AUTO-EVALUATION OF LAFARGE AGAINST TRANSPARENCY INTERNATIONAL S BUSINESS PRINCIPLES Overview Development process and leadership: Since the program has not been fully developed yet, this stage is difficult to assess. However, the s and policies do not explicitly engage employees to develop and review the program, in line with the Principles requirements. The involvement and responsibilities of the Board members and the CEO are not explicitly defined, although the is signed by the CEO and supervised during the writing process by him personally. Topics covered: The explicitly prohibits direct and indirect corruption. However, the code does not tackle explicitly the issue of facilitation payments, nor does it mention the Group's position with regards to political contributions. Tools of implementation: In line with the Principles, the has set up a whistle blowing system, guidance for employees, and sanctions in case of violations. However, the monitoring systems as planned so far, do not meet the Principles requirements: there is no specific audit of internal accounting systems, agents or contractors. Training of business partners is not included in the implementation process. Internal Alignment: In line with the Principles, the states that no employee will suffer penalty for refusing to pay bribes. However, there is no formal recognition of employees' behaviour record in the consideration of hiring and internal promotion. Regarding the scope of implementation, the code clearly states that it is applicable to all subsidiaries. However, it does not explicitly mention the necessity to conduct due diligence in the field of corruption before entering in partnership or the obligation to influence non controlled joint-ventures, as required by the Principles. External Alignment: Even if the explictly prohibits indirect corruption and recommends partnerships with external stakeholders, there is no specific measure (selection, monitoring, training...) planned or enforced to ensure compliance of the agents and contractors with the Principles. Disclosure: In line with the Principles, the Group publicly discloses its management systems against corruption and its contributions to political parties, even if there is no formal to report on these topics on a yearly basis. However, the Group does not disclose its charitable contributions, nor the effectiveness of its program against corruption.
Benchmarking Lafarge's approach against the Principles for countering bribery (in 2004) Processus de développement et leadership Sujets traités Outils d'application Objectifs, engagements et politiques Application/ Contrôle Alignement interne Alignement externe Reporting 0% 10% 20% 30% 40% 50% 60% 70% Ce graphique illustre le pourcentage de consitions requisescouvertes en partie ou en totalité par les politiques et les systèmes internes de management de Lafarge. Il ne résulte pas d'un processus d'évaluation, et n'a pas été visé par transparency international ou Social AccountAbility International. Vous trouverez les commentaires de Transparency internationalsur cette évaluation à la page suivante.
Tranparency International France's point of view Foreword The Lafarge Group has asked TI (France) to work with the Group as they implement the Principles developed by Transparency International. A three-year institutional partnership agreement was signed in 2004. The partners shared goal is to counter bribery in the areas where Lafarge operates. The first step in this collaboration is the definition and implementation of a specific action program. The principles for countering bribery were established in 2003 by a steering committee gathering representatives from the private sector, NGOs, trade unions and academia. The project has been facilitated by Transparency International and Social Accountability Initiative. These principles provide practical directions for companies to take in order to build up or consolidate anti-bribery program. They provide the first stage in a long-term process which aims at adopting standards to fight against corruption in the private sector. Comments on the evaluation presented in this document The following shares the comments made by TI (France) on this comparative study conducted by Utopies. 1. On the topics covered by the Lafarge approach in the As Utopies has described, the does not stipulate the Group s position on contributions to political parties. According to Utopies, facilitation payments are not explicitly discussed. On this point, TI (France) has not seen even implicit references to this type of corruption based on the definition provided by the Principles. Nor does the explicitly discuss passive corruption, or sponsorships, donations to charities and to foundations, which are also themes on which the Principles encourage companies to take positions. Only two themes from the Principles are clearly and specifically discussed. These are direct and indirect payment of bribes (active corruption) and rules on the subject of acceptable gifts, which are considered from the standpoint of active corruption (proposing the gift) and of passive corruption (receiving the gift). 2. On the subject of the program, the responsibilities, the tools and internal and external bringing into compliance. TI (France) shares Utopies findings on the subject of the correspondence between the Lafarge procedures and the Principles recommendations to meet the anticorruption s.
