Creating a Supplier Code of Conduct: What you Need to Know

Does your business have a code of conduct for suppliers?

Do your suppliers know what you expect from them? Do they share the same values and ethics as your business?

Before doing business with a supplier, businesses must create a code of conduct for suppliers.

In fact, creating and enforcing a supplier code of conduct is an important part of vendor management and corporate social responsibility. Businesses must take the time to create a comprehensive and detailed code of conduct that outlines the company’s expectations from its suppliers.

What is a Supplier Code of Conduct?

A supplier code of conduct is a document that outlines the expectations and standards of behavior that suppliers are expected to adhere to when conducting business with your company. It serves as a tool to ensure that suppliers understand the company’s values and comply with them. It also helps to protect the company’s reputation by setting clear boundaries between what is and what is not acceptable behavior.

The supplier code of conduct is used by companies to ensure that their suppliers are ethically and responsibly sourcing their materials and services. It lays down a set of rules, policies, and procedures that a company expects its suppliers to abide by. It outlines a company’s expectations for the way suppliers should act and provides guidance on how these expectations should be followed.

The code of conduct can include labor standards, environmental regulations, health and safety, animal welfare, and more. It should also outline the consequences for not following the code of conduct, such as termination of the relationship between the company and the supplier.

What to Include in Your Supplier Code of Conduct

When creating a supplier code of conduct, it is important to include specific language that outlines the expectations for suppliers. This language should cover both ethical and legal issues. For example, the code of conduct should outline the company’s expectations for safe and healthy working conditions, non-discrimination, and environmental responsibility. It should also include language that requires suppliers to comply with applicable laws and regulations.

The code of conduct should also describe how to handle confidential and proprietary information. It should include a clear definition of what constitutes confidential and proprietary information and a statement that suppliers must not use or disclose this information outside of the authorized scope of the business relationship.

It is also important to mention the procedure for the selection of suppliers. This should include the criteria that suppliers must meet to be eligible to do business with the company. The criteria can be related to quality, cost, delivery, and service.

Finally, the supplier code of conduct should outline the expectations for communication. This should include ways for suppliers to communicate promptly and accurately with the company and disclose any information that may be relevant to the business relationship. It should also explain how to respond to customer feedback and resolve customer complaints.

Key Components of a Supplier Code of Conduct

A supplier code of conduct should include the following components:

• A statement of the company’s expectations of its suppliers
• A list of standards that suppliers must adhere to
• Areas in which suppliers must comply (such as labor standards, environmental regulations, health and safety, etc.)
• Actions that suppliers must take to ensure compliance
• Resources available to suppliers to ensure compliance
• An outline of the consequences for not complying with the code of conduct
• A process for auditing suppliers and a process for resolving disputes

Examples of Supplier Code of Conduct

There are many examples of supplier codes of conduct that companies can use as a starting point when creating their own.

For example, a leading technology provider’s supplier code of conduct lists the company’s expectations for ethical and legal compliance, health and safety, environmental responsibility, labor and human rights, diversity and inclusion, and conflict-free materials.

Many companies have also published their codes of conduct, which can be used as a template for crafting a code of conduct for a company’s suppliers.

Benefits of a Supplier Code of Conduct

A supplier code of conduct is an important part of a company’s overall compliance strategy. It helps to ensure that the company is meeting its legal and ethical obligations and its suppliers are adhering to the same standards. It also helps to protect the company from legal or financial risks associated with its suppliers.

A supplier code of conduct also helps to build trust between the company and its suppliers. Suppliers are more likely to be loyal to a company that has a clear code of conduct and upholds its standards. It also helps to ensure that suppliers are meeting the company’s quality standards, which results in better products and services for customers.

Strategies to Implement a Supplier Code of Conduct

Once a supplier code of conduct has been crafted, the next step is to implement it. Here are some strategies for doing so:

• Educate suppliers: Make sure that suppliers have a clear understanding of the code of conduct.
• Establish communication channels: Establish clear communication channels between the company and its suppliers to make sure that any questions or concerns are addressed quickly.
• Monitor compliance: Conduct regular audits to check if suppliers are adhering to the standards outlined in the code of conduct.
• Follow up on non-compliance: Follow up with suppliers if they are not in compliance with the code of conduct and work with them to make sure they are meeting the standards.

How to Monitor and Enforce Your Supplier Code of Conduct

Once a supplier code of conduct has been created and approved, it is important to ensure that suppliers are following the guidelines outlined in the code. This can be done through regular monitoring and auditing of suppliers and their operations.

Audits should include a review of the suppliers’ operations and processes, as well as a review of the documents and records related to the code of conduct. Auditors should also conduct interviews with suppliers’ personnel to ensure they are aware of the code of conduct and are adhering to it.

The monitoring and auditing process should include both onsite visits and document reviews. It is also important to establish a process for responding to any violations or non-compliance issues that are found during the monitoring and auditing process.

Additionally, it should establish a process for resolving disputes between the company and its suppliers. This process should include steps for escalating disputes to higher levels of management and/or legal counsel, if necessary. It should also include the company’s expectations for resolving disputes in a timely and fair manner.

Establish a process for regularly reviewing and updating the code of conduct. This process should include a mechanism for soliciting feedback from suppliers and other stakeholders, as well as a process for reviewing and revising the code as needed.