Supply Chain Standards Are on the Rise: How to Ensure Compliance

Recent years have seen legislation and industry best practices raise the bar for supply chain standards. Customers, investors and governing bodies alike now expect more from business operations and supply chain performance — they want to see supply chains that are sustainable, economical, and responsible. In short, people want to know the businesses they support and work with are ethical and legitimate.

If the processes and operations behind your production flow don’t meet industry standards, your business may face reputational damage, a dip in customer satisfaction and loyalty, a drop in sales and potentially even legal action.

So to meet customer and stakeholder expectations, and protect your business from unnecessary risks, you need to ensure your supply chain complies with all relevant legislation and goes above and beyond when it comes to social and environmental responsibility.

In this article, we’ll explore everything you need to know about rising supply chain standards and how you can ensure compliance with ever-changing legislation.

How Supply Chain Standards Are Becoming Stricter

Before you can keep up with rising supply chain standards, you need to know how supply chains are getting stricter. We’ve outlined five of the most notable factors that are raising the bar for supply chain standards.

Emissions Standards Are Tightening

Many businesses, particularly in the construction industry, use vehicles, machinery and non-road mobile machinery to complete work activities throughout the production process. But with air pollution being the biggest environmental threat to health in the UK, causing up to 36,000 deaths a year, emissions standards are tightening.

For example, earlier this year in January 2020, stricter regulations regarding non-road mobile machinery were brought into play in central London and Canary Wharf. The law change means that many different types of construction machinery — forklifts, bulldozers, industrial trucks, and mobile cranes, to name just a few — will need to meet emissions standards. Greater London Authority enforcement officers will also visit sites to check that plants and machinery comply with the updated emissions regulations. The end goal of tightening these regulations is that by 2040, only zero-emissions machinery will be permitted in London — or at least, in certain areas.

While these new emissions standards are currently only applicable in London, similar measures are being considered across the rest of the UK. So regardless of where your business operates, it’s good practice to have processes in place to monitor and manage the emissions of any equipment and machinery your business relies on. If any machinery is far from meeting your emissions targets, it’s better to start searching for alternative equipment sooner rather than later.

Supply Chains Need to Prioritise Environmental and Social Responsibility

Businesses in all industries, all over the world, are facing increasing pressure to prioritise sustainability, and that means building environmental and social responsibility into supply chains.

We’re currently in an age of conscious consumerism. Customers, clients, investors — and even employees — want to know the businesses they work with are doing their best to limit any negative environmental impact from business operations. They also need to know businesses are protecting people — including customers, site visitors, workers and local communities — from harm.

Global guidance, reporting initiatives and accreditation schemes require businesses to demonstrate their commitment to corporate social responsibility and evidence their engagement with environmental and social welfare activities and strategies. For example, the Common Assessment Standard, a complete risk management solution that has become the construction industry standard, requires contractors to have documented policies evidencing the management of construction-related social and environmental issues.

Thinking further ahead, many industries are gradually shifting towards the “circular economy”, which involves eliminating waste and finding ways to continually use resources. So while environmental regulations and standards are higher than they’ve ever been before, they’re likely to keep rising. Prioritising environmental best practices can help your business stay ahead of the curve, gain a competitive advantage and keep up with constantly evolving environmental standards.

Supply Chains Are Standing up to Modern Slavery

Awareness about modern slavery is on the rise, and in the UK, it’s a devastatingly large issue, especially in the construction industry. A report from the Charted Institute of Building (CIOB) states that “In the European Union, construction ranks second only to the sex industry as the sector most prone to exploitation” and that after Brexit, EU workers could become even more vulnerable.

All supply chains need to comply with the Modern Slavery Act (MSA) 2015 and do their bit to tackle exploitation. You may need to produce an annual modern slavery statement confirming that you assess and monitor risks of modern slavery throughout your supply chain and that you have taken steps to prevent exploitation.

