Developing a Supplier Code of Conduct

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

In today’s competitive market, understanding the expectations and standards that businesses have for their suppliers is absolutely essential. Supplier codes of conduct provide a framework for ensuring that companies meet their ethical and legal obligations while maintaining the highest possible standards of business conduct.

The importance of a supplier code of conduct cannot be overstated; not only can it protect businesses from legal liability by setting out clear expectations for suppliers, but it also helps to safeguard the reputation of a business and its customers. Furthermore, by having a well-defined code in place, businesses can foster better relationships with their suppliers, as both parties understand their obligations.

The Genie AI team are experts when it comes to developing supplier codes of conduct - we have access to millions of datapoints which teach our AI what constitutes a market-standard agreement between businesses and their suppliers. Our community template library enables anyone to draft and customize high-quality legal documents without having to consult with an expert lawyer or pay expensive fees - all you need is access to our free templates!

If you’re looking for step-by-step guidance on how to create your own supplier code of conduct, or just want more information on how you can access our template library today - look no further than Genie AI!

Definitions (feel free to skip)

Supplier Code of Conduct: A set of guidelines that businesses use to ensure their suppliers are meeting certain ethical and legal standards.
Anti-corruption and Bribery: Practices or activities that are illegal or unethical and involve the offering, giving, receiving, or soliciting of something of value for the purpose of influencing a person’s actions.
Social Responsibility: The obligation of a company to act in a way that is beneficial to society and the environment.
Intellectual Property: Creative works that are protected by copyright, trademark, or patent law.
Enforcement: Taking action to ensure a rule or law is followed.
Dispute Resolution: A process of resolving a disagreement or conflict between two or more parties.
Audit: The process of examining and verifying financial accounts and records.

Contents

• Understand why a supplier code of conduct is important
• Research and analyse key elements to include in a supplier code of conduct
• Draft the supplier code of conduct
• Review the supplier code of conduct for accuracy and completeness
• Approve the supplier code of conduct
• Communicate the supplier code of conduct to suppliers
• Implement the supplier code of conduct
• Monitor compliance with the supplier code of conduct
• Audit the supplier code of conduct
• Establish a process to enforce the supplier code of conduct
• Establish a process to ensure continuous improvement of the supplier code of conduct
• Create a process to respond to non-compliance
• Create a process to review the supplier code of conduct on a regular basis
• Train staff on the supplier code of conduct

Get started

Understand why a supplier code of conduct is important

• Research the business benefits of establishing a supplier code of conduct.
• Evaluate the potential risks to the company associated with not having a supplier code of conduct in place.
• Consult with key stakeholders to understand their views on the importance of a supplier code of conduct.
• Establish the company’s commitment to upholding ethical standards.

You can check this off your list when you have researched the business benefits of establishing a supplier code of conduct, evaluated the potential risks to the company associated with not having a supplier code of conduct in place, consulted with key stakeholders to understand their views on the importance of a supplier code of conduct, and established the company’s commitment to upholding ethical standards.

Research and analyse key elements to include in a supplier code of conduct

• Review existing codes of conduct of other companies in the industry to gain an understanding of common elements and best practices
• Research industry and legal standards related to supplier conduct
• Analyze the results of research to identify the elements to include in the code of conduct
• Create a list of key elements for the supplier code of conduct
• When the key elements for the supplier code of conduct have been identified and listed, the step is complete and you can move on to drafting the supplier code of conduct.

Draft the supplier code of conduct

• Create an outline that covers all the elements of the Supplier Code of Conduct
• Identify all stakeholders who need to be involved in the process
• Use the research and analysis done in the previous step to fill in the content of the Supplier Code of Conduct
• Make sure to include any legal requirements, industry standards and best practices
• Make sure to include any relevant policies and procedures
• Review the document with all stakeholders and adjust as needed
• Once all stakeholders are in agreement, finalize the Supplier Code of Conduct

You’ll know when you can check this off your list and move on to the next step when all stakeholders have agreed on the final version of the Supplier Code of Conduct.

