A whistle-blowing procedure refers to how an employee can raise their concerns about the suspected wrongdoing they have witnessed. Particularly, misconduct on the workplace has been defined as any dangerous, illegal, or generally considered immoral action witnessed by employees.
To exemplify, such cases can occur when a company disobeys local laws, damages the environment or puts the safety of the surrounding community at risk.
Why is whistle-blower protection important?
To put into perspective what calls for such procedures, one can look at the latest news on The Voice of Holland. In this case, the channel was not aware of what happened. Had there been a whistleblowing procedure in place, the necessary actions could have been taken sooner. The events really highlight the importance of having such measures in place.
Aside from recent local news, let‘s look at a recent publication by the EQS Group. The research was done in collaboration with FHGR University of Applied Sciences. The analyses are based on a survey in which 1,239 organisations took part across France, Germany, the United Kingdom, and Switzerland.
According to the survey, unethical behaviour occurs in 1 out of 3 companies. This figure alone can be used to argue the relevance of a whistleblowing procedure. Companies where unethical and illegal practices face many risks. Most prominently, legal consequences, as well as their reputations in the eyes of the public.
A solid reporting mechanism such as a whistleblowing procedure formalises what actions to take in the case of an incident. Reports that are made in a timely manner allow companies to address the perpetrator directly. More importantly, it also protects those who blow the whistle from potential retaliation.
The survey reveals that the procedure is used by a vast majority of companies as the reporting method of choice. Similarly, it shows that large companies are more likely to suffer from such incidents due to a high number of employees. This corresponds with the finding that these businesses are more likely to implement procedures than SMEs.
As mentioned before, organisations where misconduct occurs open themselves up to legal action. However, when a whistleblowing system is in place, a proportion of financial losses can be uncovered.
Whistleblowing systems proved effective in reducing the financial damage of misconduct according to the findings. In 2020, around 1/3 of the surveyed companies were able to avoid financial consequences. A whopping 80% of the sum related to misconduct were uncovered thanks to the whistleblowing system.
Moreover, companies recognise non-financial benefits as well. Specifically:
- The procedure enhances awareness within the organisation, allowing managing breaches quickly and constructively;
- Internal reporting mechanisms promote an open culture where employees can build trust and healthier working relationships;
- Whistleblowing procedures enhance the company image and integrity and set the baseline for a more professional compliance system.
About 72% of the large businesses use whistleblowing systems for reporting unethical practices. One of the main drivers for companies not to implement it was the lack of obligation and the strong belief in self-integrity. The survey results show around 35% and 33% respectively on average.
From these figures, one can tell that the organisations do not feel it is necessary to have it in place. They see it as a purely voluntary pursuit or that they simply do not believe that incidents will happen in their company. These figures clash with the frequency of illegal and unethical behaviour. An EU-wide directive creates a sense of obligation and ensures that all companies are appropriately prepared for risks.
Let us explore how this will impact your company!
Whistleblowing in the EU
If your business operates within the European Union, a new regulation has recently come into effect.
Currently, this directive applies to organisations with more than 250 employees. From 2023 onward, it will extend to those with more than 50 employees. One of the main focuses is to protect the whistle-blower against retaliation. It also aims to set a standard across all the EU member states.
The protection under the Directive will apply when the whistle-blower has provided accurate information at the time of reporting and the information is covered under the regulation. The directive also allows for internal or external reporting of the incident to be communicated, in the hopes that more options will allow for more transparency.
In terms of protection from retaliation, the EU Directive supports the whistle-blower on the following grounds:
- The whistle-blower is not legally responsible for the information they have disclosed, on the grounds that they did not expose confidential information that would be considered a crime;
- If the whistle-blower has been negatively affected by their reporting, they must be compensated;
- The whistle-blower, when found justified, should have access to appropriate remedial action.
Who is covered under the Directive?
Depending on the size of your company, you will need to adhere to the regulation at different speeds.
For the private sector:
- If your company employs more than 250 people, you should adhere to the standards set by this Directive as of 17th of December 2021
- If your company has 50 to 249 employees, you have until 17th of December 2023 to implement the following regulation.
Some exceptions to this rule are:
- If you are a legal entity with 50 or more employees, you should have internal reporting channels. If you have fewer employees, such a procedure is not required but is always encouraged.
- If you provide financial services, this size rule does not apply to you. You should have the necessary reporting channels as soon as possible.
Conclusion
It’s safe to say that a whistleblowing procedure is essential for all companies. Not only does it support communication and transparency, having the proper reporting channels can ensure that companies are not associated with any illegal or unethical activity.
The EU directive on whistleblowing procedure appears to be working. The feedback from both SMEs and large businesses across an entire continent has been positive, with about 60% full satisfaction.
On the other side, a great majority of the companies in the EU are not qualifying with the requirements. Of the surveyed companies, only 10% indicate to already meets all the requirements. Moreover, nearly 50% doesn’t meet any of the requirements provided by the mandate.
The Directive is hoped to raise the standards across the European Union. Not only regards to how businesses go about their whistleblowing, but also how the whistle-blowers can protect themselves if needed.
The data from the report serves as a call to action for all organisations to evaluate their whistleblowing procedure. The EU Directive provides 9 principles that should be applied. Download our free checklist to make sure your policies are best practice.
