Business ethics

Business Ethics

Business ethics is a CSR subject engrained in the lottery business due to fact that many state lotteries are operated as a monopoly, have been granted governmental authorities and/or are overseen by governmental departments. A robust approach to business ethics should ensure a basic level of trust exists between stakeholders and the lottery. Some areas that fall under this are corporate governance, insider-trading, bribery, money-laundering, discrimination, fiduciary responsibilities.

While most lotteries may not classify business ethics and their established policies and standards as CSR subjects, they are a core part of most CSR activities, and common in all non-financial reporting, often referred to as “business conduct”.  

Areas that can be covered under the subject of business ethics

Code of conduct (CoC)

Many lotteries have implemented codes of conduct as part of their business ethics activities. A CoC is a set of rules which is commonly written for company employees. It aims to protect the business and inform the employees of the company's expectations concerning their behavior. A code of conduct is appropriate for even the smallest companies and does not need to be complex or have elaborate policies.  

The WLA Code of Conduct provides a framework that allows lotteries to deliver their services while adhering to robust standards of business ethics.

Compliance management systems and whistleblowing channels

Compliance management systems often cover subjects, such as the prevention of bribery and corruption, money laundering and cyber security, by way of controls, training and risk mitigation procedures.  

A whistleblowing helpline or channel is often complementary to a compliance management system and provides internal stakeholders, such as employees, but also external stakeholders, such as suppliers, retailers, and players, with an opportunity to contact the organization anonymously and report indecent business behavior. Usually, these communication channels are managed by an independent third party or the internal audit function. An example of a compliance management and a whistleblowing at IGT can be found at this link

Corporate governance

According to Investopedia, corporate governance is “the system of rules, practices, and processes by which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, senior management executives, customers, suppliers, investors, the government, and society in general.”

Many lotteries are required to follow regulations and establish substantial corporate governance systems. These often deal with non-financial issues, such as consumer protection and money laundering, and are therefore part of their CSR framework. They may include committees that deal with CSR topics.  

For instance, Française des Jeux has a Board level CSR and Responsible Gaming Committee, which reviews CSR policy and the intersection between the policies enacted and the corporate strategic policy, supports the actions and evolution of the Corporate Foundation’s policy, issues a decision on the action plan to prevent excessive gambling and underage gambling, and promotes the reasonable practice of gaming. It also validates the action plan to combat fraud and money laundering.

Key insights

Business ethics is an important topic for National Lotteries. It may not be classified as a CSR activity; but, it is a key element when setting up or further integrating CSR aspects.

When starting a CSR program, any organization should look closely at its business ethics activities to see what it already has established, or what it still requires (e.g. a code of conduct, or independent whistleblowing mechanisms).

Corporate Citizenship/community engagement

State lotteries have traditionally been established to support their country or regional jurisdictions through the money they raise for good causes. They often distribute these monies directly to designated good causes, non-governmental organizations, or to governmental departments. However, where permitted by legislation, many lotteries have also identified organizations that they like to support directly from their own budgets. Often these are classified as “corporate citizenship” activities, which aim to raise the standard of living and quality of life for the surrounding communities, give something back to their employees, as well as go above and beyond the work that lotteries already do to raise money for good causes.

Approaches

Lotteries develop corporate citizenship activities differently. Depending on the size of their business, they may have smaller designated activities or sponsorships, or fully fledged corporate citizenship programs that are linked to their strategic goals and business activities.  

One common aspect of these approaches is that the lotteries require a comprehensive understanding of community needs, and dedication to incorporate citizenship within the culture and structure of their organization. Here are some examples of successful initiatives undertaken by lotteries within the WLA community, that demonstrate how to begin work in this area:

Support employees in community engagement activities

Many lotteries support employee volunteering activities, by offering them a specific number of hours to use once a year or regularly (monthly) for volunteering activities.  

The North Carolina Education Lottery Employees provides eight hours of paid leave for all employees to participate in volunteering events throughout the year. For instance, its employees volunteer at a local elementary school giving back to teachers on Teacher Appreciation Day, at a supply drive for a preschool and to help a non-profit that donates clothing for children.

