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Driving Sustainability and Compliance (Part 3): Managing Multi-Tier Risk and Opportunity

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This post is the last in a three-part series. Click here to read part 1 and part 2.

The process of launching IntegrityNext gave our team an amazing opportunity to connect with supply chain sustainability and compliance managers worldwide. We heard about challenges and targets as well as priorities for today and concerns about tomorrow. Regardless of industry or company size, professionals have immediately engaged, driven by their desire to improve the working and living conditions of supplier organizations and the communities they are based in.

One of the questions that we heard most often was about multi-tier supplier sustainability and compliance: What does this mean and why is it important?

Multi-tier supplier management (of any kind) digs into the supply chain one step at a time. First tier suppliers are the companies that sell products and services to your company. Second tier suppliers provide products and services to your company’s first-tier suppliers. In other words, every company has sales and every company has procurement. Link them all together and the supply chain extends out in multiple tiers. The farther you get away from your company in the supply chain, the more tiers “deep” you are managing.

With compliance and sustainability, taking a multi-tier approach acknowledges that the greatest opportunity — not to mention the greatest risk — exists beyond your immediate business dealings and contracts. As most procurement and supply chain managers will acknowledge, transferring risk and responsibility to suppliers does not eliminate them. Instead it simply relocates them to where they are more difficult to manage, at least without access to up to date information.

While there are business advantages to being able to increase compliance visibility beyond the first tier, an increasing number of regulations mandate that companies monitor and even report on the compliance of their suppliers’ suppliers and so on.

Companies are now being held accountable not only for their own practices but also for the actions of their suppliers and sub-suppliers.

The (U.S.) Dodd Frank Act Section 1502 and EU Directive 2014/95/EU both require companies to take increasing corporate social responsibility (CSR) responsibility for their entire supply chain. This depth of understanding is so extensive that it is often referred to as "n-tier” supplier management, or so many tiers past the first that the company is monitoring suppliers without necessarily knowing exactly how many suppliers of suppliers of suppliers are involved.

It is both a good business practice and ethically sound to manage multiple tiers into the supply chain because the point at which the supply chain goes global varies by industry and company. Regardless of where your company is based, there is a good chance that first tier suppliers will be in your country or in one with common business practices. Go beyond that point, however, and standards for human rights, banking and environmental oversight may change such that they increase the risk of disruption and reputational damage to your company. Monitoring multiple tiers into the supply chain presents a meaningful opportunity to reduce or eliminate harmful practices that would otherwise go on, unabated and unaddressed.

IntegrityNext was designed with the capability to run compliance checks from a company’s first-tier suppliers, second-tier suppliers and so on down the supply chain. Our advanced algorithms aggregate supply chain compliance from the lowest level of the supply chain to each ascending tier, which allows customers at any point of the supply chain to clearly identify compliance threats.

About IntegrityNext

The IntegrityNext platform covers all major aspects of corporate social responsibility (CSR) and sustainability requirements, allowing companies to instantly monitor thousands of suppliers and their entire supply chain with minimal administration. IntegrityNext brings together pre-built supplier compliance assessments and real-time social media insights in a user-experience driven platform that covers international standards and extends multiple tiers into the supply chain. For more information, visit www.integritynext.com.

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