Supplier code of conduct: Guide, best practices and template
Supplier code of conduct: Guide, best practices and template
Successful vendor relationships are built on shared goals, trust and values. But, do your vendors know where you stand on key issues? And, importantly, do you know if your values align? Increasingly, organizations want to work with vendor partners that share their commitment to social and ethical standards. And, they use a supplier code of conduct to define their policies, set expectations and encourage transparency.
Indeed, with a quick web search, you can find many supplier code of conduct examples from the largest companies in the world (you can check out a list of examples in the last section of this blog). While the vendor code of conduct is an important tool for establishing standards for global suppliers, it isn’t just for huge companies — organizations of all sizes can benefit.
In this blog, we’ll explore what a supplier code of conduct is, what’s in it and why it’s important. Next, we’ll guide you through the process of writing a code of conduct that reflects your business’s values and priorities. Finally, we’ll share a template and several supplier code of conduct examples from well-known companies.
To begin, let’s start with the basics. If you have questions about supplier codes of conduct, you’ll find helpful background and context here.
What is a supplier code of conduct?
A supplier code of conduct is a document that defines the standards and rules a business requires their supplier and vendor partners to follow. Also called a vendor code of conduct, code of ethics or code of practice, it addresses an organization’s expectations about topics like labor conditions, sustainability, environmental standards, diversity and compliance.
What is in a supplier code of conduct?
To be effective, your code of conduct should reflect the unique values and priorities of your organization. However, if you review the examples from other companies below, you’ll notice that many cover similar topics. As you build a supplier code of conduct for your organization, consider addressing these areas.
Your code of conduct should address your expectations when it comes to hiring practices, health and safety, working hours, conditions, and compensation. Additionally, for companies that partner with global manufacturing suppliers, it’s also important to make your position clear on child labor, human rights and forced labor.
Sustainability and environmental issues
Many organizations have sustainability or environmental initiatives as part of their corporate responsibility policy. Your vendor code of conduct can support this by defining your organization’s goals around sustainable sourcing.
Ethics and anti-corruption
Ideally, everyone would operate their business fairly and follow the law. And, while most do, your code of conduct should specifically address this. Provide guidance for any training and mitigation requirements you have regarding anti-corruption, bribery, fair business practices, fraud and so on.
Data security and privacy
51 percent of businesses have suffered a data breach caused by a third party according to recent research. Accordingly, it’s important to include guidelines for confidentiality, data privacy and security in your vendor code of conduct. In addition to including security in your policy, you should also be sure to issue regular vendor risk assessments.
Diversity and inclusion
From increased innovation to reduced risk, organizations that focus on increasing supplier diversity enjoy a number of benefits. Adding guidelines for inclusion to your code of conduct for suppliers supports your efforts and encourages diverse suppliers to respond to your RFPs.
Benefits of a supplier code of conduct
A formal code of conduct delivers a number of benefits both for your organization and vendors.
Vendor partnerships are relationships. They are built, developed and deepened over time. Your code of conduct communicates your standards and expectations for vendors. While your relationship will evolve, the policy creates a strong foundation for building long-term trust.
Reinforce core organizational values
Your organization likely already has some internal policies that address topics like diversity, labor practices and sustainability. However, your business can expand their impact by building policies that encourage vendors to participate as well.
Protect your organization
Third-party risk management is a huge part of protecting your organization. The vendor code of conduct establishes parameters that protect your organization from risk.
Build customer trust
As consumers seek out businesses that align with their values, it becomes increasingly important to define, publish and share the principles your organization stands for. Simply having HR policies and internal initiatives is no longer enough. Your supplier code of conduct is a great way to share your values while building a reputation for social responsibility.
How to write a supplier code of conduct
Writing a new policy is always a challenge. You want to make sure it’s thorough, clear and easy to follow. However, there are a lot of things to consider. These steps will help you ensure your new vendor code of conduct is thoughtful and achieves your goals.
Assess your situation
The first step of creating an effective code of conduct is to define your purpose and needs. Start with identifying why you are creating your code of conduct. Do you want to share your dedication to specific causes with your customers? Are you building a framework to improve accountability? Whatever the answer is, write a few sentences that describe why this is a priority to the organization.
Next, take some time to explore your organization’s unique needs. Certainly, a global car manufacturer will have different concerns than a regional bank. Gather basic information about your vendors and supply chain. Where are the greatest risks? Which countries are you sourcing from? What level of dependency do you have on suppliers? Essentially, take time to decide what is most important to include in your policy.
Research relevant ethical standards
Next, do some research that will help inform your standards. Look for supplier code of conduct examples from other companies in your industry. Find out if key suppliers have their own codes of conduct in place so you can avoid requiring training that conflicts or overlaps with existing efforts.
In addition, explore initiatives and standards created by recognized authorities like the Fair Labor Association which has standards for manufacturing, agriculture and more. Many organizations draw from these guidelines and examples when writing their own code of conduct.
Now, it’s time to start drafting. Consider breaking your supplier code of conduct into sections:
Start with a sentence or two about why you’re establishing the code of conduct. What are you hoping to achieve?
Organized by topic, provide details about each requirement. Your supplier code of conduct needs to be specific enough to be meaningful, but broad enough to apply to all of your existing and prospective vendors.
Actions and accountability
Tell your vendors what comes next. How will you be evaluating, tracking and reporting their compliance with this policy? What happens if they don’t comply? You may adopt a zero-tolerance policy on some issues. On the other hand, you may give time for improvement in other areas where a vendor may fall short.
Without buy in from executives, your supplier code of conduct will lack conviction and follow through. In addition, be sure to collaborate with the legal team to ensure the policy is enforceable.
Publish and implement
Last, you’ll need to decide how you’re going to distribute the policy. Will you make it an internal document or share it publicly?
Distribute the supplier code of conduct to your current vendors. As they review, you’ll likely get a few questions and may need to request documentation to substantiate their compliance.
Finally, be sure to schedule regular reviews to ensure the policy is performing as expected. You may need to update language and address gaps as markets shift and needs change.
Supplier code of conduct template and examples
If you’re looking to create your first code of conduct or simply want to see if yours is due for any updates, it’s always helpful to see a sample. Here you’ll find a supplier code of conduct template you can customize. In addition, you can explore supplier code of conduct examples from well-known organizations.
Supplier code of conduct template
Sustainability platform Worldfavor created a helpful ebook that explores how to create a code of conduct. Included you’ll find a supplier code of conduct template that guides you through creating your own.
Supplier code of conduct examples
In each of these supplier code of conduct examples you’ll see common themes including statements about labor practices, ethics and environmental expectations. As you explore each, note how they differ. Some of these policies provide broad guidelines while others specify minimum requirements. Additionally, some use very general language while others address concerns that are unique to their industry.
Ultimately, your supplier code of conduct is just one element of the conversation when it comes to supplier relationship management. Ideally, your ethics policy helps you build valuable, trustworthy relationships while also enabling transparency. However, it’s up to your organization to put the words into action and influence positive change.