Responsible Business Under Duress: Managing the Coronavirus Impact on Supply Chains

Responsible Business Under Duress: Managing the Coronavirus Impact on Supply Chains

Coronavirus has disrupted supply chains, and some of the world’s largest brands are building new partnerships to mitigate the impact.

The pandemic’s damage may vary depending on the region of operations or supply chain tier, but generally, it includes worker shortages, financial insolvency, supply shortages and mandatory work closures. As we’ve seen, any combination of these can disrupt business indefinitely.

Some companies have knee-jerk reacted to this disruption by exercising “force majeure” clauses in their contracts to cancel purchasing orders and halt shipments. This often leaves the supplier on the hook for the merchandise, which can be financially crippling for them and their workers.

Meanwhile, other brands are working with suppliers to protect the business relationship, rather than inflict further financial losses. In doing so, they avoid the risk of being remembered as a company whose morals folded under pressure. And so, better business practices are forming under the duress.

Coronavirus & Reputation Risk

Major consumer-facing brands — especially those with public commitments to human rights — know that non-governmental organizations (NGOs) and activists are watching to see how they respond to the pandemic. And the resources available for analysts to do so, including worker reports and disclosures, will only continue to expand and grow more sophisticated.

A poor corporate response to the pandemic can also erode trust between business partners. It is far more beneficial to build a new, fair agreement with suppliers, rather than damaging or terminating the relationship.

Some companies have made mutually beneficial adjustments to payment terms to help keep suppliers in good financial standing. Consumer goods giants such as L’Oréal S.A. and Unilever are expediting payments to and/or shortening payment terms with struggling suppliers. These actions tend to be part of a more broad, corporate humanitarian response to the pandemic.

Ultimately, the coronavirus is a new supplier risk set to navigate, and best practices are emerging, including a guidance on human rights impacts and business response strategy published by the Institute for Human Rights and Business. This includes taking additional steps to know the supply chain to “anticipate operational issues that may emerge, as well as take proactive corrective steps to work with suppliers in managing the crisis.”

Geographical impact data can help companies figure out which of their suppliers may be most-affected by the pandemic, and weigh their decisions against additional human rights and trade criteria. This is crucial to maintaining business continuity through supply chain disruptions.

Coronavirus & Supply Chain Transparency

Coronavirus’s impact on supply chains is already staggering, and changing by the minute. Businesses with real-time transparency into those impacts are in a better position to not only mitigate the financial and reputational risk, but establish your company as a leader. The most efficient way to provide this visibility is through supply chain data management technology.

Assent’s COVID-19 Supply Chain Impact Map allows companies to navigate pandemic-related disruptions geographically, rather than through disclosures made by the supplier. This insight can mitigate the pandemic’s damage to both your supply chain and company, and help you build enduring supplier relationships.

For more information about how Assent can help you mitigate the damage coronavirus and other disruptions can do to your supply chain, contact us at info@assentcompliance.com.

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