Benefits & Successes

What are the benefits of integrity management?

The main business and institutional advantages of behaving with integrity in the water and sanitation sector include:

Unique selling proposition – With a clear commitment to integrity, it is possible for early movers in a market to create a unique selling proposition that can help them win projects in the water and sanitation sector. For some customers, at least—international development partners and regulatory bodies—integrity is a deciding factor when awarding contracts. The same applies to public institutions, utilities, and NGOs that try to attract additional funding from donors, the government budget, or private investors. Showing effective fiduciary risk management can help them to receive not only higher amounts, but also more flexible funding conditions.

Lower costs, higher margins – Systematically avoiding transactions where bribery is an issue can substantially reduce costs and increase margins for many companies, or improve value for money in programmes and services provided by public institutions. Beyond the savings for individual organizations, this will open wider opportunities for profit. This is because corruption damages the entire market by reducing competition and levels of investment in infrastructure, eventually undermining growth.

Higher productivity and effectiveness – Increasing staff competence and motivation, clarifying structures and processes, and improving the overall capabilities of an organization can significantly improve the productivity and effectiveness in delivering services and products.

Lower risk of prosecution – A high level of integrity greatly reduces the risk of being prosecuted for illegal transactions and economic crimes. This results in fewer fines, lower legal costs, and lower opportunity costs for the time invested in legal proceedings.

Reduced reputational risks – Growing awareness among civil society and its representatives (community organizations, consumer associations, NGOs, etc.) of non-compliance with integrity principles, and their ability to communicate this, means that corrupt behaviour is increasingly likely to be exposed. This would endanger the operations and public image of an institution or private company. Moreover, an increasing number of donors, governments, and other organizations use blacklists to ban partners and suppliers that have been involved in corruption cases, human rights violations, or other illegal activities. Corporate integrity can reduce such reputational risks.

Success stories of integrity in water sector organizations[1]

Watershed management in India

Research from India shows that, in the early stages of the watershed management programmes that were launched in the 1970s, financial leakages were of the order of 30–45% of approved amounts, with overestimation of costs by at least 15–25%. The government managed to reduce financial leakages to 20–35% of approved amounts by measures aimed at involving citizens in project implementation, devolving funds to a village body, and issuing new financial guidelines. This was largely achieved because beneficiaries became more aware of how much money was received and for what purpose.

Water supply authority in Cambodia

The Phnom Water Supply Authority in Cambodia is a government-owned water utility that was plagued by inefficiencies, water theft, deteriorating infrastructure, and demoralized and underpaid staff. With the support of external agencies, the authority has been transformed over a couple of years into an efficient, self-financed, and autonomous organization. In addition to rehabilitating the distribution network, the organization’s workforce was streamlined. Higher management was given greater responsibilities, staff salaries were increased, and a system of incentives was introduced, with a merit-based promotion system.

Pipe manufacturing in Colombia

The Transparency International chapter in Colombia facilitated the signature of a sectoral anti-bribery agreement among 11 water pipe manufacturers. These accounted for 95% of the national market and 100% of the bids in public tenders for water supply and sewer systems, based on the Business Principles for Countering Bribery. The agreement includes the adoption of a general anti-corruption policy in companies as well as guidelines for the various types of corrupt practices. These included issues of pricing and purchasing, distribution and sale schemes, internal controls and audits, human resource management, and protection of whistleblowers. Since the signing of the agreement in December 2005, it is estimated that tender prices have decreased by approximately 30%.

Water supply in Pakistan

A similar approach was adopted in the Greater Karachi Water Supply Scheme in Pakistan, with the implementation of an integrity pact. Integrity pacts involve an agreement between a government and all bidders for a public sector contract. The parties agree that neither the government nor the contractor shall pay, offer, demand, or accept a bribe or collude with competitors to obtain the contract. Bidders are also required to disclose all commissions paid to anyone in connection with the contract. The agreement led to intensified competition and the awarding of contracts at an average of 16% below the estimated cost to the public.

[1] ANTI-CORRUPTION RESOURCE CENTRE, 2009, Good practice in addressing corruption in water resource management projects, http://www.u4.no/publications/good-practice-in-addressing-corruption-in-water-resource-management-projects/, accessed 17.02.16

Last updated 31 March 2016