Whistleblowing has been in the spotlight for the past decade and many organisations are shifting towards integrating clearly defined policies and systems. So what are the advantages of whistleblowing and why has it become so important?
When we think of whistleblowing we tend to think of large-scale scandals like Cambridge Analytica and LuxLeaks; however, smaller breaches are also being reported with increasing frequency. Whistleblowing can be defined as the act of exposing any kind of unethical behaviour in the public interest, no matter how large or small. This could include financial fraud, bribery, tax evasion, breaching environmental laws, illegal surveillance, health and safety risks, and criminal activities.
Thanks to the information provided by a whistleblower, a crime could be uncovered which might otherwise have gone unnoticed. Of course, the consequences for the perpetrator could be significant, even resulting in criminal charges, depending on the severity of their actions. This is part of the reason why whistleblowing has had negative connotations in the past. The person exposing the wrongdoing was often labelled a traitor and suffered abuse and retaliation.
However, in recent years, there has been a shift in Europe towards promoting and recognizing the advantages of whistleblowing and putting it in a completely new light. Governments and organisations are recognising whistle-blowers as an essential asset in fighting criminal activities that often fly under the radar. As such, it’s important they are protected and supported throughout the process, which is why a new Whistleblowing Directive was introduced in 2019.
Following the Danske Bank scandal exposed in 2017, the EU opened talks on introducing new policies aimed at combating fraud. The scheme, in which around €200 billion was laundered through the bank over 8 years, was discovered thanks to the tip of a banker. Since then, whistleblowing has been newly evaluated. Strict regulations have been put in place to encourage reporting in the workplace.
There is still a long road ahead while companies, individuals and governments adapt to the new directives and implement the correct systems. Nonetheless, these policies are an important step towards guaranteeing protection for whistleblowers, which in turn can reduce corruption and fraud across the board. A report by the European Commission estimated that corruption costs the EU at least €179 billion every year. This shows just how necessary a new mechanism is.
So the idea behind the new regulations is to provide better support and protection to whistleblowers, in order to increase reporting. This implies a shift in processes as well as ideology, in order to promote and reward individuals who speak up and offer valuable information to stop misconduct. Once the new regulations are properly established, they are expected to significantly reduce and prevent harmful unethical behaviour in a number of areas. Including financial, environmental, public health, public procurement, consumer safety and data protection.
As we mentioned above, different people can take on the role of a whistleblower and it can happen in different ways. One of the most significant distinctions is between internal and external whistleblowing.
When someone within the organisation, usually an employee, reports the harmful behaviour to a superior. In this case, the information is disclosed and handled within the organisation.
When the reporting happens outside the organisation. For instance, when the activities are leaked to the media or reported directly to the authorities. This has more profound implications for the company as they will be placed under public scrutiny.
The advantages of internal whistleblowing for the company are significant as this gives them the opportunity to deal with the issue confidentially and avoid damage to their reputation. Therefore, putting in place a system and a culture which encourages people to come forward internally could turn out to be a life-saver for an organisation.
The Association of Certified Fraud Examiners (ACFE) discovered that 42% of corporate fraud is uncovered thanks to whistleblowers. This is more than double compared to management reviews or any other means. There is no doubt this practice should be an essential feature of any organisation.
Whistleblowers often benefit from a unique vantage point from which they are able to find out about wrongdoing and they may even be the only person in such a position. This is why they should be encouraged to speak up, as they are incredibly valuable for the organisation to which they belong. We could say that whistleblowing allows a company to have eyes everywhere so nothing goes unnoticed.
First and foremost, it allows companies to address violations directly and swiftly, potentially avoiding large financial losses caused by fraud. This also leaves the company and its employees more time and peace of mind to focus on what is important, like developing the business, reaching their goals and guaranteeing employee satisfaction.
What’s more, there’s no doubt that employees who speak up demonstrate loyalty and honesty towards the organisation where they work, promoting an ethical work environment. A functional and discreet reporting system helps promote a culture of trust and transparency. Thereby creating an open, communicative and powerful workforce. In short, whistleblowing contributes to creating an ethical corporate culture and research has proven that organisations with more frequent reporting are stronger in the long term.
So the benefits of whistleblowing in an organisation are considerable and providing clearly defined policies along with an accessible system show the company’s commitment to an ethical workplace. After all, who doesn’t like an organisation in which the voice of employees is valued and action is taken against illicit activities?
