Assessing Supply Chain Risks Through Esger's Risk Scoring Framework

February 05, 2024 - 5 min read

By Nishtha Verma, ESG Lead at Elm AI

Effective supplier risk management is critical for organizations to maintain operational resilience, safeguard their reputation, and uphold ethical standards. At Elm AI, we have developed a robust supplier risk management framework powered by AuditSense AI. In this article, we delve into the essential components that underpin our framework, empowered by cutting-edge AI technology, to proactively identify and mitigate supplier risks while enhancing overall supply chain integrity and resilience.

‍What is AuditSense AI?

‍AuditSense AI revolutionizes supply chain due diligence with its Generative AI system, providing unparalleled efficiency and accuracy in analyzing supplier social audit reports. By swiftly scanning through extensive documents, it identifies non-compliance issues and rates their severity, empowering teams to process reports at a fraction of the time as compared to manual analysis.

Key Features:

Detect non-compliances found in audit reports starting at an accuracy of 96%, often catching nuances and root causes that might otherwise be overlooked.
Assess risks across the supply chain landscape using Elm AI's supplier risk scoring framework (or replace this with the organization's individual risk framework).
Generate corrective action plans tailored to each non-conformance and gain valuable insights into supplier trends.

‍AuditSense AI's adaptability to various audit report formats and frameworks, rapid processing time of just a few minutes for hundreds of pages of documents, and multilingual capabilities make it an indispensable tool for companies striving for comprehensive compliance oversight.

‍Elm AI's Framework

‍The development of Elm AI's supplier risk scoring framework was informed by a thorough analysis of existing standards and frameworks, including BSCI, SMETA, WRAP, and SA8000, along with other industry standards and regulatory mandates. These established frameworks served as valuable sources of inspiration, offering insights into best practices and industry standards for responsible sourcing and supply chain management. By drawing upon the principles and methodologies of these frameworks, we were able to tailor our approach to meet the specific needs and objectives of organizations, ultimately enhancing the effectiveness and relevance of the supplier risk scoring framework.

‍Key components of the framework

Elm AI's framework comprises of five major pillars, each addressing the detailed key performance indicators of supplier risk management. These pillars are:

Management systems
- Establishment of policies, procedures, and records
- Identification and assessment of risks
- Monitoring processes
- Compliance management
- Implementation of corrective and preventive actions
Labor standards
- No Child Labor
- No Forced Labor
- Freedom of Association and Collective Bargaining
- No Discrimination, Violence or Harassment
- Fair Remuneration
- Working Hours
- Regular Employment (Responsible recruitment)

Health and safety
- Documentation and permits for occupational health and safety
- Establishment of health and safety committees
- Training and capacity building for workers
- Emergency preparedness and safety measures
- Provision of necessary facilities like PPEs, medical care, and childcare

Environment
- Compliance with local and national environmental laws
- Possession of relevant permits for resource use and disposal
- Awareness of environmental impact and continuous improvement efforts
- Communication of environmental policies to suppliers
- Measurement and monitoring of environmental impacts
- Availability of environmental certifications and management systems documentation

Business ethics
- Ethical conduct without bribery, corruption, or fraudulent practices
- Compliance with fiscal legislative requirements
- Transparent reporting and handling system for unethical practices
- Implementation of business ethics policies
- Training for staff in high-risk areas related to ethical practices

‍Elm AI's Supplier Risk Framework is designed to evolve and adapt to changing standards, regulations, and best practices in supply chain risk management. This involves continuous review and updating of the framework to reflect emerging risks and industry trends, as well as feedback and insights from stakeholders and other industry experts.