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ABC Ltd works with supplier XYZ Ltd who uses a variety of subcontractors. ABC has recently learned of an ethical breach being committed by one of XYZ's subcontractors. What should ABC do?
ABC should do a 'root cause analysis' to find out where the issue has come about, and why. From there, once they know what the breach is and how serious it is, they can suggest corrective action.
They can't jump straight to terminating the contract or seeking damages as it's not the supplier itself but rather the subcontractor. Also that would be really hasty considering we don't know what the issue is and what the market conditions are like. That supplier may be the only one who can provide the product. We also don't know if the supplier knows about the issue themselves.