Compliance: a must or game changer?

Compliance is perhaps more important than ever. Not only because of increasingly stringent laws and regulations, but also because of a shift in society's expectations. Issues such as integrity, reliability andsustainability are becoming increasinglyimportant. For example, for customers looking for a supplier orfor employees looking for an employer. As a result complianceis gaining strategic value and the question arises: is compliance still a must or is it becoming a gamechanger?

The literal meaning of compliance is complying with relevant laws and regulations and working according to an organization's own established standards, procedures and ethical guidelines. In short: working according to the rules.

That way, you avoid significant fines or other penalties that follow violations of the law. In addition, violations often involve scandal, loss of face or reputational damage. You also reduce this risk by being compliant.

Compliance is about integrity and behavior 

Companies may choose to focus their compliance strategy purely on compliance with laws and regulations. In this way, compliance becomes primarily a must, or a cost of doing business. A task that just comes with the territory, needs to be checked off and is perceived more as a burden than a benefit.

However, compliance has much more value to add if a company chooses to take its compliance strategy to the next level. Customers, whether consumers or organizations, are placing increasing importance on issues such as integrity.

"Compliance means behaving. It's about behavior. That's all," says Sylvie Bleker-van Eyk, professor at the postgraduate program in Compliance and Integrity Management at VU University Amsterdam and director of Risk Advisory at Deloitte Netherlands, in an interview with Executive Finance. And because compliance is about behavior, compliance is inextricably linked to the concept of integrity. "Integrity is first and foremost about trusting in something that should actually remain beyond any doubt," top lawyer Jonathan Soeharno tells Executive Finance in the same trade media.

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The strategic value of compliance 

Experts at PwC emphasize that compliance has strategic value and can even be a game-changer for companies. Indeed, through compliance, a company can exude greater trust, with new and loyal(er) customers as a proven result. In addition, strategic compliance can even provide a significant cost and competitive advantage, according to PwC. For example, because initiatives to improve compliance often also create more efficient processes within a company.

According to them, then, true compliance goes far beyond simply complying with laws and regulations. One should see it more as a statement of the values the organization is committed to and an investment in future growth. 

Similarly, Deloitte sees that companies gain strategic advantage when they go beyond just following the letter of the law with their compliance. The Big Four player advises companies to base compliance strategy on their norms and values. Moreover, they see that when ethics are fully woven into a company's DNA, it has a positive effect on customer loyalty and respect for the brand.

Demonstrably doing the right thing 

Customers are not only looking for trust, but also increasingly value companies that do good, rather than just doing good. Or, as Forbes puts it: "Doing good is good for business."

There is good reason why the importance of environmental, social and governance (ESG) policies in business continues to grow. Bain & Company research shows, among other things, that nearly all CEOs (90%) see ESG as an existential or major disruption. A majority (60%) see acting on ESG principles as an engine for growth, while two in five see it as a way to enter new markets.

"While the integration of ESG principles is driven by external pressures, including regulation and increasing consumer awareness, many companies are seizing the opportunity to set goals beyond what is required of them," said Jenny Davis-Peccoud, partner at Bain & Company and global co-leader of the Sustainability & Responsibility practice. "More and more companies believe ESG will give them a competitive advantage." 

"Doing good is good for business" 

Here, too, compliance plays a role. First, because companies are simply required to follow certain ESG rules, but also because organizations can choose to impose certain more far-reaching goals on themselves. By acting accordingly, clearly recording and reporting on this, companies have an excellent tool to show customers, suppliers, investors and other stakeholders what they are doing in terms of issues such as climate change and social responsibility. 

READ ALSO: From post-audit to clearance model: what does it mean for compliance?

What does compliance provide? 

In short, with a strategic approach, compliance can achieve much more than just avoiding fines or other penalties. Both existing and prospective customers, as well as employees, suppliers and other contacts, can see how ethical your company is, and what you are all doing in the areas that important to you and them. The ultimate result is more trust, more respect and more loyalty.

You achieve this by establishing goals, procedures or standards for your company that go beyond the existing rules (this can be in many areas; from environmental friendliness to cost savings and from data security to fraud prevention). The next step is to act on this with the entire organization.

But how do you get everyone, from cleaners to CEOs, on board with compliance? You can read about that in the blog >> Improve compliance: make it easier to be compliant

Anoek
van der Riet

Contents Specialist

Anoek writes daily about purchase to pay, order to cash and Robotic Process Automation. She enjoys diving into topics such as e-invoicing, working capital and hyperautomation.