🌿Ethical Supply Chain Management Unit 11 – Global Supply Chain Regulations & Compliance

Key Concepts & Definitions

• Global supply chain regulations set of rules and standards governing the flow of goods, services, and information across international borders
• Compliance adherence to laws, regulations, and standards applicable to an organization's operations and supply chain
• Trade agreements international treaties that establish rules and guidelines for trade between participating countries (NAFTA, EU-Japan Economic Partnership Agreement)
• Tariffs taxes imposed on imported goods to protect domestic industries or generate revenue for the government
• Non-tariff barriers (NTBs) restrictions on imports or exports that are not in the usual form of a tariff, such as quotas, embargoes, sanctions, and levies
• Harmonized System (HS) internationally standardized system of names and numbers to classify traded products
• Rules of origin criteria used to determine the national origin of a product in international trade
• Intellectual property rights (IPR) legal rights over creations of the mind, including patents, trademarks, and copyrights

Global Trade Agreements & Regulations

• World Trade Organization (WTO) intergovernmental organization that regulates and facilitates international trade between nations
  • Provides a framework for negotiating trade agreements and resolving trade disputes
  • Promotes free trade by reducing barriers and ensuring a level playing field for all members
• General Agreement on Tariffs and Trade (GATT) multilateral agreement that laid the foundation for the WTO, focusing on reducing tariffs and other trade barriers
• Regional trade agreements (RTAs) reciprocal trade agreements between two or more partners, such as free trade agreements (FTAs) and customs unions
• Generalized System of Preferences (GSP) trade program that provides preferential duty-free treatment for goods imported from designated beneficiary countries
• Export controls laws and regulations that restrict the export of certain goods, services, and technologies to protect national security and foreign policy interests
• Sanctions economic or financial penalties imposed by governments or international organizations against countries, entities, or individuals to pressure them to change their behavior
• Anti-dumping measures taken by a country to protect its domestic industries from foreign companies selling products at prices below fair market value
• Countervailing duties additional import duties imposed to offset subsidies provided by foreign governments to their exporters

Compliance Frameworks & Standards

• International Organization for Standardization (ISO) independent, non-governmental organization that develops and publishes international standards for various industries
  • ISO 9001 Quality Management Systems standard that sets out requirements for a quality management system
  • ISO 14001 Environmental Management Systems standard that specifies requirements for an effective environmental management system
  • ISO 45001 Occupational Health and Safety Management Systems standard that provides a framework for managing risks and opportunities related to health and safety in the workplace
• Social Accountability International (SAI) SA8000 standard that measures social performance in eight areas important to social accountability in workplaces
• Worldwide Responsible Accredited Production (WRAP) certification program for the sewn products sector, ensuring safe, lawful, humane, and ethical manufacturing practices
• Customs-Trade Partnership Against Terrorism (C-TPAT) voluntary supply chain security program led by U.S. Customs and Border Protection (CBP) to enhance international supply chain security
• Authorized Economic Operator (AEO) program that provides simplified customs procedures for operators who meet certain criteria related to the security of their supply chains
• Global Reporting Initiative (GRI) international standards for sustainability reporting, helping organizations understand and communicate their impacts on environmental, social, and governance issues

Risk Management in Global Supply Chains

• Identifying potential risks assessing the likelihood and impact of various risks, such as supply disruptions, quality issues, or compliance violations
• Mitigating risks implementing strategies to reduce the likelihood or impact of identified risks (diversifying suppliers, improving communication, or investing in technology)
• Business continuity planning process of creating systems of prevention and recovery to deal with potential threats to a company's operations
• Due diligence process of investigating and verifying information about potential business partners, suppliers, or investments to identify and manage risks
• Supplier audits systematic examination of a supplier's processes, systems, and facilities to assess their compliance with relevant standards and regulations
• Traceability ability to track the movement of a product or its components through the supply chain from origin to end-user
  • Helps identify the source of issues and facilitate recalls if necessary
  • Enables companies to demonstrate compliance with regulations and customer requirements
• Contingency planning preparing for and responding to potential disruptions in the supply chain, such as natural disasters, labor disputes, or geopolitical events

