As retailers and brands grow, so too does the challenge of properly managing their growing supplier base. A responsible sourcing strategy can help businesses identify and quickly mitigate risks in their supply chain and limit their environmental impact, but the success of these strategies hinges on businesses engaging their suppliers and creating visibility into their supply chain.
Particularly for large enterprises that depend on thousands of vendors, this visibility is crucial. It impacts all aspects of supply chain management, including ESG compliance, which has continued to grow more challenging in the wake of ever-stricter regulation. But this visibility can’t be achieved without collaboration from your supplier ecosystem.
Without transparency into your supply chain, social and environmental abuses can go undetected, and companies risk losing consumers’ trust, running afoul of government regulations, and incurring fines and penalties. Especially in the wake of the United States’ Uyghur Forced Labor Protection Act and the tsunami of supply chain due diligence laws recently proposed and enacted across Europe and North America, brands and retailers need complete assurance of their suppliers’ compliance.
Putting systems and processes in place to detect and address potential supplier compliance issues before they occur can help businesses avoid regulatory and reputational consequences. Here are four steps to ensure your suppliers adhere to your ESG expectations.
1. Establish Clear Vendor Compliance Policies
All vendors must have your company’s standards detailed in writing. In order for any vendor to work with your business, it must legally agree to all your terms, including operational guidelines and legal mandates. These terms should also detail the environmental and social standards you expect your suppliers to live up to, including all required government regulations, and they should spell out the consequences if your standards are not met. Remember, these policies reflect your company’s values and vision, so they should be thorough.
Common policies cover practices including fair wages and humane working conditions, as well as compliance with environmental regulations and limits on water and energy usage. It’s also incumbent on suppliers to procure necessary permits.
Make sure that these compliance policies are communicated not only to your suppliers but also to your own team members. All stakeholders involved in your company’s sourcing and purchasing operations should have a complete understanding of them.
2. Communicate Requirements During Onboarding
Onboarding is a crucial step in the buyer-supplier relationship. In addition to gathering the documentation needed to establish the company as an approved vendor and providing suppliers any tools necessary to facilitate compliance, onboarding is the time to spell out your requirements clearly, so suppliers understand your expectations. All contracts and purchasing agreements should stipulate these expectations.
Supplier Relationship Management (SRM) software helps expedite the onboarding process by automating it, ensuring that all vendors have read and consented to your terms and conditions from the earliest stages of the buyer-supplier relationship.
3. Delegate Supplier Data Input
Onboarding is also the time to secure proof of compliance from a supplier. Chasing suppliers for compliance information can be notoriously time-consuming – procurement and compliance teams waste countless hours sending reminders for documentation. Getting suppliers to provide certificates of compliance and conformity can require a lot of reminders and patience.
That’s why the best practice is now to make data gathering a mandatory step before onboarding, placing the responsibility on the supplier to provide complete information and documentation. Automating onboarding saves internal teams from having to chase while ensuring that they have all necessary information and documentation on hand when they need it.
4. Leverage Automation to Monitor Documentation and Certification Statuses
Vendor certification statuses change often, and without automated systems, it’s difficult for compliance teams to stay on top of them. SRM software alleviates that burden, making it possible to monitor hundreds or even thousands of suppliers.
SRM software alerts merchandisers and compliance teams when documentation is close to expiring or needs to be renewed, and easily allows them to check and approve those documents.
This automation makes it easy for companies to track supplier activity and performance. It also creates full visibility into your supplier base while eliminating paperwork and oversight. For apparel, for instance, the system can monitor whether vendors are current in their WRAP certification.
Safeguard Against Compliance Risks with TradeBeyond
TradeBeyond’s SRM module CBX Partner makes it easy for merchandisers and compliance managers to monitor their suppliers efficiently. TradeBeyond creates a central repository of supplier information, including licenses, registrations, insurance coverage and audit reports, while automatically tracking supplier certification statuses and compliance protocol, notifying merchandisers and compliance managers instantly about red flags.
Our cloud-based platform also safeguards against human error by preventing merchandisers from placing orders from non-compliant suppliers and preventing shipping departments from booking shipments from them. Suppliers are automatically notified of any open issues and corrective actions they must address before orders can proceed, helping avoid significant fines and lengthy delays that can prevent products from arriving on time – complications that can considerably impede a company’s bottom line.
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