First of all, we need to ask, who is a whistleblower? The short answer is: anyone who reports wrongdoing in a work environment. We tend to think of them as company employees, but that’s not always the case. It could be anyone who has been in contact with the company, including suppliers, contractors, clients and even someone just going in for an interview.
Becoming aware of wrongdoing in a company can be an uncomfortable and difficult position to be in. It takes courage to speak up and expose the truth. To encourage individuals to come forward, they must be protected against retaliation of any kind. Both from the people involved in the activities and anyone else within the company. As a result, they need to be provided with the proper tools to be able to report with confidence.
Thanks to the new directive, the whistleblower’s identity is kept confidential and they are protected against any backlash. This could be for example demotion, retaliation or unfair treatment of any kind. The new regulations eliminate the risks that used to stop people from reporting malpractice in the first place. Individuals will be able to count on a confidential, direct, and supportive system that allows them to speak up without any concerns for their well-being.
Individuals who witness misconduct no longer have to battle with their morals and stay quiet for fear of retaliation. But the importance of whistleblowing to employees not only lies in knowing they have done the right thing. They are also contributing to building a better place for everyone. When misconduct within an organisation is reported, we are looking at a call for action and reform.
As a consequence, violations being brought to light can bring about positive changes to the workplace as a whole, benefiting employees and anyone connected to the company. In short, whistleblowers help to create an ethical and honest organisation to work for, with a more positive and open environment for everyone involved.
Although we often think of financial crimes when we hear the word “whistleblowing”, many more sectors fall under the umbrella of the new EU directives. This includes public health, the environment, consumer safety and data protection. Let’s take a look at some of the most common areas in which the advantages of whistleblowing can benefit society.
Detecting financial fraud is certainly the largest and most common arena for whistleblowing. In 2014, the so-called LuxLeaks scandal hit the front pages of newspapers across Europe. An employee disclosed information revealing that over 300 large companies were involved in tax evasion, using ‘shell companies’ based in Luxemburg. Tax evasion on such a large scale implies huge losses for governments and society as a whole.
Fraud costs taxpayers a lot of money and we all pay the price. A 2017 study revealed that the EU loses between €5.8 and €9.6 billion every year due to the lack of whistleblowing in public procurement alone. This is why fighting corruption and fraud through the promotion and protection of whistleblowers is becoming a priority for governments, organisations and citizens.
Under the new EU regulations, any practice that has a negative impact on the environment or breaches environmental protection laws should be reported. This includes polluting, misreporting environmental activities, inappropriate waste disposal and damaging protected areas.
Ensuring that environmental protection laws are respected is our social responsibility as well as being in everyone’s best interest as the consequences can be severe and far-reaching. Therefore, exposing any action that may cause harm to the environment or wildlife is also considered whistleblowing. The individual will be protected for their help.
Health and Safety
The new regulations also aim to tackle the issue of underreporting health and safety concerns. Not following the health and safety laws can put workers as well as the general public at risk. For instance, think about a large building site in the city. The individual overseeing the works decides to cut corners and use less safety equipment for the scaffolding than what is dictated by health and safety regulations. If such a course of action is not promptly addressed and fixed, it could cause an accident at the site, putting both workers and civilians at risk.
Unlawful behaviour going undetected can be detrimental to society from many points of view. The impact could take many shapes and forms and affect a small group of people or have widespread implications. Whatever the circumstance, it means the bad guys win, promoting a society in which cheating is rewarded. Protecting whistleblowers promotes an ethical society in which wrongdoing and illegal activities are stopped and prevented.
So, we know the advantages of a whistleblowing system are great. They can affect many people from employees, suppliers and clients to society in general. So where do you start? Follow these simple steps and start changing your company for the better.
There is evidence to show that companies offering an anonymous reporting channel suffer less financial loss. Moreover, people are more likely to report using a purpose-built online system as they feel more protected than if they were to send an email or make a call. It’s clear that if an individual doesn’t feel at risk of losing their job or any other kind of retaliation they will be more likely to report someone else’s wrongdoing.
However, this is not enough. It’s also important that the system is easy to use and everyone involved with the organisation knows about it. Make sure the system and policies are accessible, and promote them regularly.
Implementing a user-friendly and effective whistleblowing system creates a culture of transparency and honesty within the organisation. This also helps safeguard public welfare. Having a system in place not only ensures the company is complying with the law – it builds trust in the brand. Suppliers, stakeholders and customers are more likely to engage with a brand with a strong ethical backbone they know they can rely on. Encouraging and supporting whistleblowing is the most powerful weapon any organisation has in fighting illegal activities and misconduct.
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Philippa Johnsson, Whistlelink
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