Reputational Risk Throughout the Supply Chain

Reputational Risk Throughout the Supply Chain

In 2013, the Rana Plaza building in Bangladesh collapsed, killing more than 1,100 people who worked at the garment factories housed inside. Over 2,500 workers were injured.

Clothing companies associated with the garment factories involved made headlines, suffering reputational damage as they were linked to the unsafe conditions that caused the collapse.

In response, investors representing $4.5 trillion in assets under management united to urge a corporate response through the Bangladesh Investor Initiative. Among the recommendations were that companies publicly disclose all of their suppliers, including those from Bangladesh.

Now, companies such as Everlane, a California-based clothing company, have taken supplier transparency as far as to disclosure the exact factory and associated working conditions for each of their garments.  

The Rana Plaza incident is just one of many types of reputational risk that companies are exposed to via the supply chain, and their first and second-tier suppliers.

In their day-to-day operations, companies may encounter risks such as:

  • Employee exposure to unsafe work conditions, underpayment and/or workplace harassment.
  • Modern slavery in the supply chain.
  • Actions that may call environmental harm.
  • Bribery and corruption.

When these issues come to the public’s attention, it can have a negative impact on the bottom line, including decreased sales, a drop in stock prices, and loss of investor funding.

To learn more about the corporate social responsibility issues that can affect reputational risk, download our eBook, Corporate Social Responsibility: A Quick-Start Guide to CSR & Your Supply Chain.

Suppliers can also introduce these risks across the supply chain, as seen in the Rana Plaza collapse. The companies involved suffered from brand damage because their suppliers were operating with unsafe working conditions. In order to mitigate these risks, companies should carefully consider and evaluate supplier risk.

According to studies, CSR activities that mitigate risk also play an important role in improving a company’s brand image and reputation, as well as customer satisfaction.

Activities that mitigate reputational risk may include:

  • Aligning with industry standards for corporate social responsibility.
  • Conducting proper due diligence on suppliers.
  • Implementing a verification process for supplier-submitted data.
  • Performing regular audits and inspections of supplier factories.
  • Enforcing a strong code of conduct for both employees and suppliers.
  • Delivering education on risk areas to employees and suppliers.

If companies are unable or unwilling to implement socially responsible practices, they risk being sidelined by investors, consumers, business partners and employees alike.

The Assent Compliance Platform helps companies streamline the collection of supply chain data to support a variety of risk mitigation activities. To learn more about Assent’s Corporate Social Responsibility Suite, email