A very important norm has come into play in the business and compliance environment. Companies are now increasingly accountable for the actions and decisions of the suppliers in their network, often including those several links removed along the supply chain.

Whether it be a toxic chemical in your product or a sub-supplier using forced labour, laws are coming into force which require the public disclosure of your actions – and your suppliers’ actions – to prevent negative and risky situations. For example, the EU Directive on Non-Financial Information Disclosure (Directive 2014/95/EU), due to take effect in 2017, requires companies with more than 500 employees to publicly report on the actions of their business and their suppliers related to human rights, environment, labour and other standards.

Compounding the risk, social media expands the reach of messaging from non-profit and consumer action groups seeking to influence your behaviour – or punish your brand. To avoid such consequences, companies are imposing their own requirements on business partners, stipulating, for example, adherence to a set of policies or the reporting of certain data. Those criteria are increasingly becoming standard terms in many business contracts.

No matter what industry you are in, a new class of regulations and standards demands that your company be accountable for the behaviour of your suppliers. Companies must now adopt three pillars of requirements into business practices and partner relationships: (i) laws and regulations; (ii) business-to-business preconditions; and (iii) demands that result from consumer pressure.

Jul-Sep 2016 Issue

Verisk Analytics