How can procurement prevent corruption in supply chains?

9 August 2022

Globalisation and outsourcing has increased the risk of third-party corruption, according to a report.

The report, from supply chain management company Assent, said executive staff were bound by ethical norms and laws but supply chain partners may not have the same rules. It found resources dedicated to third-party due diligence were not usually proportional to the risks businesses face because companies believed they had mitigated risk by outsourcing to a third party. 

The report said: “This perception is not a reality in the context of anti-bribery and corruption (ABAC) laws.”

Corruption and bribery definitions are not standardised across relevant laws, so companies must not assume their suppliers have the ability or impetus to comply with a business’s obligations.

Travis Miller, general counsel for Assent, said: “It all starts with having a good programme and process… Good programmes include policies, training, anonymous whistleblower hotlines, and a positive culture that emphasises doing the right thing, while not creating incentives to conduct corrupt or fraudulent activities. Most companies recognise the value in these programmes and, while there is still work to do, they are acting internally to address these issues.”

Miller provides a few steps for companies looking to improve their bribery and corruption risk:

1. Benchmarking

A business’s first steps should be to benchmark the current status of its supply chain’s bribery and corruption risk. The most practical way to do so is via an assessment survey, as it provides an introduction to partner compliance programmes and documentation of supplier engagement. The consolidated responses can also identify and help prioritise risk.

2. Alignment

The next step is to align with industry best practices, historically by aligning to known requirements, remaining static, and then adapting to high-profile government-initiated litigation and case law. Now, companies can use the internationally-recognised ISO 37001 standard of bribery management systems.

3. Data acquisition

Companies must be careful on how they acquire data on their supply chains. Assuming a partner is high-risk may blind them to other sources – impartial metrics based upon actual responses to normalised surveys should be used. Based on the company’s policies and programme, they may need to start gaining visibility and transparency into supplier data immediately to meet timeline commitments to their customers. 

“It is important to educate suppliers when the company is gathering this information,” the report said. “Simply requesting an ABAC survey without explaining the tangible reasons data is being collected will not necessarily mitigate the risk posed by non-compliance. Suppliers often face data fatigue from repeated data inquiries, and their customer response managers often do not understand the driving purpose behind many of the surveys they are asked to complete.”

4. Further actions

Further potential actions include:

  • A compliance policy supported by appropriate management systems 
  • A person responsible for managing data 
  • A supply chain risk mitigation process that continuously evaluates the supply chain for organisational change
  • Evidence of executive buy-in
  • Ongoing improvement plans and demonstrated actions based on assessment
  • Regular, relevant policy communications to internal and external associates
  • Clear supplier code of conduct and contractual language that allows a company to terminate business relationships due to bribery and corruption concerns or risks

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