Feb. 5, 2024 • Reading time: 6 Min
We live in a time when ethical behavior and corporate social responsibility are becoming increasingly important. This means that companies must adapt their business practices accordingly. An important instrument to make this possible is the Code of Conduct. This document sets out rules for fair and environmentally friendly practices. It is intended to help companies and their suppliers to follow these rules. The Code is designed to help companies promote ethical behavior and environmental awareness. It provides a common basis for companies to set and achieve their sustainable goals. The focus is on establishing ethical standards throughout the supply chain, protecting the company's image and making it successful in the long term. In this article, we will explain the importance of the Code of Conduct for companies and provide practical tips on how it can be successfully integrated into corporate practice.
The Code of Conduct is an important guideline for companies and their suppliers. It sets out social and sustainable standards to ensure that human rights are respected throughout the supply chain and that the German Supply Chain Sustainability Act (LkSG) is complied with. The Code obliges companies to act in an ethical and socially responsible manner. It contains clear rules on respectful behaviour towards one another, environmental protection and the fight against corruption and discrimination. A code of conduct is a voluntary declaration by a company to comply with certain internal and external rules of behaviour. It also serves as a reaction to possible risks. Companies can decide for themselves which rules should be included in their code. As a rule, however, it reflects the guidelines that support the company in acting in an environmentally friendly, socially responsible and economically sustainable manner.
The objectives of the Code are to define ethical and social standards and to promote compliance with them. An important aspect of this is sustainability, which emphasises environmentally and socially conscious action. In addition to the fulfilment of minimum standards, there is also the option of taking on a pioneering role and setting further targets. Companies must commit to achieving at least one target and also explain their motivation and the selection of additional measures. In principle, a code of conduct is a useful tool for promoting sustainability and responsible behaviour along the supply chain. Through clearguidelines and continuous development, companies can help to shape a better and more sustainable future.
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The Code of Conduct is an important guideline for companies and their suppliers. It sets out the social and sustainability standards they must comply with. The Code is crucial to ensure that human rights are respected throughout the supply chain and to implement the Supply Chain Due Diligence Act (LkSG ).
The Code sets out how companies operating worldwide should behave in an ethical and socially responsible manner. It contains clear rules designed to help companies treat each other with respect, protect the environment and take action against corruption and discrimination.
The Code of Conduct is a kind of voluntary declaration in which companies promise to comply with certain internal and external rules of conduct. It also serves as a response to risks to which companies are exposed. There are no specifications as to what exactly must be included in the code of conduct. As a rule, however, it sets out the corporate guidelines that help to ensure that the company acts in an environmentally friendly, socially responsible and economically sustainable manner. This helps to set clear goals for sustainability and ensure long-term security.
It is up to each company to decide for itself which rules and guidelines should be included in its code. In principle, the larger a company is, the more comprehensive the code tends to be. The Code of Conduct can be part of a company's compliance management system and implement guidelines issued by the compliance officers. This system of rules and control mechanisms is intended to ensure that all legal requirements are adhered to.
In July 2021, the EU published a Code of Conduct for Responsible Business Practices. It is intended to encourage companies in the food sector to act more sustainably. In the food industry in particular, this code is an important step towards environmentally friendly and responsible food production in Europe. When companies sign the code voluntarily, they commit to ensuring that their business practices are in line with the objectives of the EU's "Farm to Fork" strategy.
It is not just about environmental sustainability, but also about acting in a socially responsible manner and communicating openly with consumers and other interest groups. All companies and associations in the agricultural and food sector in Europe can decide to support the Code of Conduct. The cooperation between companies, NGOs and authorities shows that many agree that changes in the European food system are necessary to meet the challenges of the 21st century.
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The aim of the Code is to define ethical and social standards and to promote compliance with these standards. Sustainability is an important aspect of the Code of Conduct. It is about acting in an environmentally and socially conscious manner and taking measures to reduce environmental impact. In addition to the obligation to achieve at least one target, there is also the opportunity to take on a pioneering role. This means that the company should set itself further targets in addition to meeting the minimum standards. These targets should be measurable and in line with the "Green Deal" and the "Farm to Fork Strategy". When signing, the objectives, motivation and selection of additional measures must be justified to the EU Commission. If possible, the period of the commitments should relate to 2025 to 2030.
It is important for companies to adhere to the Code of Conduct. This can have a positive influence on how the company is perceived by employees, customers, investors and society. If the code is adhered to, this helps to build mutual trust and a good reputation. Associations also play a role and can contribute to the success of the code: they should ask themselves relevant questions, inform their members and promote exchange with other groups.
Companies must commit to achieving at least one target. Large companies must submit reports on their measures and progress every year. For small and medium-sized companies, it is sufficient to do this every two to three years.
If suppliers commit serious breaches of the rules, they should react quickly. First of all, effective measures should be introduced to deal with these violations. These measures can be discussed in a joint dialog. If suppliers do not acknowledge or remedy violations, temporary purchasing stops or penalties can be used as a solution. In order to act preventively, it is advisable to seek an open dialog with suppliers and offer them support and training on sustainability issues.
To create a code, you start with a risk analysis. This involves examining the risks to human rights and the environment in the company's own supply chains. The most important measures are then set out in a document that is binding for all suppliers. Suppliers must agree to the document.
The relevant departments and management should be involved in drawing up the Code of Conduct. It is also important to take industry standards into account. For the code to be implemented effectively, communication must be clear and transparent. It is crucial to clearly explain the approach and expectations to suppliers and to offer support with implementation. The Code normally applies to direct suppliers, but can also be extended to indirect suppliers.
