Competitive pressures, greater globalization, complex supply chains and a worldwide pandemic are intensifying third-party risks, making it more important than ever for organizations to implement a Supplier Code of Conduct and training as part of a holistic approach to supply chain risk management.
A recent Gartner survey of legal and compliance leaders found that more than half of the respondents believe that since the onset of COVID-19 they are facing greater risks of cybersecurity and data breaches. Ernst & Young’s 2020 global integrity report also highlighted the impact of the pandemic on supply chain risks — 28% of respondents said the pandemic’s disruption to the supply chain is one of the highest risks to maintaining ethical conduct in their businesses.
Not only are supply chains being disrupted, forcing organizations to take on new, unknown third-party vendors, the harsher economic climate may make organizations more inclined to disregard unethical actions by their partners. Other repercussions of COVID-19: fewer onsite inspections are happening because of travel restrictions, and child labor and human trafficking violations are spiking as a result of higher unemployment and children not attending school in person.
With the increased use of third-parties across a variety of markets, organizations should also keep in mind that many jurisdictions hold companies liable for the actions of third parties, such as bribing authorities to speed up a transaction, engaging in modern slavery and human trafficking or other unethical behavior.
What should a Supplier Code of Conduct cover?
A Supplier Code of Conduct provides third parties with guidelines, standards and expectations for upholding the highest ethical practices in their business operations.
Key topics to cover include:
- Business ethics: This encompasses a wide range of activities — anti-bribery/anti-corruption, conflicts of interest, gifts and entertainment and data privacy and security.
- Labor: Suppliers are responsible for creating a safe, respectful workplace that is free of discrimination and harassment in all areas of employment. Employment agreements, young workers and child labor, wages and benefits, humane treatment, freedom of association and preventing discrimination and harassment are among the labor-related topics found in a Supplier Code of Conduct.
Health & Safety: Promoting and ensuring health and safety throughout the supply chain is critical in preventing injury and illness. This includes taking actions to prepare for emergencies, creating safe working and living conditions and protecting the health and safety of workers and communities.
- Environmental Concerns: There is a growing need to reduce the impact of supply chains on the environment. Suppliers should be aware of global environmental standards and guidelines regarding hazardous substances, waste and emissions, source materials and environmental permits and reporting.
Today’s global business environment presents unprecedented ethical and compliance challenges. Implementing a Supplier Code of Conduct and training program can help organizations minimize the financial and reputational risks of unethical suppliers by demonstrating a “good faith effort” to prevent illegal activities. A written Code should set clear expectations for maintaining a safe work environment, treating employees with respect and adhering to environmentally friendly processes and practices.
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