How Supply Chain Due Diligence meets Product Compliance
Around six months ago, I posted about Where Supply Chain Due Diligence meets Product Compliance. While the central statements in that blog post still hold true, existing regulatory requirements have further come to the fore and new requirements are appearing on the horizon, partly even with an extended scope, such as the European Corporate Sustainability Due Diligence Directive. But not only the regulatory landscape has evolved. The SAP solution portfolio for Environmental, Social, and Governance (ESG) topics has also evolved since then:
- In the SAP Business Network, suppliers can now prepare for human rights due diligence requests from their buyers with out-of-the-box self-assessment questionnaires and share this information easily via their network (link)
- In SAP Ariba Supplier Risk, a rich set of capabilities to manage central aspects of Human Rights Due Diligence Acts compliance with your supply base has been released over the past months (link)
On top of these significant innovations to manage due diligence risks on the supplier level, the foundation to manage the impact of these risks on a product level has been laid in SAP S/4HANA Cloud for product compliance, a solution natively integrated into SAP S/4HANA Cloud. This kind of integration allows you to attach not only human rights due diligence, but also other sustainability aspects of supply chain due diligence seamlessly to the core business processes of your company like procurement and sales. On top of that, you can immediately benefit from latest innovations released each month with minimal disruption to your business. Later, these innovations are planned to become also available in further SAP S/4HANA offerings.
Before giving a first glimpse into how supply chain diligence meets product compliance in the new solution capabilities, let’s briefly recap on where supply chain due diligence meets product compliance:
- The product dimension and its determinable product risk is a crucial factor in the overall risk analysis as part of due diligence activities
- When identifying appropriate remedial measures on supplier level, it makes sense to consider the correlation to the marketability of your products as well, and even to also implement measures on the product level.
- Mapping supplier specific risks to the product level enables you to leverage a sustainable supply chain as a catalyst for new business models
- From a legal perspective, environmental risks are in some cases directly addressed in due diligence acts, as for example Persistent Organic Pollutants, Mercury or Waste and in most of these cases, there is a specific correlation with products and their composition.
For details and examples, let me point you again to this blog post.
Some of the prerequisites to make these ends meet have been available in SAP S/4HANA for product compliance for a long time, most prominently the extensive capabilities to manage compliance requirements and compliance purposes. This capability also represents a key element for due diligence acts, as it enables the implementation of regulatory scope of several worldwide Due Diligence Acts via self-configured or provided compliance requirements on Due Diligence Acts. Therefore, existing compliance requirements now been enhanced with additional compliance requirement versions for several Due Diligence Acts, available as exemplary content. Examples are the German Lieferkettensorgfaltspflichtengesetz (LkSG) or the British Modern Slavery Act.
How the basis for the other angle – the actual data for due diligence acts – can be supported, will be explained in another blog post. But to say it up front: A compliance disclosure management, to collect and consolidate compliance disclosures from business partners such as suppliers, for sure could be a good starting point.
You probably recognize that with these capabilities, you can now bridge the gap between a supplier-centric supply chain due diligence risk analysis (with a focus on supplier risk) and product compliance (with a focus on product risk). As highlighted above, there are many touchpoints, and SAP S/4HANA Cloud for product compliance represents the bridge that finally enables you to connect processes and several risk dimensions which have been managed in silos before.
Stay tuned for more details coming soon with a blog post in the SAP Product Compliance Applications community. In between, feel free to have a look at the SAP Road Map Explorer and search for “support for due diligence acts”, there you will find clear indicators which capabilities are available or planned. The existing capabilities are also described in the What’s New in SAP S/4HANA Cloud 2302.3 section in the SAP Help Portal. And a call to action for all SAP customers: Start collecting and documenting your disclosures already today and feel free to share your thoughts in the comments.