It is important to carry out regular reviews (audits). This allows you to find out where the strengths and weaknesses lie and where there is still room for improvement. These audits help to identify risks at an early stage. The audits do not necessarily have to be carried out on site, but can also be carried out by independent auditors.
For example, the code of conduct deals with working conditions, environmental protection, ethical behavior and how companies are managed. The rules in a code of conduct can be divided into three main areas:
The document may contain rules and requirements for legal compliance and confidentiality. It also sets out the company's fundamental values and principles. This can also include rules for communication, advertising, import and export regulations as well as product quality and safety.
The Code of Conduct serves to establish that a company is against bribery, money laundering, terrorist financing, insider trading and corruption. Steps are taken to ensure that these matters are avoided and combated.
The code also explains how the company should deal with conflicts. Be it within the company or with external partners or suppliers.
The Code also contains provisions on the protection of employee rights. These include clear statements that discrimination and harassment are not permitted in the workplace. At the same time, the company's expectations for a respectful and healthy working environment are set out. There are rules for occupational safety, data protection, IT security and the handling of personal data in this document.
The Code of Conduct can also state that the company strives to act in a sustainable and environmentally conscious manner. Measures are taken to minimize the impact on the environment. This includes complying with environmental laws and regulations, reducing greenhouse gas emissions and avoiding child labor or forced labor. The company's social commitment and charitable activities may also be recorded there.
The Code states that the company treats its employees, customers and suppliers fairly and responsibly.
When drawing up their own code, companies should refer to existing international standards:
A code of conduct has many advantages. It helps to promote ethical standards and responsible behavior along the supply chain.
Clarity and common standards: It defines clear rules of conduct for suppliers. This creates a common basis and helps to avoid misunderstandings.
Protecting reputation: The Code helps companies to protect their good reputation. It ensures that suppliers act ethically and adhere to environmental and labor standards in accordance with the Declaration of Human Rights and the Corporate Social Responsibility (CSR) guidelines.
Risk mitigation: It also helps companies to identify potential breaches of ethical standards at an early stage and take action against them. This can reduce financial, operational and legal risks.
Customer demand and competitive advantage: More and more customers are looking for ethical and sustainable business practices when making purchasing decisions. A code enables companies to meet these requirements and set themselves apart from the competition.
Improving supply chain transparency: The Code encourages suppliers to report openly and transparently on their practices and performance. This helps companies to obtain important information about their supply chain and to demand improvements where necessary.
A sense of responsibility and change: The Code of Conduct promotes awareness of ethical and sustainable business practices among both suppliers and companies themselves. It serves as an impetus for change and improvement throughout the entire supply chain.
It is important to realize that a code of conduct is not enough to make real change. Training should also be provided, monitoring systems put in place and programs developed to improve skills. In this way, it can be ensured that everyone adheres to the code.
Limited control options: Although a code of conduct can define rules, it is difficult to ensure that suppliers comply with them.
Lack of enforcement options: If a supplier violates the Code, it can be difficult to enforce effective sanctions or consequences. As a result, it may not be implemented effectively.
Different standards: The Code may not always take into account the different cultural, legal and social contexts in which suppliers operate. This could make the standards unrealistic or difficult to implement.
Superficial compliance: Some suppliers may only superficially comply with the Code of Conduct as a means of good PR or to deflect potential criticism. However, actual changes in corporate behavior may be limited.
Focus on formal processes: A code of conduct can only focus on formal processes and documentation. As a result, far-reaching changes in supplier organizations could be neglected. This could limit the improvement of working conditions and sustainability performance.
Lack of implementation strategies: A Code of Conduct alone may not be enough to bring about change among suppliers. It is important to provide training and support to help suppliers understand and implement the standards.
Even if there are some disadvantages, the code should not be completely rejected. With a good strategy to regularly review the Code, many of these problems can be solved. The document can therefore serve as a useful tool to promote sustainability, responsible and desirable behavior in the supply chain.
It is important to understand that the Code of Conduct does not stand alone, but is an essential part of the business strategy. It is crucial to embed the Code firmly into company policies, procedures and decisions.
It is important to review the Code regularly and update it as necessary. This ensures that it complies with current legislation and changing corporate values.
It is important that companies communicate clearly and comprehensively to all employees and suppliers. Training should be provided so that everyone knows what the Code says and how they can act accordingly.
Companies should not only set rules for their own employees, but also for suppliers and other partners. They must make it clear what they expect from their suppliers. If necessary, they should help them to achieve these standards.
It is important to put in place ways to ensure that the Code of Conduct is adhered to. This can be done through regular audits, self-assessments or other checks. Companies should also provide clear information on how well they are complying with the code and what progress they are making.
A code should be seen as a living document that is constantly being improved. Companies should collect feedback and suggestions and develop the code accordingly.
When companies follow these tips, they ensure that their Code of Conduct works well in practice. This helps to promote ethical standards and responsible behavior throughout the supply chain.
The Code of Conduct is like an agreement between the company and its suppliers. It sets out clear rules on how to work ethically, socially and environmentally consciously. If companies accept the code, they commit to acting sustainably and thereby improve their reputation among employees, customers and investors.
To implement a code of conduct, companies should first assess the risks and have clear discussions with suppliers. Then it is important to review the code regularly. A code has many advantages, such as clear rules, protection of the company's reputation and fewer risks. But there are also difficulties, such as limited control and enforcement. Nevertheless, a well-implemented code can help to make companies more sustainable.
In the future, codes of conduct will become more important as companies place greater emphasis on ethical and sustainable behavior. Standards for social responsibility will become stricter, requiring companies to pay more attention to the environment and society. Through better codes, companies can help to create a fair and sustainable world.
