Board-Level Solutions: Supplier Ethics Management: What You Don t Manage Can Hurt You

Transcription

1 Board-Level Solutions: Supplier Ethics Management: What You Don t Manage Can Hurt You Michael Levin, Esq. CCEP Vice President, Corporate Integrity Strategy Integrity Interactive Corp. Tuesday, September 16, :15 PM Society of Corporate Compliance and Ethics 6500 Barrie Road, Suite 250, Minneapolis, MN 55435, United States or Today s Agenda Our speaker will address the following topics: What is the ethics problem in the supply chain? What is Supplier Ethics Management (SEM)? What is the current state of SEM? What is changing? How can E&C help the VP of Supply? What can your company do right now? or

2 1. What is the ethics problem in the supply chain? Purchasers can get blamed for ethical lapses of suppliers: Poisonous Wheat Gluten (2007) Lead in Toys (2007) Tainted Lettuce (2007) Faulty Batteries (2007) Poisonous Wheat Gluten (2007) Faulty Batteries (2007) Vendor Collusion (2007) Sweatshop Conditions (1996) Tainted Spinach (2006) Battery Failures (2003) Defective Tires (1995) or What is the ethics problem in the supply chain? Purchasers can sustain brand-damage (and worse): Mattel Does Damage Control After New Recall (Wall Street Journal) Del Monte Pet Products Recalls Food Items (Washington Post) French Retail Giant Carrefour Is Fined (AP online) Nike Admits Sweatshop Conditions (The New Zealand Herald) Toshiba Laptop Batteries Pose Fire Hazard (computerworld.com) A Blowout of Trust - Firestone and Ford Motor Co. (Automotive Industries magazine) or

3 1. What is the ethics problem in the supply chain? The supply chain ethics problem in a nutshell: Being an ethical company isn t enough anymore. Your brand will be judged by the company it keeps. Your whole supply chain must be ethical. The biggest brand in the chain will get most of the blame. Solutions can and should be implemented immediately. Penalties for inaction can be great (damaged brand reputation). Cost of implementation can be affordable or What is Supplier Ethics Management? Supplier Ethics Management: The management of suppliers and supply relationships with strategies, programs, and metrics that better align supplier business conduct with purchaser standards, with the goal of reducing the purchaser s overall risk of corporate integrity failure in the supply chain or

4 2. What is Supplier Ethics Management Supplier conduct should align with purchaser standards in all three major areas of corporate integrity: Supplier Integrity Compliance Ethics Corporate Responsibility Conformance with: Laws Regulations Adherence to: Internal Values Internal Standards Commitment to: External Values External Standards or What is Supplier Ethics Management Supplier codes should address these topics: Environment, Health & Safety Forced Labor Child Labor Wage & Hour Free Association & Collective Bargaining Discrimination & Abuse Compliance with Laws or

5 3. What is the current state of SEM? Most ethics & compliance programs don t reach suppliers or What is the current state of SEM? When it comes to supporting Supplier Ethics Management, the answer inside most companies today is no: or

6 Integrity Client Survey (Sept. 2007) Does your company maintain a Web-based portal for suppliers? Yes No 12% 88% suppliers 3d pty or Integrity Client Survey (Sept. 2007) Are suppliers included in your company s primary Code of Conduct? Suppliers Included 14% Suppliers Not Included 86% no yes or

7 Integrity Client Survey (Sept. 2007) Does your company have a separate Code of Conduct for suppliers? No Yes 50% 50% no yes or Integrity Client Survey (Sept. 2007) Does your company require suppliers to acknowledge or certify a Code of Conduct? Require Action 40% 60% Require Nothing yes no or

8 Integrity Client Survey (Sept. 2007) Who is included in your company s ethics & compliance programs? Suppliers Included Suppliers Not Included 17% 83% no yes or What is changing? Leading brands are taking responsibility for supplier ethics: Dear Valued Guest,...We are wholly committed to our customers safety and have reiterated that simple, single fact to our suppliers and business partners. We will not tolerate products that do not meet our rigorous safety standards... Sincerely, Gerald L. Storch Chairman & CEO Toys R Us, Inc or

9 4. What is changing? Company leaders are looking beyond the Corporate Veil : Not our employee is no longer an acceptable answer! or What is changing? And here s one more thing that is no longer good enough: Supplier Representations & Warranties 29. REGULATORY COMPLIANCE. (a) Supplier will comply in all material respects with all federal, state and local laws, regulations and standards applicable to production by Supplier and its performance of its obligations hereunder, and will also use best efforts to comply with any applicable laws, regulations and standards of those European countries set forth on Exhibit B or

10 Integrity Client Survey (Sept. 2007) Do you plan to include suppliers in your ethics programs in the next two years? No Not Sure 31% 12% 57% Yes yes no nto sure or Integrity Client Survey (Sept. 2007) Who should drive supplier participation in your company s ethics and compliance programs? Purchaser 14% 86% Suppliers or Someone Else Suppliers or Someone Els Purchaser or

11 Integrity Client Survey (Sept. 2007) Who should pay for providing your company s compliance & ethics programs to suppliers? Purchaser Suppliers should share or bear the cost 25% 75% Suppliers Purchaser or How can E&C help the VP of Supply? Ethics & compliance officers can partner with Procurement colleagues on 5 major initiatives: Make ethics & compliance a factor in supplier selection. Target and segment suppliers by importance and ethics risk. Create and maintain compliance profiles of targeted suppliers. Assign E&C personnel to major supply-relationships. Conduct regular assessments of supplier ethics or

12 7. What can your company do right now? Do a quick self-assessment & check all that apply. Does your company: Have a large number of suppliers Maintain high profile Possess a valuable brand Sell to high profile partners Have suppliers in developing nations Feel pressure by NGOs or regulators Depend on consumer trust If you have checked 2 or more boxes, you should focus on SEM or What can your company do right now? Companies should immediately deploy an SEM platform for targeted suppliers: Your Company Deliver Code & Updates Receive Inbound Messages (Reports) Document Code Receipt Collect Code Certification Deliver Outbound Messages (Alerts) or

13 7. What can your company do right now? Don t wait 2 years to focus on SEM! An SEM platform is available today that: is capable of reaching tens of thousands of supplier companies. performs basic SEM functions and tasks over the Internet. maintains a persistent link between purchaser and suppliers. allows communication with suppliers on an as-needed basis. costs nothing to access, deploy, or maintain. costs suppliers a nominal annual usage fee. can be deployed today. To learn more, emurphy@i2c.com or For More Information For more information on this or any other topic relating to the management of corporate integrity risks, please contact: emurphy@i2c.com Thank you for your interest in Integrity Interactive & SCCE! Integrity Interactive Corporation 51 Sawyer Road Waltham, MA or