Compliance means different things to different people, depending on the industry they work in and their job role. For many though, the perception is that it’s a time-consuming task primarily concerned with ticking the right boxes in order to avoid unwanted attention from regulators.
Compliance should be about more than doing the bare minimum. With the right mindset, it can not only be an effective risk management tool, but a way of ensuring that buyers and suppliers have the same values, ethics and goals. Yes, compliance is something you have to do, but this doesn’t mean you can’t use it to create real value and benefits across your supply chain.
Form over function
The compliance and ethics field has seen a huge amount of growth over the past few decades. An increasingly complex and stringent regulatory landscape combined with rapid innovation and technological change has transformed the function in the vast majority of industries. Staying on the right side of regulations and industry standards now often requires a compliance and ethics programme, exhaustive employee training and a reactive, predictive compliance and risk management function operating in real time.
But this growing complexity of compliance requirements hasn’t prevented a steady stream of corporate scandals – such as Uber and Samsung. We can conclude that a large-scale compliance infrastructure doesn’t by itself prevent misconduct.
The legal focus of compliance in its current form makes it primarily concerned with avoiding legal liability. This means that companies often view it as a risk management exercise to help them avoid negative legal, financial and reputational consequences rather than forging a way of working that reflects their ethics, promotes best practice and builds value for all stakeholders.
This is where culture becomes really important in helping companies harness the strategic potential of compliance.
What does compliance mean for you?
It seems to be the case that companies with strong and long-standing ethical cultures tend to be involved in fewer compliance-based scandals. This is likely to be because ethics and values in these companies originate from the top and filter down, rather than being tacked on retroactively as a response to regulatory developments.
There are a number of ways to interpret compliance and why it is important to you, your organisation and its supply chain risk management. It could be the things you absolutely have to do in order to be able to operate or a way of avoiding a negative image for your brand. But equally, it could be about ensuring you have the right safety culture in place or are actively minimising your supply chain’s environmental impact.
Compliance teams taking on the role of influencers was shown to be the link between a strong culture and a more strategic view of compliance, in a recent Deloitte study. In these situations “the team is able to drive change through strong networks and clear, consistent messaging”. It is here that compliance can help enable better decision making, helping to both protect and add value to a company.
We think that there is a link between an increased risk of scandal, issues and incidents and taking a legal-only, box-ticking view of compliance. Companies that work to build a culture of integrity and ethics can use Achilles Supplier Scoring as way of making sure that every part of their supply chains are working towards their sustainability, safety and ethical business goals.
Doing more than the minimum
It is, however, not that simple.
Our data shows that many suppliers are still not up to the standards that buyers expect. Currently, 59% of suppliers have no modern slavery policy, including 23% of those with a turnover of £36 million (for which it is a legal requirement). 70% of suppliers don’t measure their carbon emissions and 68% have no produce liability insurance in place. These suppliers represent a risk to buyers and their supply chains, not just in terms of becoming a compliance issue themselves but being seen to operate contrary to the stated values of their supply chain.
For buyers, effective supply chain risk management means using compliance as a tool that helps every single part of your operations contribute to your sustainability and social goals. It’s about establishing a source of suppliers with a ‘licence to operate’. If this sounds like a complex undertaking, here are a few steps to get you thinking more strategically about compliance:
Define what compliance means for your organisation – this has to happen at a high level in order to be truly effective
Use this internal standard to investigate and identify weak spots in your current processes and supply chain – you can now access Achilles supplier scoring tools to accurately measure the companies you work with against your standards rather than the bare minimum requirements of your sector
Create an action plan for bringing your suppliers up to the right level – we have a lot of experience helping buyers how to do this
Use audits to provide ongoing certainty of your suppliers’ ‘license to operate’ and consider adding tailored questions to your questionnaires to pre-qualify your suppliers – by tailoring your procurement management approach to really reflect your values, it is easier to prioritise the right kind of suppliers
Maintain regular due diligence to combat gaps in training, complacency and emerging compliance issues as quickly as possible
We believe that every procurement, compliance, sustainability and supply chain risk management process can be optimised to provide better results for both buyers and suppliers. A lot of companies expend unnecessary resources doing things just because they are required to do so. By taking a more holistic, strategic look at the activities that an organisation is performing on a day to day basis, it is possible to have every function adding value to the whole.
If you want us to help you elevate compliance from a tick-boxing exercise to something that adds value to your entire supply chain, talk to us today.