AIM PROGRESS Responsible Sourcing Supplier event€¦ · Completion of a Self-Assessment...
Transcript of AIM PROGRESS Responsible Sourcing Supplier event€¦ · Completion of a Self-Assessment...
AIM PROGRESS Responsible
Sourcing Supplier eventNew Delhi, India
25th September 2017
Safety and logistics notice
Anti-trust caution
The Association shall not enter into any discussion,
activity or conduct that may infringe, on its part or on the
part of its members, any applicable competition law. By
way of example, members shall not discuss,
communicate or exchange any commercially sensitive
information, including non-public information relating to
prices, marketing and advertising strategy, costs and
revenues, trading terms and conditions with third
parties, including purchasing strategy, terms of supply,
trade programmes or distribution strategy. This applies
not only to discussions in formal meetings but also to
informal discussions before, during and after meetings.
Agenda – Morning
FROM TO Topic Speakers
8:30 9:00 Registration & tea/coffee
9:00 9:15 Welcome & Introductions
Sunil Gulati – Vice President Technical, INSWA BU, Coca-
Cola Company
RadhaMohan Gupta – Head of Procurement South Asia,
Reckitt Benckiser
Gaurav Gupta – Manager Social Accountability, Unilever
9:15 9:45
Overview of AIM-PROGRESS and
Responsible Sourcing
programmes
AIM-PROGRESS joint point of view on this topic
Nishi Chaturvedi - Human & Workplace Rights Director,
Coca-Cola Company
David Pettet - Global Human Rights Manager, Reckitt
Benckiser
Gaurav Gupta - Manager Social Accountability, Unilever
9:45 10:30Key updates 2017, an overview of
social auditing and SMETA 6.0Swapnil Savadi - Manager Audits, Intertek
10:30 11:15 Supplier testimonials
Surendra Agarwal - Founder, Creative Group of Industries
Surendra Babu - VP Human Resources, Alpla India Pvt.
Ltd
11:15 11:30 Coffee break
11:30 12:30 Anti-bribery & Corruption Kunal Gupta – Head of Investigations, Cyril Shroff
12:30 13:30 Lunch
Agenda - Afternoon
Welcome & Introductions
Sunil Gulati – Vice President Technical, INSWA BU, Coca-Cola Company
RadhaMohan Gupta – Head of Procurement South Asia, Reckitt Benckiser
Gaurav Gupta – Manager Social Accountability, Unilever
Overview of
AIM-PROGRESS
Nishi Chaturvedi - Human & Workplace
Rights Director, Coca-Cola Company
AIM-PROGRESS:
A global forum of branded, fast moving consumer goods manufacturers (FMCG) and common suppliers
Our mission: “Positively impacting people’s lives through our combined leadership of robust responsible sourcing practices throughout our supply chains”
AIM-PROGRESS comprised of 40+ member
companies
AIM-PROGRESS Member Scope
Our purpose
Raising the bar for responsible sourcing…
…in the FMCG supply chain…
…through converging standards and practices….
…thereby making a positive impact on people’s lives
Our 3 key objectives:
1. Building member capability
All member organisations are competent and executing robust responsible sourcing programs
2. Effectively assuring compliance in our supply chains
Ensuring increasing supplier compliance as expectations rise through having in place increasingly aligned practices, standards and metrics
3. Driving continuous improvement
Demonstrating activities of responsible sourcing which go beyond relevant legislation, international standards and company codes
Our activities
➢ Mutual Recognition • “An audit for one is an audit for all”
➢ Capability Building • of members and suppliers
➢ Human Rights • implementing UNGPs
➢ Business Integrity • tackling bribery and corruption in the supply chain
➢ Environment • taking your commitments through the supply chain
➢ Impact measurement• are we positively impacting people’s lives?