Lottotech Mauritius provides a great example of how employee volunteering and community support can go hand-in-hand. It believes its employees must be involved in community work. When a local school that did not have sufficient funds to pay a teacher on a regular basis needed support, Lottotech Mauritius developed an IT program to help the pupils. Once a week, a group of four employee volunteers taught IT classes to the children, using a ‘learning by doing’ method. Additionally, all children who participated were assessed each quarter on their progress to identify whether there were any children with special needs.

Establish a foundation or strategic partnerships with a charitable organization

Lotteries with larger corporate citizenship programs may choose to establish their own foundation/trust (e.g. Française des Jeux) or set up a strategic partnership with charitable organizations. This enables them to independently support charitable good causes that are close to their hearts and in line with their strategic goals. The Lottery Corporation has established partnerships with a range of charitable organizations that it supports financially and by sharing resources, networks and skills in the areas of health, research, education, environment and natural disasters, as well as arts and culture.

Design a strategic sponsorship program to support local causes

Numerous charitable organizations and non-governmental organizations approach the lotteries for sponsorship and funding. It can be challenging to know which organization to support and where the funds can make the biggest impact. Thus, a thorough knowledge of the communities that surround an organization is required when making sponsorship decisions. Equally, it is important to understand what causes employees would like to support.  

The Tennessee Education Lottery (TEL) supports non-governmental organizations, such as food and clothing banks that benefit the community. TEL employees also give back through the PENCIL Partners program with Metro Nashville Public Schools.

Key insights

When designing a corporate citizenship program, a thorough knowledge of local community needs is vital for impactful engagement. If employees and other stakeholders support your community activities it will further increase the scale of your program.  

Considerations for successful corporate citizenship activities are:

• Linking strategic goals with your activities
• Finding employees that would like to get involved and support the programs  
• Establishing long-standing partnerships to create maximum impact within your communities

Environmental engagement

Around the world, a growing number of businesses are addressing environmental issues and are concerned with climate change, the loss of biodiversity, increased energy prices, as well as the amounts of waste to landfill. Most governments have expectations with regards to reducing carbon dioxide (CO2) emissions and waste, of using less energy while protecting local communities that might be affected by climate change.

Approaches

More WLA members from all continents have worked on developing their environmental programs. The most common issues include:  

Reducing CO2 emissions and/or energy consumption

Most lotteries have a relatively small direct carbon footprint, due to the nature of their businesses. Since they do not produce their products or sell the majority of them directly (with the exception of online products or through their own stores/casinos etc.), most of their carbon emissions occur across their value chain, where such products are produced. Lotteries that assess carbon emissions usually focus on the following areas:  

• Energy consumption of their IT-servers
• Vehicle fleets
• Energy consumption of offices/retail locations’ (including casinos)  

Lotteries usually begin by introducing energy or electricity-saving measures, at their office buildings. For instance, the Chilean State Lottery (Polla Chilena de Beneficencia S.A. NT) has introduced light sensors in restrooms and asked employees to reduce energy consumption where possible.  

Other lotteries try to reduce CO2 emissions of their car fleets by shifting to hybrid or electrical vehicles. Oftentimes, lottery IT-servers greatly affect energy consumption levels. Lotteries should purchase energy-efficient IT equipment, especially when for IT security reasons, cloud services are not available.  

Some lotteries have already started to set targets on where to reduce energy and/or CO2 emissions and to measure their CO2 footprint to fully understand where the largest energy use occurs. Others have set strategic company targets for the next five to 10 years. SELAE, the Spanish lottery operator, has introduced several KPIs to measure its CO2 emissions. These can be found in their annual report. https://www.selae.es/es/web-corporativa/responsabilidad-social/memoria-anual/memoria-anual  

The Hong Kong Jockey Club measures its carbon emissions and energy consumption. Its Environmental Report 2021, noted a reduction of 15% compared to its 2009/10 baseline data, partly due to measures undertaken, including investment in energy efficiency, waste reduction and water management.

Most lottery CO2 emissions are created outside of their direct influence and operations. For example, Veikkaus has analyzed its CO2 emissions along the value chain, by calculating its carbon footprint. It found out that 95% of its emissions were created along the value chain. The largest amounts were caused by transportation and the electricity and heat consumed on its premises. Consequently, Veikkaus has increased the share of renewable energy and heat, and started to optimize its transportation, by reducing significantly, the number of individual deliveries. Its premises are rented, which means that many of the energy reduction measures can only been done in agreement with the lessors. Furthermore, it works continually with its suppliers and other stakeholders to find ways to reduce CO2 emissions and other environmental harm caused by transportation. More information can be found in its 2022 Veikkaus Sustainability Report.

