined by corruption.

Corruption and the energy crisis
After Russia’s invasion of Ukraine, countries are reassessing their reliance on Russian oil and gas, and considering a speedier adoption of greener energies. This looks like good news for the global anti-corruption agenda, given that countries with large extractive industries are plagued by grand corruption and bribery (commonly known as the “resource curse”).

However, the transition to renewables also carries a myriad of corruption risks, due to the substantial capital investments involved. The future, decarbonized global energy sector is expected to need cumulative investments of at least $110 trillion between now and 2050, representing an average of 2% of global GDP per annum.

“Navigating towards a NET-ZERO society will require a permanent commitment to Integrity and Transparency. Organizations will be scrutinized to demonstrate their positive impact, their contribution to the society and to actively promoting an ethical and competitive business environment under increasingly challenging scenarios.” Salvador Dahan, Chief Governance & Compliance Officer, Petrobras

To manage corruption during the energy transition we need to assess the risks in different renewable energy technologies. Corruption might move across the non-renewable and renewable sectors, driven by the growing demand for critical minerals. Certainly, the renewable energy sector should draw on the lessons learned from mitigating corruption in extractive industries.

Corruption accelerates social vulnerabilities
Corruption is linked to inequality, poverty, discrimination, and social exclusion. There is strong evidence of a negative correlation between corruption and the level of GDP per capita. Waste or diversion of public funds due to corruption leaves governments with fewer resources to fulfil their human rights obligations, to deliver services and to improve the standard of living of their citizens. Consequently, corruption negatively impacts human development and increases social vulnerabilities.

Take the provision of basic services as an example: an estimated US$500 billion in public health spending is lost globally to corruption every year, undermining health services. Studies suggest that 50% of school children do not complete primary school in countries where bribery is common. Fighting corruption is thus considered a foundation for delivering the 2030 Sustainable Development Agenda.

Geopolitical instability
Corruption is closely intertwined with geopolitical instability. Countries experiencing violent conflict show significantly higher rates of corruption, and corruption also makes countries more vulnerable to malign foreign influence. As the National Endowment for Democracy explains: “corrosive capital and strategic corruption differ from other forms of corruption in that they are backed, and sometimes orchestrated, by a state power for political rather than economic goals.”

“We live in a rapidly changing world with fluid and unpredictable geo-political risks. It is in times of crisis, when you don’t often have the luxury of time, that the true essence of an organization is revealed. Having an ethical culture and a proper risk management system in place is essential to operating with integrity and building trust with society. This is the purpose of the Ethics, Risk and Compliance function at Novartis - to support our associates to do the right thing. Doing what’s right for patients and society is, and must always be, our priority. It’s a journey, and we remain humble in our understanding that this will take time. But we are well on our way to building trust.” Klaus Moosmayer, Chief Ethics, Risk & Compliance Officer, Novartis

Anti-corruption measures are essential to reconstruct and stabilize countries in the aftermath of conflict; this is a hard lesson learned from Bosnia and Afghanistan, among others. They will be important for Ukraine in recovering from the current war.

The way forward
The International Anti-Corruption Conference (IACC), taking place from 6 to 10 December in Washington DC, offers the most important multi-stakeholder dialogue on corruption issues. At this year’s International Anti-Corruption Conference, the Forum’s Partnering Against Corruption Initiative is hosting several workshops to shape innovative solutions and pave the way forward for the fight against corruption. We will place more emphasis on the role of good governance – including anti-corruption – which is needed to achieve positive environmental and social change.

A second workshop, organized in cooperation with the International Federation of Accountants (IFAC), will shed light on the role of gatekeepers in mitigating illicit financial flows – a key topic in face of the current crisis in Ukraine. Finally, PACI will address how frontier technologies can help to bolster anti-corruption efforts, making detection, prevention, and investigations more efficient and effective.

DMU Timestamp: February 21, 2023 13:31

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