Mutual Recognition of Audits
An Audit for one AIM-PROGRESS member is an audit for
all AIM-PROGRESS members
The purpose of Mutual Recognition is to reduce audit
duplication in the supply chain. Recognizing ethical compliance
audits conducted on behalf of another member helps:
• Reduce audit fatigue and cost burden on suppliers
• Reduce time investment of buyers
• Shifts focus from audits to performance
Mutual Recognition of Audits
Framework Agreement
• All AIM-PROGRESS members
agree to the Mutual Recognition
framework
• Suppliers can share their audit
results in order to meet multiple
customer needs
• Shared list of over 10,000
audited suppliers
Getting Your Audit Recognized – 3 steps
✓ Complete an audit conducted by a recognized audit firm
and to a recognized standard as outlined in the
framework. Examples include: SMETA 6.0, URSA, SGP
**Ensure you utilize the most updated SMETA version for full recognition
✓ Pay for the audit to ensure you own the audit report and
can share the results
✓ Upload the results to a common platform like Sedex or
share the report directly with customers
Why are your customers interested in
Responsible Sourcing
➢ Consumers expect brands to behave in a responsible manner
➢ Companies need to know their supply chains and be able to trust their
suppliers
➢ Companies need to ensure that responsible sourcing assessment are
conducted to highlight gaps in the supply chain
➢ Responsible Sourcing enables ongoing improvement in the industry
AIM-PROGRESS helps increase efficiency by sharing data – “an audit for
one is an audit for all”
4 pillars of Responsible Sourcing
➢ Workers are treated fairly
➢ The workplaces are safe and
protect the worker’s health
➢ Companies care about their
environmental impact
➢ Companies behave with
integrity and honesty
Environmental
Management
Business
Integrity
Health &
Safety
Social/Human
Rights
Reputations: Hard to build... Easy to loose
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Legislation Trend: Disclosure/Certification
• Disclosure Requirements - e.g. UK Modern Slavery Act, CA Transparency in Supply
Chains Act
• Compliance Requirements – e.g. Executive Order 13627, Dodd-Frank,
Consumptive Demand Repeal
The Requirements reach across the supply chain
Overview of Responsible
Sourcing programmes
David Pettet - Global Human Rights Manager, Reckitt
Benckiser
Gaurav Gupta - Manager Social Accountability,
Unilever
Responsible Sourcing Cycle – Commonalities on the
supplier assessment journey
Synergies towards common
methods & data
Supplier Engagement
Supplier Assessment
Risk Assessment
Audit
Corrective Action Plan
Building Supplier
Capability
Common formats
include Sedex and
EcoVadis SAQs
Companies make
individual risk
assessments
Determined by
individual companies
Mutual Recognition: Companies agree to recognise audits done on behalf of other
customers. Audits can also be shared using online platforms.
Sharing of
methodologies for
corrective action plans.
Common supplier
training events
Supplier engagement and Assessment
Supplier
engagement and
Assessment
➢ Communication of requirements and
expectations: e-mail, supplier forums, phone,
contract negotiations, etc.
➢ Contact made by the customer, audit firms or other
third parties such as Sedex or EcoVadis
➢ Completion of a Self-Assessment Questionnaire
may be required:
➢ Useful tool for suppliers and buyers to assess
overall capabilities and risk and ensure
management processes are in place
➢ Risk-assessment
➢ ENGAGE and PARTICIPATE
Common Methods
➢ A physical on site assessment of the following 4-
pillars:
➢ Not fault finding but solution finding
➢ Collaborative effort
➢ Focus on Continuous Improvement
Audit - Overview
Human Rights & Labour
Standards
Health & Safety
EnvironmentBusiness Integrity
Step 4:
Audit
Common method
Corrective action plan
➢ Ensure Corrective Actions address the root cause of the noncompliance
➢ Not a tick box exercise – Tool to facilitate continuous improvement
➢ Implement a process to monitor CA implementation and success
➢ Timeframe and follow-up methods depend on the type of issue and the severity
• Desk based verification vs. follow-up visit
• Critical, Major, Minor categorization of issues
Corrective
Action Plan
Plan Do Check Act
Building member and supplier capability
➢ AIM-PROGRESS events and forums aim is to:
• Raise awareness and understanding of responsible
sourcing
• Increase supplier capability to improve compliance
within their own facility
• Work collaboratively to address regional challenges
• Provide the tools for suppliers to implement their own
programme
Building
capability
POLL● Prior to today, were you aware of the general principles of responsible sourcing and your
clients requirements concerning labour H&S, Environment and Business Integrity?
