Creating a Nuanced Responsible Sourcing Program

Introducing our Risk Profile Builder

Due diligence. We hear it consistently in dialogue surrounding supply chains, but it is often broadcast without clear indicators of how it is achieved. Many responsible sourcing programs cover the fundamentals of ESG but lack the nuance necessary to meet new due diligence requirements. This month, LRQA is pleased to announce the launch of its Risk Profile Builder in EiQ, expressly designed to help businesses customize metrics that enhance your due diligence efforts. This new feature ends ambiguity over how effective risk mapping is conducted and enables companies to develop an interoperable risk mitigation framework that spans multiple geographies.

We will look at ways in which the Risk Profile Builder is used to address problems stemming from modern supply chain due diligence requirements and ways companies can use it to address zero tolerance issues related to their specific program.

Why tailored programs matter

Think of every territory where new supply chain laws have been implemented or proposed recently: Germany, Switzerland, the US, Canada, the EU, as well as where they were already in place: Australia and the UK. (See more about regulations worldwide with our new interactive Supply Chain Due Diligence Legislation Map.)

Each country and law may have varied requirements and yet businesses with operations in multiple regions must adhere to each country’s mandates. A one-size-fits-all approach to due diligence is no longer viable, and a new level of tailoring must occur to rebuild programs to face the demands of legislation today.  A company’s due diligence system must be agile enough to address each component of ESG with unique risk resolutions.

Examples of regulatory coverage. The image on the left shows the focuses of the German Due Diligence Law, and on the right displays the focus of the United States Uyghur Forced Labor Prevention Act (UFLPA)  

Reaching the next level of due diligence

With the new Risk Profile Builder in EiQ, companies can tailor their supply chain risk profiles for specific areas of focus based on custom weightings and supply chain ESG indices. This feature allows businesses to conduct risk mapping based on the regulations and requirements that apply to their individual supplier base.

Companies are using this feature to manage their due diligence processes. A couple of examples of this framework include:

The German Supply Chain Due Diligence Act

 EiQ Heat Map using Metrics Associated to German Due Diligence Law 

Our Risk Profile Builder allows a company to customize their risk view and select indices related to the German due diligence law such as Forced Labor, Child Labor, Freedom of Association, Occupational Safety, Wages, Environment Management. EiQ produces a risk map in real-time based on these customized metrics, such as the heat map above, and allows users to customize the weighting of each metric.

This also applies outside of regulations. Companies can adjust weightings and indices to reflect investor priorities for external reporting purposes. This level of nuance allows for different risk views of supply chains to enhance risk mitigation and monitoring and enables more effective segmentation of high-risk areas. Not all “high-risk” is the same, depending on different indices and ESG factors. This new view will allow a more granular focus to promote better deployment of financial resources and capacity building measures. For example, companies wanting to prioritize zero tolerance labor risks may use the framework below:

Zero Tolerance Risk View: Forced Labor and Child Labor

Heat Map using Zero Tolerance Metrics: Forced Labor and Child Labor

Prioritizing Environmental Risk

Companies looking to prioritize environmental risk to align with targets for cutting carbon emissions or lowering their carbon footprint may use the custom index to focus on metrics such as air emissions and wastewater violations, as indicated in the map below.

Heat map using Environmental metrics: Environmental Management, Air Emissions, Waste Management, and Wastewater Violations

Rooting out Corruption: Business Ethics and Transparency

Companies may also want to focus on business ethics within their supplier base and therefore can generate a risk view using the metrics of Transparency, Business Integrity, and Worker Contracts, as shown in the map below.

Heat Map using Corruption metrics: Transparency, Business Integrity, and Worker Contracts

Companies are currently caught on their heels and forced to react as new regulations surface. With tools like our Supply Chain Due Diligence Map and Risk Profile Builder in EiQ, companies can be better positioned to proactively prepare for any new regulations developing worldwide. Rather than an arbitrary view of risk mitigation, the Risk Profile Builder allows for the true intentional risk targeting necessary to meet the demands of investors, governments, consumers, and beyond.

Find out more about our Risk Profile Builder by booking a free demo of EiQ here.