Review the supplier code of conduct for accuracy and completeness

• Analyze the supplier code of conduct for clarity, accuracy, completeness, and consistency
• Review the supplier code of conduct with the relevant stakeholders to ensure their input is included
• Ensure that all language used is clear and unambiguous
• Check that all terms and conditions are accurate
• Look for any missing information or any areas that need to be clarified
• Make sure all necessary legal compliance requirements are addressed
• Once all changes are complete, the supplier code of conduct is ready to be approved
• You’ll know when you’re finished reviewing the supplier code of conduct when all changes have been made to ensure accuracy and completeness.

Approve the supplier code of conduct

• Review the supplier code of conduct to ensure accuracy and completeness
• Confirm the supplier code of conduct meets all internal and external requirements
• Obtain approval from the necessary stakeholders
• Document the approval with signatures
• Create a system to store the approved supplier code of conduct
• When all the steps are completed, you can check this off your list and move on to the next step of communicating the supplier code of conduct to suppliers.

Communicate the supplier code of conduct to suppliers

• Draft a letter or email to all current suppliers introducing the code of conduct and the expectations of suppliers
• Set up individual meetings with each supplier to discuss the code of conduct in detail
• Make sure that each supplier understands the code of conduct, and any expectations of their performance
• Ask suppliers to sign a document confirming that they have received and understood the code of conduct
• Follow up with suppliers periodically to ensure they are meeting the expectations of the code of conduct
• When all suppliers have signed the document confirming that they have received and understood the code of conduct, you can check this step off your list and move on to the next step.

Implement the supplier code of conduct

• Finalize the supplier code of conduct document and have it approved by the relevant personnel.
• Provide a copy of the supplier code of conduct to each supplier.
• Have each supplier sign and return an acknowledgement of the code of conduct, stating they agree to comply with the outlined standards.
• Make the supplier code of conduct available to all suppliers and staff on your company’s website or intranet.

Once all suppliers have acknowledged the code of conduct and it is available online, you can move on to the next step.

Monitor compliance with the supplier code of conduct

• Establish a system to regularly monitor suppliers’ compliance with the code of conduct and any changes
• Establish a system for suppliers to report any non-compliance
• Establish a system for escalating and resolving any non-compliance issues
• Track and report on supplier compliance
• Develop a plan for dealing with any identified non-compliance issues
• Educate suppliers on the expectations of the code of conduct
• Publish an annual report on supplier compliance

How you’ll know when you can check this off your list and move on to the next step:
When all the above steps have been completed, the monitoring of compliance with the supplier code of conduct has been successfully implemented and it is ready for auditing.

Audit the supplier code of conduct

• Define the scope of the audit, the suppliers that need to be included
• Establish criteria for the audit and the expectations for the suppliers
• Determine the frequency of the audit
• Source and select an auditor for the audit
• Communicate the audit plan to the suppliers and stakeholders
• Collect information and audit evidence to assess the supplier code of conduct
• Assess the audit results and determine any remedial action required
• Upon completion of the audit, document the results and produce a report
• When the audits are completed and the report is finalized, it can be checked off the list and the next step can be taken.

Establish a process to enforce the supplier code of conduct

• Develop a system for monitoring suppliers and ensuring that the code of conduct is adhered to.
• Consider developing an evaluation process to assess supplier performance in regards to the code of conduct.
• Create a set of consequences for suppliers who violate the code of conduct.
• Establish a process for addressing supplier violations and informing suppliers of the consequences.
• Develop a plan for regularly auditing suppliers and confirming that they are compliant with the code of conduct.
• When the process is established and the supplier code of conduct is enforced, it is time to move on to the next step.

