Supply chain legislation is sweeping across the world, from BRSR Core in India to LkSG, CSDDD and Apenhetsloven in Europe and Bill S-211 in Canada, as governments respond to the UN’s Sustainable Development Goals and work to address global inequality, social and environmental issues.
Even though you may not be based in one of the countries that has introduced due diligence legislation, if you are selling products and services to clients in one of those countries, it’s almost certain to impact you.
Until now, most commentary about supply chain legislation has focused on the major corporations that it is designed to hold to account. But what does this new wave of legislation mean to the businesses (of all shapes and sizes) that supply them?
In this blog, we look at the 5 biggest impacts of supply chain legislation on supply-side businesses and how to make the legislation work to your advantage.
1 Increasing scrutiny and need for greater transparency
First up is increasing accountability. One of the key objectives of the new supply chain legislation is to create more transparency and make corporations accountable for their actions. In Norway, the Norwegian Apenhetsloven even directly translates to “Transparency Act” in English.
In the past, your biggest customers might have asked you to fill in a form asking some basic questions relating to things like modern slavery to tick a box, but in this new era of supply chain legislation, that is no longer going to be enough. If your customers are in places where regulation has been introduced, they also now need to demonstrate that they are carrying out activities which help to identify potential human rights or environmental risks within their supply chain. It is now a requirement that your customers practice what they preach.
As a supplier that means being prepared to be much more open to questioning from your customers, including providing more detailed information about, and evidencing, policies, practices, and processes – so that your approach to things like health and safety, environmental impact and human rights can all be accurately checked.
The steps your customers take to verify your ESG credentials will vary based on their due diligence processes and the risk they think you might present. Approaches may include desktop auditing where a professional independent auditor talks to you about your processes and systems or an on-site audit where an auditor visits your business to assess your processes and inspect your premises. Your more diligent clients may also insist on worker interviews to check the employment conditions in your offices and factories.
Supplier checks may include:
- Desktop auditing
- On-site auditing
- Worker interviews
2 Improved ethical and sustainability standards
Secondly, suppliers wishing to provide products and services to businesses governed by new legislation may find they need to adhere to higher ethical and sustainability standards. This could involve adopting more environmentally friendly practices, ensuring improving labour or employment conditions, and promoting responsible sourcing within the supply chain – as well as demonstrating how this has been implemented Studies indicate that many companies who adopt more sustainable business practices create increased value and profitability.
3 Cost and investment
In cases where businesses have multiple clients wishing to undertake the same checks, these sorts of requests for information and audits can quickly become very time-consuming and a very real cost to your business.
You may also find you need to invest in new systems to enhance transparency and traceability as well as recruit people to manage documentation effectively and/or provide training to your staff to ensure they are aware of and capable of implementing what is required.
At this point it’s worth considering a third-party solution to help you manage the information you need to capture and track. Using a third-party system like Achilles can help you to keep costs down significantly.
The MyAchilles platform supports in excess of 100k suppliers worldwide, offering significant economies of scale. Achilles also continuously monitors new and evolving supply chain legislation worldwide to ensure that you have the right information to meet your client requirements, so you don’t have to.
Importantly for those wanting to operate as efficiently as possible, having everything in one place makes it easier to manage and keep up to date. It also makes it much easier to share documents with clients whenever you need to. In addition, MyAchilles is also carefully designed to minimise the compliance burden enabling you to capture information once and use it multiple times in different ways to meet different legislation and client requirements.
4 Greater focus on risk mitigation and management
This new wave of supply chain legislation is causing larger corporations to look to achieve deeper supply chain transparency going beyond direct suppliers (Tier 1) to include their suppliers’ suppliers (Tier 2 and beyond). This cradle-to-grave approach considers the end-to-end process from the extraction of raw material through to manufacture and distribution and ultimately final disposal of the product.
Suppliers that want to work more collaboratively with their clients and develop stronger relationships with greater longevity, may find it pays to invest in systems and processes to enable them to identify, assess, and mitigate the risks within their own supply chains to meet both client needs and meet their own environmental, social and governance obligations and goals.
This could involve implementing your own supply chain risk management and due diligence processes, undertaking supplier audits, and/or just generally improving overall transparency. You can learn more about Achilles’ supply chain due diligence services here.
5 New business opportunities
The good news is, for suppliers that do this well, this new legislation also creates opportunities to create differentiation and win new business.
Non-compliance may result in losing customers who prioritise ethical and sustainable business practices, being able to demonstrate compliance with due diligence legislation can enhance your market access by meeting the expectations of socially responsible customers. Similarly, in the same way that non-compliance or negative incidents can damage a supplier’s brand and customer relationships, compliance with due diligence legislation can enhance a supplier’s reputation as a responsible and trustworthy business partner. A business that can evidence its approach to sustainable business practices is much more likely to fast-track their sales processes, achieve preferred supplier status, and win more business.
Astute companies are taking steps to prepare for these likely impacts by introducing better processes and documentation. Many are voluntarily undertaking independent audits and sharing the audit results with clients. You can read about Achilles audit programme here or complete the form to arrange a no-obligation consultation to discuss audit options.
In summary, while supply chain due diligence legislation aims to promote ethical and sustainable business practices, it can pose challenges and opportunities for the supply chain, requiring adaptation and alignment with ever evolving standards and expectations.
Alongside those challenges are very real business opportunities – to drive process improvement, demonstrate competitive differentiation and win more business with clients that are increasingly focused on operating with higher levels of higher ethical and sustainability standards across their end-to-end value chains.
Businesses that work with Achilles to help them manage their supplier credentials talk about these sorts of outcomes:
- It being more efficient to bid for new business because they have all information that buyers want and need in one place. Read about Grupo Eulen’s experience here.
- Management and regulatory compliance being so much easier in the MyAchilles dedicated platform compared with Excel spreadsheets and PDFs.
- Having more time to focus on doing things closer to the company’s core business.
- Having systems and processes to drive business improvement and compliance efficiencies. Read about Sanghvi Movers experience here.
- Having much better control with Achilles acting as the extension of their internal team.
- Accessing new business opportunities by being part of the Achilles global network of buyers and suppliers.
Use the form to request a no obligation consultation and learn more about how our supplier services can support your business growth.