Your Reputation Is Your Wealth – ESG in the Supply Chain

Imagine cracking open a fortune cookie and finding this sage advice on the paper slip: “Your reputation is your wealth.”

A recent Shared Assessments’ Operational/Industrial Technology Risk Management Working Group meeting cracked open this cookie as they examined reputation and explored risk management’s role in preserving it.

Reputation is tied to the supply chain. The entire network involved in the creation and sale of a product can either uphold or degrade an organisations’ reputation. (When there is a lack of transparency in the supply chain, the opportunity for unethical behaviour increases, and corporate reputation is at risk.)

Jennifer Moreau, Marketing Director for the Anti-Human Trafficking Intelligence Initiative (ATII), introduced concepts, best practices and tools for managing corporate reputation risks arising from the supply chain.

For those links in the supply chain that are distant or murky – you should be asking questions.  Your consumers already are! Consumers are asking brands about their supply chains wanting to know:

Do you trust your suppliers and supply chain partners? Do they keep their word regarding ethics and morals, regardless of possible additional costs?

Does each link in the supply chain take care of its workers with fair pay, sustainable work loads, and ethical work conduct?

Is the sourcing of materials done from sources with renewable or low impact extraction methods? Is this certified?

If unethical behaviour is discovered, how will it be remedied? Will each partner in the supply chain actively work to make sure it’s corrected?

Consumers are holding businesses accountable. As a result, businesses have both responsibility and ability to create awareness and policy change. As social media becomes more powerful, brand equity can be shattered in seconds. Investors pay close attention to risk; if your organisation depends on a faulty and unsustainable supply chain, it is an issue of integrity and financial risk.

What is the solution? Enter the United Nations Global Sustainable Development Goals Action Manager. A free tool, the SDG Action Manager brings together in an actionable format the global goals set by the United Nations General Assembly for the year 2030. (Global goals include generally ending poverty, protecting the planet, and ensuring that all people enjoy a shared and durable prosperity.) Section 8 of the tool is most pertinent to Risk Management.

Questions in Section 8 of the United Nations SDG Action Manager include:

Does your company do any of the following to protect migrant workers from the risks of exploitation?

• We have policies and practices in place to ensure that migrant workers do not need to independently pay recruitment or administrative fees to relocate or gain access to employment
• We have policies and practices in place to facilitate migrant workers’ settlement, including housing and education for their children
• We have policies and screening practices in place that require the use of only legally registered recruiters
• We transparently provide details of the conditions of work to prospective migrant workers
• We provide access to resources that support migrant laborers to reduce costs of financial remittance to their home countries (i.e. avoidance of high cost services)

Does your company have any of the following regarding commitments to human rights?

• We have a formal human rights policy
• Our human rights policy is made publicly available
• Our policy explicitly recognises the United Nations Universal Declaration of Human Rights and UN Guiding Principles on Business and Human Rights (Ruggie Principles)
• Our policy explicitly acknowledges the rights of indigenous peoples
• We have practices in place to review the human rights implications of our business activities

What methods does your company use to evaluate the social or environmental impact of your suppliers?

• We share policies or rules with suppliers but we don’t have a verification process in place
• We require suppliers to complete an assessment we designed
• We use third-party risk or impact assessment tools (Sedex, BIA)
• We conduct routine audits or reviews of suppliers at least every two years
• We have third parties conduct routine audits or reviews of suppliers at least every two years

Does your company do any of the following with regards to preventing or managing the risk of child and forced labor in their own operations or their supply chain?

• We have conducted an analysis of our operations and supply chain to identify risk areas for potential use of child and forced labour
• We have conducted reviews of our own operations and suppliers to prevent the use of child and forced labour
• We have purchasing policies and procedures in place designed to screen or prevent purchases from companies with child or forced labour
• We have undergone a third party review of our own operations that screened for child and forced labour
• We have utilised third parties to audit for child and forced labour in our supply chain

Even if you visit the impact management tool and only look at Section 8 (without completing the entire survey), the answers from which you can select serve as a good checklist and starting place for improving supply chain practices and reducing reputational risk.

In deciding who to business with, it is best to meet your suppliers in their warehouses to see first-hand what the conditions are like. Your organisation might consider hiring a 3^rd party consultant to evaluate your vendors and verify ethical business practices. Also, putting your organisation’s Human Trafficking, Child Labour, & Supplier Code of Conduct Policies on your website will boost transparency and credibility.

If you are not yet convinced that corporate reputation matters, the following advice comes from the CEO of the world’s largest hedge fund (BlackRock) rather than a fortune cookie. Larry Fink advises that “Society is demanding that companies, both public and private, serve a social purpose.  To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

You’re Only As Strong As Your Weakest Link

There’s never been a more vital time to ensure the security and reputation of your organisation and the supply chain you rely on. DVV Solutions are here to help with a range of managed services and solutions proven to improve your ability to assess, analyse and manage Environmental, Social and Governance (ESG) risks within third-parties and the supply chain.

For more information on enhancing your ESG oversight:

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This article was originally published by Shared Assessments and is shared with their kind permission