Quantification of corruption in preventative cost-based S-LCA: a contribution to the Oiconomy project

Pim R Croes,Walter J V Vermeulen

doi:10.1007/s11367-018-1507-z

Abstract

PurposeCorruption is one of the key social aspects, heavily impacting all three Planet-, People- and Prosperity sustainability pillars and is therefore essential to be included in S-LCA. The objective of this article is to consider the available options to quantify corruption in preventative cost-based S-LCA, and to make a first proposal for quantification.MethodsLiterature was investigated on potential S-LCA assessment methods of corruption. To date, such literature is hardly available, so more generally, S-LCA methods were assessed on described concepts and ideas, and assessed on five criteria. Following this, using the obtained conclusions and ideas, a proposal for the quantification of corruption for the preventative cost-based Oiconomy system was developed, following the five-step Oiconomy method (Croes and Vermeulen in J Clean Prod 102:178–187, 2015).Results and discussionBased on some examples, Dreyer et al. (Int J Life Cycle Assess 15(3):247–259, 2010) argue that various social aspects, including corruption, are better assessed by companies’ preventative efforts than by their impact. Therefore, modifying a method developed by Dreyer et al. (Int J Life Cycle Assess 15(3):247–259, 2010), an indicator is proposed provided by the product of the marginal preventative costs and the quality of a companies’ preventative governance. For the aspect of corruption, the internationally accepted target is “zero tolerance.” Literature shows that the ultimate business choice under pressure of corruption is “not doing the business.” Because profitability is the main driver for companies, refraining from the business is proposed as the marginal preventative measure, and the related profit as the maximum quantitative indicator for S-LCA. For the risk factor, a technique is proposed based on scoring a company’s governance quality by checking the four Plan-Do-Check-Act effort classes of common risk-based certification standards’ criteria.ConclusionsOur assessment shows a definite need for the inclusion of the aspect of corruption in S-LCA, but no options for a reasonably certain assessment are available for the aspect of corruption in impact-based S-LCA, also suitable for the preventative cost-based Oiconomy system. However, based on literature-derived ideas and principles, for the Oiconomy system, we could propose both a performance reference point and marginal preventative costs as a quantitative measure for corruption. The proposed measure is not paying the bribe, but the proposed indicator is a governance quality-dependent fraction of the consequentially lost profit margin. Consequences, limitations and possible objections to our proposed methods are discussed.

Highlights

The definition of corruption by the United Nations Global Compact, Transparency International and the World Bank is: “The abuse of entrusted power for private gain” (United Nations Global Compact and Transparency International 2009; World Bank 2008, p.16), including bribery of public officials, embezzlement, trading in influence, abuse of function, illicit enrichment by public officials, money laundering, and obstruction of justiceInt J Life Cycle Assess (2019) 24:142–159(United Nations Global Compact 2010, p.13)
The objective of this paper is to investigate literature on the available options to quantify corruption in S-LCA, distinctive for specific products and use the options and ideas found to make a first proposal for quantification for preventative costs based S-LCA
As mentioned before in step 2, in order to avoid unnecessary burdens to the supply chain actors we propose to allocate zero Eco Social Cost Units” (ESCUs) in countries with a corruption index score above 64, which means that in a risk-based certification system the aspect needs no verification in such countries

Summary

Introduction

The definition of corruption by the United Nations Global Compact, Transparency International and the World Bank is: “The abuse of entrusted power for private gain” (United Nations Global Compact and Transparency International 2009; World Bank 2008, p.16), including bribery of public officials, embezzlement, trading in influence, abuse of function, illicit enrichment by public officials, money laundering, and obstruction of justiceInt J Life Cycle Assess (2019) 24:142–159(United Nations Global Compact 2010, p.13). Corruption, defined as a crime by the 2004 UN Convention against Corruption, signed by 140 countries and legally implemented by many countries, extends the concept of private gain to “another person or entity,” this way including the various types of favoritism (United Nations Office on Drugs and Crime 2004, article 15), such as nepotism, clientelism and cronyism. An OECD convention regulates information transfer on taxes between countries (OECD and The Council of Europe 2012), there is no international agreement on aspects like tax evasion and political involvement. Because company-specific data on their involvement in bribery- and favoritism-related activities usually are illicit, but data on their paid taxes available, quantification of these aspects requires different methods. For the purpose of this paper we choose to define “corruption” as all bribery- and favoritismrelated activities, and exclude the aspect of tax evasion

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Discussion

Conclusion