How to Create a Risk-Based Supplier Code of Conduct
A Supplier Code of Conduct is not one-size-fits-all. Because suppliers face different risks based on geography, operations, materials, size, and financial stability, the most effective Codes are adapted to specific circumstances. By tailoring expectations, companies can both strengthen compliance and build more resilient partnerships across supply chains.
Want to learn the basics of Supplier Codes of Conduct? Check out our blog post here and reach out to learn more about how Source Beauty builds responsible procurement programs for companies of all sizes.
How do Supplier Risks Differ?
Factors such as geography, operational complexity, ingredient sourcing, size, and financial stability all shape where vulnerabilities may appear in a supply chain.
Geographic risk: Suppliers in regions with weak oversight, instability, or corruption may face higher risk of labor violations or environmental damage.
Operational complexity risk: Multi-tier suppliers with complex subcontracting create visibility gaps and make compliance harder to monitor.
Ingredient-specific risks: Sensitive materials like palm oil or mica are often linked to ethical sourcing challenges.
Size & capacity risks: Smaller suppliers may lack resources for compliance, while larger suppliers may be harder to monitor.
Financial stability risks: Financially pressured suppliers may cut corners on safety, quality, or ethics.
How Can a Supplier Code of Conduct Address These Risks?
Geographic Risk
Require third-party certifications (like Fair Trade Certified™) that provide independent verification of standards
Implement more frequent and unannounced audits with local expert auditors
Establish worker feedback mechanisms and grievance procedures
Operational Complexity Risk / Multi-Tier Operations
Mandate supply chain mapping and transparency reporting
Require suppliers to flow down Code requirements to their subcontractors
Implement digital tracking systems for better visibility
Sensitive Ingredient Sourcing
Require certification from recognized standards bodies or cooperation with industry groups (like RSPO for palm oil or RMI for mica)
Implement ingredient traceability systems back to source
Partner with industry initiatives focused on specific commodity challenges
Smaller suppliers
Offer training programs and technical assistance for compliance
Provide longer implementation timelines with milestone check-ins
Share resources and best practices through supplier networks
Financially stressed suppliers
Conduct more frequent financial health assessments
Establish contingency planning for supplier transitions
Offer longer-term contracts to provide stability
When is Tailoring Most Valuable?
Adapting a Supplier Code of Conduct is especially important when a company manages a diverse supplier base. Codes that recognize real differences in risk profiles are more than compliance tools—they become frameworks for building resilience, accountability, and positive impact throughout the supply chain.
Remember: a Supplier Code of Conduct isn’t just about setting universal standards—it’s about meeting suppliers where they are. By tailoring your approach, you create a system that protects your brand while strengthening supplier partnerships and amplifying long-term sustainability.
To learn more about how Source Beauty can build out your responsible procurement systems, including a Supplier Code of Conduct, you can contact us here. And to stay updated on the latest in sustainability, supply chains, and everything in between, join the Source Beauty Download for quarterly digests.
