AIM PROGRESS Responsible

Sourcing Supplier eventNew Delhi, India

25th September 2017

Safety and logistics notice

Anti-trust caution

The Association shall not enter into any discussion,

activity or conduct that may infringe, on its part or on the

part of its members, any applicable competition law. By

way of example, members shall not discuss,

communicate or exchange any commercially sensitive

information, including non-public information relating to

prices, marketing and advertising strategy, costs and

revenues, trading terms and conditions with third

parties, including purchasing strategy, terms of supply,

trade programmes or distribution strategy. This applies

not only to discussions in formal meetings but also to

informal discussions before, during and after meetings.

Agenda – Morning

FROM TO Topic Speakers

8:30 9:00 Registration & tea/coffee

9:00 9:15 Welcome & Introductions

Sunil Gulati – Vice President Technical, INSWA BU, Coca-

Cola Company

RadhaMohan Gupta – Head of Procurement South Asia,

Reckitt Benckiser

Gaurav Gupta – Manager Social Accountability, Unilever

9:15 9:45

Overview of AIM-PROGRESS and

Responsible Sourcing

programmes

AIM-PROGRESS joint point of view on this topic

Nishi Chaturvedi - Human & Workplace Rights Director,

Coca-Cola Company

David Pettet - Global Human Rights Manager, Reckitt

Benckiser

Gaurav Gupta - Manager Social Accountability, Unilever

9:45 10:30Key updates 2017, an overview of

social auditing and SMETA 6.0Swapnil Savadi - Manager Audits, Intertek

10:30 11:15 Supplier testimonials

Surendra Agarwal - Founder, Creative Group of Industries

Surendra Babu - VP Human Resources, Alpla India Pvt.

Ltd

11:15 11:30 Coffee break

11:30 12:30 Anti-bribery & Corruption Kunal Gupta – Head of Investigations, Cyril Shroff

12:30 13:30 Lunch

Agenda - Afternoon

Welcome & Introductions

Sunil Gulati – Vice President Technical, INSWA BU, Coca-Cola Company

RadhaMohan Gupta – Head of Procurement South Asia, Reckitt Benckiser

Gaurav Gupta – Manager Social Accountability, Unilever

Overview of

AIM-PROGRESS

Nishi Chaturvedi - Human & Workplace

Rights Director, Coca-Cola Company

AIM-PROGRESS:

A global forum of branded, fast moving consumer goods manufacturers (FMCG) and common suppliers

Our mission: “Positively impacting people’s lives through our combined leadership of robust responsible sourcing practices throughout our supply chains”

AIM-PROGRESS comprised of 40+ member

companies

AIM-PROGRESS Member Scope

Our purpose

Raising the bar for responsible sourcing…

…in the FMCG supply chain…

…through converging standards and practices….

…thereby making a positive impact on people’s lives

Our 3 key objectives:

1. Building member capability

All member organisations are competent and executing robust responsible sourcing programs

2. Effectively assuring compliance in our supply chains

Ensuring increasing supplier compliance as expectations rise through having in place increasingly aligned practices, standards and metrics

3. Driving continuous improvement

Demonstrating activities of responsible sourcing which go beyond relevant legislation, international standards and company codes

Our activities

➢ Mutual Recognition • “An audit for one is an audit for all”

➢ Capability Building • of members and suppliers

➢ Human Rights • implementing UNGPs

➢ Business Integrity • tackling bribery and corruption in the supply chain

➢ Environment • taking your commitments through the supply chain

➢ Impact measurement• are we positively impacting people’s lives?