Comments on the anti-corruption section of Lafarge's 2004 sustainability report 1. On the percentage of the business units which have internal corruption prevention policies see the chart on the last page In our opinion, two important details should have been brought to the reader s attention: - This data came from internal reports whose results had not been verified. The exact question which was actually asked was "Do you have a policy or written guidelines for the Unit?" - By the word policy, Lafarge only means a statement of intention. Therefore, a policy of prevention may simply entail a statement against corruption, which is not necessarily further expressed in any application procedures. The external observer therefore must clearly understand that the percentage of Units with a corruption prevention policy such as it appears in the 2004 sustainable development report, corresponds to the percentage of Units whose Directors have stated that they are aware of the risk of corruption, yet who have not necessarily developed procedures which are adapted to the prevention and reduction of the risk. 2. On the subject of the presentation of the country risks see the chart on the last page Lafarge has built its analysis of the country risks on the basis of the 2003 Corruption Perceptions Index (CPI), produced annually by Transparency International. For readers to best interpret the results of this table, the tool s usefulness and limits must be understood. In 2003, the CPI ranked 133 countries in terms of the degree to which corruption is perceived to exist among public officials and politicians. The CPI is based on polls which reflect both the opinions and the experience of people who directly face the realities of corruption. This is the only way to gather data which can be compared. CPI is a solid measurement tool with respect to perceptions of corruption. CPI s reliability varies depending on the country. This explains why it stipulates the number of sources used for each country and the degree of dispersion of the responses gathered. The greater the number of polls a country s score is based upon, and the closer the values from these polls, the greater the reliability of the country s score. CPI provides a macro-economic analysis of the country risks, and states its opinion on the general degree of corruption in the public sector. It does not provide specific information about the characteristics of the risks to which the business units are directly exposed depending on their location and their business. This is why TI (France) has encouraged Lafarge to carry out detailed analyses of the corruption risks per business. Operating staff should be included in these analyses, via discussion workshops and individual interviews, to describe the corruption threats which they perceive in their direct surroundings. Conclusion We are proud that the Lafarge Group is a pioneer in the application of the Principles. The Group has clearly displayed its determination to contribute to reducing the scourge of corruption in countries where Lafarge operates. This study, ordered by Utopies, the analysis of risk exposure in various Units, the publication of the political party financing, and the objective, for 2005, of defining a specific program with help from TI (France), all constitute positive first steps in this direction.
Development process Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles regarding the development of a Programme for Countering Bribery May 2005*? Enforced in 4.1 An enterprise should develop a Programme reflecting its size, business sector, potential risks and locations of operation, which should, clearly and in reasonable detail, articulate values, policies an procedures to be used to prevent bribery from occurring in all activities under its effective control. Commitment in 2002 and 2003 sustainability reports 4.2 The Programme should be consistent with all laws relevant to countering bribery in all the jurisdictions in which the enterprise Not operates, particularly laws that are directly relevant to specific businapplicable practices. yet Not yet enforced but planned Not applicable yet 4.3 The enterprise should develop the Programme in consultation w employees, trade unions or other employee representative bodies. 4.4 The enterprise should ensure that it is informed of all matters material to the effective development of the Programme by communicating with relevant interested parties. Started in 2003 and 2004 Principles regarding the implementation and review 6.7.2 The enterprise should establish feedback mechanisms and other internal processes supporting the continuous improvement of the Programme. Enforced (group actions) or monitored (entities actions) in 6.3.2 The human resources policies and practices relevant to the Programme should be developed and undertaken in consultation with employees, trade unions or other employee representative bodies as appropriate.
Principles regarding the organisation and responsibilities 6.1.1 The Board of Directors or equivalent body should base their policy on the Principles and provide leadership, resources and active support for management s implementation of the Programme. 6.1.2 The Chief Executive Officer is responsible for ensuring that the Programme is carried out consistently with clear lines of authority. 6.1.3 The Board of Directors, Chief Executive Officer and senior management should demonstrate visible and active to the implementation of the Principles. Formal group objective set in 2002 Responsibility of the entities planned in the See 2002 sutainability report as well as speech by Bernard Kasriel on page 1 of 2004 SD report Enforced (group actions) or monitored (entities actions) in The Code of partly covers the Principles. The program design started in 2003 No monitoring system enforced in 2003 *Sustainability Report published in May 2005
Implementation tools Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles regarding the guidance and training Enforced (group actions) or monitored (entities actions) in 6.5.2 These channels (see 6.5.1) should also be available for employees and others to seek advice or suggest improvements to the Programme. To support this process, the enterprise should provide guidance to employees and others with respect to the interpretation of the Programme in individual cases. 6.6.1 The enterprise should establish effective internal and external communication of the Programme. 6.4.1 Managers, employees and agents should receive specific training on the Programme. 6.4.2 Where appropriate, contractors and suppliers should receive training on the Programme. Not explicilty mentioned Principles regarding the control systems Enforced (group actions) or monitored (entities actions) in 6.5.1 To be effective, the Programme should rely on employees and others to raise concerns and violations as early as possible. To this end, the enterprise should provide secure and accessible channels through which employees and others should feel able to raise concerns and report violations ( whistle-blowing ) in confidence and without risk of reprisal.
