Ethics comer.

• Author: Thompson, Traci

Supplier Codes of Conduct Often Overlooked

(*) Companies devote significant resources in time and money designing, promoting and providing training on a code of business ethics and conduct that establishes the ethical behavior expected of all employees.

Such a code aims to improve a company's ability to comply with regulatory and legal standards, and also to underscore the company's reputation. Companies can, however, spend so much time focused on dieir internal code diat they overlook a large stakeholder community that is integrally related to the company's reputation and overall compliance regime - their suppliers and subcontractors.

A supplier code of conduct is an important vehicle for integrating principles from a company's own code into its supply chain relationships, thereby providing a more effective compliance framework and fostering better business relationships. In some cases supplier codes may be mandated, butas explained below, even if not required, an effective supplier code is certainly a best practice.

For a defense contractor, whether it's a $200 million business or a $50 billion original equipment manufacturer, often more than 50 percent of a company's revenues derive from items or servicesprovided by others - whether commodities, components, systems, engineering services or consulting.Thus, absent an enforceable supplier code, a company unwittingly may be generating revenues largely based on activities wholly ungoverned by those standards and values embodied in the company's code.

"A supplier code of conduct is an important vehicle for integrating principles from a company'sown code into its supply chain relationships, thereby providing a more effective compliance framework and fostering better business relationships."

A supplier code should describe die company's expectations of all those that intend on doing business with the company. In addition to communicating the company's values and mission, it should mandate full compliance with all laws and regulations. It also should address the proper handling of intellectual property and other sensitive data, health, safety and environmental concerns, applicable social sustainability initiatives and any other industry specific issues for which compliance should be expected.

Effectiveness of a supplier code depends upon how well it is drafted, how it is trained internally, how it is communicated externally and how it is enforced by die company.

NDIA ETHICS COMMITTEE

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