Ethical Considerations & Corporate Responsibility

• Corporate social responsibility (CSR) a company's commitment to managing its environmental, social, and economic impacts and contributing to sustainable development
• Human rights ensuring that supply chain practices respect and promote the fundamental rights and freedoms of all individuals involved in the production process
• Labor standards regulations and guidelines that aim to protect workers' rights, health, and well-being (minimum wage, working hours, and safe working conditions)
• Environmental sustainability minimizing the negative environmental impacts of supply chain activities and promoting the efficient use of resources
• Responsible sourcing practices that ensure the materials and products sourced by a company are obtained in an ethical, legal, and sustainable manner
• Conflict minerals tin, tantalum, tungsten, and gold (3TG) that are mined in areas of armed conflict and human rights abuses, particularly in the Democratic Republic of the Congo (DRC) and adjoining countries
  • Dodd-Frank Act (Section 1502) requires U.S. publicly traded companies to disclose their use of conflict minerals and conduct due diligence on their supply chains
• Transparency openly communicating information about a company's supply chain practices, policies, and performance to stakeholders
• Collaboration working with industry partners, NGOs, and governments to address shared challenges and promote responsible business practices in global supply chains

Technology & Data in Compliance

• Supply chain visibility leveraging technology to gain real-time insights into the movement of goods, information, and finances across the supply chain
• Blockchain distributed ledger technology that enables secure, transparent, and tamper-proof record-keeping and information sharing among supply chain participants
  • Enhances traceability, reduces fraud, and improves efficiency in supply chain processes
  • Examples include IBM Food Trust and TradeLens (shipping industry)
• Internet of Things (IoT) network of connected devices that collect and exchange data, enabling real-time monitoring and optimization of supply chain operations
• Artificial Intelligence (AI) and Machine Learning (ML) technologies that enable automated data analysis, predictive analytics, and decision support in supply chain management
• Big data large, complex datasets that can be analyzed to reveal patterns, trends, and insights to inform supply chain strategies and compliance efforts
• Cloud computing delivery of computing services (storage, databases, software) over the internet, enabling scalable and flexible supply chain solutions
• Cybersecurity measures taken to protect supply chain data, systems, and networks from unauthorized access, use, disclosure, disruption, modification, or destruction
• Digital twins virtual representations of physical supply chain assets, processes, or systems that can be used for simulation, optimization, and decision-making

Case Studies & Real-World Applications

• Rana Plaza factory collapse (Bangladesh, 2013) highlighted the need for improved labor standards and building safety in the garment industry supply chain
  • Led to the formation of the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety
• Foxconn labor practices (China) electronics manufacturing company faced scrutiny over working conditions, wages, and labor rights violations in its factories
  • Apple, a major customer, implemented supplier responsibility programs and audits to address these issues
• Mattel toy recalls (2007) company recalled millions of toys due to safety concerns related to lead paint and small magnets, highlighting the importance of quality control and supplier management
• Conflict minerals in the electronics industry companies like Intel, Apple, and Microsoft have implemented due diligence processes and reporting to ensure responsible sourcing of 3TG minerals
• Patagonia's Footprint Chronicles initiative that provides transparency into the company's supply chain, including information on suppliers, materials, and environmental impacts
• Unilever's Sustainable Living Plan company's commitment to sourcing 100% of its agricultural raw materials sustainably and enhancing the livelihoods of smallholder farmers in its supply chain
• COVID-19 pandemic disruptions global health crisis exposed vulnerabilities in supply chains, leading companies to reassess their risk management strategies and invest in resilience and agility

Future Trends & Challenges

• Increasing complexity of global supply chains as companies expand their operations and supplier networks across multiple countries and regions
• Growing emphasis on sustainability and circular economy principles in supply chain management, driven by consumer demands and regulatory pressures
• Adoption of Industry 4.0 technologies (IoT, AI, robotics) to enable smart, connected, and autonomous supply chain operations
• Heightened focus on supply chain resilience and risk management in the wake of global disruptions like the COVID-19 pandemic and geopolitical tensions
• Evolving regulatory landscape with new and stricter requirements for transparency, due diligence, and reporting on supply chain practices (e.g., EU Conflict Minerals Regulation, UK Modern Slavery Act)
• Skill gap and talent shortage in supply chain management, particularly in areas like data analytics, digital transformation, and sustainability
• Balancing cost, speed, and sustainability in supply chain decisions as companies face pressure to optimize their operations while meeting stakeholder expectations
• Collaboration and partnerships among industry players, governments, and NGOs to address systemic challenges and drive positive change in global supply chains