What Is Supply Chain Compliance and Why Does It Matter for Your Business?

Digitalization in procurement has shifted the paradigm from regulatory compliance only to encompass social responsibility and accountability. In other words, where you once were required to fulfill legal obligations set by authorities, you now have to respond to stakeholders, investors, partners, consumers, journalists. Your business goals are as much about being profitable as they are about being transparent, ethical and promoting sustainable practices.

Defining Supply Chain Compliance

The necessity of a compliant supply chain stems from the business conditions that surround the sourcing and/or manufacturing of products, from the raw materials in production to the channels used to deliver those products to their intended users.

Regardless of your position in the supply chain, you face both legal and moral responsibilities, most of which are codified.

The scope covered by supply chain compliance is extremely wide, ranging from human rights to chemical management, health issues, environmental protection measures, and data privacy.

  • Ethical Sourcing Compliance covers transparency in sourcing conflict minerals or raw materials that may be mined/produced from condemned practices such as financing armed factions, fueling political unrest and conflicts, supporting corruption and bribery, engaging in human trafficking, child labor, and violating human rights.
  • Although not yes as widely regulated, environmental responsibility is bound to take center stage, especially in view of the mediatization of natural resources and wildlife habitat protection (cobalt, palm oil, exotic timber).
  • Chemical Compliance addresses label requirements, hazardous material management, safety data sheets, harmful materials disclosure. As technology and testing progress at a rapid pace, staying on top of updates and regulations is a challenge (think how lead, VOC in paint, asbestos have changed manufacturing processes and consumption habits).
  • Cybersecurity Compliance is arguably one of the most complex to achieve as it pertains to protecting data integrity, accessibility, and confidentiality. With the ever-increasing volume of data being collected, stored and transferred, cybersecurity crosses over many different procurement and supply chain functions, from personal data to payment information and privacy rights.

How to Build a Compliant Supply Chain

Vendor Management

Implement a rigorous process to vet and onboard your suppliers. They should be fully aware of your compliance requirements and ethical policies. Request that they provide assurance and material disclosure.

Risk Mitigation Strategy

Develop processes that continuously monitor and assess risk factors and develop measures to mitigate those risks. Evaluate your vendors’ respective codes of conduct.

Procurement/Compliance Collaboration

Procurement and compliance are 2 profiles of the same face. While each function has its own sets of regulatory requirements and best practices, they should work closely together to align their roles to the organization’s needs.

Centralized Data Collection & Aggregation

Analytics deliver actionable insights when data is collected into a single platform that can leverage multiple crossing points. This also makes compliance reporting much less time-consuming and helps validate disclosure obligations.

Why Should Your Business Strive for Compliance?

Beyond mandatory disclosures, certifications and declarations requested by regulatory bodies, supply chain compliance protects your business by protecting its customers. Your brand reaches a new dimension when it is associated with ethical commitment, social concern, and sustainable practices. Due diligence, risk management, and communication are key factors anywhere along the supply chain. This means working closely with your partners and educating them so they too adopt conformance as a way of doing business.

If you have any questions, please ask below!