In 1992 just 261 listed companies produced ‘non-financial’ reports on their impact on the environment, society and workforce. By the end of last year this figure had risen to more than 2,500, including about 90% of the FTSE100.

Any casual observer might conclude from this that an ethics and corporate responsibility revolution has taken place. And, the UK produces more of these reports than any other markets world-wide.

However, there is a growing gap between the rhetoric and the reality. For many companies these reports are soft marketing rather than a serious attempt to describe what is really going on inside the organisation. As the reports are part of a communications function in most companies, the gap with actual
business practices can be significant.

The recent wave of corruption scandals comes to mind, such as the 37 UK construction firms that admitted to the OFT that they had rigged some bids. These 37 include winners of corporate responsibility awards!

One might conclude that the gap between the rhetoric and reality does not matter. But the costs cannot be under-stated. In the construction case the OFT can fine companies up to 10% of their turnover. In addition they will be removed from tender lists so work will be lost.

Softer costs include the considerable amount of management time needed to clean up the mess as well as the departure of unimpressed employees.

Clearly there is still a lot of cleaning up to be done and anyone who thinks that sound business management is not cost-effective should take a long hard look at the long-term impact of these types of scandals on their reputation.

Having conducted more than 250 assessments in 40 countries for almost 100 organisations, GoodCorporation has found that one of the biggest problems businesses face is that much of the corruption goes on beneath the radar of auditors, lawyers and finance departments. Even the brightest of forensic accountants will not see insider trading, a conflicted supplier relationship, facilitation pay-ments or the inappropriate acceptance of hospitality, as these are almost always hidden beyond the scrutiny of the accounting system.

Accountants can help their clients to protect their reputation by helping them recognise that many of the answers are about culture, values, incentives and behaviour. Better accountants and stronger controls are certainly welcome, but they are just one part of making corporate responsibility a reality.

Leo Martin is director at ethical auditing company Good Corporation (goodcorporation.com)