Revising the code of practice on ethical employment in supply chains: integrated impact assessment

The Welsh Government is consulting on a proposed revision to the Code of Practice on Ethical Employment in Supply Chains ("the Code"). The Code was first published by Welsh Government in 2017. Since then, over 800 public, private and third sector organisations have signed up, committing themselves to actions which aim to reduce risks of modern slavery within their organisations and supply chains and promote fair work and ethical employment practices. It needs to be updated to bring it in line with developments since the Code was published in 2017.

The draft revised Code sets out updated organisational commitments to reduce risks of modern slavery and unethical employment, strengthen worker voice, promote fair pay (including the Real Living Wage), support equality, diversity and inclusion, ensure safe workplaces, and manage impacts of technology (including AI and people‑management technology). 

The consultation will test the clarity, feasibility and proportionality of the revised commitments and help identify whether organisations require any additional support to implement the Code. 

Taking the five ways of working (Well-being of Future Generations (Wales) Act 2015) in turn, the following benefits are expected:

Long term

The current Code aims to embed fair work practices across supply chains, addressing systemic risks such as forced labour, insecure work and discriminatory practices. It aims to drive improvements over time. The revised Code has the same aims but provides additional clarity in addressing and identifying the risks of modern slavery and unethical employment; and strengthens the commitment on paying at least the Real Living Wage; and places a focus on suppliers that can demonstrate a positive approach to working with trade unions. 

Prevention

By encouraging risk assessment, due diligence, remediation and transparent reporting, the Code seeks to prevent harm (e.g., exploitation, unsafe work) and break cycles of poverty and poor health associated with low pay and insecure employment. The draft Code includes commitments around equality in the workplace and well-being and expects rights to be clearly stated in employment contracts. 

Integration

The draft Code contributes to multiple well-being goals: A Prosperous Wales (decent work), A More Equal Wales (Equality and anti-discrimination), A Healthier Wales (safe work), A Wales of Cohesive Communities (worker voice. 

Collaboration 

The development of the draft Code and its implementation requires partnership with social partners (trade unions and employer representative organisations), public sector bodies, third sector organisations and others.

Involvement

Through promoting worker voice, the Code seeks to involve employers, workers, and trade unions in decisions affecting workers. It also places a focus on suppliers who can provide clear evidence of effective health and safety management.

Impact, costs and savings 

The main potential benefits include reduced risk of modern slavery and unethical employment; improved pay, security and safety; enhanced supplier resilience and reputation; improved contract delivery; and better data for risk management. These benefits are difficult to quantify, and their scale will depend upon the extent to which the Code is adopted and implemented by organisations. Organisations may incur transitional costs (policy drafting, training, risk assessment, reporting) and ongoing costs (due diligence, monitoring, living wage uplifts). Although difficult to quantify, these costs are expected to be offset to some extent by improved worker engagement, including improved retention and productivity. No new primary legislation is proposed at consultation stage.

How have people most likely to be affected by the proposal been involved in developing it?

The revised Code has been developed with a clear commitment to involvement, in line with the Well‑being of Future Generations (Wales) Act 2015. A public consultation will provide the primary mechanism for engaging those most likely to be affected, ensuring that a wide and diverse range of voices can shape the final version of the Code. The consultation will invite feedback on the clarity, feasibility and proportionality of the revised commitments, and will help identify the types of implementation support organisations may need. This will include engagement with public bodies, suppliers, third sector organisations and businesses operating within Wales and, where relevant, internationally. To support Welsh speakers and Welsh language groups, all materials will be made available bilingually, ensuring that individuals can engage fully in their language of choice. Wider stakeholders, including trade unions, sector bodies and organisations representing vulnerable or low‑paid workers, will also be encouraged to contribute.

This inclusive approach is designed to ensure that the revised Code reflects the needs and experiences of those most affected and supports fair, ethical and equitable employment practices across all supply chains.

What are the most significant impacts, positive and negative?

The assessment identifies that the proposed revised Code is expected to generate a range of positive impacts, with no negative impacts identified across any of the well‑being domains, other than if a current signatory operating in a competitive sector, where it is challenging to pay all staff the Real Living Wage, decides it is no longer able to be a signatory, and then fails to act on its other Code commitments. However, signing the Code is not mandatory, so this is not likely to have a significant negative impact. We will monitor this potential impact. The overarching benefit of the revised Code is its potential to reduce the risk of exploitation, modern slavery and unethical employment practices within supply chains. Strengthened commitments on the Real Living Wage, equality, worker voice, health and safety and the remediation of harms provide a more robust framework to support fairer and safer employment conditions. These improvements are particularly relevant for low‑paid, agency and migrant workers who are most vulnerable to poor treatment and socio‑economic disadvantage.

For people and communities, the revised Code potentially contributes to improved financial security and supports fair treatment and safer workplaces. This aligns strongly with the well‑being goals of A More Equal Wales, A Healthier Wales, A Wales of Cohesive Communities, and A Prosperous Wales. Fair work has clear links to better mental and physical health, reduced in‑work poverty and more stable family and community life. While the Code does not directly address cultural or environmental determinants, its emphasis on ethical supply chains and responsible procurement supports the wider conditions needed for resilient communities and sustainable local economies.

