Paper to note: code of practice on ethical employment in supply chains

SPC Members are asked to: 

• note this update on the refresh to the Code of Practice on Ethical Employment in Supply Chains and the draft at Annex 1

1. This paper updates the SPC on work to refresh the voluntary Code of Practice on Ethical Employment in Supply Chains. It summarises the proposed changes to its content and sets out a broad timeline for the work.
    
2. The Code aligns with the Welsh Government’s ambition to promote fair work and ethical employment in direct employment and global supply chains. It aligns with the ambition in the Welsh Government’s International Strategy to “demonstrate global responsibility by cementing our reputation as a Fair Nation – committed to Fair Trade, Fair Work, Fair Play, especially with regards to equality.” The Code also contributes to the Well-being of Future Generations (Wales) Act 2015, particularly the well-being goal of ‘A globally responsible Wales’. 
    
3. The refresh to the Code reflects developments since the current version of the Code was introduced in 2017. 

4. The Code was published in 2017 as part of the Wales response to the Modern Slavery Act 2015. The Code covered a wider range of topics and set an expectation (but did not mandate) that organisations receiving public funds should become signatories, while also encouraging other organisations operating in Wales to adopt it as a matter of good practice.  The Code covers reserved matters and devolved matters. Over 900 organisations have signed up to the Code, with on average around 50 signing up each year. 
    
5. The Code’s existing twelve commitments include consideration of paying the Real Living Wage, ensuring that false self-employment is not undertaken, and not using umbrella schemes or zero-hours contracts unfairly. It also contains a commitment for public bodies to apply the (Two-tier) Workforce Code. 
    
6. Opportunities to further embed the Code in public procurement have been considered as part of work on the Social Partnership and Public Procurement (Wales) Act 2023 (the SPPP Act). This legislation includes a new Workforce Code as well as objective-setting and reporting requirements for public bodies. The Code needs to be refreshed to reflect these changes. 
    
7. Moreover, Public bodies covered by the Act will also be required to submit annual socially responsible procurement reports. While secondary legislation and guidance are in development, it is expected, subject to consultation, that one of the reporting metrics will be the proportion of suppliers signed up to the Code of Practice.
    
8. Other sections of guidance on the SPPP Act will refer to the Code, for example in relation to objective-setting, major construction contracts and annual reporting.

9. Welsh Government officials have undertaken research and held three engagement sessions with signatory organisations and other stakeholders.  Social partners were invited. These sessions were held to gather views on how the Code might be refreshed. Around 50 individuals attended these sessions.
    
10. We received generally positive feedback on proposals to update and strengthen some of the commitments, remove duplication, and improve overall structure and clarity. There were no significant concerns raised with the content, although was an appetite for combining some commitments, and for more support to be available. 
     
11. As with most forms of engagement, there is an element of self-selection in who chooses to attend and share their views. It is potentially the case that those who participated were more inclined to view the Code positively, with the potential for optimism bias. 
     
12. Some issues were raised about the challenges of implementing the Code throughout supply chains and not just on direct employment and first tier suppliers.

13. Based on the feedback we have received, we have taken several actions in the draft refresh of the Code. These include:

• Keeping the overall number of commitments to twelve. However, we have organised them in a more logical fashion and changed their content, adding commitments on equality, diversity and inclusion, discrimination and harassment, health and safety, and the use of technology including AI.
• Strengthening the commitment on the Real Living Wage. We are asking signatories to pay at least the Real Living Wage to all direct employees, rather than just to “consider” doing so as is the case in the current version of the Code.

14. The transition between the current version of the Code to the new refreshed version will need to be carefully managed. There are several options for doing this and some may include further and more formal consultation on the draft refreshed Code. We will be preparing advice to the Minister setting out those options in the coming days. 

We will:

1. Develop and implement a policy on tackling modern slavery and unethical employment 

• Produce and implement a written policy (or policies) to address modern slavery and unethical employment and recruitment in our own organisation and our supply chains. Such policies should be endorsed at a senior level and cover international workers where applicable.

2. Provide training on modern slavery and unethical employment

• Train relevant staff and, where feasible, encourage suppliers to understand modern slavery, unethical employment and our organisation’s policies.

3. Assess risks of modern slavery and unethical employment 

• Produce and regularly update a risk assessment of key products and services that may involve modern slavery and unethical employment practices either in our organisation or supply chains.

4. Address risks of modern slavery and unethical employment

• Respond to our risk assessments by acting to reduce and mitigate risks. Where necessary, remediate harms linked to our organisation and our supply chains.

5. Record our actions to reduce modern slavery and unethical employment

• Record our key actions, findings, progress and outcomes, within our organisation and our supply chains, and make this a regular topic of contract management and review meetings. 

6. Publish annual statements about our work on modern slavery and unethical employment

• Produce and publish an annual statement explaining what we have done and what we plan to do to tackle modern slavery and unethical employment in our organisation and our supply chains. 

7. Pay at least the Real Living Wage

• Pay at least the Real Living Wage to all direct employees. Consider becoming an accredited Real Living Wage employer and encourage UK suppliers to pay at least the Real Living Wage.
• When buying goods and services overseas, give focus to suppliers who pay at least a regional living wage for their geographical area or use certifications focused on fair pay.

8. Provide access to trade unions

• Make sure trade unions can access the workplace and that workers can join and participate in trade unions without fear of discrimination. Ensure workers are protected from adverse treatment and blacklisting when raising grievances, making formal complaints or whistleblowing. Ensure these rights are clearly stated in employment contracts.
• Place a focus on suppliers, in the UK and globally, who can show a positive and cooperative approach to working with trade unions.

9. Protect workers’ rights and job security

• Meet all legal duties to our workers and make sure they know their rights. Prevent unfair treatment in relation to pay, terms and conditions and avoid unfair use of umbrella schemes and zero hours contracts, or false self-employment.
• Support job security of suppliers’ workers by paying invoices promptly, within 30 days, and ensure that undue cost and time pressures are not applied that may lead to the unethical treatment of workers. 

10. Promote equality, diversity and inclusion

• Embed equal opportunities in our recruitment, workforce and treatment of others, and eliminate unlawful discrimination, harassment, and victimisation.
• Place a focus on suppliers who actively promote equality, diversity and inclusion and encourage suppliers to keep improving practice in these areas.
• Act to prevent all forms of discrimination and harassment (including sexual harassment) and respond effectively when it arises.

11. Keep workers and workplaces safe

• Ensure that our organisation has effective health and safety measures, and these are communicated and regularly reviewed in consultation with workers and trade union representatives

12. Consider the impact of technology on workers

• In consultation with the workforce, identify and manage risks associated with the use of technology, including AI and people-management technology, in our organisation and supply chains.