► Yes
► No
● Have you had an audit before?
► Yes
► No
● Which kinds of issues do you think are most often found during audits in the region?
► Business integrity
► Child labour
► Discrimination
► Environmental issues
► Forced Labour
► Freedom of Association
► Grievance Mechanisms
► Health and Safety
► Land Rights
► Working Hours
► Wages
Key updates 2017, an overview
of social auditing and SMETA
6.0
Swapnil Savadi - Manager Audits, Intertek
Supplier testimonial
Surendra Agarwal - Founder, Creative Group of
Industries
Supplier testimonial
Surendra Babu - VP Human Resources, Alpla India
Pvt. Ltd
Supplier testimonial
?
Coffee Break
Please be back ready for a 11:30 start
Anti-bribery & Corruption
Kunal Gupta – Head of Investigations, Cyril Shroff
AIM-PROGRESS RESPONSIBLE SOURCING
SUPPLIER EVENT
September 26, 2017
Kunal Gupta
Partner, White Collar Crimes
Cyril Amarchand Mangaldas, New Delhi
AGENDA
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Anti – Corruption Legal FrameworkB
FCPA, 1977 D
Prevention of Corruption Act, 1988C
AGENDA
Collaborative & Collective ActionG
Factual ScenariosH
Enforcement TrendsF
The ‘Anti – Corruption’ ProblemA
E U.K. Bribery Act
THE ‘ANTI-CORRUPTION’
PROBLEM
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International Landscape
▪ In recent years, there has been a growing international consensus that corruption must be combated.
▪ Nearly three quarters of the 178 countries in the Corruption Perceptions Index score below five, on a scale from 10 (highly clean) to 0 (highly corrupt), suggesting a perception of widespread corruption among public officials.
▪ Under a number of international conventions, countries that are parties undertake commitments to adopt a range of preventive and criminal law measures to combat corruption.
▪ OECD - Convention on Combating bribery of Foreign Officials in International Business Transactions, 1998 (Anti Bribery Convention)
▪ United Nations Convention Against Corruption, 2005
▪ Inter–American Convention Against Corruption, 1996 (ICAC)
▪ Council of Europe – Group of States Against Corruption, 1999 (GRECO)
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From Transparency International’s Corruption Perception Index 2016
This Heat Map Highlights Corruption is a Global Issue
Where is your
supply chain
located? The
darker the color,
the greater the
corruption risk
Why is India unique from an anti-corruption perspective?
▪ Due to historic reasons, a medium to strong form of government regulation in almost all sectors
▪ Businesses cannot avoid dealing with state or its instrumentalities because state is also present in
many non-traditional sectors
▪ Banking –Public Sector Banks
▪ Utilities – Power, Water etc.
▪ Customers – PSEs
▪ Public sector employees are on an average paid salaries less than their peers in private sector with
the same experience creating incentives for rent seeking
▪ India ranks 79 out of 176 countries in Transparency International’s Corruption Perception Index
(CPI)
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Corruption: The Cost to Business
▪ Corruption, broadly defined, is the single greatest obstacle to economic and social development around the
world.
▪ Corruption distorts markets, stifles economic growth, debases democracy and undermines the rule
of law, thus, contributing to conflict and instability.
▪ It has been estimated, for example, that the cost of corruption equals more than 5% of global GDP (US $2.6
trillion), with over US $1 trillion paid in bribes each year.