Establish a process to ensure continuous improvement of the supplier code of conduct

• Set up a regular schedule for reviewing and assessing the effectiveness of the code of conduct
• Identify and address any gaps in the code of conduct
• Develop a system for tracking and improving the supplier code of conduct
• Solicit feedback from suppliers to identify areas for improvement
• Establish a timeline for when feedback must be gathered from suppliers
• Monitor supplier performance to ensure compliance with the code of conduct

When you have established the process to ensure continuous improvement of the supplier code of conduct, you can check this off your list and move on to the next step.

Create a process to respond to non-compliance

• Establish a protocol for responding to non-compliance. This should include steps for investigation, communication, and corrective action.
• Develop a process for tracking and reporting incidents of non-compliance and corrective action taken.
• Ensure that all employees and contractors understand the process for responding to non-compliance.
• Make sure that all employees and contractors are aware of the consequences of non-compliance.
• Make sure that there is an established procedure for reporting incidents of non-compliance, and that all employees and contractors are aware of it.

Once you have established a process to respond to non-compliance and have ensured that all employees and contractors understand it, you can check this step off your list and move on to the next step.

Create a process to review the supplier code of conduct on a regular basis

• Establish a timeline for reviewing the code of conduct (e.g. every 6 months)
• Designate a team to review the code of conduct
• Gather feedback from the team on any changes, updates, or modifications needed
• Ensure the code of conduct is updated to reflect any changes or modifications made
• Share the updated code of conduct with suppliers
• Monitor any supplier feedback and make changes accordingly
• Document any changes or modifications made during the review process
• When all changes and updates are completed, check off this step and move on to the next one.

Train staff on the supplier code of conduct

• Develop a training program for staff on the supplier code of conduct
• Make sure to explain the purpose of the code of conduct and the expected behaviors
• Include any relevant scenarios or case studies to help staff understand the code of conduct
• Make sure to explain any consequences for violation of the code of conduct
• Allow staff to ask questions and provide feedback
• Provide appropriate follow-up to ensure staff understand and can comply with the code of conduct
• Document that staff training has been successfully completed
• Once all staff have been trained, you can check this off your list and move on to the next step.

FAQ:

Q: What is the main purpose of a Supplier Code of Conduct?

Asked by Richard on 2nd March 2022.
A: The main purpose of a Supplier Code of Conduct (SCoC) is to provide written standards and procedures that guide suppliers in conducting their business. It helps to ensure that suppliers operate ethically and adhere to the laws and regulations of the country in which they operate. The SCoC should provide clear expectations for suppliers and address topics such as anti-corruption, human rights, environmental responsibility, safety, and health.

Q: What are the differences between UK, USA, and EU jurisdictions and laws?

Asked by Elizabeth on 17th April 2022.
A: The legal systems of the UK, USA, and EU are based on different principles and have developed differently over time. There are significant differences in their laws and regulations concerning corporate governance, intellectual property rights, labour laws, consumer protection, anti-corruption legislation, data privacy, data security, environmental protection, health & safety regulations and taxation. For example, the UK has stricter labour laws than the US or EU; it also has stricter anti-corruption legislation than the US or EU. In addition, the US has more stringent data privacy laws than either the UK or EU.

Q: How might a Supplier Code of Conduct differ between different industries or sectors?

Asked by Justin on 12th May 2022.
A: A Supplier Code of Conduct can be tailored to suit specific industries or sectors depending on their unique needs. For example, a technology company may have more stringent requirements for suppliers related to data security than an eCommerce business. Similarly an industry such as B2B may have different requirements for suppliers related to customer service than a company operating within the SaaS sector. A SCoC should be reviewed regularly to ensure it remains relevant and up-to-date with industry best practice standards.

Q: What factors should be considered when developing a Supplier Code of Conduct?

Asked by Jessica on 1st June 2022.
A: When developing a Supplier Code of Conduct it is important to consider factors such as the country or countries in which your suppliers operate; the industry sector; any applicable laws, regulations or best practice guidelines; any customer requirements; as well as any other factors that may impact on your supplier relationships. It is important to also consider how you will measure supplier performance against the code to ensure compliance and adherence.

