Supply chain compliance is when organizations comply with applicable relevant laws, regulations, and industry standards across every stage of the supply chain, from sourcing raw materials to delivering finished products or services to customers.
Regulations such as RoHS, REACH, and the conflict minerals rule call for greater transparency in supply chains. With a definitive strategy and real-time visibility across the supply chain, organizations can effectively mitigate risks and ensure compliance.
Mandatory reporting requirements for regulations such as REACH (Registration, Evaluation, Authorisation, and Restriction of Chemicals), RoHS Restriction of Hazardous Substances), and the conflict minerals rule have resulted in an increased focus on environmental compliance and ethical sourcing across the globe. Meanwhile, new regulations such as the EU’s proposed conflict minerals mandates and the Chinese Due Diligence Guidance for Responsible Mineral Supply Chains continue to proliferate in various geographies at a rapid pace.
For companies to successfully operate in these markets, it is essential that they understand and comply with the various product and supply chain laws and standards that exist at the local, national, and international levels. Adding to these demands is the ever-increasing list of monitored substances which requires organizations, as well as their suppliers and importers, to keep track of the substances, chemicals, and minerals used in their products, and then evaluate them against the relevant regulations. Non-compliance with these requirements can prove to be costly.
To meet these demands, organizations are increasingly looking to establish a definitive strategy for compliance. Many have realized that by adhering to regulations and standards with the right processes and best practices, they can improve both risk management and supply chain management. Moreover, by integrating compliance and due diligence efforts, they can assess their supply chain risks more effectively, and build robust strategies for responsible sourcing.
There are many challenges involved in adhering to product compliance requirements from authorities such as the SEC (Securities and Exchange Commission) and ECHA (European Chemical Agency), as well as the mandatory CE marking and conformity declaration requirements of RoHS.
Most recently, conflict minerals laws have been creating multiple regulatory challenges. Companies covered under these regulations have to trace the origin of conflict minerals and smelter information, conduct an RCOI (Reasonable Country of Origin Inquiry), and maintain approved supplier lists to be compliant. They also have to gather additional information about their supply chains, regarding the use of forced labor, human trafficking, slavery, and other violations.
Similarly, REACH and RoHS make it imperative for companies to identify supplied parts from their Bill of Materials (BOM), document the presence of ”Substances of Very High Concern” (SVHC) above a certain threshold, and send requests for declarations to their suppliers.
Managing all the data associated with these compliance activities has become a formidable task due to the ever-growing supplier base and the need to track sub-suppliers and their suppliers. The issue is often complicated by the communication chaos in the supply chain, and the lack of accurate supplier responses to surveys and other queries.
As the supply chain expands, and the list of applicable regulations increases, companies need to be aware of the risks related to sourcing, and execute a robust supplier governance and compliance program.
Regulations such as RoHS, REACH, and the conflict minerals rule call for greater transparency in supply chains. Companies who prepare well to respond to these regulations are better positioned than others to handle future regulatory developments. They also become more aware of the risks related to sourcing, and are therefore better able to execute a robust supply chain compliance and governance program which can be expanded to manage compliance with new regulatory requirements as well.
Armed with an effective program for compliance with the conflict minerals rule, REACH, RoHS, and other such regulations, organizations can easily respond to supply chain changes, and maintain compliance with multiple regulations. Below are the key best practices that make up an effective compliance program:
New regulations come with complex challenges, but if interpreted and complied with effectively, they can help an organization build credibility and brand value. In fact, regulatory compliance efforts can be a source of competitive advantage. However, many organizations use multiple fragmented compliance management systems that lead to duplication of time, effort, costs, and resources, and make it difficult to derive important risk intelligence from consolidated data.
This is where technology can help. By leveraging a robust compliance management solution, organizations can not only streamline compliance management, risk management, document management, and reporting, but also integrate multiple product compliance management initiatives. A good system provides the transparency and visibility needed to respond promptly to various regulatory requirements.
Rapidly changing industry regulations and standards have made it imperative for companies to establish a clear strategy for compliance management, subject to the nature and design of regulatory changes and the level of risk involved. Companies are often better able to respond to changing regulatory requirements by adopting an automated solution which is efficient and user-friendly for concerned stakeholders and suppliers worldwide. Such a solution should also provide real-time visibility into compliance across all the tiers in the supply chain, and help stakeholders understand the impact of risks on strategic and organizational goals.