For culture and the Welsh language, the impacts are also potentially positive. Although the Code does not directly influence cultural participation or heritage, it is published in both Welsh and English and this will help ensure that Welsh speakers can engage fully and confidently. Supporting stable employment in local economies can also help sustain community identity and environments where the Welsh language can thrive.

Economically, the revised Code is intended to have modest positive long‑term impacts. Clearer expectations and fairer employment practices can improve productivity, reduce staff turnover, and strengthen the resilience and reputation of supply chains. Prompt payment requirements support the viability of SMEs, particularly in rural or economically disadvantaged areas, helping build a fairer and more foundationally rooted Welsh economy. While some suppliers may experience minimal short‑term adjustment costs, these are expected to be proportionate and outweighed by longer‑term benefits.

For the public sector, the impacts are similarly positive. Stronger expectations on worker health and safety, equality, oversight and remediation help reduce governance and reputational risks and support more effective contract management. The revised Code also aligns with current Welsh Government priorities on tackling poverty, promoting fair work, strengthening ethical procurement and improving well‑being outcomes.

For the third sector, the impacts are positive, as many third sector organisations already work to promote fair work, prevent exploitation, or support vulnerable workers and communities. The revised Code reinforces these agendas and may create new opportunities for third sector involvement in awareness‑raising, training or specialist support. No negative impacts on service users, volunteering or community assets are anticipated.

Environmentally and in relation to natural resources, the impacts are neutral. The revised Code does not directly influence environmental management, biodiversity or climate adaptation. However, by supporting more resilient communities and fairer work, it contributes indirectly to the broader social conditions that underpin sustainable local development.

Although the Code does not mandate supplier sign‑up, its influence through public sector procurement could be significant. Voluntary adoption, coupled with reinforced reporting expectations for public bodies, provides a strong mechanism to drive behaviour change and raise standards across supply chains without unintended burdens.

Overall, the revised Code has the potential to deliver broad and sustained positive impacts across people, the economy and wider well‑being goals, with no negative impacts identified.

In light of the impacts identified, how will the proposal maximise contribution to our well-being objectives and the seven well-being goals and (or) avoid, reduce or mitigate any negative impacts?

The proposed revised Code makes a meaningful contribution to the Welsh Government’s well‑being objectives and the seven well‑being goals set out in the Well‑being of Future Generations (Wales) Act 2015. It does so primarily by promoting fair work, encouraging ethical employment standards, mitigating risks of exploitation and enhancing the ethical performance of supply chains across Wales and beyond.

The revised Code is designed to support Welsh Ministers in understanding and influencing supplier behaviour. Although suppliers are not mandated to sign up to the Code, public bodies are required to report whether their suppliers have done so, creating a mechanism that encourages engagement without imposing a statutory obligation. This transparency supports Ministers in identifying where further action or influence may be beneficial and helps support contracting activity to contribute more consistently to social, economic, environmental and cultural well‑being.

The most significant positive contributions relate to A Prosperous Wales, A More Equal Wales, A Healthier Wales, and A Globally Responsible Wales. Strengthened commitments on the Real Living Wage, equality, diversity and inclusion, worker voice and health and safety all support improved conditions for workers, particularly those in low‑paid, insecure or high‑risk roles. Fair work is closely associated with better mental and physical health, higher levels of financial security and more stable households, reinforcing long‑term economic resilience and contributing to reduced inequality of outcomes. These improvements help deliver on the current Welsh Government’s broader ambition to tackle poverty and promote fair and sustainable economic growth.

The revised Code also contributes to A Wales of Cohesive Communities by promoting responsible procurement and strengthening expectations around the fair treatment of workers across supply chains. Fair, ethical and safe working environments support stronger, more stable communities, with indirect benefits for social cohesion and community well‑being. By encouraging public bodies and suppliers to adopt ethical practices, the Code helps foster trust in public procurement and supports environments where communities can thrive.

Importantly, no negative impacts have been identified across any of the well‑being goals. The Code has been designed to avoid or mitigate potential risks by ensuring that all commitments are proportionate, achievable and flexible enough to accommodate organisations of different sizes and levels of risk exposure. The engagement and consultation process will also help identify areas where further guidance or support is needed, ensuring that the burden of implementation is not disproportionately placed on particular sectors, small organisations or those with limited capacity. The Code emphasises continuous improvement rather than prescriptive compliance, further mitigating potential unintended consequences.

In addition, the strengthened focus on remediation ensures that when harms do occur within supply chains, organisations have clearer expectations regarding how to respond effectively. This supports a preventative and restorative approach, ensuring that issues are addressed promptly and contributing to long‑term improvements in working conditions across Wales and globally.

Overall, the revised Code contributes to national well‑being objectives by embedding fair work principles into procurement practice, promoting transparency and accountability, reducing the risk of exploitation and supporting better outcomes for workers and communities. At the same time, the flexible, non‑mandatory nature of supplier sign‑up, combined with consultation, ensures that the Code remains proportionate and avoids or mitigates negative impacts.

How will the impact of the proposal be monitored and evaluated as it progresses and when it concludes?

This will be a decision for Welsh Ministers following the Senedd election.