Reducing paper consumption

Another direct environmental impact area is paper consumption. The lotteries print many paper tickets, and produce tons of marketing materials for use at their retail outlet points of sale. Lotteries with mature CSR programs have reduced their use of paper or shifted to sustainably produced paper.  

Programs and solutions have been developed by organizations including:  

• Forest Stewardship Council (FCS)
• Programme for Endorsement of Forest Certification (PEFC)

Furniture and technical equipment

When furnishing or revamping retail/sales outlets, lotteries should include the management and recycling of furniture or technical equipment in their planning processes, to avoid waste, and where possible to reuse as many components as possible. This is in line with the thinking of the circular economy.

Engaging employees in waste management

Another area to consider is the reduction of waste at lottery offices and their sales offices. Paper choice and recycling initiatives should be established together with employees. A good first step is to create a team of employees from across the business to help identify such opportunities in these locations.  

Key insights

• Start focusing on your direct environmental impact
• Include employees in the environmental impact assessment and work closely with facility management  
• Measure your own energy consumption and your indirect carbon emissions (e.g. through electricity contracts)  
• Address paper consumption and waste management when introducing an environmental program

More information can be found in a paper by Katie Margaret Carlson entitled Greener Gaming Products: Considering Environmental Impacts When Assessing Gambling Related Harms published by Harvard Library Office for Scholarly Communication.

Addressing social issues together with stakeholders

Some lotteries with a mature CSR program in place have begun to focus on the wider and indirect social impact their operations may have. Most of the social impact lotteries may have should already be covered through their work on Responsible Gaming.  

Nonetheless, there may be other indirect effects across the value chain, for instance concerning the potential for violation of fundamental human rights due to a lack of supplier information, and the protection of labor rights in the supply chain.  

Approaches

Reducing social impact in retail and the supply chain

In order to reduce the social and environmental impact caused along the value chain, the lotteries must work together with their suppliers. As a starting point for assessing the supply chain, some lotteries have introduced a supplier code of conduct, which provides standards that suppliers are expected to comply with. Such assessments can be conducted through questionnaires, IT supported systems or by auditing premises.  

Veikkaus has supplemented its procurement system and management reporting with a follow-up mechanism concerning the environmental impact of its procurement processes. In 2021, 44 percent of the acquisitions were made considering environmental criteria.  

IGT values and protects its people, advances responsibility, supports its communities and fosters sustainable operations. These key priorities are highlighted in 2022 IGT Sustainability Report.

Key insights

• Focus initially on your direct environmental impact, but when further developing your CSR program, broaden the scope to your overall social and environmental footprint.
• Work closely in conjunction with stakeholders, in particular suppliers and retailers.
• Assess social and environmental impacts in your wider value chain.
• Communicate your expectations and plans to reduce your social and environmental footprint to your stakeholders, and consider introducing a supplier code of conduct.

Labor relations

The relationship between a company and its employees is important for any organization. In recent years, topics such as diversity and inclusion, fair employment practices, and the safeguarding of fundamental human rights have become increasingly important in various jurisdictions.

Approaches

Most lotteries have a long tradition of being national institutions, with close links to their governments and high profiles among the societies they serve. Despite their high public profile, many have a relatively small workforce that bears much responsibility for protecting the public good. Thus, the lotteries have habitually taken very good care of their employees.  

Over the past few years, societal expectations have grown considerably in many jurisdictions around the world. In particular, young people actively look for employers, or buy products from companies that can demonstrate that they provide inclusive working environments offering equal opportunities while protecting vulnerable and disadvantaged people. There are many good examples how lotteries have worked on these emerging issues and succeeded in attracting younger generations to work for them.

