Alex Minett, head of products and markets at CHAS, looks at seven issues companies should be aware of when shoring up resilience for their supply chains in 2023
The last year has been challenging for supply chains, with 2023 set for similar pressures and a raft of new legislation to boot. But forewarned is forearmed.
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Public procurement changes
Public procurement is set for a big shake-up in 2023, with the new Procurement Bill currently making its way through parliament.
The bill replaces a system primarily based on EU rules with a more simple, flexible and transparent regime tailored to the UK.
It centres around a set of guiding standards which focus on environmental targets, social value, information sharing, equality, value for money and creating more opportunities for smaller businesses and social enterprises. It will also include a centralised public debarment list.
Businesses looking to win public contracts can prepare by familiarising themselves with the Common Assessment Standard – an industry-led pre-qualification system covering a range of compliance topics from health and safety to modern slavery and corruption.
An imminent update to Procurement Policy Note (PPN) 08/16 is expected to recommend and even obligate undertaking the Common Assessment Standard for all contractors bidding for public sector works.
The additional advantage is that Common Assessment Standard will help to mitigate many of the risks associated with a company ending up on the debarment register.
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Building Safety Act reforms
The Building Safety Act became law in April 2022, with 2023 seeing more of its provisions coming into force.
Between April and October 2023, all higher-risk buildings must be registered with the Building Safety Regulator, while October 2023 will introduce new safety management requirements such as new duties on the Accountable Person (to manage building safety risks and in relation to residents).
Contractors should pay attention to the introduction of increased retrospective liability. This gives private individuals the right to claim damages if they come to harm as a result of work on a building if it has not met Building Regulations standards and could include the work of builders, designers and architects.
Building owners will also be able to launch legal action against developers, contractors and manufacturers for poor construction works and defective products that have resulted in homes being unfit for habitation. Defective construction products will be enforced and monitored by the National Regulator for Construction Products, which will become fully operational once all of the act’s measures have come into effect. They will have the powers to inspect premises, withdraw unfit products from the market and issue fines.
View the full Building Safety Bill transition timeline.
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Environment Act targets
It has been a year since the Environment Act 2021 gained Royal Assent, and while there has been a delay to the planned autumn 2022 publication of targets around air pollution, biodiversity, water quality and waste, they are expected before parliament imminently.
Businesses will need to be aware of the applicable policies that follow and should remember they are also liable for the compliance of their supply chains.
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Global focus on supply chain due diligence and ESG
The European Union aims to transition all economic sectors to a sustainable economy. Under the umbrella term ESG (Environmental, Social and Governance), there will be a compulsion for EU companies to take responsibility for the rights of foreign workers and the global environment when doing business.
The European Parliament has recently adopted the Corporate Sustainability Reporting Directive and will implement individual laws for member states within the next few years. The directive means companies operating along the supply chain of EU countries must implement a due diligence process that can identify actual and potential adverse impacts on environmental and human rights issues.
Meanwhile, the German Supply Chain Due Diligence Act (GSCA) came into force on 1 January 2023, obligating companies to assess and evidence due diligence on human rights and environmental risks across their entire supply chain.
For UK businesses, the GCSA will apply to any company employing over 3,000 staff (dropping to 1,000 from 2024) with a registered branch office in Germany. The act applies to all suppliers, direct or indirect, so if there is any German customer within the supply chain, they will be impacted by the act and compliance with GCSA will need to be ensured.
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Increasing awareness of social value
The impetus to embed social value is growing as stakeholders strengthen their focus on quality and sustainability over cost and price alone. One of the prevailing issues for implementing social value has been that it is difficult to define and measure but the national TOMs framework is fast becoming the preferred standard for measuring social value success. The TOMs framework provides a consistent method of reporting and measuring social value, offering best practice guidance and adopting the use of proxy values against key performance indicators.
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Ongoing challenge of materials and labour shortages
Shortage of raw materials and soaring inflation have dominated the industry over the last few years and while the shortages are reportedly easing, prices look set to remain stubbornly high. Government figures show an almost consistent rise in the cost of materials over the last 21 months. With the impact of global crises on supply chains remaining beyond their control, forging strong and transparent relationships with suppliers will prove their worth.
Labour shortages are fast becoming a grave concern, with 25% of construction businesses in the UK affected, according to the Office for National Statistics (ONS). This broadly equates to around 244,000 workers who have left the industry. With SMEs feeling the most impact – it takes on average three years to train a skilled tradesperson – finding ways to attract and retain workers will be at the forefront of many businesses’ New Year objectives.
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Closer scrutiny of materials suppliers
Materials suppliers have traditionally managed to avoid the same level of scrutiny faced by contractors, but the current economic climate and increasing regulations mean selecting the least risky products is now more important than ever.
Suppliers are being asked to confirm they comply with a growing list of legislation and guidelines covering health and safety, quality assurance, environmental protection and ethical practices, among others.
Legislation linked to materials suppliers might include UK GDPR; Health and Safety at Work etc. Act 1974; Modern Slavery Act 2015; Environment Act 2021, the Equality Act 2010 and more.
Alex Minett
Head of products and markets
CHAS
