Per reader request, in this series of blog posts, I have provided in English a template (compliments of www.PSSchina.com) for the key terms and conditions that should be in a professional Vendor Code of Conduct for those who buy products in China.
In this final installment of this series, I will offer some tips to improve the effectiveness of a Vendor Code of Conduct.
Many buyers put a vendor code of conduct in place simply to satisfy their clients who require such a document to be present. So having the policy in the first place is good for marketing. But the document won’t enforce itself in China, so if you really are concerned about social compliance, you will need to get involved. Here are some tips to help ensure your vendor code of conduct is respected.
1. Find the right supplier in the first place.
When you are selecting suppliers, know that if you pick one that doesn’t respect the items on your list; you will most likely have a hard time convincing them to improve. It can be done, but it is not easy or inexpensive. Rather than trying to teach an old dog new tricks, when you are looking for suppliers upfront, add “social compliance” to your list of desired features in an ideal supplier. These videos here and here
2. Make violation of the terms a loss of face for the factory boss.
Make sure the terms are in Chinese so there is no excuse for not understanding what is being signed. Sign off on each item one by one. Most importantly, when you are signing the agreement, try to get as large a group as possible in the room for the signature. This way if the terms are broker unilaterally by the boss, his staff will know he is not a man or his word. Sometimes the desire not to lose face among their peer group is more powerful than the threat of legal action.
Speaking of signatures…Here is the template for the signature section. Make sure the company chop (Chinese ink seal) is also used. Confirm the person signing is the legal representative of the company by checking the business license that should be hanging on the wall. Confirm that the company under signature is the company you are buying from. Sounds obvious, but with so many trading companies in the mix, it is not always transparent. Check out this blog post explaining the dangers of not taking that precaution.
Buyer is dedicated to full and complete compliance with all laws and regulations applicable to the conduct of its business and expects its vendors, and buying agents utmost cooperation and commitment with such efforts. It is therefore requested that the owner, president, managing director, or chairperson for your company sign and return a copy of this letter thereby confirming your understanding of its contents and agreement to undertake the obligations it sets forth.
In closing, we highly value the relationship with your company and believe that you share our compliance concerns. Thank you in advance for your cooperation and we look forward to continually strengthening our relationship for years to come.
Name: _________________________ Title: _____________________
Date: __________________________ Signature/ Chop: _________________
3. Consider periodic social compliance auditing.
The good news is that it costs 100’s not 1000’s of USD if you hire a professional 3rd party. And the factory will know you are serious about the issue. State in your contracts that if the factory fails the audit, they pay a penalty, such as 3X the cost of the audit. If the factory passes, great, you pay and sleep well at night knowing it was money well spent.
4. Consider investigative social compliance monitoring.
Know that employees can be coached on how to pass a social audit, but you will be happy to know that for a reasonable fee, undercover investigators can be engaged to monitor your suppliers without the suppliers knowing they are being watched.
The firms I use for the overt auditing is www.AsiaQualityFocus.com while www.sourcingservicecenter.comis who I use for the covert monitoring of suppliers. Contact me if you would like an introduction.
5. Confirm that the code of conduct is in the vendor’s employee handbook (in Chinese) and clearly posted in the facility.
6. Have a hotline/ email for whistleblowing.
7. Deal with outsourcing.
All the tips above are a waste of time if your factory outsources production to another factory where there is no social compliance or a code of conduct. So in your memo of understanding with the factory, you need to be clear that if outsourcing is to take place, you have the right to know about it and audit that facility in advance.
Hope this tips help you! Let me know if I missed anything.
Wishing you successful China sourcing!
About the blogger
Written by Mike Bellamy – author of, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (www.PSSchina.com)