How to draw up a powerful code of conduct for suppliers?

The practices of subcontractors and other partners sometimes cause headaches, concerns and worries. At worst, undesirable practices can cause significant business risks and damage. Reputational damage in particular can easily hit your own organisation. 

A code of conduct for subcontractors, which is attached to the contract, is an effective way of communicating expectations and desired practices, as well as a cost-effective way of practising professional risk management.

When considering a code of conduct for suppliers, you're essentially looking at a framework that outlines the values and principles a company expects its suppliers to adhere to. This can cover a wide range of areas, including ethical practices, labor rights, environmental management, and compliance with laws.

Here are seven key elements to consider when developing or evaluating a supplier code of conduct:

1. Alignment with your Core Values
   
   Your supplier code of conduct should reflect your company's core values and ethical standards, ensuring that supplier behaviour aligns with your corporate identity and expectations. Which risks would be critical from the point of view of your strategy and future scenarios?
   
   
2. Compliance and Legal Integrity

   A robust Code of Conduct starts with strict adherence to legal standards. Suppliers must comply with all local, national, and international regulations including labor laws, environmental statutes, and anti-corruption laws. The code should address issues of integrity and honesty, including anti-corruption, anti-bribery, and conflict of interest policies. This foundation protects your company from legal liabilities and ensures that business operations uphold desired ethical standards.
   
   

3. Environmental Protection
   

   Environmental stewardship is increasingly important to consumers and businesses alike. A forward-thinking Code of Conduct requires suppliers to implement practices that reduce ecological footprints, such as efficient waste management, reduced emissions, and sustainable resource use. This commitment can also drive innovation, value creation and efficiency in supply chain operations.
   
   

4. Human Rights
   

   Respecting human rights is non-negotiable. Your code should explicitly outlaw any kind of discrimination, also forced and child labor, promote fair compensation, and uphold workers' rights to safe working conditions and collective bargaining. Ensure that suppliers provide a safe and healthy work environment both physically and mentally. These practices are not only ethical but foster a stable, productive supply chain. Which risks are most prominent in which cultures?
   
   

5. Transparency and Monitoring

   Transparency is key to accountability. Your code should include obligations for suppliers to conduct regular audits, provide transparent reports, and facilitate verifications to assess compliance. This transparency not only helps identify issues before they become systemic but also builds trust with your stakeholders. Which factors are especially important to monitor in which field?
   
   

6. Continuous Improvement and Stakeholder Engagement

   Finally, a dynamic Code of Conduct encourages continuous improvement and adapts to changing ethical, environmental, and social expectations. Encourage suppliers to continuously improve their practices and go beyond mere compliance with the code, fostering innovation in sustainability and ethical practices.
   
   Engaging with stakeholders—including NGOs, local communities, and industry experts—can provide diverse insights that enhance the relevance and impact of your code. Provide a clear and accessible mechanism for workers and other stakeholders to report violations of the code, ensuring that such reports are investigated and addressed appropriately.
   
   

7. Support and collaboration attitude

   When drafting or assessing a supplier code of conduct, it's crucial to strike a balance between setting high standards and providing realistic pathways for suppliers to achieve them. Collaboration and engagement with suppliers are key to ensuring that the code of conduct becomes an integral part of the supply chain's operational practices. Consider offering guidance, training, or resources to help suppliers meet the code's requirements, especially in areas where they may struggle to comply.
   
   

Implementing these seven core elements in your Supplier Code of Conduct will help create a responsible, resilient, and legally compliant supply chain. Such a code not only safeguards against reputational damage but also contributes to long-term business success by aligning suppliers with your corporate values and ethical standards. Remember, a well-crafted code is a living document that evolves as new challenges and opportunities arise.

In this age of transparency and accountability, investing in a comprehensive Supplier Code of Conduct is not just good practice—it's essential for creating sustainable success.

How to take into account all critical factors when hands are already full of work?
Be in touch! Let’s look at options together. We are happy to share ways and means by which it is possible to build a targeted and powerful code of conduct.

Erika Heiskanen