Managing Ethics in Supply Chain Presentation- Sept 16 08

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Society of Corporate Compliance and Ethics

6500 Barrie Road, Suite 250, Minneapolis, MN 55435, United States

www.corporatecompliance.org | +1 952 933 4977 or 888 277 4977

Board-Level Solutions:

Supplier Ethics Management:What You Don’t Manage Can Hurt You

Michael Levin, Esq. CCEP

Vice President, Corporate Integrity StrategyIntegrity Interactive Corp.

Tuesday, September 16, 2008

3:15 PM

www.corporatecompliance.org | +1 952 933 4977 or 888 277 4977 2

Today’s Agenda

Our speaker will address the following topics:

What is the ethics problem in the supply chain?

What is Supplier Ethics Management (SEM)?

What is the current state of SEM?

What is changing?

How can E&C help the VP of Supply?

What can your company do right now?

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1. What is the ethics problem in the supply chain?

Purchasers can get blamed for ethical lapses of suppliers:

Lead in Toys (2007)

Poisonous Wheat Gluten (2007)

Poisonous Wheat Gluten

(2007)Vendor Collusion (2007)

Faulty Batteries (2007)

Tainted Lettuce (2007)

Defective Tires (1995)Battery Failures (2003)Tainted Spinach (2006)

Sweatshop Conditions (1996)

Faulty Batteries (2007)



Mattel Does Damage Control After New Recall(Wall Street Journal)

Del Monte Pet Products Recalls Food Items(Washington Post)

French Retail Giant Carrefour Is Fined(AP online)

Nike Admits Sweatshop Conditions(The New Zealand Herald)

Toshiba Laptop Batteries Pose Fire Hazard(computerworld.com)

A Blowout of Trust - Firestone and Ford Motor Co.(Automotive Industries magazine)

Purchasers can sustain brand-damage (and worse):

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The supply chain ethics problem in a nutshell:

• Being an ethical company isn’t enough anymore.

• Your brand will be judged by the company it keeps.

• Your whole supply chain must be ethical.

• The biggest brand in the chain will get most of the blame.

• Solutions can and should be implemented immediately.

• Penalties for inaction can be great (damaged brand reputation).

• Cost of implementation can be affordable.


2. What is Supplier Ethics Management?

Supplier Ethics Management:

The management of suppliers and supply relationships with

strategies, programs, and metrics that better align supplier

business conduct with purchaser standards, with the goal of

reducing the purchaser’s overall risk of corporate integrity

failure in the supply chain.

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2. What is Supplier Ethics Management

Supplier conduct should align with purchaser standards in all three major areas of corporate integrity:

Supplier Integrity

Conformance with:

�Laws

�Regulations

Adherence to:

�Internal Values

�Internal Standards

Commitment to:

�External Values

�External Standards

Compliance EthicsCorporate

Responsibility


2. What is Supplier Ethics Management

Supplier codes should address these topics:

Environment,

Health

& Safety

Forced

LaborChild

Labor

Wage

& Hour

Free

Association &

Collective

Bargaining

Discrimination

& Abuse

Compliance

with Laws

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3. What is the current state of SEM?

Most ethics & compliance programs don’t reach suppliers.


3. What is the current state of SEM?

When it comes to supporting Supplier Ethics Management, the answer inside most companies today is no:

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Integrity Client Survey (Sept. 2007)

Does your company maintain a Web-based portal for suppliers?

suppliers

3d pty

Yes

12%

88%

No

Survey Group: Senior ethics & compliance officers at 108 Global 2000 companies.



Are suppliers included in your company’s primary Code of

Conduct?


no

yes

86%14%

Suppliers Included

Suppliers Not Included

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Does your company have a separate Code of Conduct for suppliers?


no

yes

No

50%50%Yes



Does your company require suppliers to acknowledge or certify

a Code of Conduct?

yes

no

40% 60%Require Action

Require Nothing


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Who is included in your company’s ethics & compliance programs?


no

yes

83%17%

Suppliers Included

Suppliers Not Included


4. What is changing?

Leading brands are taking responsibility for supplier ethics:

Gerald L. StorchChairman & CEOToys “R” Us, Inc.

Dear Valued Guest,

...We are wholly committed to our customers’ safety and have reiterated that simple, single fact to our suppliers and business partners. We will not tolerate products that do not meet our rigorous safety standards...

Sincerely,

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Company leaders are looking beyond the “Corporate Veil”:

“Not our employee” is no longer an acceptable answer!



And here’s one more thing that is no longer good enough:

29. REGULATORY COMPLIANCE.

(a) Supplier will comply in all material

respects with all federal, state and local

laws, regulations and standards applicable

to production by Supplier and its

performance of its obligations hereunder,

and will also use best efforts to comply

with any applicable laws, regulations and

standards of those European countries set

forth on Exhibit B.

Supplier Representations & Warranties

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Do you plan to include suppliers in your ethics programs in the next

two years?

yes

no

nto sure

57%31%12%

Yes

No

Not Sure




Who should drive supplier participation in your company’s ethics

and compliance programs?

Suppliers or Someone Else

Purchaser

Suppliers or Someone Else

Purchaser

86%14%


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Who should pay for providing your company’s compliance & ethics

programs to suppliers?

Suppliers

Purchaser

75%25%

Purchaser

Suppliers should share or bear the cost



6. How can E&C help the VP of Supply?

• Make ethics & compliance a factor in supplier selection.

• Target and segment suppliers by importance and ethics risk.

• Create and maintain compliance profiles of targeted suppliers.

• Assign E&C personnel to major supply-relationships.

• Conduct regular assessments of supplier ethics.

Ethics & compliance officers can partner with Procurement colleagues on 5 major initiatives:

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7. What can your company do right now?

Do a quick self-assessment & check all that apply. Does your company:

If you have checked 2 or more boxes, you should focus on SEM.

� Have a large number of suppliers

� Maintain high profile

� Possess a valuable brand

� Sell to high profile partners

� Have suppliers in developing nations

� Feel pressure by NGOs or regulators

� Depend on consumer trust



Companies should immediately deploy an SEM platform for targeted suppliers:

Deliver Code &

Updates

Document

Code

ReceiptCollect

CodeCertification

Deliver

Outbound Messages

(Alerts)

Receive

Inbound

Messages

(Reports)

Your

Company

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• is capable of reaching tens of thousands of supplier companies.

• performs basic SEM functions and tasks over the Internet.

• maintains a persistent link between purchaser and suppliers.

• allows communication with suppliers on an as-needed basis.

• costs nothing to access, deploy, or maintain.

• costs suppliers a nominal annual usage fee.

• can be deployed today.

An SEM platform is available today that:

To learn more, email [email protected].

Don’t wait 2 years to focus on SEM!


For More Information

For more information on this or any other topic relating to the

management of corporate integrity risks, please contact:

[email protected]

Thank you for your interest in Integrity Interactive & SCCE!

Integrity Interactive Corporation

51 Sawyer RoadWaltham, MA 02453

+1 781-891-9700www.corporateintegrity.com

Managing Ethics in Supply Chain Presentation- Sept 16 08

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