In today’s competitive manufacturing landscape, CEOs must view compliance as more than a legal obligation—it’s a cornerstone of trust and a fundamental requirement for global business. By adhering to regulations and standards, you ensure product safety, quality, and ethical practices, which are essential for maintaining consumer confidence and avoiding costly penalties.
Neglecting compliance leads to severe and far-reaching repercussions, as evidenced by the Volkswagen emissions scandal. This incident starkly reminds us of the critical importance of robust compliance measures in safeguarding your company’s reputation.
Volkswagen’s compliance fiasco: when ‘going green’ means going rogue
In the shadow of a sleek, innocent-looking Volkswagen brand (VW), a scandal unfolded that would send shockwaves through the global automotive industry, revealing a dark deception hidden beneath the veneer of green innovation.
Dubbed the “diesel dupe” and “dieselgate”, the VW emissions scandal erupted in September 2015 when the U.S. regulatory authority, the Environmental Protection Agency, discovered that many of the VW diesel cars sold in the U.S. were rigged with software to cheat emissions tests. VW admitted to deceiving regulators, affecting brands such as the Audi A3 and VW Jetta, Beetle, Golf, and Passat.
The aftermath was devasting. Hiltrud Werner, former head of integrity and legal affairs at VW, said of the crisis: “We really hope every company has this experience only once. We don’t want to have it again.” Martin Winterkorn, CEO of VW, resigned immediately and is due to go on trial for fraud in September 2024.
This breach in ethical standards led to billions in fines, legal battles, and a long-lasting impact on VW’s brand integrity. Getting the consumers’ trust back and untangling the legal mess was a long and arduous road and something the German manufacturer is still battling through.
The VW scandal exemplifies how a compliance fiasco can damage the reputation of entire industries, highlighting the crucial importance of understanding what compliance in manufacturing truly entails.
What does good manufacturing compliance look like?
In the manufacturing sector, compliance means adhering to laws, regulations, industry standards, and internal policies. This includes safety standards, environmental regulations, quality control, labour laws, and ethical practices. Ensuring compliance safeguards consumers and maintains fair practices.
For manufacturers, robust compliance frameworks offer numerous benefits. They cut risks by avoiding legal issues and penalties, enhance reputation, and build trust with clients and partners. Compliance also boosts operational efficiency by streamlining processes. Ultimately, a deep commitment to compliance protects the business and positions it as a leader in ethical manufacturing.
1. Navigating the maze of regulatory challenges
Navigating the intricate web of regulatory requirements in manufacturing can be challenging, with variations by region, product type, and industry standards. This complexity often feels like a maze for businesses. In the medical technology sector, Deloitte highlights a “triple witching hour” for regulatory compliance. Between 2016-2020, new regulations from the European Union, ISO, and the MDSAP simultaneously came into effect, requiring swift adaptation.
Businesses needed to proactively assess the impact of these new regulations on current practices, identify compliance gaps, and ensure supplier networks adhered to the latest standards. Collaboration with regulatory bodies became crucial to maintain alignment. By adopting these proactive strategies, companies can effectively navigate regulatory changes and maintain compliance.
2. Building strong manufacturing compliance strategies
Mastering compliance strategies is essential to navigate today’s complex regulations. Manufacturers should proactively review current practices against the latest rules, identify gaps, and implement strategic planning. This approach not only ensures adherence but also positions businesses for long-term success and operational efficiency.
3. Adherence to Good Manufacturing Practices (GMP)
GMP sets the guidelines and standards for every aspect of production, from raw materials to final product testing, in the pharmaceutical, food, and cosmetics industries. By adhering to GMP, manufacturers prevent contamination, errors, and defects, ensuring products consistently meet regulatory standards and customer expectations.
The finer points of GMP within an industry may be different. In pharmaceuticals, GMP ensures products remain uncontaminated and labels are accurate, crucial for patient safety. GMP certifications are essential for manufacturers, involving rigorous steps to uphold quality and safety.
GMP certifications are de rigour for manufacturers and follow these steps:
- Form a dedicated GMP quality team with members from various departments such as production, labelling, and sourcing. This team will oversee the implementation of GMP practices.
- Assess current operations to identify gaps or deficiencies that need addressing to meet GMP standards.
- Evaluate validation processes to ensure they consistently deliver the expected results in key areas like sanitation and computer systems.
- Conduct surprise internal audits to simulate the inspection process, pinpointing areas for improvement and ensuring all departments align in their compliance efforts.
Each step is crucial in maintaining GMP compliance and upholding product quality and safety.
4. Keep robust documentation and ensure record-keeping
Maintain thorough and accurate records of all compliance-related activities. Document processes, audits, and communication with regulatory bodies meticulously. Good record-keeping not only demonstrates compliance but also simplifies addressing any emerging issues. This practice is vital for effective compliance management.
5. Infuse accountability and empowerment around compliance in the company culture
In a podcast for the Boston Consulting Group, Hiltrud Werner from VW discussed her role as Group Audit Director and Head of Integrity and Legal Affairs in steering the auto manufacturer through the emissions crisis and transforming company culture. She highlighted the importance of empowerment and integrity. Her team’s significant change agent was a network of “Integrity ambassadors.”
These ambassadors communicated the cultural changes to their colleagues, fostering grassroots-level conversations that drove the transformation from the bottom up. Werner explained, “These integrity ambassadors would explain to their own colleagues how to understand the new code of conduct.”
By embedding accountability and empowerment in company culture through initiatives like Integrity Ambassadors, organisations can seamlessly enhance their compliance management strategies, setting a solid foundation for transformative manufacturing practices.
Enhancing manufacturing transformation through effective compliance management
Effectively managing compliance risks is essential for driving successful manufacturing transformation. By taking a proactive approach to compliance, you not only mitigate legal and financial risks but also foster innovation and operational excellence.
Leverage the Smart Industry Readiness Index (SIRI) to navigate this complex landscape and progress your manufacturing transformation journey. As the world’s premier independent assessment tool, SIRI provides a comprehensive suite of frameworks and tools designed to guide manufacturers of all sizes and industries through their journey, ensuring strategic benefits and business growth.