Mutual Recognition of Audits

An Audit for one AIM-PROGRESS member is an audit for

all AIM-PROGRESS members

The purpose of Mutual Recognition is to reduce audit

duplication in the supply chain. Recognizing ethical compliance

audits conducted on behalf of another member helps:

• Reduce audit fatigue and cost burden on suppliers

• Reduce time investment of buyers

• Shifts focus from audits to performance

Mutual Recognition of Audits

Framework Agreement

• All AIM-PROGRESS members

agree to the Mutual Recognition

framework

• Suppliers can share their audit

results in order to meet multiple

customer needs

• Shared list of over 10,000

audited suppliers

Getting Your Audit Recognized – 3 steps

✓ Complete an audit conducted by a recognized audit firm

and to a recognized standard as outlined in the

framework. Examples include: SMETA 6.0, URSA, SGP

**Ensure you utilize the most updated SMETA version for full recognition

✓ Pay for the audit to ensure you own the audit report and

can share the results

✓ Upload the results to a common platform like Sedex or

share the report directly with customers

Why are your customers interested in

Responsible Sourcing

➢ Consumers expect brands to behave in a responsible manner

➢ Companies need to know their supply chains and be able to trust their

suppliers

➢ Companies need to ensure that responsible sourcing assessment are

conducted to highlight gaps in the supply chain

➢ Responsible Sourcing enables ongoing improvement in the industry

AIM-PROGRESS helps increase efficiency by sharing data – “an audit for

one is an audit for all”

4 pillars of Responsible Sourcing

➢ Workers are treated fairly

➢ The workplaces are safe and

protect the worker’s health

➢ Companies care about their

environmental impact

➢ Companies behave with

integrity and honesty

Environmental

Management

Business

Integrity

Health &

Safety

Social/Human

Rights

Reputations: Hard to build... Easy to loose

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Legislation Trend: Disclosure/Certification

• Disclosure Requirements - e.g. UK Modern Slavery Act, CA Transparency in Supply

Chains Act

• Compliance Requirements – e.g. Executive Order 13627, Dodd-Frank,

Consumptive Demand Repeal

The Requirements reach across the supply chain

Overview of Responsible

Sourcing programmes

David Pettet - Global Human Rights Manager, Reckitt

Benckiser

Gaurav Gupta - Manager Social Accountability,

Unilever

Responsible Sourcing Cycle – Commonalities on the

supplier assessment journey

Synergies towards common

methods & data

Supplier Engagement

Supplier Assessment

Risk Assessment

Audit

Corrective Action Plan

Building Supplier

Capability

Common formats

include Sedex and

EcoVadis SAQs

Companies make

individual risk

assessments

Determined by

individual companies

Mutual Recognition: Companies agree to recognise audits done on behalf of other

customers. Audits can also be shared using online platforms.

Sharing of

methodologies for

corrective action plans.

Common supplier

training events

Supplier engagement and Assessment

Supplier

engagement and

Assessment

➢ Communication of requirements and

expectations: e-mail, supplier forums, phone,

contract negotiations, etc.

➢ Contact made by the customer, audit firms or other

third parties such as Sedex or EcoVadis

➢ Completion of a Self-Assessment Questionnaire

may be required:

➢ Useful tool for suppliers and buyers to assess

overall capabilities and risk and ensure

management processes are in place

➢ Risk-assessment

➢ ENGAGE and PARTICIPATE

Common Methods

➢ A physical on site assessment of the following 4-

pillars:

➢ Not fault finding but solution finding

➢ Collaborative effort

➢ Focus on Continuous Improvement

Audit - Overview

Human Rights & Labour

Standards

Health & Safety

EnvironmentBusiness Integrity

Step 4:

Audit

Common method

Corrective action plan

➢ Ensure Corrective Actions address the root cause of the noncompliance

➢ Not a tick box exercise – Tool to facilitate continuous improvement

➢ Implement a process to monitor CA implementation and success

➢ Timeframe and follow-up methods depend on the type of issue and the severity

• Desk based verification vs. follow-up visit

• Critical, Major, Minor categorization of issues

Corrective

Action Plan

Plan Do Check Act

Building member and supplier capability

➢ AIM-PROGRESS events and forums aim is to:

• Raise awareness and understanding of responsible

sourcing

• Increase supplier capability to improve compliance

within their own facility

• Work collaboratively to address regional challenges

• Provide the tools for suppliers to implement their own

programme

Building

capability

POLL● Prior to today, were you aware of the general principles of responsible sourcing and your

clients requirements concerning labour H&S, Environment and Business Integrity?

