18 February 2013 | Adam Leach
The majority of companies are oblivious to whether unethical or improper activity is going on in their supply chain, because they are not carrying out due diligence.
A survey by consultancy Ernst & Young revealed just 48 per cent of UK firms carry out due diligence on their supply chain, with 30 per cent admitting they had not carried out any checks whatsoever.
The survey, which was based on interviews with procurement managers and directors, revealed just 6 per cent of respondents had received notification of unethical activity in their supply chain, while 14 per cent didn’t even know what third party due diligence meant.
John Smart, partner and UK head of Ernst & Young’s fraud investigation team, said in a statement: “The current issues around contamination of products have highlighted the importance of understanding and ensuring the integrity of the supply chain, which is a big part of the DNA of many businesses. Companies are, in most cases responsible for the actions of third parties acting in their name; however our research reveals that firms, across a range of sectors, are not carrying out basic checks.”
The firm also highlighted the importance of having procedures in place to address supply chain risks with regard to the UK Bribery Act. Under the legislation, companies are required to demonstrate that they have adequate procedures in place to address the risks. If they are found to have fallen short of the requirements, they can face sizeable fines or executives could be sent to prison.
Ernst & Young surveyed 50 UK companies with a turnover of £5 to 50 million.