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Why You Shouldn't Skip This Important Audit

02/20/2015 05:02 EST | Updated 04/22/2015 05:59 EDT

Last fall at the UN's "Climate Summit 2014: Catalyzing Action," more than 150 governments, businesses, NGOs, Civil Society Organizations, and Indigenous Peoples endorsed a declaration to help safeguard the world's forests and tackle climate change in signing The New York Declaration on Forests.

Achieving the shared goal of ending global forest loss will not be possible without the commitment of business, a force that often has greater agility than government to mobilize resources quickly and implement the steps required to tackle urgent deforestation and climate change issues.

Many companies in Canada are just now waking up to the reality that their business' customers and consumers generally are demanding increased supply chain transparency, and that sustainability isn't just a buzz-word, but a concept of good environmental stewardship that's here to stay.

For those who are getting on board with this important and modern day business practice, a supply chain audit may be among the first fundamental steps required by a company to play a meaningful role in effecting global change. Only once there is a full understanding of the company's environmental impact, such as the implementation of Asia Pulp & Paper's Forest Conservation Policy, can a business begin to make the important decisions needed to affect a substantial positive impact.

The thought of auditing your company's supply chain can be daunting and overwhelming. Several questions come to mind: How much will it cost to audit our supply chain? We don't have an infrastructure in place to implement this audit, so where do we begin? Will auditing the supply chain reveal issues that will prove costly and damaging to our brand? Is it best to leave as-is until an issue manifests?

If the last question sounds familiar then it's definitely time to reevaluate your approach. Although investment and infrastructure are needed to audit suppliers, the fact is that delaying the process of auditing your supply chain to ensure that your business is at the very least compliant with environmental and social standards can prove to be more costly than proactive engagement with...? Stakeholders? Those on the ground? Activists? Worse, not taking proactive measures may have a long-term negative effect on your customer base and reputation.

The time is now to make a positive impact - be it socially or environmentally - and it's never been more cost-effective for companies to ensure their supply chain meets the requirements of customers, regulators, NGOs and international governmental bodies like the United Nations.

Here are three important points that should be taken into consideration when taking that important next step:

1. Misconception: Initiating a supply chain audit is prohibitively expensive and time consuming

When Chief Procurement Officers (CPOs) request a compliance and risk management audit, they invariably are hit with this question: "How much will this cost?" Part of the reason why CPOs and others are reluctant to engage in auditing their global supply chain is because of the misconception that it will cost too much and be far too time consuming. While some investment is needed to initiate the process, the investment is worthwhile in the long run considering the massive damage that could result if environmental or other harmful infractions are present within the supply chain.

The good news is that there is an existing infrastructure in place to help reduce costs, time and other resources. For instance, when my company Asia Pulp & Paper (APP) decided to initiate a comprehensive audit of its supply chain it engaged a third party, The Forest Trust (TFT), to help carry out this review.

2. The costs of inaction are far greater and potentially damaging

There are a multitude of examples demonstrating that the costs of inaction on supply chain improvements have wide-reaching and lasting financial and reputational consequences. For instance, a great example of a company that proactively sought to ensure the integrity of its supply chain is Sobeys. To help establish the baseline of their suppliers' sustainability practices, including social compliance, sustainable packaging, and reducing energy and water use, Sobeys commissioned a sample survey of their private label suppliers and worked with students in the Masters of Environmental Studies program at the University of Western Ontario to....do what exactly? Elaborate for a sentence here to drive the point home.

Sobeys highlights that "...the quantitative and qualitative insights gathered from the survey were instrumental in helping us engage and direct our suppliers toward greater sustainability. Examples of our actions include hosting a National Sustainable Seafood Summit meeting for over 150 of our suppliers to help educate them on sustainability issues, our activation plan and their role, participating in the pilot of the Global Packaging Project to better understand our suppliers' awareness of packaging sustainability issues, and providing selected suppliers with a sustainability packaging tool to help them with improved decisions on a package-by-package basis."

3. Gain a competitive advantage by being proactive

Companies are now able to leverage the various constituencies (e.g., NGO partners, audit tools, private consultancies) to take advantage of best practice audit processes and bolster the efficiency and competitiveness of their global supply chains. For instance, for companies launching large-scale CSR initiatives, engaging third parties allows them to reinforce CSR claims and can also help detect any risks in the supply chain, or breaches from suppliers that may not have previously been recognized.

Along these lines, a number of global brands have recently declared significant zero deforestation policies throughout their supply chains, ranging from Proctor & Gamble and Unilever, to Cargill and Mars. They correctly understood the financial, reputational, and environmental benefits of proactively launching these sustainability initiatives, which promote greater internal and external transparency into their supply chains.

While auditing your global supply chain may at first glance appear to be a costly, time consuming and seemingly insurmountable process, an existing infrastructure of widely available tools and resources affords companies the opportunity to do this audit efficiently and effectively. Ultimately, the benefits of acting now and making the necessary investment will pay long-term dividends for the future reputation and performance of your company.

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