Vigilance plan, reduced competitiveness or value creation?
By Thomas Busuttil and Baptiste Carpentier - 09/29/2017
Respect for human rights has long been a subject on which companies have been working. However, according to a recent 2016 study carried out by the Vigéo firm, less than 4% of the companies surveyed have formulated commitments, a policy and dedicated procedures... and 20% have been the subject of at least one controversy in this area...
A fundamental subject, but a very low rate of commitment and action: why?
Hard to know. But it is certain that this is not due to a lack of reference documents: many frameworks and practical guides from institutions or sectoral and multisectoral organizations are published each year. We can therefore ask ourselves the question of the perception that the leaders have of this subject. Is this a source of additional costs and constraints that would make them lose competitiveness? Is it only a lever to strengthen the control of reputational risks?
A law of unparalleled ambition
It is in this socio-economic context that the draft law on the duty of vigilance of parent companies and contracting companies was born, finally published in the Official Journal in March 2017. This law today undoubtedly constitutes the the most "binding" legislative framework in terms of corporate vigilance on the social and environmental impacts generated. In addition to impacting purchasing and supply strategy, this law has an overall influence on supply chain strategies: the responsibility of the ordering company applies to all suppliers and subcontractors, regardless of whatever the rank.
Between 150 and 200 companies are currently affected by this law. But it is likely that the thresholds will be lowered in the coming years (as was the case for the obligations in terms of extra-financial reporting).
These companies are required to make public a Vigilance Plan consisting of risk mapping, a dedicated policy, alert and monitoring mechanisms... it is therefore an obligation of means which can easily be perceived as yet another constraint. But it can also be a lever for creating value. Or rather valueS, insofar as it is a win-win approach which seems important to privilege.
The vigilance plan, vector of opportunities for the entire value chain
By combining a risk-based approach with a longer-term strategic approach, the organization can mitigate threats and take advantage of opportunities. Indeed, the vigilance plan can (and must) also be considered as a performance tool that will:
o Better control of supplier risks by knowing their social and environmental practices, their habits in terms of subcontracting, etc.
o Strengthen the management of the overall quality of products. By bringing together the intrinsic quality of the product and the quality of the production methods, the vigilance approach makes it possible to deploy a transversal approach to quality.
o Reduce costs. The implementation of a vigilance plan makes it possible to rationalize the portfolio of suppliers and to develop usual practices. So certainly a social audit is not free, but when it comes to sometimes deeply reviewing inventory management, purchasing methods, etc., the economies of scale can be very significant.
To create value, a vigilance plan must almost systematically be accompanied by the implementation of a partnership approach with suppliers. The changes in practices required of them can sometimes be very heavy. It is therefore essential to support them and give them time to implement these changes. This change in position is often accompanied by the development of a more participatory and open approach: co-development of products, sharing of skills, implementation of specific payment methods, support for investment, multi-year contracts, etc.
It is thus the capacity to innovate in the organization, the products, the industrial processes... and to be flexible which grows significantly. Assets that are increasingly important in a context of high instability in the cost and availability of raw materials and constantly reduced visibility on the markets.
It is through the obligation to publish the Vigilance Plan that we will finally be able to observe the direction that the law will take: either a simple (and boring) compliance, or if the approach is pragmatic and adapted, a vector of creation of overall economic, social and environmental values for all supply chain stakeholders.