France’s Sapin II Anti-Corruption Law Requires Risk Assessments of Suppliers & Other Third-parties

May 2, 2016 EcoVadis

The past few years have shown that the fight against corruption is as relevant as ever: companies are now facing record fines and an increasingly aggressive enforcement. For the past years the US and the UK have been leading the way in terms of enforcement against corruption, but more and more States worldwide are catching up and reviewing their legal framework. France, with its Sapin II draft law, is the latest in this group and should be closer aligned with other regulations such as the US FCPA or the UK Bribery Act, in what seems to be becoming an international standard. This is especially relevant for French businesses, as three out of ten companies involved in the top FCPA enforcement actions of all time were French. Just earlier this year, Transparency International ranked France 23rd in its latest Corruption Perceptions Index, next to Chile and the UAE – confirming France has been lagging behind on this issue. France now seems ready to tackle the issue head on and French Minister of Finance Michel Sapin has declared “trade prospers where corruption declines”, estimating tighter corruption laws could bring France about 0.2 percent of growth a year.

Who? Companies with 500+ employees or subsidiaries of groups with 500+ employees and revenue > € 100 million. This represents about 1570 large groups in France.

What? Among other things, the law proposal introduces a legal obligation to implement due diligence processes in order to prevent and detect all forms of domestic or foreign corruption. The draft law requires companies to implement concrete measures such as:

  • Map corruption-related risks, based on the location of operations and on the industry sector;
  • Develop a code of conduct;
  • Implement procedures to assess risks related to third-party intermediaries and suppliers;
  • Conduct internal or external accounting audits;
  • Implement a whistle-blower procedure;
  • Train managers and other exposed persons;
  • Implement disciplinary sanctions.

The new National Agency for the prevention and detection of corruption will be in charge of centralizing and disseminating information. Its responsibilities include:

  • Developing risk assessments and multiannual action plans against corruption.
  • Providing guiding principles to companies to promote best practices based on their size and exposure to corruption risks
  • Monitoring and investigating the implementation of companies’ due diligence processes.
  • Protecting whistle-blowers, which may include financial support.

Finally, the Agency will be able to fine up to € 1 million companies having failed to implement adequate processes.

Despite its similarities with the FCPA, the current version of the Sapin II draft law no longer includes the possibility for companies to sign a deferred prosecution agreement.

How EcoVadis can assist:

Companies who are just beginning the sustainable procurement/supplier monitoring process have an opportunity to achieve much broader visibility, risk reduction and drive improvements and even innovation in their supply chains with minimal additional incremental investment. Indeed, the new regulation will merge with other sustainability processes and can be combined with existing CSR schemes and requirements to end up cover the whole CSR spectrum in a single process.

EcoVadis’ CSR assessments can assist companies in meeting the due diligence requirements currently proposed in the law.

RISK ASSESSMENT – Through its risk analysis, EcoVadis facilitates the due diligence process by mapping operations to identify and prioritize high risk sectors and locations that, when not managed appropriately, generate corruption risks.

EVALUATION – EcoVadis’ CSR assessments evaluate policies and actions implemented by subsidiaries or business partners to enforce compliance with anti-corruption frameworks, including the Guiding Principles on Business and Human Rights, the UN Global Compact and ISO 26001. Respondents provide information regarding their policies and actions (e.g. training of their employees, internal audits, whistle-blower lines…) through sector-specific questionnaires.

EcoVadis questionnaires also ask respondents to provide information about their own due diligence procedures, thus providing clients with higher visibility of their business partners and suppliers’ due diligence efforts.

Finally, the EcoVadis evaluation includes a 360° watch, which allows EcoVadis to enrich its analysis by collecting stakeholder opinions, using an internal database covering more than 800 sources (e.g. trade unions, NGOs, press, specialized data providers) in order to identify the respondent’s condemnations, controversies or innovative practices.

AUDITS AND PRODUCT CERTIFICATIONS – The evaluation methodology used for the CSR assessments takes into account previously administered third party on-site environmental or social audits. Audit reports can be used by buyers to identify compliance gaps within their global value chains, which can later be addressed by corrective action plans developed by the mandated internal accountability standards and procedures.

CORRECTIVE ACTION PLANS – The EcoVadis evaluation maps out the strengths and improvement areas of the evaluated entity, which can then access an online corrective action plan module in order to improve in a specific area, allowing the client to monitor the improvement.

INTERNAL ACCOUNTABILITY STANDARDS – EcoVadis assists companies in developing Codes of Conduct that formalize expectations of business partners’ commitments to respect internationally recognized anti-corruption principles. In addition, EcoVadis systematically provides a qualitative assessment of internal procedures, and proposes corrective actions to address potential red flags.

This blog post contributed by

Bettina Grabmayer, CSR Analyst, EcoVadis

What to read next…

Anti-corruption Due Diligence in the Supply Chain – framework and overview, how to get started

The Rise of Mandatory Human Rights Due Diligence in supply chains – recent laws and trends

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