There are many demands on a company when considering their value chain. Managing risk and reputation can often be the most challenging. However, not fully understanding and addressing related issues can be the squeaky wheel that may ultimately cause the business to crash. Such crises affect not only the organisation and its stakeholders, but also may impact on wider society and the economy.
That is why as part of the rethinking the value chain series, CGMA is highlighting the ethical, legal governance, regulatory and social responsibility aspects of the extended value chain. Risk implications compromise the ever-evolving governance of organisations and it is important to create resilience, to deal with both the expected and unexpected. This is not only via building strong defence mechanisms but also identifying opportunities and maximising partnerships and alliances.
In recent years the spotlight on corrupt practices has intensified. Significantly, alongside civil society and governments, businesses are also demanding less corruption and greater transparency in the economies in which they operate. All CGMAs have a responsibility to be aware of the global demand for increased transparency in order to prevent corruption and improve fair and competitive conditions for business. This would include being aware of anti-corruption legislation within their own markets and those they operate in. A joint CGMA/ Transparency International briefing highlights the risk in different markets as well as an overview of legislation in the UK, USA and selected emerging economies.
There is rising attention to areas that pose great risk in the supply chain related to environment, labour and human rights. The fallout of disasters such as BP Gulf disaster in 2010 and the Rana Plaza building collapse that cost over 1,000 lives in Bangladesh in 2013 sadly epitomise this. A number of initiatives such as the United Nations Global Compact, the Principles for Responsible Investment and Ruggie’s Guiding Principles on Business and Human Rights are being embedded into enlightened companies’ operations whatever their size – if the issues are material. Their leadership realise that demand for transparency, and the immediacy of social media and online reporting means companies have to rethink how they mitigate and deal with risk and shortfalls across their chain. Today anyone has the capability to both break and then keep news on the screens of multiple devices worldwide should trending occur.
You need to map out who you are dealing with, and to have an idea of who they are dealing with in turn, whether you are a supplier or procuring. As Carmel Giblin, CEO of Sedex (the largest collaborative platform for sharing ethical supply chain data) states in her video of top tips for CGMAs, it is not unusual for large companies to have over 100,000 suppliers in their extended chain. It would not be possible, or practical, to manage all of those equally so prioritising and assessing high risk is necessary. In sum – good companies keep good company
Corporate culture is the link between organisations and long term success. A healthy culture reinforces integrity, ethics transparency and trust across global business value chains. When there is limited internal control, or complex decentralised structures with minimal headquarter oversight and unclear processes or accountability, risk is heightened. As the current CEO of Siemens is quoted as saying “Ultimately strategy papers don’t make or break the future and sustained success of a company. Its corporate culture does”.
Find out more about the series here: www.cgma.org/valuechain.