► Yes

► No

● Have you had an audit before?

► Yes

► No

● Which kinds of issues do you think are most often found during audits in the region?

► Business integrity

► Child labour

► Discrimination

► Environmental issues

► Forced Labour

► Freedom of Association

► Grievance Mechanisms

► Health and Safety

► Land Rights

► Working Hours

► Wages

Key updates 2017, an overview

of social auditing and SMETA

6.0

Swapnil Savadi - Manager Audits, Intertek

Supplier testimonial

Surendra Agarwal - Founder, Creative Group of

Industries

Supplier testimonial

Surendra Babu - VP Human Resources, Alpla India

Pvt. Ltd

Supplier testimonial

?

Coffee Break

Please be back ready for a 11:30 start

Anti-bribery & Corruption

Kunal Gupta – Head of Investigations, Cyril Shroff

AIM-PROGRESS RESPONSIBLE SOURCING

SUPPLIER EVENT

September 26, 2017

Kunal Gupta

Partner, White Collar Crimes

Cyril Amarchand Mangaldas, New Delhi

AGENDA

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Anti – Corruption Legal FrameworkB

FCPA, 1977 D

Prevention of Corruption Act, 1988C

AGENDA

Collaborative & Collective ActionG

Factual ScenariosH

Enforcement TrendsF

The ‘Anti – Corruption’ ProblemA

E U.K. Bribery Act

THE ‘ANTI-CORRUPTION’

PROBLEM

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International Landscape

▪ In recent years, there has been a growing international consensus that corruption must be combated.

▪ Nearly three quarters of the 178 countries in the Corruption Perceptions Index score below five, on a scale from 10 (highly clean) to 0 (highly corrupt), suggesting a perception of widespread corruption among public officials.

▪ Under a number of international conventions, countries that are parties undertake commitments to adopt a range of preventive and criminal law measures to combat corruption.

▪ OECD - Convention on Combating bribery of Foreign Officials in International Business Transactions, 1998 (Anti Bribery Convention)

▪ United Nations Convention Against Corruption, 2005

▪ Inter–American Convention Against Corruption, 1996 (ICAC)

▪ Council of Europe – Group of States Against Corruption, 1999 (GRECO)

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From Transparency International’s Corruption Perception Index 2016

This Heat Map Highlights Corruption is a Global Issue

Where is your

supply chain

located? The

darker the color,

the greater the

corruption risk

Why is India unique from an anti-corruption perspective?

▪ Due to historic reasons, a medium to strong form of government regulation in almost all sectors

▪ Businesses cannot avoid dealing with state or its instrumentalities because state is also present in

many non-traditional sectors

▪ Banking –Public Sector Banks

▪ Utilities – Power, Water etc.

▪ Customers – PSEs

▪ Public sector employees are on an average paid salaries less than their peers in private sector with

the same experience creating incentives for rent seeking

▪ India ranks 79 out of 176 countries in Transparency International’s Corruption Perception Index

(CPI)

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Corruption: The Cost to Business

▪ Corruption, broadly defined, is the single greatest obstacle to economic and social development around the

world.

▪ Corruption distorts markets, stifles economic growth, debases democracy and undermines the rule

of law, thus, contributing to conflict and instability.

▪ It has been estimated, for example, that the cost of corruption equals more than 5% of global GDP (US $2.6

trillion), with over US $1 trillion paid in bribes each year.

