How Procurement Teams are Implementing Code of Conduct
Beyond a mere document, it serves as a beacon of integrity, guiding organisations through the labyrinth of risks and opportunities inherent in procurement. With a steadfast focus on sustainability, this code transcends mere compliance, becoming a cornerstone of brand reputation, cost efficiency, and stakeholder trust. Join us as we embark on a journey to unravel the multifaceted significance of crafting and implementing an effective supplier code of conduct in today's dynamic business landscape.
An ethical compass for procurement excellence
Amidst the complexities of modern supply chains, the supplier code of conduct stands as a testament to an organisation's commitment to ethical business practices.
Far more than a bureaucratic formality, it encapsulates the principles and values that underpin sustainable procurement.
From fostering transparent supplier relationships to mitigating risks of unethical behaviour, the effectiveness of this code lies in its ability to translate lofty ideals into actionable guidelines. In the following sections, we delve into the key components that define an exemplary supplier code of conduct and explore its pivotal role in shaping the future of responsible procurement.
We unravel the multifaceted significance of crafting and implementing an effective supplier code of conduct in today's dynamic business landscape, by speaking with Kim Russell, Head of Procurement Transformation at OCS Group, which provides a wide range of facilities management services, including cleaning, security, catering, waste management, and more, to clients across various sectors worldwide.
Stuart Swindell, Risk and Compliance Strategy Director at Dun & Bradstreet, UK&I, providing business intelligence and analytics through proprietary software and a global network, and Graham Levey, Operational Analyst at epi Consulting, a firm spearheading the reduction of carbon emissions in the technology and telecoms sectors.
Unveiling the Blueprint
At the heart of a code of conduct lies the comprehensive framework that delineates the ethical standards, legal obligations, and sustainability principles expected of suppliers. As organisations increasingly recognise the importance of ethical sourcing and corporate responsibility, the developing and implementing of an effective supplier code of conduct have emerged as essential components of procurement strategy.
For the companies we spoke to, there was an emphasis on its importance to uphold those ethical and responsible practices within the supply chain.
Kim says: “It is consistent with best practice to ensure our expectations of suppliers do not radically conflict with those commonly imposed by others.”
The trio also highlighted its critical need for clear communication so stakeholders know their expectations , and that legal compliance, including adherence to labour laws, health and safety standards, and ethical business practices.
Stuart adds: “A good supplier code of conduct must also include ethical marketplace guidelines such as anti-corruption laws and responsible sourcing, for achieving success and growth while also following fair business practices and being socially responsible.”
While all follow similarity in their answers, there were areas which were highlighting more , for Graham, stressed the importance of senior management endorsement and effective communication: “Beyond the specific legal requirements, a supplier code of conduct should express a company’s expectations and how they expect suppliers to act.”
Sustainability: The Cornerstone of Ethical Procurement Practices
All three stressed the importance of sustainability in their code of conduct, as it has emerged as a cornerstone of responsible procurement practices, shaping the ethical and operational framework of organisations worldwide. At the heart of this evolution is integratingsustainability principles into procurement codes of conduct—a strategic imperative driven by ethical responsibility, risk mitigation, regulatory compliance, cost efficiency, and brand reputation.
Kim emphasises building trust and loyalty through sustainability: "Businesses are under greater scrutiny regarding their obligations to society, making it increasingly important to consider the environmental and social impact on supply chains. Corporate Social Responsibility includes sustainability, and demonstrating these initiatives is vital for building trust and customer trust and loyalty."
Including sustainability considerations within the supplier code of conduct fosters supplier partnerships that support ESG goals and help demonstrate continuous improvement against UK Government targets, such as Net Zero 2050."
Stuart focuses on the importance of regulatory compliance. As the UK Government plans to implement directives such as the UK Sustainability Disclosure Standards (SDS) and UK Sustainability Disclosure Requirements (SDR) this year to curb greenwashing and enhance sustainability disclosure, “it is imperative that businesses commit to these considerations within their code of conduct to ensure greater compliance,” he adds.
"A comprehensive supplier code of conduct must outline environmental considerations and push for greater sustainability measures within supplier relationships. Only by doing this can it promote ethical business practices."
Graham stresses the need to help suppliers overcome challenges, adding that “organisations should educate, train and offer support to suppliers to ensure they have the tools to achieve these goals."
Evolution in Action
Over the past decade, codes of conduct have evolved due to stricter regulations, heightened stakeholder expectations, and the complexities of global supply chains. Companies are palcing more focus on Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) goals, driven by the need for transparency, ethical business practices, and sustainability. Technological advancements, ethical scandals, and growing awareness of diversity, equity, inclusion, and environmental concerns have also played a significant role.
These factors collectively have pushed businesses to adopt more comprehensive and enforceable ethical guidelines to meet modern demands and maintain trust.
Kim highlights the impact of regulatory changes and the increasing emphasis on Environmental, Social, and Governance (ESG) reporting, driven by legislation such as Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and the EU’s Non-Financial Reporting Directive brought into UK law in 2016. Changes in regulations have forced companies to develop and re-develop supplier codes of conduct to ensure continued compliance throughout the supply chain: “We’ve seen changes in ESG reporting requirements which became a larger focus in 2015 with the introduction of the 17 SDGs and is even more prevalent today with increasing challenges around climate change and social inequality.”
