What's Happening?
Recent audits reveal significant social and environmental compliance gaps within North American supply chains, challenging the assumption that such risks are predominantly overseas. Data indicates that 41% of North American sites have wage-related compliance issues,
and thousands face waste management violations. Fire safety protocols are critically overlooked, posing operational risks. As companies adjust their supply chains due to geopolitical tensions and tariffs, they are moving sourcing closer to home, which presents its own set of challenges. Increased visibility through audits has led to a 10-fold increase in SMETA audits over seven years, highlighting the need for thorough due diligence to mitigate these issues.
Why It's Important?
The findings underscore the importance of proactive risk management and compliance assessment in building resilient supply chains. As trade rules tighten, responsible sourcing expectations grow, and businesses that address compliance risks early can prevent disruptions such as fines or product seizures. Social and environmental concerns can directly affect supply chain performance, leading to lower productivity and operational disruptions. Companies that engage with suppliers to improve social and ethical standards lay strong foundations for supply chain stability, benefiting from improved productivity, energy efficiency, and reduced operational costs.
What's Next?
Legislation worldwide is introducing stricter supply chain due diligence laws, increasing responsibility on businesses to ensure sustainable practices. Companies that proactively improve supply chain visibility are better positioned for successful compliance, avoiding consequences like product seizures. Collaboration with suppliers is essential to combat supply chain disruptions and address sustainability risks. As manufacturers increase due diligence activities, supplier support is crucial for accessing information from lower tiers of the supply chain.
Beyond the Headlines
The shift towards onshoring and nearshoring in response to geopolitical tensions and tariffs highlights a broader trend in supply chain management. This move is not just about reducing overseas risks but also about addressing domestic compliance challenges. The increased focus on sustainability and ethical practices reflects a growing consumer demand for transparency and accountability in supply chains.
