How do you guarantee supplier compliance?

In today’s corporate world, global supply chains are increasingly complex, and regulatory frameworks are constantly evolving. That’s why it has become essential for businesses across all sectors to ensure supplier compliance. This involves implementing a supplier compliance management system, which includes the assessment, monitoring, and improvement of their commercial partners’ level of compliance. This proactive approach helps reduce supplier risks while maintaining the integrity of your company’s supply chain.

What is Supplier Compliance?

Supplier compliance refers to all procedures aimed at ensuring that suppliers meet the regulatory, operational, and ethical requirements defined by the company they are working with or by legislators.

This involves the company monitoring and evaluating suppliers to ensure they comply with applicable laws, regulations, and standards, as well as contractual terms defined by its procurement department. This approach covers broad areas such as:

• Respect for human rights
• Prevention of undeclared work
• Anti-corruption and influence peddling
• Environmental protection
• Data confidentiality and information security

It’s important to assess supplier compliance before formalising any future business relationship. Alternatively, this exercise can be performed during the business relationship if it couldn’t be done earlier. This is a key step that allows companies to identify potential risks related to collaborating with a partner, thus protecting themselves more effectively.

Overview of the European Regulatory Landscape

• French Sapin II anti-corruption law
• French corporate duty of vigilance law
• Norwegian Transparency Act
• German Supply Chain Due Diligence Act
• Corporate Sustainability Due Diligence Directive (CSDDD)

The Importance of Supplier Compliance

Supplier compliance raises key issues regarding competitiveness, differentiation, and corporate image.

Reducing Risks

A supplier compliance program helps reduce a wide range of risks, enabling companies to identify and address potential problems before they escalate. These can include supply chain disruptions, regulatory fines, legal actions, and reputational damage.

Improving Performance

By ensuring operational requirements are met regarding delivery and quality, this approach also helps improve performance throughout the supply chain. “This represents an undeniable competitive advantage, as companies better understand their suppliers and can more easily launch action plans,” says Emmanuel Roy, Managing Partner at Jicap Performance. As a result, companies can increase efficiency and enhance customer satisfaction.

Promoting a Sustainable Supply Chain

This process also promotes ethical and sustainable procurement practices. Supplier compliance is a powerful lever for ensuring respect for human rights, health, safety, and good working conditions throughout the supply chain. This helps build a network of responsible suppliers through reliable, long-term partnerships.

Reducing Costs

Supplier compliance helps identify inefficiencies and non-compliance issues, which often lead to waste or delays. This contributes to reducing costs and improving profitability.

5 Steps to Guarantee Supplier Compliance

A supplier compliance program includes five main steps, from defining requirements to continuous improvement with suppliers.

1. Define Clear Supplier Compliance Requirements

The company must first establish its expectations for suppliers through a compliance policy. This typically includes operational, regulatory, or even corporate social responsibility (CSR) criteria. These elements can be included as specific clauses in supplier contracts. International certifications or standards can also be integrated, along with ethical charters and codes of conduct.

2. Implement a Rigorous Evaluation Process

The second step involves creating a supplier evaluation process, with preliminary checks during the sourcing phase. This means verifying suppliers’ overall legal compliance (identity of any third parties, solvency, activities, etc.) and reputational aspects (press analysis of the company and its stakeholders, any sanctions they may have faced, etc.). This step can be facilitated by implementing a compliance solution or collaborative platform where each party can share information and documents. Based on collected data, the company can then classify suppliers according to their risk level and importance to its activities.

3. Monitor Supplier Compliance

Next, it’s essential to implement monitoring tools, such as regular supplier audits and/or assessments, as well as key performance indicators. This allows the company to track its suppliers’ compliance levels and identify potential gaps over the long term. This is particularly crucial given constantly evolving regulations. It may involve planning sanctions (e.g., blocking supplier accounts, contract termination) in case of non-compliance.

4. Support Suppliers

Throughout this process, it’s important to provide clear information to suppliers about the company’s compliance expectations and policies. This can take the form of training sessions on key compliance topics, such as ethical practices, corporate social responsibility, or regulatory compliance. This helps suppliers understand and promote their adherence to the company’s compliance policy.

5. Commit to Continuous Improvement

Lastly, the company must work to continuously improve its supplier compliance performance. For example, by developing corrective action plans with suppliers. This requires a strong relationship based on open communication, trust, and mutual understanding of compliance requirements. A reward system can also be implemented for suppliers who meet or exceed expectations.

Ensuring supplier compliance is a task as complex as it is essential for securing company sustainability and reputation. Going well beyond mere legal requirements, this forms part of a true risk management and competitiveness strategy for today’s businesses.

Download our Procurement Policy and CSR White Paper.