The Global Approach to Supply Chain Transparency and Compliance
As we move into the second half of 2016, it is important to reflect on the events that we have seen so far in 2016 for supply chain transparency. We saw the global modern day slavery movement enhanced by many regions of the world passing legislation. There have also been new approaches developed by NGO's to tackle slavery in supply chains. The same can be said for conflict minerals. More companies started to take an active approach to identifying the origin of 3TG. Yesterday, Source Intelligence released their research report on the recent SEC conflict minerals filings for the reporting year 2015. One of the most powerful takeaways from the report is that companies' reports were on average 60% longer than the previous year. Page length, among other things, tells us that businesses are becoming more conscious of conflict minerals in their supply chains, and they have taken a proactive approach to mitigating unethical sourcing of 3TG.
The global approach to 3TG reporting, or conflict minerals, was raised by the EU in June when the three main EU political parties came to an agreement on conflict minerals reporting framework. After about four months of negotiations, the EU Council, EU Parliament, and the EU Commission all agreed to deploy a mandatory reporting scheme for all companies that import tin, tantalum, tungsten or gold (commonly referred to as 3TG or conflict minerals).
The EU conflict minerals regulation is similar to the US's Dodd-Frank Section 1502 in many ways but fundamentally differentiates itself in the fact that the EU will look at 3TG sourcing from around the globe, not just the "DRC and covered countries." Source Intelligence recently teamed up with Martello Risk to discuss and dissect the new EU regulation in their recent webinar, EU Conflict Minerals, A Complete Guide To The New Legislation. The webinar on demand can be found here.
Modern Day Slavery is a subject that has been in the spotlight since the beginning of 2016. There have been many regions of the world to join the already growing global anti-slavery movement. The UK rolled out their Modern Day Slavery Act reporting requirements, which companies started reporting on at the end of Q1. India published its first ever draft on modern day slavery to be the first country in that region to push legislation on forced labor in the supply chain. These new regulations have encouraged more companies to start taking a proactive approach to mitigating slavery in their supply chains.
A recent statistic came out that around 93% of SME's and emerging business do not use technology to monitor their supply chain activities. The laws mentioned above all have thresholds, where companies meeting a minimum revenue threshold are in scope of reporting requirements. However, businesses that don't meet the income threshold are out of the scope of the regulation and essentially don't have to report any of their efforts. This becomes very problematic as SME's are historically opaque in their transparency efforts and as a whole, make up a significant portion of modern day slavery issues.
Transparency International recently reported that emerging market multinationals have dangerously low transparency standards. Specifically, 75 of 100 assessed companies (in their report) scored less than 5 out of 10 overall and scored an average of 48% for disclosure of their anti-corruption programs. SME's and emerging multinationals are in a particularly important group, due to their high growth and constant new market entry. On top of mitigating slavery in their supply chains, there are also multiple new regulations SME's need to be aware of as they move to new markets. Keeping up with new regulations, and the "Unknowns" of compliance can make this time consuming and challenging. Source Intelligence has recently developed their network platform for SME's, multinationals, and enterprises to join and learn more about global regulations. The Source Intelligence Network provides a platform for companies to upload products, and instantly check them against any regulation. To learn more about testing your products against regulations and the many other things you can do on the Source Intelligence Network, click here.
