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Supplier code of conduct: is it still enough?

Making sure your company is complying with human rights, labor standards, and environmental policies is only a part of companies duties. Verifying that suppliers are in compliance with the applicable laws and ethics is also subject to companies’ obligations.

To ensure that suppliers are in compliance with the applicable laws and company standards, most establish a supplier code of conduct. Implementing such a written guideline enables companies to prevent some supply chain risks and safeguard their reputation. It can even translate into a competitive advantage when scouting for a proper supplier.  

What is the supplier code of conduct? 

A supplier code of conduct, as well called a code of ethics or code of practices, is a guideline that describes the acceptable and undesirable practices for suppliers. The supplier code of conduct intends to certify that suppliers are treating their employees rightfully and respecting the environment. Commonly supplier code of conduct consists of the following topics.  

  • Labor Practice and Standards – This covers safeguards against child labor, non-discrimination, health and safety, working conditions, working hours, compensation, right to association, freely chosen employment. 
  • Environmental Policy – Consists of regulations and requirements to ensure the supplier doesn’t harm the environment. 
  • Ethics – Compliance with fair business practices, anti-corruption regulations, and rightful managing partner relationships. 
  • Documentation Policy and Review – Detailed description of the documentation process and an outline of the review process.  

Why should the supplier code of conduct be of interest to you?

A resilient and transparent supply chain is an advantage for any company. Yet, it is not an easy feat to ensure that all international suppliers are on the same page. A code of conduct ensures that your suppliers are sharing the same ethical ground, increases the engagement of the supplier, and establishes clear expectations. Moreover, it could play a vital role of insurance, by protecting your companies reputation from harm caused by third parties’ actions. Code of conduct is especially valuable if your company sources material and products from countries where environmental and labor laws are feeble. Furthermore, the code of conduct could be an essential part of the process of choosing a supplier.

How to create a supplier code of conduct?  

For the supplier code of conduct to work effectively and as intended it needs to be tailored for the needs of the company and specific supply chain. These three steps of implementing a supplier code of conduct will enable you to adjust the code of conduct for the companies needs: 

  1. Analyze your companies supply chain and related risks – Depending on the country your supplier is located in, industry, and product, different alterations will need to be imposed in the supplier code of conduct. 
  2. Discuss with your suppliers and operating companies of the industry – As your suppliers are directly affected, a discussion with them is highly recommended. Moreover, your suppliers already might be in compliance with a code of conduct. It could be useful to examine the existing code of conduct. 
  3. Explore standardized supplier code of conduct in your industry – Industry-standardized code of conduct could be advantageous in your strategy of cooperation with suppliers. Examples of such standardized code of conduct are the Ethical Trading Initiative, Fair Labor Association, and Industry Citizenship Coalition. As well, soon enough Prewave will have a standardized code of conduct for our customers.

Usually, the following International Labor and Environmental standards are used as the basis for the supplier code of conduct. These texts describe the basic principles of human rights, labor regulations, and environmental policies.

Labor Standards  

Enviremental Standarts

  • ISO14000 is a collection of voluntary standards and rules concerning environmental management systems, eco-labeling, environmental auditing, environmental performance evaluation, environmental aspects in product standards, and life cycle assessments.  

Implementation and Monitoring 

When your supplier code of conduct is ready, you will be required to establish a strategy of implementing and monitoring the code of conduct at your supplier, to assure that your suppliers are in compliance with the applicable laws. Usually, audits are used to help monitor the supplier.

Is implementing a code of conduct good enough to ensure a sustainable supply chain?

In short, no. It is a good step in the right direction but as the saying goes, paper is patient. We have illustrated the issue for your in the following short video:

While implementing a supplier code of conduct is a welcomed and essential cornerstone of any sustainability strategy, companies can nowadays go beyond simple guidelines and assessments with real-time monitoring.

Supplier in all tiers are monitored online in news, social media and any other available data source in order to pick up on risks and events happening at the supplier. While most suppliers are certified and agree to sign a code of conduct, in reality there might be issues with human rights, child labor, pollution or a wide variety of other risks. Prewave picks up on these risks, even if they are just a rumour on social media and reports them back to you so you can react, investigate and solve these problems. True sustainability can only be achieved when you have all the possible information. Make sure that nothing in your supply chain goes unnoticed. If you would like to find out more about how Prewave can be used to monitor your suppliers read our article on supply chain monitoring or have a look at our Audi, Porsche and VW case study.

For a more general industry sustainability overview check out our latest sustainability rankings.

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