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Supplier Code of Conduct

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What is a Supplier code of conduct?

A supplier code of conduct is created for the purpose of ensuring that a company’s suppliers put into place safe working conditions and their employees are treated with respect. Also their production processes being responsible and environmentally friendly.  Components of a supplier code of conduct include:

  • Labor practice and standards: This includes safeguards against child labour, non-discrimination, health and safety, working conditions, working hours, compensation, right to association, freely chosen employment.
  • Environmental policy: This comprises of product and materials use and technology of transport system
  • Ethics: Establishing anti-corruption measures, and adhering to fair business practices in winning business, employees, and in managing partner relationships (e.g. ‘upstream’ in the supply chain)
  • Review and documentation policy: How it will be monitored and reviewed

How to develop your supplier code of conduct

1. Assess risk in your company’s supply chain:

  • Where are your manufactured products sourced from?
  • What is the environmental and labor law enforcement like in those countries?
  • Are the methods used in manufacturing conflict with the environmental and social goals of your company?

2. Discuss and consult with your suppliers and other companies operating in your industry 

If your suppliers are working with customers who already have a code of conduct in place, it will be useful to have terminology and organization as consistent as possible, where appropriate.

3. Seek out examples of supplier code of conducts based on industry initiatives or standards 

Your industry may have one or more initiatives to create a common set of supplier conduct standards, and will publish example code of conduct you can use as a model. Examples include Ethical Trading Initiative, fair labor association workplace and Electronic Industry Citizenship Coalition.


International Labor and Environmental Standards

Important standards found in many supplier code of conducts are set from the following international environmental and labor standards. A company may choose to use these standard as guidelines in their supplier code of conduct or ensure that the factories of their suppliers adhere to these specific standards.

Labor standards

Environmental and social standards

  • ISO 14000 : ISO 14000 is a set of international voluntary standards and guidelines regarding environmental management systems, eco labeling, environmental auditing, environmental performance evaluation, environmental aspects in product standards, and life cycle assessments.
  • SA 8000 : SA 8000 is an international standard to ensure good working conditions that covers topics such as: preventing child labor and forced labor, workplace safety and health, freedom of association and right to collective bargaining, anti-discrimination, discipline, remuneration, working hours, and HR management systems.

Establishing and monitoring

Monitoring your company’s supplier code of conduct usually involves a multi-stakeholder initiative that will include many elements such as:

  • New tools for understanding supplier performance on the topics addressed (e.g. corporate responsibility and business conduct). These may include assessments and ratings such as EcoVadis provides, audits
  • New processes in procurement and supply chain management to integrate these  code of conduct performance measurements into procurement decisions. These might include SRM or supplier information systems that can track which suppliers have agreed and signed the Supplier code of conduct.
  • Commercial enforcement mechanisms such as contract clauses, RFI/RFX rules etc. or eligibility for rewards programs such as “preferred supplier” or “key supplier” status programs or other incentives.
  • Internal change management efforts to train employees and suppliers on the code of conduct and its implications for your business.

Benefits of a supplier code of conduct

  • By creating a supplier code of conduct, you set clear expectations for suppliers in a way they can consult and engage with.
  • Helps protect a company’s brand image in case of an incident  at a supplier’s site (e.g. environmental or human rights violation, etc.)
  • Code of conducts are of great importance if your company obtains and sources materials and products from countries where environmental and labor law enforcement is not solid.