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How to Create a Supplier Code of Conduct

How to Create a Supplier Code of Conduct

What is a Supplier Code of Conduct?

A supplier code sets rules for suppliers to follow, as required by a business. Companies require suppliers with shared values and commitments to human rights, the environment, safety, and ethics.

Benefits of Having a Supplier Code of Conduct

Creating a supplier code of conduct is important for enterprises, as it can help them to:

  • Improve their supply chain management and performance
  • Reduce their operational and reputational risks
  • Enhance their brand image and customer loyalty
  • Comply with relevant laws and regulations
  • Contribute to social and environmental causes

What to Include in Your Supplier Code of Conduct

A supplier code should include important elements and topics that show what your business expects from suppliers. These may vary depending on your industry, location, and stakeholders, but some of the common ones are:

Compliance with laws and regulations

Your suppliers must adhere to all applicable laws and regulations in the jurisdictions they operate in. This covers many areas like work, environment, health, safety, trade, taxes, fair competition, honesty, data security, and ideas ownership.

Human rights and labor standards

Suppliers must respect and protect the rights and dignity of everyone involved in their work, like employees, contractors, subcontractors, and communities. This means ensuring fair pay, reasonable hours, and good benefits, while strictly banning child labor, forced labor, human trafficking, and discrimination. It’s important to respect freedom of association, and collective bargaining, and provide safe and healthy working conditions.

Environmental impacts and sustainability

Encourage your suppliers to take proactive steps towards environmental responsibility and contribute to environmental sustainability. This means reducing their effect on the environment by using less energy, producing less waste, and using less water. It also entails preventing pollution and environmental harm, utilizing renewable and recycled materials, and implementing environmental management systems, and obtaining certifications.

Health and safety

Make sure your supplier’s rules highlight the need for a safe and supportive workplace for everyone who works or visits there. This means following occupational health and safety standards and regulations, implementing proactive measures to prevent accidents, injuries, and illnesses, providing comprehensive training, state-of-the-art equipment, and top-notch facilities, as well as promptly reporting and thoroughly investigating any incidents or potential hazards.

Anti-bribery and anti-corruption

Suppliers must be honest, and avoid bribery, corruption, fraud, and unethical behavior in their business dealings. This means no giving or receiving improper payments, gifts, or favors. It also means no unfair competition or conflicts of interest. Lastly, it means not trying to influence or interfere with public officials or authorities.

Confidentiality and data protection

Your suppliers must prioritize the confidentiality and security of the information and data they receive, access, or process within your business relationship. This entails adhering to data protection laws and regulations, seeking consent and providing notice for any data collection, use, or disclosure, implementing effective technical and organizational measures to prevent unauthorized access, use, disclosure, alteration, or destruction, and promptly informing you of any data breaches or incidents.

How to Create a Supplier Code of Conduct

Developing a supplier code of conduct is an ongoing endeavor that encompasses multiple stages and engages various individuals. Here is a guide on the few essential steps to successfully establish a supplier code of conduct:

1. Define your objectives and scope

Before creating your supplier code, determine your goals and how much you want to enforce them.

  • What are the primary objectives and advantages you hope to attain with your supplier code of conduct?
  • Who are the intended audience and stakeholders for your supplier code of conduct?
  • Which suppliers and vendors fall under the purview of your supplier code of conduct?
  • How do you plan to effectively communicate and enforce your supplier’s code of conduct?

2. Conduct a gap analysis and benchmark

To develop a supplier code of conduct that is both relevant and impactful, it is essential to conduct a thorough analysis of your current practices and compare them to industry benchmarks.

  • How do you currently oversee and monitor your suppliers and vendors?
  • What policies, standards, and guidelines are currently in place for them?

Finding and addressing gaps or risks is important for the success of your supplier code of conduct. Consider how your colleagues and rivals handle their supplier rules. Take note of the effective business practices and standards that you can adopt or incorporate into your operations.

3. Involve relevant stakeholders

Creating a supplier code of conduct requires input from relevant stakeholders, both inside and outside the company. To improve your supplier rules, it is crucial to communicate and engage with your suppliers, customers, employees, and outside experts. These experts can include industry groups, NGOs, regulators, and consultants.

By seeking their feedback and ideas, you can gather valuable insights. By doing this, your supplier code of conduct will align with your business’s vision, mission, values, and goals. Additionally, it will meet the expectations and needs of your stakeholders.

