Friday Rant: Do We Need a Foreign Corrupt Practices Act for Supply Chain CSR Practices?

Enforcement of the Foreign Corrupt Practices Act (FCPA) has now become one of the drivers in deploying technology platforms to monitor and assure certain practices of supply chain partners in terms of supplier management. The FCPA is a rather elegant piece of policy that essentially prohibits businesses and individuals from engaging in behavior that would not be allowed domestically -- when it comes to bribery and related activities to solicit business involving foreign officials and the companies/entities they represent. Businesses must also keep audit trails of activities that monitor transactions and related interactions (hence the benefits of deploying an automated supplier management platform to manage some compliance aspects of the act).

In summary, according to FCPA Enforcement, "The FCPA's Antibribery provisions generally prohibit U.S. companies and citizens, foreign companies listed on a U.S. stock exchange, or any person acting while in the United States from corruptly paying or offering to pay, directly or indirectly, money or anything of value to a foreign official, a foreign political party or official, or a candidate for foreign political office for purposes of influencing any act or decision (including a decision not to act) of such official in his or her official capacity, inducing the official to do any act in violation of his or her lawful duty, or to secure any improper advantage in order to assist the payer in obtaining or retaining business for or with any person, or in directing business to any person."

In short, if you're a US company or a foreign company doing business on US soil, you must act globally as you act locally when it comes to ethical business practices to secure contracts. But the provisions of FCPA appear to stop at the stage of contracting and undue influence in exchange for personal gain. There is no provision of the FCPA that extends to insuring that your suppliers in global countries (and their partners, i.e., the extended supply chain) maintain the same set of production, labor and environmental practices that are required in the US or the EU. Granted, we do have certain pieces of legislation (e.g., ROHS, Frank-Dodd, etc.) that require some elements of supply chain assurance and traceability, but they're highly defined in scope.

I personally believe that it's time to start a debate that considers a more broad type of FCPA-like act. An act that would level the playing field for domestic and foreign suppliers alike and require US and EU companies, that sell products in Western markets, to insure that global suppliers act and behave like local providers when it comes to environmental, labor, health, safety, environmental and related practices. Moreover, such a discussion would move the needle on what it means to effectively manage a global supply chain away from just cost to broader issues that influence the total footprint and impact of production, assembly, distribution and ultimate consumption. After all, if you look at the AMR/Gartner top supply chain leaders every year, those who win (e.g., Apple) are leaders because of supply chain success tied to supply continuity, inventory turns, total cost and related areas – there is limited (if any) measurement of global CSR standards and practices.

In the US, suppliers (and manufacturers in general) compared with global suppliers, are often at a significant disadvantage because labor, environmental (e.g., EPA) and other requirements. The move to global standards of supplier and manufacturing behaviors might also help put US policy in line with global standards of production and supplier practice. More important, the move would allow domestic and other Western suppliers to compete fairly against suppliers with different sets of labor, environmental and related practices.

The FCPA has improved large company behavior and created better global practices -- holding everyone accountable in their business standards. Granted, it's not been a panacea that has ended business and government contracting corruption. Yet it has gone further than any other piece of legislation in helping define a universal behavioral standard in business and constructing fair levels of competition for companies that want to do business on US soil. Such a piece of similar legislation that links business expectations and standards around global supply chain practices to the standards of where goods are ultimately sold and/or consumed would change the way supply chains operate. And it would not come a moment too soon as a means to level the global playing field for Western suppliers and improve environmental and working conditions across Asia and other global sourcing markets in the process.

Jason Busch

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