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Source: Kroll Global Fraud & Risk Report 2016-17

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Corrupt practices include:

• Bribery

• Facilitating or “Grease” Payments

• Kickbacks

• Extortion

• Fraud

• Bid rigging

• Suppliers who corruptly bypass health and safety

requirements

• Suppliers who avoid necessary licensing

• Suppliers who pay bribes to customs officials or

licensing authorities

• Suppliers who pay bribes to government officials

to bypass taxes

Common Forms Of “Corrupt Practices”

ZERO TOLERANCE POLICY!!

ANTI- CORRUPTION LEGAL

FRAMEWORK

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Indian Legislations Global Legislations

Prevention of Corruption Act, 1988

The Indian Penal Code, 1890

All India Services (Conduct) Rules, 1968

Central Civil Services (Conduct) Rules, 1964

Code of Conduct for Ministers as notified by theMinistry of Home Affairs

Central Vigilance Commission Act, 2003

Delhi Special Police Establishment Act, 1946(DSPE Act)

Lokpal and Lokayuktas Act, 2013

Foreign Corrupt Practices Act , 1977

Bribery Act, 2010 (UK)

Corruption of Foreign Public Officials Act(Canada)

OECD Convention on Combating Bribery ofForeign Public Officials in International BusinessTransactions

Inter-American Convention Against Corruption

United Nations Convention Against Corruption

PREVENTION OF CORRUPTION ACT

1988

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Prevention of Corruption Act, 1988

▪ Key anti-corruption legislation in India. Criminalises practice of bribery by public officials

▪ Covers the following three categories of offenders:

➢ A bribe taker who is a public servant (Demand side of bribery)

➢ Bribe giver (Supply side of bribery)

➢ Middlemen who influences a public servant (either by a payment or personal influence).

▪ Wide definition of ‘public servant’ and includes employees of government-owned and statutory corporations.

▪ Bribe is a bribe – cash or kind

▪ Punishment ranges between 6 months and 5 years along with a fine. In certain cases of habitual offenders imprisonment could be 7 years.

▪ There is no limit on the maximum fine payable.

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Prevention of Corruption Act, 1988

NOTE !!

▪ Public official is covered very broadly – for example, bank manager of a private bank is also a public official

▪ There is no minimum bribe. A bribe of 10 Rupees is as bad as 10 Lac Rupees !!

▪ Not necessary that payment should be given, mere offer for payment would qualify

▪ There are a number of cases where private officials of companies are being prosecuted – 2G, Coal Scam etc.

▪ PCA enforcement leads to multiple other enforcements – Enforcement Directorate, SFIO, Department of Revenue Intelligence – all these targetindividuals as well as companies.

▪ Small bribe payments that are disclosed as a result of US law are picked up by Indian agencies. E.g., Embraer, Walmart.

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FOREIGN CORRUPT PRACTICES ACT

1977

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Foreign Corrupt Practices Act, 1977

▪ The FCPA’s two main areas of focus are:

▪ Anti-Bribery Provisions

▪ Accounting Requirements

▪ The Anti-Bribery Provisions

▪ Prohibit offering anything to a non-U.S. government official for an improper purpose – a quid pro quo in order to influence official actionor obtain an improper advantage.

▪ The Accounting Provisions

Require U.S. issuers to:

▪ Keep accurate books and records and report transactions in reasonable detail and

▪ Create and maintain adequate internal controls over accounting records and assets

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FCPA Bribery Principles• Who is subject to the FCPA?

• Company, its subsidiaries, its agents.

• What are “things of value”?

• Cash, travel, lavish entertainment or gifts (e.g. expensive liquor, gifts for spouses, paid vacations),pleasure trips to resorts, adult entertainment, employment of a relative, sponsorship

• Who is a government official?

• Anyone in executive, legislative or judicial agency

• Political candidates

• Employees of state-owned-enterprises

• What is an “indirect” bribe?