Q: Are there any examples of best practice guidelines which might be useful when developing a Supplier Code of Conduct?

Asked by David on 23rd June 2022.
A: Yes, there are several examples of best practice guidelines which can be useful when developing a Supplier Code of Conduct. These include guidelines from organizations such as the Global Compact Network (which provides guidance on human rights and labour standards), Global Reporting Initiative (which provides guidance on environmental sustainability), International Organization for Standardization (which provides guidance on quality management systems) and Responsible Business Alliance (which provides guidance on responsible sourcing). Additionally there are several industry-specific best practices which can be useful for certain sectors such as finance or retail.

Q: What other documents should be considered when developing a Supplier Code of Conduct?

Asked by Matthew on 9th July 2022.
A: In addition to considering best practice guidelines when developing a Supplier Code of Conduct it is important to also consider other documents such as existing policies within your organization; applicable laws and regulations; contracts with suppliers; terms & conditions; supplier agreements; as well as any applicable international standards or conventions such as OECD Guidelines for Multinational Enterprises or United Nations Guiding Principles on Business & Human Rights.

Q: How should a Supplier Code of Conduct be enforced?

Asked by Ashley on 20th August 2022.
A: A SCoC should be enforced through regular monitoring and follow up with suppliers where necessary to ensure compliance with the code requirements. This may include audits or inspections of supplier facilities; reviews of supplier contracts and performance reports; training sessions for suppliers; as well as establishing an effective system for reporting non-compliance issues with suppliers which could include anonymous whistle-blowing policies or other measures to ensure that issues are addressed quickly and effectively.

Q: What type of sanctions can be imposed if suppliers breach their obligations under a Supplier Code of Conduct?

Asked by John on 5th September 2022.
A: Sanctions for breaching a SCoC can vary depending on the nature and severity of the breach but may include financial penalties; suspension or termination of contracts with suppliers; reputational damage through public disclosure; or even criminal prosecution in extreme cases where there is evidence that laws have been broken. It is important to have clear processes in place for addressing breaches which are proportionate yet firm in order to ensure that suppliers understand that any breach will not be tolerated and will result in appropriate consequences being imposed.

Q: What challenges might arise when implementing a Supplier Code of Conduct?

Asked by Sarah on 10th October 2022.
A: One challenge when implementing a SCoC is ensuring that suppliers understand what is expected from them under the code requirements and that they comply with them fully. It is also important to consider how you will measure compliance with the code and how you will address any issues that arise where suppliers are not adhering to it fully. Additionally cultural differences between countries or regions can present challenges when implementing a SCoC so it is important that these differences are taken into account during implementation in order to ensure successful adoption across all stakeholders involved in the process

Example dispute

Lawsuits Referencing Supplier Code of Conduct

• A plaintiff may raise a lawsuit which references a supplier code of conduct if the code of conduct has been violated. The code of conduct must be legally binding and must have been agreed to by the supplier and the plaintiff.
• The plaintiff must be able to provide evidence that the code of conduct has been violated and the supplier must not have taken action to correct the violation.
• The lawsuit may seek compensation for damages, such as lost profits or expenses incurred as a result of the violation. The plaintiff may also be able to seek punitive damages if the violation was intentional or malicious.
• The plaintiff may also seek a court order requiring the supplier to comply with the code of conduct and to take corrective action.
• In some cases, the court may also award attorney’s fees to the plaintiff, if it is deemed that the supplier’s conduct was unlawful or unethical.
• Settlement may be reached through mediation or negotiation between the plaintiff and the supplier. If the case goes to trial, the court may determine the amount of damages or other relief to be awarded.

Templates available (free to use)

Supplier Code Of Conduct For Uk Based B2B Customer
Supplier Code Of Conduct Policy
Supplier Code Of Conduct Poster

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