Stuart said that over the last decade, one of the biggest reforms has been the inclusion of technology in all aspects of supply chain operations, including monitoring and tracking of supplier compliance: “By leveraging data and analytics, organisations are better positioned to understand the potential risks and prioritise audits,” he says.
“Supplier code of conducts have also evolved to be more transparent and easily available."
Graham says that codes have undergone development or revision, expanding in scope, and addressing the increasing significance of sustainability and data security.
He highlighted the telecom company Swisscom, which is actively working with its supply chains to achieve net-zero emissions, which is integral to its business identity . “Ensuring no supplier is overlooked is crucial in this work,” Graham adds.
“Working with EPI Consulting, their supplier development program has significantly improved suppliers’ working conditions and has led to meaningful reductions in overtime, accidents, defects, and energy consumption, while also boosting productivity."
Upholding Integrity: Strategies to Ensure Supplier Compliance
While the code of conduct is vital, it can only be seen to be making its maximum impact if the supplier adheres to it. By enforcing the code, companies demonstrate their commitment to responsible business practices, promote sustainability, and comply with legal and regulatory requirements. This not only safeguards the company's reputation but also contributes to a more ethical and sustainable supply chain.
Kim spoke on enforcement, which is where the code can come unstuck, highlighting the good practice of having suppliers confirm their commitment by signing the code and tying the code to the supplier’s contract so that any breach of the code directly correlates with a breach of contract.
“It is equally important to monitor and review your supplier’s performance against the code. It can involve establishing related KPIs, supplier audits, surveys, and reports to collect and analyse data on supplier adherence. Additional strategies to encourage adherence include putting sanctions in place for breaches and offering a way for others to report breaches through a whistleblowing process."
Stuart focused on communication and integration, such as providing training materials and actively communicating regarding any questions. He also said that integrating the code into your supplier onboarding process can help set expectations immediately .
“The compliance standards in the UK and in the wider EU have only gotten stricter in the last couple of years, including requirements such as DORA, GDPR, and NIS 2 Directive,” he adds.
“Conducting regular audits (both onsite and document reviews) can help flag non-compliance at an early stage to implement corrective actions such as potential termination of the supplier contract to avoid ethical and reputational risks."
Graham noticed that engagement with suppliers improves markedly once those companies see the business and cost benefits of joining programs like a Supplier Development Programme: “Seeing the benefits that other suppliers have motivates suppliers, especially if companies share achievements and create measurable goals for their suppliers to reach."
Future Horizons: Navigating the Path Forward for Supplier Codes
Continuous review and improvement of the supplier code of conduct is paramount for companies seeking to maintain ethical standards, mitigate risks, and align with evolving regulatory requirements and stakeholder expectations.
As market conditions shift, industry standards evolve, and ethical considerations change, regular evaluation ensures that the supplier code remains relevant, effective, and aligned with organisational goals and values.
By proactively addressing gaps, integrating feedback, and staying abreast of legal and ethical developments, companies can uphold the highest standards of ethical conduct throughout their supply chain, enhance trust with stakeholders, and mitigate the risk of non-compliance.
Kim believes that reviewing and updating the supplier code of conduct is vital to ensure it remains relevant in light of market changes and specific legislation or regulatory changes. “On-going reviews also ensure your code supports your organisation’s goals, values and developing needs,” she adds.
Stuart believes there needs to be continuous evolution: “The supplier code of conduct isn’t a one-time job and needs to be regularly reviewed and updated according to evolving social, ethical, and environmental standards. Regularly accessing and updating the code ensures that it aligns with the changing business goals and is relevant to the current business landscape."
Graham said that continuously reviewing and improving the supplier code is essential for staying compliant with evolving regulations, especially with recent legislation like the CSRD, for example, mandates European companies to report their CSR performance, necessitating alignment with Supplier Codes of Conduct.
“Regular updates ensure that Supplier Codes of Conduct remain relevant and legally compliant, and that makes sure that companies uphold ethical standards and meet regulatory requirements,” he adds.
Where the practice might go next is a mystery with the constantly evolving landscape of supplier codes of conduct. Still, there is expected to be a significant shift towards greater transparency, accountability, and sustainability.
Kim believes the supplier code of conduct will need to adapt to regulatory demands and mandatory disclosures, likely advancing the ESG agenda. “We will no longer be able to self-certify our organisations' ethical practices but must to demonstrate compliance with evidence actively.
“The future will bring a greater need for transparency, compulsory ESG and sustainability ratings, and visibility into the origins of materials to evidence ethical sourcing."
Stuart said that with the increasing focus on transparency and accountability, supplier codes are poised to prioritise environmental and social sustainability. “This will include guidelines to minimise carbon footprint and encourage ethical sourcing,” he adds.
“Incorporating technology, such as AI and automation, will enhance real-time monitoring and auditing for labour violations or environmental issues."
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