Companies Are Obliged to Combat Corruption and Bribery in Supply Chains

Corruption and bribery are serious offences that can damage the reputation of your business, compromise ethical business practices, and lead to unlimited fines and up to ten years in jail.

You need to ensure your supply chain is compliant with legislation such as the Bribery Act 2010, which requires businesses to have “adequate procedures” in place to prevent bribery. It’s also worth noting that in addition to the act of bribery, failing to prevent bribery within your organisation will also leave you liable.

Guidance from the UK government’s Ministry of Justice outlines six principles for bribery prevention to help you tackle corruption:

• Proportionate Procedures — Procedures you implement to tackle bribery throughout your organisation and supply chain should be proportionate to the bribery risks your business faces and the complexity of your business activities.
• Top-Level Commitment — Top-level management must prevent bribery and create a culture throughout the organisation in which bribery and corruption are completely unacceptable.
• Risk Assessment —  Risks of bribery and corruption need to be monitored, assessed and control measures identified.
• Due Diligence — You need to apply due diligence procedures to mitigate risks of bribery identified during the risk assessment.
• Communication — Bribery prevention policies and procedures need to be understood by everyone involved in your supply chain, so they need to be communicated through internal and external communications, including training.
• Monitoring and Review — You need to monitor and review the policies and procedures that have been implemented to assess their effectiveness. If any new risks emerge or procedures prove to be ineffective, you will need to make changes and improvements where necessary.

Bribery prosecutions are on the rise and January 2020 saw the largest corporate fine for bribery the world had ever seen when Airbus was fined £3 billion. So following these six principles is hugely important for safeguarding your business’s integrity and reputation and protecting your business from legal liability.

The Cost of Health and Safety Non-compliance Is Increasing

Health and safety is a huge part of supply chain risk management. You need to make sure everyone involved or affected by your supply chain is protected from harm and ill-health. Failure to look after the welfare of people, including workers, site visitors and the general public, can result in reputational damage, lost sales and customer loyalty.  Higher business costs can also apply — and reduced productivity, legal penalties and hefty fines — especially as recent years have seen the cost of non-compliance rise dramatically.

In 2016, new sentencing guidelines for health and safety offences were introduced to ensure that the cost of non-compliance is much greater than the cost of taking appropriate precautions. Now, fines for health and safety offences are higher than they’ve ever been before — the average health and safety fine paid by UK businesses in 2016 was £115,440. But penalties in the millions are also commonplace for larger organisations. And, as the cost of compliance tends to range between £5,000 and £40,000, the average health and safety fines cost thousands more than compliance.

The new health and safety sentencing guidelines also mean death no longer needs to occur for larger fines of over £1 million to apply. Significant fines can also be issued without any actual harm taking place. If a risk of injury is present and adequate procedures aren’t put in place to mitigate that risk, your business will still face hefty fines.

So to protect your business from fines, reputational damage and potential financial difficulties, you need to ensure excellent health and safety standards throughout your supply chain. If you are engaging contractors in work activities, your health and safety responsibilities include protecting contractors and anyone who could be affected by their actions from harm. So as well as carrying out risk assessments for different business operations and workplaces, you need to conduct a contractor assessment during the procurement process to ensure that contractors are suitably trained, qualified and knowledgeable.

How to Ensure Compliance with Rising Supply Chain Standards

With so many supply chain standards to comply with, supply chain management can feel like a big task. But CHAS can help you ensure compliance throughout your supply chain.

We offer several supply chain management services that can help you comply with legislation, meet expectations, mitigate supply chain risks, and protect your business from reputational damage and legal liability.

Many issues and areas of risk management that affect supply chains, including modern slavery, bribery and corruption, environmental and social responsibility, and health and safety are covered in our Common Assessment Standard. Contractors with accreditation under the Common Assessment Standard will have demonstrated their compliance in 12 areas of risk management. Through the CHAS client portal, employers can find accredited contractors and hire with confidence, knowing that contractors have risk management measures in place. If the compliance status of any contractors changes, clients will be notified instantly.