It has become fairly commonplace for companies of all sizes and industries to tout a commitment to ethical and socially-conscious business practices as a key differentiator in their respective markets. For example, a clothing company might distinguish itself by its commitment to sustainable manufacturing practices that include waste recycling and efficient water usage systems. Aside from being a means of establishing brand identity, this promise also may help a company attract capital from investors who share a similar sense of social responsibility. Regardless of the reason, companies who choose to adopt standards which exceed basic government guidelines must take appropriate steps to ensure the fulfillment of such promised social and ethical obligations.
Compliance typically starts with internal policies and procedures, which are codified in employee codes of conduct and standard operating procedures (SOPs). However, when companies also rely on external vendors to meet such standards, it may be wise to negotiate provisions within vendor agreements that obligate business partners to abide by certain ethical, social and environmental standards (e.g. no child or indentured labor). These provisions can be incorporated directly into the obligations set out in the agreement or included as an exhibit to the agreement, such as in a vendor code of conduct or compliance manual.
Over the years, I have seen the inclusion of these provisions trickle down from agreements generated by global conglomerates to agreements between smaller, but no less thoughtful, companies. Often, the parties will agree to a Code of Conduct, and to give the provisions weight, they may try to negotiate audit and termination rights, as well as indemnification provisions to cover any losses caused by a breach of such provisions. Ultimately, as ethical and social covenants become more ubiquitous in commercial agreements, the influence of business and its power to improve conditions across the globe will really begin to unfold.
If you have questions about vendor codes of conduct, please contact Brad Auerbach at bauerbach@outsidegc.com or 310-382-0019.
Brad Auerbach is a Partner with our California-based team, bringing over three decades of senior in-house counsel experience in the media, gaming and technology industries. Brad has been involved in structuring many groundbreaking deals with a diverse range of rights holders, including NFL, NBA, NHL, HBO, MTV, ESPN, Sesame Workshop, Nickelodeon, Live Nation, Marvel Entertainment, International Olympic Committee, English Premier League, Screen Actors Guild, every significant Hollywood studio, each of the major record labels, many major book and news publishers, several world class photographers and Getty Images, among numerous others.