In this episode of The Ethics Experts, Nick welcomes Steve Koslow. Steve Koslow is the Chief Ethics and Compliance Officer at Allianz Life Insurance Company of North America. With more than 20 years of experience in the financial services industry, Koslow has broad knowledge in the development of ethics and compliance programs for insurance companies.
Jared Connors and Daniel Zamora join Tom Fox in the final episode of the Supply Chain and ESG – What You Need to Know series, to discuss how market expectations have evolved with regards to due diligence in the responsible sourcing field.
Due diligence used to be a data collection exercise where you get transparency into your supply chain, but now it’s all about what you do with that information after you collect data – how a company can move from being reactive to being proactive. The first step to making this move is collecting data more efficiently; this allows you to have the resources in place to perform risk management within your supply chain. You need to know who’s on your supply chain, and you need to have a specific program in place to identify the risks of smelters.
Under the Biden administration, there has been a major focus on critical minerals when it comes to sanctions and regulations. Critical minerals are not specifically tied to the Dodd-Frank Act, but this focus has emphasized to stakeholders in the industry to be vigilant about them in general. Having an entity in your supply chain that is tied to a sanction puts you at risk no matter how direct or indirect that linkage is.
Resources
In this brief solo episode, Tom Fox is reflecting on the impact the Russian Invasion had on ESG. He talks about how the invasion changed the way businesses viewed their ESG programs, the importance of ESG in business and national security, and what it means for businesses to be purpose-driven.
ESG is Business Change
ESG is not driven by a specific political ideology or political group. What drives ESG is the business world. “What the Russian invasion of Ukraine drove home was the need for a more holistic approach to corporate ESG, which integrates each one of those letters into the fully formed ESG,” Tom says. ESG also is key in national security interest. “The transparency required by ESG programs through government required disclosure, or private sector required disclosure also ties into other areas of business change,” he adds.
Reputational Risk
The Russian invasion caused a major disruption in the global supply chain and created higher reputational risk for companies. Some companies were hit with sanctions, and customers boycotted others. “Hits to reputational damage are above-the-line costs meaning they eat directly into sales revenue and overall business success,” Tom remarks. If consumers view your organization as supportive of oppressive and autocratic regimes, or your goods as created by slave labor, they will not want to do business with you. “The risk is simply too high. Consumers want to purchase and transact with purpose-driven businesses,” Tom adds.
Be Purpose Driven
“People are demanding that a company align with their values and align with their ethics,” Tom iterates. An organization must fully incorporate ESG into an effective business strategy. “You have to look at ESG proactively and react to situations based upon the turmoil that is ongoing literally across the globe,” Tom stresses. ESG is now seen as a ‘must have’ in businesses across the US and Western Europe, and companies need to understand that these requirements are not driven by regulators. To unlock capital and cash, and to grow your business, you have to have an effective and transparent ESG program so that people will want to invest in you and do business with you.
Resources
Tom Fox email
In this episode of the FCPA Compliance Report, I am joined by Tomell Ceasar. He is the Group Head of Ethics and Compliance at Careem (An Uber Company). He is one of the founders of the Middle East and Africa Compliance Association (MEACA). Some of the highlights include:
1. What is it like practicing compliance in EAME?
2. EAME is a huge amount of territory to cover with many different countries and cultures.
3. How does that play into compliance for the region?
4. Training in EAME.
5. Genesis of MEACA.
6. What do you and the other founders hope to accomplish through MEACA?
7. What are the requirements for membership?
Resources
Tomell Ceasar on LinkedIn
In today’s edition of Daily Compliance News:
I recently had the opportunity to visit with several folks from Assent Inc. for a sponsored podcast series entitled Supply Chain and ESG – What You Need to Know. We discussed: ESG drivers with Jared Connors and James Calder; UFLPA, Supply Chain and ESG with Travis Miller and Jamie Wallisch; the New World of Product Compliance and ESG, with Cally Edgren and Devin O’Herron; Emissions Reporting Strategies with Devin O’Herron and Jared Connors; and Responsible Minerals, Supply Chain and ESG, with Jared Connors and Daniel Zamora. Today, in our final post, we consider responsible minerals, supply chains and ESG.
We began with a review of the evolution on responsible mineral sourcing. It started with conflict minerals, which has been around for 10 years or so. This led to a rather dramatic shift in the worldwide corporate mindset and companies and stakeholders determined that there needed to be more engagement all levels within the supply change. Zamora pointed to the example of due diligence. “It began as a data collection exercise where you get transparency into your supply chain, but now it’s all about, what can you do with that information after you collect data? What you see from the expectations of stakeholders is performing risk management, right to diligence activities within your supply chain.” This means going beyond regulatory requirements, it means risk management activities related to identifying sanctions within your supply chain.
One of the key themes of this series has been how a comprehensive ESG program can bring a much more integrated, holistic approach to not simply regulatory compliance but also in overall business operations. That also presents the opportunity to use an ESG approach to move from simply a reactive to proactive program. With Zamora, we look at steps a company can take to facilitate this change.
Zamora said, the “first step is you need to collect data efficiently. Once you do that officially, it allows your organization to have the resources in place to focus at how to perform risk management from within your supply chain. Number two, you need to have a specific program in place that would allow you to see and identify the risks so you can see where minerals are coming from and where the minerals are going afterwards. This allows you to identify those risks ahead of time, having risk assess verifiable sources out there that will allow determine who the bad actors are before then engage in bad behaviors.”
All of this allows a company to make better business decisions in terms of risk management. Zamora said, “it gives them time. It gives them a lot of power to take corrective actions, according to those risks. It could be communicating that those risks within their own supply chain. It could be passing that information along to their legal team. Once you have that ability to see these risks live as if an organization is being proactive about it instead of being reactive and waiting for those risks to show up in your supply change; a company will have a lot of power to have corrective action in order to mitigate those risks.”
We concluded with a discussion of the stakeholders who might be concerned with responsible minerals and how a corporation can use an overall ESG program to engage with them. This can include the shareholders, it could include customers, it could include employees, it could include third parties your organization does business with, and it could include the locales where a company does business or operates. Zamora said, “conversations have definitely changed,”. Now it has expanded to “even metal associations.” These conversations are also at “multiple levels within the supply chain. It is no longer the downstream companies and the shareholders right now, you see expectations at the mid-tier suppliers, you see these conversations at the smelters and at the upstream level.” All these levels are getting engaged in discussions and conversations around the ESG requirements.
To listen to the podcast this blog post is based upon, click here.