Diversity and inclusion

The Tennessee Lottery has developed many different initiatives for its diversity and inclusion program, which is part of any recruitment process, how it establishes workstreams and is fundamental to its supplier program. The organization is convinced that with a diverse workforce led from the top, it will be more successful and more attractive for the next generations, as explained in this video:

In 2016, the WLA introduced a program to support women in the lottery industry. The Women's Initiative in Lottery Leadership (WILL) established a mentoring program and training initiatives. More information can be found at this link.

Fair employment practices and safeguarding human rights

The commitment to protect employees from unfair working conditions, safeguard basic human rights, and ensure that employees can thrive and develop, is crucial for the reputation and attractiveness of an employer, especially when operating across different jurisdictions or countries.  

Some lotteries and suppliers have developed employment principles, integrated fair employment practices, and institutionalized consultation mechanisms. Multinational organizations with workforces in different jurisdictions or organizations that are listed in specific regions, publish a “modern slavery” statement every year. This demonstrates their due diligence, to ensure that slavery is not taking place anywhere in their supply chains or in their own businesses.  Some examples include Scientific Games, and The Lottery Corporation, Australia.

Key insights

• Incorporate diversity and inclusion into your employee strategy.
• Understand how to protect basic human rights and prove due diligence, which is important for all organizations.
• Consult with your own employees when you begin to work on these issues.

Responsible Gaming and money for good causes

The lotteries have historically been custodians of national institutions. This often puts them under intense scrutiny with regards to their business models and how they generate returns for good causes. One of the main challenges faced is to maximize returns for the good causes they support while minimizing any harm their products may cause to vulnerable groups. Understandably, Responsible Gaming is a fundamental value and core activity for any lottery’s CSR program.

Approaches

Lotteries across the globe operate under different jurisdictional requirements and business models. Some support good causes directly through their revenue streams, some pay the money that they raise into government departments, in the form of taxes or to the treasury, and others are legally required to pay designated charities or non-governmental organizations. Regardless of the model, they all must strike a balance between increasing sales and returns for good causes, while ensuring a healthy and sustainable player base. Some examples of successful initiatives by WLA lotteries are listed below.

Receive external recognition for your RG program

To ensure that the sale of lottery products and raising funds for good causes do not increase harm to vulnerable groups, lotteries should continuously improve their responsible gaming programs. WLA member lotteries can apply for certification to the WLA Responsible Gaming Framework (RGF) certification. Over 60 percent have already made the most of this opportunity.  

The WLA RG Framework consists of four levels of achievement and 10 Program elements. It outlines how lotteries can demonstrate their level of commitment to the WLA Responsible Gaming Principles. It also allows for cultural and regional differences and is designed to complement and improve – not replace – the safeguards that individual lottery members have in place. Many lotteries use their certification to demonstrate their robust and externally recognized approach to responsible gaming and place logos and certificates prominently on their websites and in make then part of the conversations with their regulators.

Measure and communicate your sustainable gaming approach

Lotteries are required to say that they are not causing harm, but very often they must also prove it. Some lotteries regularly track the money they have raised for good causes, and the average spend on lottery products. Other lotteries promote sustainable gaming directly at the point of sale, such as Svenska Spel, FDJ, or Veikkaus. Generally speaking, the approaches of healthy play and/or sustainable gambling are driven forward successfully, in particular, by lotteries in North America and Europe, and increasingly in South America and Asia.

Connect designated good causes to your products or launch charitable products

When lotteries have the regulatory possibility to connect products directly with designated charitable causes, it serves as an opportunity to educate players on the connection between lottery sales and a player’s contribution to good causes.  

Several lotteries have demonstrated this link either in their advertisements or via their products. A prominent example of this was the London 2020 Olympic Games, which gave Camelot UK Lotteries the opportunity to launch designated products for the financial support of the Games. The Loto-Québec “Loto-o-suivant” scratch ticket is another successful example that provides players the opportunity to win CAD 10,000 and have the same amount donated to a Québec charitable organization of their choice from the CanadaHelps.org website.

Key insights

A natural start for setting up a CSR program in a lottery organization is to work on responsible gaming activities and to ensure that the commercial activities of a lottery protect vulnerable groups. There are various success factors which can help to improve a CSR program in this area, such as:

• Ensuring players understand the connection between your products and good causes.
• Promoting sustainable gaming as part of your corporate and product brands.
• Establishing KPI’s that measure how effective and appropriate your RG work is.