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Source: Kroll Global Fraud & Risk Report 2016-17
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Corrupt practices include:
• Bribery
• Facilitating or “Grease” Payments
• Kickbacks
• Extortion
• Fraud
• Bid rigging
• Suppliers who corruptly bypass health and safety
requirements
• Suppliers who avoid necessary licensing
• Suppliers who pay bribes to customs officials or
licensing authorities
• Suppliers who pay bribes to government officials
to bypass taxes
Common Forms Of “Corrupt Practices”
ZERO TOLERANCE POLICY!!
ANTI- CORRUPTION LEGAL
FRAMEWORK
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Indian Legislations Global Legislations
Prevention of Corruption Act, 1988
The Indian Penal Code, 1890
All India Services (Conduct) Rules, 1968
Central Civil Services (Conduct) Rules, 1964
Code of Conduct for Ministers as notified by theMinistry of Home Affairs
Central Vigilance Commission Act, 2003
Delhi Special Police Establishment Act, 1946(DSPE Act)
Lokpal and Lokayuktas Act, 2013
Foreign Corrupt Practices Act , 1977
Bribery Act, 2010 (UK)
Corruption of Foreign Public Officials Act(Canada)
OECD Convention on Combating Bribery ofForeign Public Officials in International BusinessTransactions
Inter-American Convention Against Corruption
United Nations Convention Against Corruption
PREVENTION OF CORRUPTION ACT
1988
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Prevention of Corruption Act, 1988
▪ Key anti-corruption legislation in India. Criminalises practice of bribery by public officials
▪ Covers the following three categories of offenders:
➢ A bribe taker who is a public servant (Demand side of bribery)
➢ Bribe giver (Supply side of bribery)
➢ Middlemen who influences a public servant (either by a payment or personal influence).
▪ Wide definition of ‘public servant’ and includes employees of government-owned and statutory corporations.
▪ Bribe is a bribe – cash or kind
▪ Punishment ranges between 6 months and 5 years along with a fine. In certain cases of habitual offenders imprisonment could be 7 years.
▪ There is no limit on the maximum fine payable.
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Prevention of Corruption Act, 1988
NOTE !!
▪ Public official is covered very broadly – for example, bank manager of a private bank is also a public official
▪ There is no minimum bribe. A bribe of 10 Rupees is as bad as 10 Lac Rupees !!
▪ Not necessary that payment should be given, mere offer for payment would qualify
▪ There are a number of cases where private officials of companies are being prosecuted – 2G, Coal Scam etc.
▪ PCA enforcement leads to multiple other enforcements – Enforcement Directorate, SFIO, Department of Revenue Intelligence – all these targetindividuals as well as companies.
▪ Small bribe payments that are disclosed as a result of US law are picked up by Indian agencies. E.g., Embraer, Walmart.
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FOREIGN CORRUPT PRACTICES ACT
1977
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Foreign Corrupt Practices Act, 1977
▪ The FCPA’s two main areas of focus are:
▪ Anti-Bribery Provisions
▪ Accounting Requirements
▪ The Anti-Bribery Provisions
▪ Prohibit offering anything to a non-U.S. government official for an improper purpose – a quid pro quo in order to influence official actionor obtain an improper advantage.
▪ The Accounting Provisions
Require U.S. issuers to:
▪ Keep accurate books and records and report transactions in reasonable detail and
▪ Create and maintain adequate internal controls over accounting records and assets
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FCPA Bribery Principles• Who is subject to the FCPA?
• Company, its subsidiaries, its agents.
• What are “things of value”?
• Cash, travel, lavish entertainment or gifts (e.g. expensive liquor, gifts for spouses, paid vacations),pleasure trips to resorts, adult entertainment, employment of a relative, sponsorship
• Who is a government official?
• Anyone in executive, legislative or judicial agency
• Political candidates
• Employees of state-owned-enterprises
• What is an “indirect” bribe?
