Inbound Logistics | July 2024

[ INSIGHT ] SCCOMPLIANCE

by Katrina Duck Enterprise Account Executive, Inspectorio katrina@inspectorio.com | +447916672489

Four Steps to Mitigate Risk Supply chain regulations are in constant flux. In March 2024, the SEC announced new rules regarding climate-related disclosures, and there have been calls to strengthen the enforcement of the Uyghur Forced Labor Prevention Act. Meanwhile, the EU is also enhancing regulations regarding corporate sustainability, deforestation, ambient air quality, waste, and forced labor.

to diversify. This decision protects the retailer from the massive disruption that would occur within the supply chain if that region faced a new environmental challenge or a resource shortage. 4. Establish chain of custody traceability. Mapping the supply chain also promotes traceability. In this nal step, retailers must collect the data necessary to develop chain of custody documentation across the product’s lifecycle, especially in high-risk countries or when high-risk materials are involved. While important, traceability can be difcult, particularly within the middle stages of the supply chain known as the production chain. The best supply chain partners will support the data collection needed for the chain of custody, helping to future- proof the supply chain and mitigate operational and regulatory risks. With these documents, retailers can determine which suppliers are complying with global regulations and which are vital and effective members of the supply chain. This step provides the intel needed to make ongoing, informed supplier decisions. This nal initiative is critical for regulatory compliance and opens opportunities for remediation, education, and long-term success. Once retailers have mastered these four steps, they are well on their way to a compliant supply chain. n

2. Create a supplier code of conduct. Develop and share clear guidance for all supply chain partners regarding how they should operate within the established expectations and requirements. For example, retailers may require that their suppliers provide traceability documentation that facilitates conversations around improvements. Even after they complete and share the supplier code of conduct with all supply chain members, retailers must continue to educate their suppliers on regulation changes in real time. By maintaining ongoing conversations about compliance, retailers can create a sense of community and engagement around these critical initiatives. 3. Map the supply chain. Now that retailers and their suppliers are openly sharing compliance information, retailers must map their supply chain with a focus on risk assessment and analysis. For example, if 85% of a retailer’s textile production is coming from one region, the risk assessment may prompt them

Industry regulations such as these have serious implications for retailers’ market access and brand transparency— especially for apparel retailers, who are regularly scrutinized for labor concerns and greenwashing. Fortunately, retailers can follow four steps to achieve compliance and mitigate legal and nancial risks, even as regulations continue to change. 1. Understand obligations and identify values. The rst step in any strategic plan is to set goals that serve as guideposts for future decisions. To set optimal compliance goals, retailers must consider two elements: • The legal requirements in the markets where the retailer operates and sells. • Areas of priority for the brand in terms of environmental sustainability and responsible sourcing. Once they establish these priorities, retailers can decide where to focus employee efforts and resources to ensure they can achieve all of their compliance goals.

36 Inbound Logistics • July 2024