Tightening the screws on supply chain transparency

MORE THAN three years after the chaos caused by the pandemic, supply chain disruption remains a challenge for all industries with ongoing labour and materials shortages, unpredictable lead times and spiralling costs. While current global uncertainty is defying any sort of complete recovery, attention is turning to how supply chains can be 'cleaned up', leaving them more resilient to further disruption and less exposed to risks. 

For businesses, current and pending regulations are increasingly focused on supply chain accountability, which goes beyond achieving health and safety compliance. The UK's Procurement Bill, alongside new and pending EU laws, signal a clear direction of travel when it comes to increasing scrutiny in supply chains. So, what do businesses need to know to prepare themselves and manage their supply chain risks?

The Procurement Bill

The new Procurement Bill is going through parliament, with Royal Assent expected in early 2024. Its aims are to provide a new set of guiding standards for public procurement which focus on delivering environmental targets, social value and value for money, information sharing and equality. While the rules apply to public procurement, there are lessons to learn for the private sector. 

Some of its key features include a new single digital platform which will allow suppliers to see all opportunities in one place and provide details of key performance indicators to incentivise good practice. A debarment list will record those who are excluded during the procurement process for reasons of poor performance or inappropriate/criminal behaviour such as fraud and conviction of modern slavery.

Supporting public procurement law is the updated procurement policy note PPN0203 which emphasises applying more stringent risk management standards to supply chains by requesting declarations on health and safety, data protection, modern slavery, carbon emissions reduction and finances. These are all risk areas covered by the Common Assessment Standard, which may in future, be mandated as the accreditation requirement for public sector contracts.

Intensifying global focus on supply chain due diligence and ESG

The German Supply Chain Due Diligence Act (GSCA) came into force on 1st January 2023, obligating companies to assess and evidence due diligence on human rights and environmental risks across the entire supply chain. For UK businesses, the GCSA applies to any company employing over 3000 staff (dropping to 1000 from 2024) with a registered branch office in Germany. The GCSA applies to all suppliers, directly or indirectly, so if there is any German customer within the supply chain, then they will need to ensure compliance with the Act.

The European Union’s goal to transition all economic sectors to a sustainable economy has also been laid out. Under the umbrella term ESG (Environmental, Social and Governance), EU companies will be expected to take responsibility for the rights of foreign workers and the global environment when doing business. The European Parliament have agreed on the Corporate Sustainability Reporting Directive leading to the implementation of individual laws for member states within the next few years. The Directive means companies operating along the supply chain of EU countries will be obliged to establish a due diligence process that will effectively identify and tackle actual and potential adverse impacts on environmental and human rights issues. 

How can businesses stay ahead?

Overhauling supply chains is no mean feat, but for companies looking to build resilience, increase transparency and mitigate risk, there is support available. Engaging a supply chain management service like CHAS can take the stress out of the procurement process by helping to identify vetted contractors who already meet risk management best practices in areas such as health and safety, modern slavery and environmental regulations. CHAS membership for clients provides instant access to a complete prequalified contractor list via the CHAS Client Portal, using a variety of search parameters. It also offers companies complete visibility of their projects, the subcontractors in their network, and their compliance. 

Materials suppliers are not exempt from new levels of scrutiny, so with the impetus to demonstrate credentials across a number of regulatory areas, verification through a scheme such as CHAS Verified Supplier could be the answer. With verification undertaken via a single annual process, pre-qualification for supply chain contracts are easier and faster. Additional member benefits include access to an easy-to-use dashboard with complete overview of verification and compliance records, including expiration and renewal dates. Members can also take advantage of special offers and benefits from trade partners. 

For contractors, now is the perfect time to consider gaining the Common Assessment Standard. The CHAS Common Assessment Standard covers 13 areas of risk management in a single assessment, including Anti-Bribery and Corruption, Environmental, Equality Diversity and Inclusion, Financial, Health and Safety, Modern Slavery, Corporate Social Responsibility, and Information Security.

It is reviewed annually and is swiftly adapted to reflect the latest rules, regulations and compliance concerns. For potential public sector contractors, it mitigates the risks associated with ending up on the debarment register, and for everyone else, it offers transparency and a competitive edge. 

Conclusion

The bell is certainly ringing for supply chain reform, and businesses in all industries are under increasing pressure to demonstrate compliance across their entire network, whichever sector they operate in. Yet, even where the highest levels of compliance aren’t mandatory, aiming for best practice standards in the procurement process can only lead to an efficient, transparent, and resilient supply chain better equipped to meet customer needs and drive sustainable growth.

Alex Minett is head of products and services at CHAS

For more information:

www.chas.co.uk

Tel: 0345 521 9111