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    Turn compliance into an opportunity

    Having a 360-degree view of supplier risk adds value to your offering – and your customers reward this

    Compliance and due diligence are essential for successful supply chain operations. But compliance is about more than avoiding penalties. “Consumerism and choice are really driving the agenda,” says Ted Datta, Head of the Financial Crime Compliance Practice, Europe and Africa at Moody’s Analytics. All stakeholders, from shareholders to the general public, increasingly expect ethically sourced products.

    Regulation and your reputation

    The UK’s Modern Slavery Act came into force in 2015. An amendment proposes prohibitions against falsifying slavery and human trafficking statements, and strengthens the requirement for supply chain transparency. Germany’s Supply Chain Due Diligence Act, due to come into force at the start of 2023, requires companies to ensure human rights throughout their supply chains. According to the University of Nottingham Rights Lab, by 2030 legislation on combating modern slavery will cover markets that account for 30% of global GDP.

    Starting to prepare for such regulations now will associate your company name with high standards and ethics, boosting your reputation. “If you can see that a company has a sustainable offering and is free from modern slavery, you are more likely to buy its product,” says Datta. Responsible sourcing can give you a competitive edge.

    Sustainability can burnish your reputation, and is becoming codified. The recently established International Sustainability Standards Board has released two draft sustainability disclosures, which it hopes will set the template that other local and regional sustainability standards will follow.

    Ownership structures and sanctions

    “In the past, supply chain monitoring has not focused on understanding ownership,” says Datta. “Now it really needs to.”

    You must know your suppliers’ ultimate beneficial owners to comply with sanctions rules. You need to understand exactly who is present in your supply chain, and strong due diligence can help to prevent bad actors in your supply chain from disrupting your business or leaving you in breach of sanctions rules.

    As well as bringing a financial penalty, failure to comply with sanctions regimes would damage your reputation. This is worth remembering as regulatory bodies step up their focus on sanctions in the wake of Russia’s invasion of Ukraine. In the UK, the Financial Conduct Authority plans to increase its sanctions auditing requirements. In the United States, the Office of Foreign Assets Control has supply chain in their sights.

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