The discussion took place during a panel on sustainable economic growth at the 9th Paths Against Corruption Seminar,

Compliance and ESG (environmental, social and governance) policy experts said at a panel this Tuesday, the 5th, in São Paulo, that the absence of integrity programs can undermine and drive away investors, since the decision whether to bet on a project includes a detailed pricing of risks. The discussion took place during a panel on sustainable economic growth at the 9th Paths Against Corruption Seminar, organized by Estadão and Instituto Não Aceito Corrupção (Inac).

“We ask ourselves: ‘isn’t paying a bribe cheaper than dealing with the bureaucracy created to control corruption?’. The point is that (actions such as) paying for an inspector’s lunch, for example, are followed by other risks, such as the revocation of a license,” said Natasha Schmitt, lawyer and vice-president of the Center for Studies on Integrity and Development (Ceid). “Investors see this as a risk. And they price in every risk. As a result, they end up giving up on the investment when there is no solid integrity program.”

Ceid president Rodrigo Bertoccelli and Brenno Machado Nogueira, Institutional and Business Development Director of Spanish company Acciona, also took part in the panel. The discussion was moderated by Renée Pereira, Estadão’s assistant economics editor. “Integrity is a reality. Fifteen years ago, terms like this or compliance were not part of our vocabulary,” said Bertoccelli.

The Ceid president said that, for companies, it is no longer enough to talk about integrity and have a program just “for show”. “We have tools to measure the effectiveness of these measures. Oversight bodies, development banks and capital are increasingly attentive. Having a good integrity program is a business strategy. In the past, the law provided that if there was a tie in a tender, the winner would be drawn by lot. Now, whoever has the best integrity program wins. The new procurement law opens a new frontier for public contracts that are more sustainable from a social, governance and environmental standpoint.”

The Ceid experts noted that integrity policies within companies must be established “from the top down”. “Integrity must come from the boards, from the CEOs,” said Natasha. For Bertoccelli, senior management must demonstrate and prove an “effective and absolute” commitment. “This does not mean the CEO just has to state that they do not tolerate discrimination, for example. The company must show that it has the means and resources to back this up.”

Acciona director says contracts need flexibility: ‘Re-tendering is more costly than negotiating’

Institutional and Business Development Director at Acciona, the company responsible for São Paulo Metro Line 6-Orange, Nogueira said that transparency and ethics programs have been fundamental in the company’s relationship with public authorities. “We have taken part in several concession and PPP (public-private partnership) projects where the dialogue has been very transparent. This interaction builds trust and investment. Integrity creates an environment of trust that attracts investment and generates economic, social and environmental development.”

Nogueira also commented on works stalled by legal disputes. “Dialogue needs to remain open. While the granting authority must oversee, it must also understand that changes happen. A contract is not set in stone; there must be flexibility for negotiations during the years of the concession. We must remember that re-tendering may be more costly for the State than negotiating.”

Originally published by Estadão (in Portuguese).