Supplier Codes of Conduct & Audits (AQA A Level Business): Revision Note

Supplier codes of conduct

• A supplier code of conduct is a formal set of standards a business requires its suppliers to follow

• It typically covers areas such as labour rights, health and safety and environmental practices

The purpose and value of a supplier code of conduct

• Sets clear, consistent expectations for all suppliers

  • This reduces the risk of misunderstanding the standards required

• Helps protect a business's reputation

  • Customers and other stakeholders increasingly expect ethical practices throughout the supply chain

• Reduces legal and reputational risk

  • A supplier found breaching laws, such as on labour rights, can seriously damage the business that buys from it

• Provides a business with clear grounds to end a relationship with a supplier that seriously breaches agreed standards

A typical supplier code of conduct

Labour standards

Suppliers must not use child labour or forced labour, and must pay at least the legal minimum wage

Working hours

Employees must not be required to work more hours than permitted by local law, and must receive appropriate rest breaks

Health and safety

Suppliers must provide a safe working environment, including appropriate safety equipment and training

Environmental standards

Suppliers must comply with local environmental laws and take reasonable steps to reduce waste and pollution

Anti-discrimination

Suppliers must not discriminate against employees on the basis of gender, race, religion or disability

Right to audit

Suppliers must allow the business, or an independent third party acting on its behalf, to inspect premises and records to check compliance

Supplier audits

• A supplier audit is a formal check, carried out by a business or an independent third party, to verify that a supplier is actually complying with the agreed standards

• A code of conduct sets out expectations in writing, but an audit is what confirms whether a supplier is genuinely following it in practice, since agreeing to a code does not guarantee compliance

Example

A clothing retailer requires all its suppliers to sign a code of conduct banning child labour and setting minimum safety standards, then sends independent auditors to visit factories unannounced to check that working conditions match what has been agreed

Purpose and value of supplier audits

• Verifies that a supplier is genuinely meeting the standards in the code of conduct, rather than simply agreeing to them on paper

• Helps identify problems early, before they escalate into a serious ethical or legal issue that could damage the business's reputation

• Provides evidence a business can show to customers, investors or regulators that it takes ethical sourcing seriously

• Encourages continuous improvement

  • Regular audits can highlight areas where a supplier needs to make changes over time