ESG Code of Conduct for Supplier (Customer Version)
Businesses are increasingly trying to tackle ESG issues.
As part of their efforts to do so, businesses buying goods and services often try to ensure that their suppliers, as part of the buyer’s supply chain, also address ESG issues. A buyer might require its suppliers to meet ESG standards laid down by the buyer in a supplier code of conduct produced by the buyer. In that way, the buyer can create a means whereby its suppliers assist it to adhere to the buyer’s own ESG principles, policies, standards and processes.
This ESG Code of Conduct for Supplier (Customer Version) is a template / checklist that a buyer can use as a starting point when creating an ESG supplier code of conduct. (The content of the buyer’s standard supplier code of conduct will depend in each case on the particular type, size, circumstances and requirements of the buyer in question.)
Once it has been finalised, the document can be given by the buyer to each supplier with the request that the supplier should adhere to the Code’s contents for as long as they remain a supplier to that buyer.
When a business customer has created its ESG Code of Conduct, it might then establish a mechanism for ensuring that its suppliers are legally bound to adhere to the Code. A buyer can achieve this by inserting in its purchase contracts with its suppliers a suitable contract clause whereby the supplier formally undertakes to meet the requirements of the Code.
There is a template contract clause of that type - the ESG (Environmental, Social and Governance) and Legal Compliance Clause - which accompanies this template Code, and it can be found here. That template clause can also be found here and here.
The drafting of both the Code and the contract clause will need to be tailored to each buyer’s own needs and circumstances.
Use of an ESG Supplier Code of Conduct (and inclusion of an ESG legal compliance clause in the contract with the supplier) can help to promote compliance by suppliers with the buyer’s ESG and legal requirements. It can also serve to demonstrate to a buyer’s customers, staff, investors and other stakeholders that the buyer is serious about ESG and that, wherever possible, it only deals with suppliers who are prepared to meet stringent contract requirements relating to the ESG and other requirements of the buyer.
Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.
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