Compliance in procurement: from hindrance to strategic factor for organizations

Even today, there are organizations that face compliance as a major hindrance in their business processes. But to stay on a sustainable path, a company must establish guidelines on ethical and anti-corruption practices in the supply chain.

In spite of being a concept that is maturing in the country, compliance is one of the key guidelines for corporations, precisely because it drives transparency and ethical commitment towards society – and here the area of supplies can’t exempt itself.

In this post, we will introduce the concept of compliance, its importance, the main mistakes to avoid and how to apply it in your company. Read on and learn more!

What is compliance after all?

The word compliance means “to be compliant”, “to follow rules”, “to be in agreement”. To make compliance inherent to the business, particularly in procurement, we must dismiss the concept that it’s a complicated issue and that only huge companies are concerned about it.

According to the latest KPMG survey, conducted in 2019, on the maturity of compliance in Brazil, a company’s code of ethics and conduct refers, for 92% of respondents, to regulatory and compliance aspects.

The most relevant compliance risks highlighted by the participants in this study were: third-party management/contracts (82%), labor, occupational safety, social security and taxes (82%) and competition, privileged information and conflict of interest (79%).

In the procurement area, in contrast to popular belief, delving into compliance and risk management issues is, above all, ensuring more peace of mind in decision-making.

With clear rules and policies, there are more benefits than drawbacks to this choice.

The most common compliance errors

Adding compliance to procurement can look difficult at first. For this reason, before creating policies, standards and procedures, the company must go deeper into its activity, mission, vision and values, in order to assess which are the most important and sensitive issues in its case.

A mistake made by many companies is to approach compliance in a superficial way, by searching and copying existing policy models – often available from other companies on the Internet – with no consideration for their own specificities and needs.

The importance of a compliance culture

The commitment to an ethical, upright and responsible conduct must be aligned to the organization’s culture, reflect its interests and train all employees in the most diverse risk situations, as they can impact its competitiveness and reputation in the market.

In this sense, to engage people in the compliance culture, it’s vital to adopt a clear communication, in order to properly talk to the different stakeholders (employees, customers, suppliers and society as a whole, for instance).

Training is one of the most common ways to disseminate compliance. In a survey conducted by KPMG, 77% of respondents said they received guidance on compliance and anti-corruption (related to the code of ethics and conduct), while 52% reported that the training didn’t include third parties (risk management).

It’s important to make clear that compliance and internal audits are different tools, although complementary ones. Compliance establishes guidelines for risk management, while internal audits ensure compliance with these processes.

Digital tools are great allies to achieve compliance

One of the key difficulties for organizations is making the right choice of suppliers – that is, doing business with partners who are updated with all compliance-related issues. Therefore, the company must properly define the criteria for supplier selection and evaluation.

Mercado Eletrônico’s Suppliers Management (SRM) solution helps companies during partner analysis, to check if they comply with the standards. This tool allows consolidating all suppliers and creating registration, approval, evaluation and third-party inspection processes.

As to the Contract Lifecycle Management (CLM) solution, it automates and controls all stages of contract life cycle, from creation to renewal. With such tool, you can manage contracts of the whole base with the help of charts and performance indicators (KPIs).

Both Mercado Eletrônico tools can render traceable and auditable all actions of those involved in procurement – required procedures to ensure a high compliance level.

Chat about compliance with a FGV expert

Luciana Betiol, coordinator of FGVethics and researcher at FGV-CELog, participated in a live chat with Luiz Gastão Bolonhez, VP at Mercado Eletrônico, about compliance in procurement, called “Compliance in procurement: A strategic issue for organizations”.

With a didactic approach and plenty of experience, Ms. Betiol explained how an organization’s set of disciplines can foster more ethical and transparent relationships in B2B, both on a daily basis and in times of crisis.

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