6.6.3 The enterprise should be open to receiving communications from relevant interested parties with respect to the Programme. SD reporting process Stakeholder consultation processes 6.7.3 The enterprise should subject the internal control systems, in particular the accounting and record keeping practices, to regular audits to provide assurance that they are effective in countering bribery. 6.2.3.3 The company should monitor the conduct of major contractors and suppliers and should have a right of termination in the event that they pay bribes. 6.2.2.6 The enterprise should monitor the conduct of its agents and should have a right of termination in the event that they pay bribes. No to specific audits Principles regarding sanctions 6.3.4 The enterprise should apply appropriate sanctions for violations of its Programme. Formally Planned / Commitment Enforced (group actions) or monitored (entities actions) in
Topics covered Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles regarding the scope of the programme The Programme should address the most prevalent forms of bribery relevant to the enterprise but at a minimum should cover the following areas: 5.1 Bribes 5.1.1 The enterprise should prohibit the offer, gift, or acceptance of a bribe in any form, including kickbacks, on any portion of a contract payment, or the use of other routes or channels to provide improper benefits to customers, agents, contractors, suppliers or employees of any such party or government officials. 5.1.2 The enterprise should also prohibit an employee from arranging or accepting a bribe or kickback from customers, agents, contractors, suppliers, or employees of any such party or from government officials, for the employee s benefit or that of the employee s family, friends, associates or acquaintances. 5.2 Political contributions 5.2.1 The enterprise, its employees or agents should not make direct or indirect contributions to political parties, organisations or individuals engaged in politics, as a way of obtaining advantage in business transactions. 5.3 Charitable contributions and sponsorships 5.3.1 The enterprise should ensure that charitable contributions and sponsorships are not being used as a subterfuge for bribery. 5.4.1 Facilitation payments Recognising that facilitation payments are a form of bribery, the enterprise should work to identify and eliminate them. to do so made before May 2005? 5.5.1Gifts, hospitality and expenses The enterprise should prohibit the offer or receipt of gifts, hospitality or expenses whenever such arrangements could affect the outcome of business transactions and are not reasonable and bona fide expenditures.
Internal Alignment Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles requirements regarding Human Ressources made before May 2005? Enforced in 6.3.1 Recruitment, promotion, training, performance evaluation and recognition should reflect the enterprise s to the Programme. 6.3.3 The enterprise should make it clear that no employee will suffer demotion, penalty, or other adverse consequences for refusing to pay bribes even if it may result in the enterprise losing business. Principles requirements regarding accounting systems 6.7.1 The enterprise should maintain accurate books and records, available for inspection, which properly and fairly document all financial transactions. The enterprise should not maintain off-the-books accounts. Principles requirements regarding compliance of subsidiaries and joint ventures Not explicitly mentioned made before May 2005? made before May 2005? 6.2.1.1 The enterprise should conduct due diligence before enterin into a joint venture. 6.2.1.2 The enterprise should ensure that subsidiaries and joint ventures over which it maintains effective control adopt its Programme...Where an enterprise does not have effective control it should make known its Programme and use its best efforts to monitor that the conduct of such subsidiaries and joint ventures is consistent with the Principles. Enforced in Enforcement of the Financial Policies monitored by the internal and external audits Enforced in
External Alignment Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles requirements regarding relationship with agents 6.2.2.1 The enterprise should not channel improper payments through an agent. 6.2.2.2 The enterprise should undertake due diligence before appointing an agent. 6.2.2.3 Compensation paid to agents should be appropriate and justifiable remuneration for legitimate services rendered. 6.2.2.4 The relationship should be documented. 6.2.2.5 The agent should contractually agree to comply with the enterprise s Programme. Enforced in Principles requirements regarding relationship with contractors and suppliers 6.2.3.1 The enterprise should conduct its procurement practices insuppliers a fair and transparent manner. guide 6.2.3.4 The enterprise should avoid dealing with prospective contractors and suppliers known to be paying bribes. 6.2.3.2 The enterprise should undertake due diligence in evaluating major prospective contractors and suppliers to ensure t they have effective anti-bribery policies. 6.2.3.3 The enterprise should make known its anti-bribery policies to contractors and suppliers. Enforced in Suppplier management program
Disclosure Fully in line with the Principle Partly in line or not explicit enough Not in line with the Principle Principles requirements regarding disclosure and reporting on performance 6.6.2 The enterprise should, on request, publicly disclose the management systems it employs in countering bribery. 6.8.1 Senior management of the enterprise should monitor the Programme and periodically review the Programme s suitability, adequacy and effectiveness and implement improvements as appropriate. They should periodically report of the Audit Committee or the Board the results of the Programme review. 6.8.2 The Audit Committee or the Board should make an independent assessment of the adequacy of the Programme and disclose its findings in the Annual Report to shareholders. Commitment in the 2002 sustainability report Enforced in See this document + the Group sustainability report Non relevant yet Non relevant yet 5.2.2 The enterprise should publicly disclose all its political contributions. 5.3.2 The enterprise should publicly disclose all its charitable contributions or sponsorships. 2003 Sustainability report No reporting system at group
Extracts from Lafarge 2004 Sustainability Report