Small Business
Business INSIGHTS e-News for Manufacturers
You Could Be Held Responsible For Your Suppliers' Behavior

Consumer demand and new legislation are changing--be sure you're keeping up.

Are you responsible for the environmental, social and governance (ESG) practices of your suppliers? Increasingly, the answer is yes. Consumers are beginning to demand products that are manufactured with sustainability and social well-being in mind. Legislation and regulation are growing, requiring more awareness and compliance responsibility from you.

Trouble can be buried deep within tiers of your suppliers, their suppliers and their suppliers' suppliers. For example, conflict minerals--tantalum, tin, tungsten and gold--have financed armed aggression in the Congo and surrounding regions. New legislation will require publically traded manufacturing companies to report on sourcing these metals by 2014. These companies will have to trace small amounts of raw materials moving through supply chains to end up as part of a product. It's a new burden of compliance, and as yet, there are no consistent and efficient means of certification of the companies in supply chains.

Another example of changing expectations is assuring worker safety throughout a supply chain. Consider just one facet: chemical safety. The U.S. is in the process of adopting the Globally Harmonized System of Classification and Labeling of Chemicals (GHS). Companies will need to change the way they collect and organize data. The Automotive Industry Action Group (AIAG) is assisting global original equipment manufacturers (OEMs) and suppliers through its Chemical Management and Reporting Advisory Group. Its task is to help define the global impact of new regulations, help with the chemical-reporting processes and work with other industry organizations to address the issue. They also aim to make compliance easier by sharing best practices with other automotive-related companies.

How are companies going to measure environmental performance? Metrics vary widely among companies and industries. Environmental-performance data is hard to assess and compare. The need for this information is growing as companies begin to evaluate their suppliers based on sustainability. Companies also want to benchmark their performance against others. The AIAG is also tackling the problems of reporting and standardization. Its Environmental Sustainability Performance Metrics Group will help define metrics in the auto industry and develop the tools and guidance needed to collect data, set baselines and report performance.

Manufacturing associations in other industries keep members abreast of new requirements and provide help in complying with them. They support manufacturers and suppliers in pooling their resources and building frameworks for responsibility and accountability. Participating in industry groups will help you develop competitive advantages on many levels.


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