From Ethics to Compliance: How a Supplier Code of Conduct Benefits Your Organization

A Supplier Code of Conduct (SCC) is a powerful tool your organization can use to maintain productive, ethical, and compliant relationships with your suppliers.  From protecting your reputation to improving the quality and reliability of your supply chain, a supplier code of conduct provides clear guidelines and standards for your suppliers to follow.

If you’re considering rolling out a supplier code of conduct in your organization, this blog’s for you.  In it I break down:

  • What a supplier code of conduct is
  • The benefits of having one
  • 8 key sections you’ll want to include
  • How to communicate your SCC to your suppliers.

Let’s get started.

What is a Supplier Code of Conduct?

A supplier code of conduct is a set of guidelines and standards that your organization outlines for your suppliers regarding expectations for responsible and ethical business practices. The purpose of a supplier code of conduct is to ensure that your suppliers are operating in a manner that aligns with your own organization’s ethical principles and values. 

The SCC provides:

  • a framework for what your organization expects from your suppliers, 
  • a vehicle for you to communicate those expectations to your suppliers, and
  • standards you can use to monitor supplier compliance to your code of conduct.

Benefits of Having a Supplier Code of Conduct

Implementing an SCC is beneficial for both you and your suppliers. The benefits to your organization include:

  1. Trust. Your customers expect you to operate ethically. A supplier code of conduct helps to build trust with your customers, stakeholders, and the broader community, as it shows you are committed to working with partners who share your own ethical values and principles.
  2. Improved Supplier Relationships:  An SCC helps to build trust and transparency between you and your suppliers. By engaging with your suppliers on issues that are important to your organization, you can build relationships that are transparent, accountable and allow for continuous improvement.
  3. Supply Chain Integrity: An SCC helps to ensure that your suppliers are using appropriate materials and processes, and that the products they produce are of high quality. This helps to ensure the integrity of your supply chain and reduces the risk of product recalls or other costly problems.
  4. Compliance: Your organization is responsible for ensuring that your suppliers are in compliance with applicable laws and regulations. An SCC helps to ensure that suppliers are aware of their legal obligations as a result of their relationship with you.
  5. Social Responsibility: More and more companies are integrating social responsibility into their operations – and those responsibilities flow down to their suppliers. An SCC helps your organization promote and monitor supplier practices that are consistent with your own social responsibility goals. 

What to Include In Your Supplier Code of Conduct

The specific contents of a supplier code of conduct vary from one organization to the next.  In fact, it’s critical that you customize your SCC to align specifically to your organization’s own ethics standards and industry requirements. 

With that said, common areas that are typically covered in an SCC include:

  • Business integrity: Standards for ethical business practices, including anti-corruption, anti-bribery, and transparency.
  • Compliance: A commitment to compliance with applicable laws and regulations.
  • Environmental protection: Requirements for responsible environmental practices, including reducing waste and minimizing the impact of operations on the environment.
  • Health and safety: Standards for promoting and protecting worker health and safety, including requirements for safe working conditions and adequate training.
  • Labor and human rights: Requirements and standards for fair labor practices, non-discrimination, and respect for human rights, including freedom of association, child labor, and forced labor.
  • Implementation and communication: Expectations for how the supplier will communicate the code of conduct within their organization.
  • Monitoring and reporting: Mechanisms for monitoring compliance and reporting violations of the code of conduct.

    A well written SCC should also address what happens if the supplier doesn’t comply, which can include process changes, training or possible termination of the business relationship.

How to Communicate Your Code of Conduct to Suppliers

Best practice is to communicate your supplier code of conduct, in writing, during your risk assessment process (pre-contract).  This ensures that suppliers are aware of your expectations prior to signing a contract, and you can perform diligence on the supplier to ensure they have the necessary policies and controls in place to comply with the SCC.

It’s also important to communicate your SCC on a periodic basis, usually annually, to refresh suppliers on your expectations and to inform them of any changes in your SCC.  This can be done as part of a general communication, or as part of your periodic due diligence process.  Many organizations also post their supplier code of conduct publicly on their website, or through a secure supplier portal.

Overall, the key to effectively communicating the supplier code of conduct is to ensure that it is clear, concise, and accessible to all suppliers, and to reinforce the importance of compliance through training, monitoring, and enforcement.

If you’re interested in creating and implementing a Supplier Code of Conduct for your organization, contact us to learn how we can help.

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