• Any action by a third party that you are aware is likely to result in giving an improper personalbenefit to a government official

Consequences of FCPA Violation

▪ The FCPA carries criminal penalties and fines of up to:

▪ $2 million or twice the gain for companies

▪ $100,000 for individuals and up to five years imprisonment

▪ A person or firm found in violation of the FCPA may be:

▪ barred from doing business with the federal government;

▪ ruled ineligible to receive export licenses;

▪ barred from securities business; and

▪ may be suspended from agency programs of the Commodity Futures Trading Commission and the Overseas Private InvestmentCorporation

▪ FCPA issues are also fertile ground for plaintiff actions or competitor lawsuits.

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THE BRIBERY ACT, 2010 (UNITED KINGDOM)

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UK Bribery Act

• The UK Bribery Act 2010 came into force on 1 July 2011

• It is considered as one of the biggest reforms, a single Act of Parliament simplified the old legal structure and modernised the law of bribery

• The UK Bribery Act addresses not just Public Bribery but also Private Bribery

• Broadly, the Act defines bribery as giving or receiving a financial or other advantage in connection with the "improper performance" of a position of trust, or a function that is expected to be performed impartially or in good faith

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UK Bribery Act - Offences

• Two general offences covering the offering;

• Active bribery (promising or giving of a bribe)

• Passive Bribery (the requesting, agreeing to receive or accepting of a bribe);

• It sets out two further offences which specifically address commercial bribery:

• Section 6 of the Act creates an offence relating to bribery of a foreign public official in order to obtain or retain business or an advantage

in the conduct of business

• Section 7 creates a new form of corporate liability for failing to prevent bribery on behalf of a commercial organization.

ENFORCEMENT TRENDS

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Key domestic trends

▪ Use of technology – Almost every investigation conducted by investigation authorities involve use of forensic

technology involving imaging of laptops, computers and mobile devices

▪ Liability of the directors and officers of the company – Trend to regard a separate corporate action as one

single transaction leading up to the alleged payment of bribe

▪ Regulatory co-ordination – Action which is undertaken by one agency may likely lead to actions by other

agencies as well.

▪ Fallout of a global regulatory enforcement – Corporate disclosures or regulatory actions which are public and

with an Indian connection are regularly being examined by domestic investigation agencies

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Deals in news

NEED FOR COLLABORATION

AND COLLECTIVE ACTION

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Many anti-corruption law

violations involve 3rd parties

like you.

Fact:

About 90% of FCPA

violations involve 3rd parties

So why should Anti-Corruption Law Compliance

matter to you?

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Anti-Corruption Law Compliance: How – An Effective Compliance

Program

Values & Standards Executive Oversight Due Diligence

Training /

Communication

Internal

Controls

Continuous

Improvement

How to manage your corruption risk:

Proactive Program and Process

Ethics and Compliance Program

Recognize Issue

Respond appropriately

Report Immediately

Notify Customer

Investigate Situation

Establish a Robust Issue Response Process

Hallmarks of an Effective Anti-Corruption Compliance Program

✓ Conducting periodic and targeted ethics and compliance risk assessments

✓ Commitment from Senior Management and clearly articulated policy against corruption

✓ Code of Conduct and ethics and compliance policies and procedures

✓ Appropriate oversight and autonomy by Chief Ethics and Compliance Officer, adequate resources, and access to senior

management and the Board

✓ Providing appropriate ethics and compliance training and continuing advice

✓ Implementing a system of consistent disciplinary measures and appropriate incentives

✓ Implementing a process for internal controls and appropriate delegation of approval Authority

✓ Implementing processes for third-party due diligence and payments

✓ Devising a system for confidential reporting of concerns and internal investigations

✓ Continuous improvement, including periodic assessments and evaluations

What more should prudent suppliers do?

66This training presentation is not intended to provide legal advice.

Our Supply Chain is only as strong as its weakest link.

Let’s work together.

Collective action is needed to effectively combat corruption

• Maintain a “speak-up” line for your employees and suppliers.

• Investigate corruption allegations thoroughly and impartially.

