Establishing a transparent supply chain is critical in today’s globalised economy, but is challenging to accomplish. Companies increasingly rely on large, widespread networks of contractors and suppliers, but managing them has become progressively complex and risky.
As countries tighten their regulations, hiring clients must ensure that not only they, but their partners, uphold high standards in areas such as health and safety, sustainability, labour laws and cyber security. Those who fail to do this may find themselves exposed to significant levels of financial, legal and reputational risk.
Embedding transparency and best practice across supply chains is key, but achieving this can be tough, as rules differ from country to country – and change regularly – making remaining compliant a full-time job. Hiring clients must collect rich, usable data about their partners to monitor their performance and help them improve. But many contractors, particularly smaller ones, lack the systems and processes necessary to gather this information, while facing the same requirements.
Benchmarking for success
Market-leading companies are increasingly turning to specialists, such as ISN, for help. Established in 2001, the Dallas-based firm is a global authority in contractor and supplier information management, providing data-driven solutions to help companies manage risk and strengthen their contractor relationships.
ISN clients can collect and analyse large volumes of data on their contractors’ performance, giving them full oversight of supply chains. They can also benchmark themselves against peers within their industry or geography to identify poor performance and best-in-class suppliers.
To do this, the company leverages its international network of nearly 700 hiring clients and 75,000 active contractors and suppliers, spanning industries as varied as oil and gas, construction, manufacturing and IT.
Rick Dorsett is senior director at the company, overseeing its health, safety, environmental and sustainability review team. He believes hiring clients have made progress in improving supply chain oversight but acknowledges that there is room for improvement.
“For a third party contractor or supplier to comply with your expectations they have to understand them,” says Dorsett. “The key is creating the right framework and communicating it effectively, but it isn’t always easy.”
This is where a firm like ISN can step in, he says. Helping hiring clients to set goals and benchmarks, and decide on the data they need from contractors, can drive change. Clients benefit from a diverse range of reports, dashboards, interactive analytics and perception surveys to help them understand their networks. They can also evaluate their contractor bases in their entirety or segmented by business unit, work type or job site.
According to ISN’s research, detailed in its Contractor Management White Paper 2022, firms are under pressure to tackle supply chain blind spots. A large amount of work continues to be outsourced by hiring clients, but one in four either do not track or do not know the amount of work done on their behalf.
In addition, while one-third of hiring organisations surveyed described themselves as “proactive” or “sustained” in the maturity of their contractor management systems, 16% considered themselves as “reactive” or at the start of their journey. Only 6% considered themselves at a sustained state of maturity.
This is concerning, given that many contractors and suppliers still do not pay key areas of compliance due attention. Separate research carried out by ISN in 2021 found that only 60% of contractors and suppliers had implemented an environmental management system, and fewer than half had policies in place regarding protection of human rights (42%), diversity and inclusion (45%), and forced labour (41%).
Additionally, less than one-third (27%) of contractors and suppliers were found to have defined criteria for notifying a hiring client of a cyber incident in 2022, according to ISN.
But progress is being made in some areas. Jenny Buckley, senior vice president at ISN, says contractors and suppliers have improved certain aspects of their businesses – for example, 87% had anti-discrimination policies in place in 2021. That said, any company that works with third party contractors will be exposed to some level of risk.
“Companies that manage this risk successfully will reap the benefits, but those that don’t could pay a heavy price,” she says.
By offering clients deep insights on their supply chains that can be turned into action, ISN’s tools improve contractor performance over time, in turn benefiting the hiring client. In recent research, ISN found that 65% of best-in-class companies with leading contractor management systems reported improving safety culture as most effective in driving down serious injuries and fatalities (SIFs) and 99% of best-in-class companies incorporate SIF metrics as part of their overall grading scheme.
“Using ISN’s tools is an ongoing process, not a one-off,” says Buckley. “You glean data, then circle back and use those insights to educate and improve your suppliers. It’s not about disqualification but continual improvement, allowing you to quickly identify where things are going wrong and provide specific feedback.”
ISN CultureSight enables hiring clients to poll employees and workers anonymously to assess their perception of risks and flaws in their processes and policies. Meanwhile, VendorSight allows them to survey contractor and supplier views on their procurement practices, so the hiring client obtains a fuller picture of how it performs as a business partner.
“These tools are about evaluating the strengths, opportunities and overall consistency of processes within your business,” says Buckley. “Ultimately good compliance comes from good governance, and ISN can help clients drive that cultural change.”
Please see ISN’s insights report, A strategy-led approach to health and safety governance, for a comprehensive look at the world of health and safety.