In the world of business, there are so many moving parts that it sometimes becomes hard to control each individual aspect of your supply chain or logistical flow.

Even more so when it comes to ensuring that you and your business partners adhere to the government’s regulations pertaining to employee health and safety.

There are robust guidelines that have to be strictly followed, and those who don’t follow these guidelines risk running afoul of the law and potential lawsuits.

One such regulation is an important one – called the supplier code of conduct. This was created to ensure that a company’s suppliers have put in place proper working conditions and keep their employees safe and treated with respect.

Also included as an important aspect of the supplier code of conduct is the consideration of their production processes to be environmentally responsible and ecologically friendly.

This is especially important in the age of today where unsustainable business practices alone may be enough to risk a significant reduction in market share, thanks to social media and environmental awareness of today’s modern consumer.

The major components of a supplier code of conduct include the following:

Environmental policies

This relates to the production processes of the suppliers – who may produce raw material as part of the primary sector of the supply chain, or who distributes wholesale finished products to be sold by your business at retail prices.

The supplier code of conduct specifies that these suppliers should – in a significant capacity of their business models – adopt ecologically-friendly ways to produce their goods or raw materials that reduces pollution to the environment.

As a business owner, the responsibility is on you to research every aspect of your company’s supply chain to ensure that your suppliers source their products in sustainable areas and to check whether your suppliers’ business practices align with the social and environmental goals of your company – especially if that is your business’s key selling point on your customer facing platforms, both online and offline.

Labor practices and standards

Safeguarding against child labor, modern slavery, workplace discrimination and ensuring safe and fair working conditions of all employees is a massive worldwide problem, especially in third world countries where unsurprisingly – a large percentage of manufacturing for the world’s largest companies are based in.

The working conditions of your supplier’s employees should be documented clearly and transparently, and should be a large consideration in your supplier code of conduct.

Things like providing employees with personal protective equipment, humane working hours, mitigation of hazardous working conditions and detailed incident reporting procedures are just some of the expectations that a supplier should adhere to.

If your business’s manufacturing is based overseas, or even onshore – it is always best to conduct a walking tour of the factory or premises to have a first-hand view of the business practices of your suppliers in order to ascertain that your supply chain and your business as a whole adheres to the supplier code of conduct.

Ethical considerations

Corruption is another problem that plagues many companies – even and especially the bigger companies in the world, with a complicated hierarchical structure that has the potential to create loopholes that employees can exploit for personal financial gain.

A good supplier code of conduct should establish robust anti-corruption measures and specify fair business practices pertaining to competition in business, employee management and partner relationships in the supply chain.

This ensures that you and your suppliers understand and adhere to the legal aspects of ethical business practices that may result in criminal liabilities if these business rules are broken.

Documentation policies

Every aspect of the supplier code of conduct should be written and documented in black and white, and signed off by the relevant parties, and for added security – have them legally notarized by a legal representative.

The benefit and security of having such documents at hand reduces the risk of either party running into trouble with local government regulation and allows for better coordination of business processes up or down the supply chain.

The benefits of having a good supplier code of conduct

With a clear and concise supplier code of conduct that is well documented and legally acknowledged, you effectively set clear, achievable expectations for your business that involve full consultation and engagement from your suppliers, who are integral to your supply chain.

The clearer the rules, the easier it is to establish logistical processes that are both efficient and law-abiding.

A good supplier code of conduct also helps protect the brand image of your company in the unfortunate event of an incident at the supplier side.

This could be issues such as environmental, human rights or ethical violations that are hard to predict.

With a legally binding document that clearly states the expectations that your company has towards its suppliers, this allows you to step out of the line of fire – and gives the media one less party to blame when they report the incident on the news.

Why should I have a supplier code of conduct?

If you’re a fast-growing enterprise that is staking your claim in the world of business, a supplier code of conduct is essential to assessing risk – and preparing your business for the worst when it comes to supply chain management.

Codes of conduct can exist in many forms, but a supplier code of conduct is of particular importance especially if your company sources and obtains products or raw material from other countries – where enforcement of labor and environmental laws may not be as strong as you expect.

There are a lot of moving parts in the world of business, and your suppliers are one of the biggest cogs in the constantly moving piece of machinery that is your company.

One mistake from your suppliers may lead to disastrous effects to the success of your business processes, so it is always best to establish expectations and boundaries beforehand to ensure that all parties adhere to the highest levels of corporate responsibility that is expected of all 21st century businesses that exist today – and especially yours.