The challenges faced by international companies in rolling out effective codes of conduct for suppliers in China stem from several key issues:

  1. Lack of Competence in Sourcing and Purchasing Staff: Often, the responsibility for ensuring compliance with ethical standards is placed at a lower organizational level where the staff, particularly in purchasing departments, lack the necessary knowledge in areas like sustainability. Governance, environmental health and safety or labor issues.
  2. Focus on Price and Delivery: Local supplier discussions tend to revolve around price and delivery terms, pushing issues related to compliance, ethics, and sustainability to the background. This makes it difficult for sourcing teams to engage in meaningful conversations about labor and environmental standards.
  3. Challenges of Implementing International Guidelines: While many companies adopt international guidelines (e.g., from the UN, OECD, or ICC), applying them fully in China can be difficult. Companies often find it hard to reconcile international standards with local practices.
  4. Inconsistent Enforcement of Local Laws: Although China has a broad legal framework, new laws are slow to take full effect and enforcement is inconsistent. Companies face unpredictability, as suppliers may suddenly be shut down without warning if found non-compliant during one of the government campaigns , causing disruptions in the supply chain.

Scandic Sourcing’s Approach

Scandic Sourcing offers a solution through a customized program that focuses on:

  • Training Sourcing and Purchasing Staff: By equipping these staff members with knowledge and skills in ESG standards, the program ensures they are more competent in engaging suppliers on these issues.
  • Third-Party Inspections: Independent inspections by experts in sustainability, labor, safety, and environmental compliance help suppliers understand expectations and allow higher-level management to take ownership of compliance issues. This also gives auditors better access to sensitive information like accident reports, employee files, and government compliance records, which may not be easily accessible otherwise.
  • Balancing International and Local Practices: Scandic Sourcing draws from both international guidelines and a practical understanding of China’s evolving regulatory and industrial landscape. They tailor programs to fit both client expectations and local realities.

Importance of Measuring Supplier Performance

Measuring supplier performance regularly and providing clear feedback is crucial for improvement. By highlighting areas where suppliers can make relatively simple changes for significant impact, the program encourages engagement and continuous improvement. Additionally, suppliers view these programs positively as they provide clarity on what overseas clients require, thereby enhancing their competitiveness.

Results

Scandic Sourcing's experience shows that Scandic Sourcing Supplier Code of Conduct Audit Program leads to significant improvement over time, with many suppliers embracing the changes and feeling proud of their progress. Suppliers that resist these programs often exhibit broader issues in quality and delivery, making this approach an effective way to identify and remove problematic suppliers.

Conclusion

For companies operating in China, integrating ethical codes of conduct for suppliers is more complex than implementing internal standards. However, with a well-structured program that includes training, third-party inspections, and continuous performance measurement, it is possible to drive meaningful improvements in supplier compliance with international and local standards. Scandic Sourcing’s approach addresses the root causes of these challenges and provides a practical path forward for companies to ensure their supply chains are ethically and sustainably managed.

Contact Scandic Sourcing to learn more: sourcing@scandicsourcing.com