Seven pointers for the ideal supplier code of conduct

Supplier codes of conduct are ineffective if they are not matched with actions to promote transparency, a report has warned.

The report, by sustainability and human rights consultancy Ardea International and the University of Westminster Business School, said codes of conduct were “essential for responsible business practice in today’s business climate”.

But Ardea warned codes of conduct were “ineffective if their requirements are not met with actions to bring about transparency”.

Companies need to act beyond their code and ensure the principles outlined are upheld through regular monitoring. 

Failure to maintain transparency could result in reputational risks, withdrawal of stakeholder support, and loss of market share.

The report said a code was “a set of guidelines that both defines the company’s relationship with their employees and lays out behavioral standards for their employees, partners, and suppliers”.

The overarching goal of a supplier code of conduct is to instill financial and social transparency in the supply chain, with the intention of creating accountability and full disclosure around issues such as human rights, health and safety and environmental impacts.

The report said this involved “identifying company standards, and a clear plan of action to address grievances within the organisation and the supply chain”.

The United Nations and the International Labour Organization were highlighted as key resources for developing a valuable supplier code of conduct.

Seven key points for designing a supplier code of conduct:

1. Research the UN’s Guiding Principles on Business and Human Rights to understand how your organisation can uphold ethical responsibilities.

2. Use the four key categories of human rights, labour, the environment and anti-corruption, outlined by the United Nations Global Compact, as the main foundation of your code of conduct, and consider your company’s approach to whistleblowing. 

3. Tailor it to your market, and explore sector specific areas such as science and technology, competition, taxation and consumer interest. Ardea highlighted that the OECD Guidelines for Multinational Enterprises was a useful resource.

4. Choose the correct person to draft the guidelines, ideally senior leadership employees who can be accountable for the code of conduct, and incorporate “company values, awareness of current problems, and intentions to address them”. Ensure the draft is reviewed and confirmed by legal counsel and senior leadership.

5. Keep your code realistic and honest – do not add requirements that are impractical or cannot be measured, and back up anything with an understanding of minimum requirements, context and examples.

6. Ensure regular monitoring through audits, risks assessments, or conversations with suppliers.

7. Outline how you will respond to violations by developing solutions, rather than terminating business relationships as a first response.

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