by Source Intelligence
on November 15, 2021
However, an important aspect of procurement is often overlooked: compliance. It’s not enough to negotiate the best deal; you must deal with regulations that may constrain sales.
In this article, we review the most challenging aspects of product compliance and offer solutions to simplify the process.
Section 1502 of the Dodd-Frank Act required that companies publicly traded in the U.S. submit a conflict minerals disclosure. This is because revenues from the extraction and processing of the 3TGs (tin, tungsten, tantalum, gold) in the Democratic Republic of Congo (DRC) and adjoining countries may contribute to fund armed groups and illegal hostile militia.
In Europe, the conflict minerals compliance program does not limit due diligence to the DRC and neighbors, but also includes high-risk areas where local conflicts or political instability may exist.
From forced labor to child labor and human trafficking, human rights are abused in violation of international laws.
Some countries have pledged to eradicate this through future legislative measures. Many companies are now prioritizing this as well, due to its negative impact on brand image. Consumers are more aware of the Uyghur situation in China, child labor in mica mines, human trafficking and other crimes against human rights.
According to End Slavery Now, there are an estimated 21 million to 45 million people victims of slavery today. In the U.S., the Uyghur Forced Labor Prevention Act is on the 2021-2022 legislative agenda, aiming to ban imports of goods produced in Xinjiang.
Value chains have become increasingly complex, and globalization makes it difficult to gain visibility beyond the first tier. With the multiplication of suppliers and geographic disparity comes the risk of exposure to illegal activities, unsustainable practices, and human rights violations. With the rise in popularity of ESG investing and more customers factoring the importance of brand sustainability, many companies have put supply chain ESG reporting on the agenda.
Substances harmful to human health and the environment must also be taken into consideration. One of the biggest challenges of product compliance in the next few years will also be curbing Greenhouse Gas emissions (GHG) to satisfy carbon emissions requirements from the Paris Agreement.
Now that the U.S. is officially part of the Paris Agreement, states are quickly rolling out programs targeting the use of fossil fuels and announcing their commitment to ambitious carbon neutrality goals. The Paris Act is a collective of 196 countries that expect businesses to report on GHG emissions and deploy efforts to reduce their carbon footprint.
President Biden aims for a reduction of 50-52 percent of gas pollution in 2030 (from 2005 levels).
In its article on solving the net-zero equation, McKinsey states that “capital markets are increasingly building emissions risk into asset prices, and venture investments in transition technologies are at an all-time high.”
Consumer goods, apparel, electronics, industrial manufacturing, A&D, and pharmaceuticals industries all produce millions of products that contain chemicals that fall under global regulations. Regulatory agencies, however, are increasingly strengthening restrictions on Substances of Very High Concern (SVHCs) known to present short and long-term risks to human health.
From California Prop 65 to REACH, RoHS, SCIP and EU MDR, procurement professionals must engage in collecting massive amounts of data and technical documentation. Failure to comply could mean legal fines or removal of the product from the market.
In view of the many product compliance requirements and sustainability initiatives, the amount of work to perform seems overwhelming. Supply chain transparency is difficult to acquire but is crucial to assess and mitigate risks of non-compliance and avoid costly disruptions.
Fortunately, there are tools that support the process and empower procurement professionals to be more efficient and more thorough when collecting and verifying data, as well as determining the risk profile of suppliers.
Virtual audits are the perfect alternative or complement to field audits which are costly, impractical, and have lately been interrupted by travel restrictions. Using standard or customized templates, you can obtain information in real-time.
Some benefits of our virtual audits program include:
Click the button below to watch our webinar on how to conduct successful virtual audits and fully utilize the data.
Organized crime is a lucrative business often linked to other activities like human trafficking. It is not uncommon that value chains be utilized to launder money. Cross-referencing global corruption index and sanction data with your supplier information, you can not only be compliant with anti-corruption laws, but also flag areas where risks of human rights abuses may occur.
Our Financial Crime Prevention Program identifies where you’re at risk of money laundering, fraud, bribery, terrorist funding, and corruption in your supply chain.
Technology advances at a rapid pace and environmental and chemical regulations impact components' lifecycle, especially in the electronics industry.
Our automated obsolescence management solution provides predictive BOM analysis and end-of-life forecasting. It also gives you insights into any need for changes or redesigns due to obsolescence or environmental compliance impact.
Counterfeits may enter your supply chain carrying the risk of bringing in hazardous materials, safety concerns, product failure, etc. You need the capability to verify and monitor all suppliers, manufacturers, subcontractors, and distributors and implement risk-mapping processes.
Our Counterfeit Parts Prevention solution gives you advance warning of counterfeit parts issues, keeping you safe from brand damage and impacts to product quality.
A valuable component of compliance and risk management is media monitoring. AI technology can parse millions of pieces of content and trigger alerts on topics, events, or companies you want to follow. From news outlets to websites and social media, you keep informed with news and rumors that may have an impact on your procurement operations.
While media monitoring should not be the tool you should solely rely on for compliance and brand reputation, it can provide huge insights into the risk of human rights abuses, organized crime, practices that go against environmental and sustainable standards, or CSR issues when paired with other risk monitoring efforts.
Our Media Monitoring solution allows you to manage brand reputational risk with instant alerts for news on your suppliers and proactively identify which supply chain actors are at higher risk.
Suppliers are too often considered only as providers of products or materials, expected to deliver on time and at a fair price. As a result, engagement is low and commitment to help you reach compliance is not necessarily justified from their point of view.
Building a strong community and providing training and education tools will help strengthen the relationship and empower them to be part of the solution.
With support and education, they can better understand requirements that are often complex or obscure to them; in turn, they can realize the benefits for their business and growth opportunities.
At Source Intelligence, we have a robust, multilingual supplier engagement team that is available 24/7 to help suppliers meet your regulatory requests timely and accurately.
A common mistake when dealing with compliance is to fragment solutions per program. Unharmonized systems lead to redundancies, data gaps, and multiplied costs.
With Source Intelligence, compliance is centralized on our AI-powered platform so you work with unified tools and avoid repeating tasks for each of your compliance needs.
Our platform allows you to:
We can’t wait to show you the industry-leading compliance solution on the market. Request a demo to take a tour of how we can make product compliance easy and take unnecessary manual tasks off your plate.