• Any action by a third party that you are aware is likely to result in giving an improper personalbenefit to a government official
Consequences of FCPA Violation
▪ The FCPA carries criminal penalties and fines of up to:
▪ $2 million or twice the gain for companies
▪ $100,000 for individuals and up to five years imprisonment
▪ A person or firm found in violation of the FCPA may be:
▪ barred from doing business with the federal government;
▪ ruled ineligible to receive export licenses;
▪ barred from securities business; and
▪ may be suspended from agency programs of the Commodity Futures Trading Commission and the Overseas Private InvestmentCorporation
▪ FCPA issues are also fertile ground for plaintiff actions or competitor lawsuits.
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THE BRIBERY ACT, 2010 (UNITED KINGDOM)
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UK Bribery Act
• The UK Bribery Act 2010 came into force on 1 July 2011
• It is considered as one of the biggest reforms, a single Act of Parliament simplified the old legal structure and modernised the law of bribery
• The UK Bribery Act addresses not just Public Bribery but also Private Bribery
• Broadly, the Act defines bribery as giving or receiving a financial or other advantage in connection with the "improper performance" of a position of trust, or a function that is expected to be performed impartially or in good faith
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UK Bribery Act - Offences
• Two general offences covering the offering;
• Active bribery (promising or giving of a bribe)
• Passive Bribery (the requesting, agreeing to receive or accepting of a bribe);
• It sets out two further offences which specifically address commercial bribery:
• Section 6 of the Act creates an offence relating to bribery of a foreign public official in order to obtain or retain business or an advantage
in the conduct of business
• Section 7 creates a new form of corporate liability for failing to prevent bribery on behalf of a commercial organization.
ENFORCEMENT TRENDS
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Key domestic trends
▪ Use of technology – Almost every investigation conducted by investigation authorities involve use of forensic
technology involving imaging of laptops, computers and mobile devices
▪ Liability of the directors and officers of the company – Trend to regard a separate corporate action as one
single transaction leading up to the alleged payment of bribe
▪ Regulatory co-ordination – Action which is undertaken by one agency may likely lead to actions by other
agencies as well.
▪ Fallout of a global regulatory enforcement – Corporate disclosures or regulatory actions which are public and
with an Indian connection are regularly being examined by domestic investigation agencies
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Deals in news
NEED FOR COLLABORATION
AND COLLECTIVE ACTION
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Many anti-corruption law
violations involve 3rd parties
like you.
Fact:
About 90% of FCPA
violations involve 3rd parties
So why should Anti-Corruption Law Compliance
matter to you?
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Anti-Corruption Law Compliance: How – An Effective Compliance
Program
Values & Standards Executive Oversight Due Diligence
Training /
Communication
Internal
Controls
Continuous
Improvement
How to manage your corruption risk:
Proactive Program and Process
Ethics and Compliance Program
Recognize Issue
Respond appropriately
Report Immediately
Notify Customer
Investigate Situation
Establish a Robust Issue Response Process
Hallmarks of an Effective Anti-Corruption Compliance Program
✓ Conducting periodic and targeted ethics and compliance risk assessments
✓ Commitment from Senior Management and clearly articulated policy against corruption
✓ Code of Conduct and ethics and compliance policies and procedures
✓ Appropriate oversight and autonomy by Chief Ethics and Compliance Officer, adequate resources, and access to senior
management and the Board
✓ Providing appropriate ethics and compliance training and continuing advice
✓ Implementing a system of consistent disciplinary measures and appropriate incentives
✓ Implementing a process for internal controls and appropriate delegation of approval Authority
✓ Implementing processes for third-party due diligence and payments
✓ Devising a system for confidential reporting of concerns and internal investigations
✓ Continuous improvement, including periodic assessments and evaluations
What more should prudent suppliers do?
66This training presentation is not intended to provide legal advice.
Our Supply Chain is only as strong as its weakest link.
Let’s work together.
Collective action is needed to effectively combat corruption
• Maintain a “speak-up” line for your employees and suppliers.
• Investigate corruption allegations thoroughly and impartially.