• Provide anti-corruption training to your employees.

• Tighten your policies and processes. Remember – anti-corruption is

also indicative of a leaky organization

FACTUAL SCENARIOS

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Scenario 1

A manufacturer of food products receives ingredients from a supplier. The supplier is subject to inspection by the local

health department. During the inspection the local health official informs the supplier that some of its perishable items

are beyond their expiration date and may not be used as ingredients in food products for public consumption. A

supplier employee pays the inspector a bribe to ignore the problem, and the supplier ships the ingredients to the

customer. A supplier employee who witnessed the bribe calls the customer’s reporting hotline and informs the

customer of the bribe and the shipment of the ingredients. What should the customer do?

How should you respond?

The supplier should stop use of the ingredients and promptly assess all legal, operational, and reputational risks and remedies:

✓ Conduct an independent audit to assess any actual risks to product or consumer health and safety

✓ Ensure that the product recall and other contingency plans are up-to-date

✓ Carry out a complete investigation of the matter, and if necessary, assist in notifying the authorities

✓ Investigate, in conjunction with its management, whether the bribe was an isolated incident or indicative of a systemic practice

✓ Inform the health inspector’s supervisor of the incident

Scenario 2

A supplier produces widgets for a customer. The contract specifies certain deadlines by which the widgets must bedelivered, and imposes substantial penalties for late delivery. The supplier orders certain component parts for thewidgets from outside the country. These parts arrive in port, but are held up in customs, where a local customsofficial demands a payment from the supplier before he will release the goods. The supplier will incur significantpenalties under the contract with its customer if the parts are not received immediately for the production ofwidgets. What should the supplier do?

How should you respond?

✓ The supplier should refuse to pay the bribe, explaining that it violates the business principles of the company.

✓Make a record of the relevant interaction

✓ Immediately report to supplier management or the appropriate officer responsible for matters involving the code of conduct

✓ Return to the customs official with at least one witness and explain that the supplier would like the goods released if they are in compliance with customs regulations, otherwise the official should indicate specifically what is not in compliance and the supplier will correct the problem

✓ If the bribery demand is reiterated inform the customs official that this practice is not acceptable

✓Notify the customer that delivery may be delayed as a result of the bribery demand from the customs official, and work with the customer to find a solution

Scenario 3

During a solicitation for bids, a procurement manager approaches one of the potential suppliers andoffers to secure the contract in exchange for a payment (“kickback”). What should the Supplier do?

How should you respond?

✓Supplier should refuse to make the corrupt payment on the grounds that such payment violates thebusiness principles of the company and may violate applicable laws, and could lead to dismissal andcriminal prosecution.

Scenario 4

A company outsources certain production to a supplier. The unit price the customer pays is based on a combinationof production cost and a predetermined margin for the supplier. Because production cost is dependent on the hoursworked by the relevant supplier operators, the contract requires that the supplier inform the customer of actual workhours. The customer receives an invoice from the supplier that contains inconsistencies in reported work hours. Athorough examination of the invoice reveals that the supplier may have inflated work hours. The customer reportsthe same to the supplier. What should the supplier do?

How should you respond?

The supplier should investigate, perhaps in conjunction with supplier’s management, whether inaccuracies in the invoice were inadvertent or intentional, and if intentional, whether an isolated incident or a systemic practice:

✓ Review pay slips, ledgers, etc.

✓ Interview supplier managers or supervisors to verify work hours.

✓ Review all prior invoices generated by the relevant supplier manager to check for similar inaccuracies

✓ If the supplier manager intentionally overbilled and the incident was isolated, the supplier senior management should warn the manager that any future incident will result in contract termination.

✓ If the supplier manager intentionally overbilled and the practice is systemic, the supplier senior management should terminate contract with the supplier manager.

THANK YOU

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LunchPlease be in the correct meeting room for a 13:30

start

In Crystal room 2

In Crystal room 3

In Crystal room 4