4. Draft, review, and finalize your supplier code of conduct

After getting enough information and insights from stakeholders, you can create your supplier code of conduct. Use language that is clear, concise, and easily understandable while following a well-organized and logical structure. Additionally, ensure that your code includes a concise introduction, a comprehensive summary, and a well-thought-out conclusion.

To enhance accessibility, consider incorporating a table of contents, definitions, references, and appendices if necessary. Review and revise your draft, get feedback, and get approval from stakeholders before finalizing your supplier code of conduct.

5. Publish and distribute your supplier code of conduct

Once you finish creating your supplier code, share it with suppliers, vendors, customers, employees, and other stakeholders. Make your supplier’s code of conduct easy to find and see by using different channels and formats. These can include online, print, and digital platforms. Include a contact person or email for questions about your supplier’s code of conduct.

How to Implement and Monitor a Supplier Code of Conduct

Crafting a supplier code of conduct is just the beginning, not the end. To avoid non-compliance and meet your expectations, effective due diligence is crucial.

Educate and train your suppliers and employees

Education and training are important for successfully implementing and monitoring your supplier’s code of conduct. You should educate your suppliers and employees about your supplier code of conduct. This includes explaining its purpose, content, requirements, and how it affects their roles and responsibilities.

Use different ways and tools, like webinars, workshops, e-learning, manuals, guides, etc., to teach your education and training programs. Assess and measure the success of your education and training programs, and offer additional courses or updates when necessary.

Conduct regular audits and assessments

Another key factor for effective implementation and monitoring of your supplier’s code of conduct is audits and assessments. Regularly audit and assess suppliers and vendors to ensure they meet your code of conduct and perform well.

Utilize a diverse range of sources and methodologies, including self-assessments, audits, surveys, interviews, and more, to collect and analyze data and evidence. Additionally, employ a variety of criteria and indicators, such as scorecards, ratings, rankings, and more, to effectively measure and compare your suppliers and vendors.

Get started with auditing your suppliers with Certainty’s free Supplier Social & Environmental Compliance Checklist.

Handle and resolve any issues or violations

Even if you try your best, you might face problems or rule-breaking from your suppliers, vendors, employees, or customers.

Have a clear process for handling issues, communicate them to stakeholders, and resolve any problems or violations. You need a clear and consistent policy for punishing or ending contracts if there are serious or repeated problems or violations. You should also document and report any issues or violations, and their outcomes, to your stakeholders.

Review and update your supplier code of conduct as needed

Your supplier code of conduct should be regularly reviewed and updated to reflect any changes in your business, industry, or environment. Have a consistent process to review and update your supplier code of conduct, and include stakeholders in the process. You should also communicate and distribute any changes or updates.

How to Improve Supplier Audits and Inspections with Certainty Software

Certainty Software is an invaluable tool that empowers businesses to effectively oversee and meticulously document supplier audits and inspections. By leveraging the remarkable capabilities of Certainty Software, you can effortlessly enhance the implementation and monitoring of your supplier code of conduct. Experience features such as:

Customizable checklists

Elevate your supplier audits and inspections with personalized checklists or tap into Certainty Software’s library of ready-made templates. Enhance the comprehensiveness and relevance of your checklists by incorporating scoring, weighting, and branching logic. Customize every aspect to suit your needs and ensure a seamless audit experience.

Automated workflows

Streamline and automate your supplier audits and inspections by effortlessly scheduling, assigning, notifying, reminding, escalating, and approving. 

Real-time data

Gather and instantly access up-to-date information from your supplier audits and inspections, using any device of your choice – be it smartphones, tablets, laptops, and more. Enhance your data by effortlessly capturing and attaching photos, videos, audio, signatures, GPS, and other elements to provide comprehensive evidence and context.

Analytics and dashboards

Use Certainty Software’s analytics and dashboards to analyze and visualize supplier audit and inspection data. Customize reports and charts to fit your needs. Easily export and share findings to collaborate with stakeholders.

Corrective action management

Manage and track issues or violations found during audits and inspections with Certainty Software’s corrective action management feature. Assign, monitor, and verify actions for efficient execution and desired results.

Book a demo with our team today to learn how Certainty can help with evaluating your supplier performance.