• Provide anti-corruption training to your employees.
• Tighten your policies and processes. Remember – anti-corruption is
also indicative of a leaky organization
FACTUAL SCENARIOS
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Scenario 1
A manufacturer of food products receives ingredients from a supplier. The supplier is subject to inspection by the local
health department. During the inspection the local health official informs the supplier that some of its perishable items
are beyond their expiration date and may not be used as ingredients in food products for public consumption. A
supplier employee pays the inspector a bribe to ignore the problem, and the supplier ships the ingredients to the
customer. A supplier employee who witnessed the bribe calls the customer’s reporting hotline and informs the
customer of the bribe and the shipment of the ingredients. What should the customer do?
How should you respond?
The supplier should stop use of the ingredients and promptly assess all legal, operational, and reputational risks and remedies:
✓ Conduct an independent audit to assess any actual risks to product or consumer health and safety
✓ Ensure that the product recall and other contingency plans are up-to-date
✓ Carry out a complete investigation of the matter, and if necessary, assist in notifying the authorities
✓ Investigate, in conjunction with its management, whether the bribe was an isolated incident or indicative of a systemic practice
✓ Inform the health inspector’s supervisor of the incident
Scenario 2
A supplier produces widgets for a customer. The contract specifies certain deadlines by which the widgets must bedelivered, and imposes substantial penalties for late delivery. The supplier orders certain component parts for thewidgets from outside the country. These parts arrive in port, but are held up in customs, where a local customsofficial demands a payment from the supplier before he will release the goods. The supplier will incur significantpenalties under the contract with its customer if the parts are not received immediately for the production ofwidgets. What should the supplier do?
How should you respond?
✓ The supplier should refuse to pay the bribe, explaining that it violates the business principles of the company.
✓Make a record of the relevant interaction
✓ Immediately report to supplier management or the appropriate officer responsible for matters involving the code of conduct
✓ Return to the customs official with at least one witness and explain that the supplier would like the goods released if they are in compliance with customs regulations, otherwise the official should indicate specifically what is not in compliance and the supplier will correct the problem
✓ If the bribery demand is reiterated inform the customs official that this practice is not acceptable
✓Notify the customer that delivery may be delayed as a result of the bribery demand from the customs official, and work with the customer to find a solution
Scenario 3
During a solicitation for bids, a procurement manager approaches one of the potential suppliers andoffers to secure the contract in exchange for a payment (“kickback”). What should the Supplier do?
How should you respond?
✓Supplier should refuse to make the corrupt payment on the grounds that such payment violates thebusiness principles of the company and may violate applicable laws, and could lead to dismissal andcriminal prosecution.
Scenario 4
A company outsources certain production to a supplier. The unit price the customer pays is based on a combinationof production cost and a predetermined margin for the supplier. Because production cost is dependent on the hoursworked by the relevant supplier operators, the contract requires that the supplier inform the customer of actual workhours. The customer receives an invoice from the supplier that contains inconsistencies in reported work hours. Athorough examination of the invoice reveals that the supplier may have inflated work hours. The customer reportsthe same to the supplier. What should the supplier do?
How should you respond?
The supplier should investigate, perhaps in conjunction with supplier’s management, whether inaccuracies in the invoice were inadvertent or intentional, and if intentional, whether an isolated incident or a systemic practice:
✓ Review pay slips, ledgers, etc.
✓ Interview supplier managers or supervisors to verify work hours.
✓ Review all prior invoices generated by the relevant supplier manager to check for similar inaccuracies
✓ If the supplier manager intentionally overbilled and the incident was isolated, the supplier senior management should warn the manager that any future incident will result in contract termination.
✓ If the supplier manager intentionally overbilled and the practice is systemic, the supplier senior management should terminate contract with the supplier manager.
THANK YOU
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LunchPlease be in the correct meeting room for a 13:30
start
In Crystal room 2
In Crystal room 3
In Crystal room 4