What is the Buyer Code of Conduct?

The Responsible Purchasing Code of Conduct, aka, the Buyer Code of Conduct, is a set of principles and practices to which apparel brands and retailers (known in this document as “Buyers”) commit to uphold the human rights of workers throughout their global supply chains. When inserted into a contract for the purchase of apparel, the Buyer Code becomes enforceable.

The Buyer Code was created by a working group of the American Bar Association in recognition of the fact that Buyers’ own business practices are extremely important for ensuring human rights and good working conditions in supply chains. This is why, while most codes of conduct apply to Suppliers (meaning factories and other producers), the Buyer Code applies to brands. You can find the ABA working group’s Buyer Code here. The projects’ broader Model Contract Clause “Contracting for Human Rights Toolkit” is available here.



 

What does the Buyer Code accomplish and why does it matter?

The Buyer Code aims to address the power imbalance between Buyers and their Suppliers (e.g. factories, farms) by having Buyers commit to improving their own purchasing practices. Purchasing practices include, to name just a few examples, the pricing and payment terms offered by the Buyer, production timelines, and delivery terms, among others.

Brands’ own irresponsible purchasing practices can and do contribute to human rights abuses in the supply chain. COVID-19 highlighted this enormous power disparity and its adverse impact on human rights when, during the early months of the pandemic, apparel brands leaned on one-sided terms in their contracts that allowed them to cancel orders worth billions of dollars in total without payment and without considering the implications of their decisions for vulnerable workers.

Even in normal times, unfair or aggressive commercial practices employed by Buyers can put so much pressure on Suppliers that it becomes virtually impossible to uphold human rights standards and ensure fair working conditions. Here are a few other ways that Buyer behavior and purchasing practices can negatively impact working conditions:

  • Paying Suppliers a price for goods that is below the cost of production or too low to pay the minimum wage under local labor laws
  • Making last-minute changes to orders (e.g., quantity, timing, or design) that Suppliers can’t meet, or that require factory workers to put in long hours without additional pay, or owners to subcontract to less reputable Suppliers
  • Cutting ties with a Supplier or cancelling contracts irresponsibly (without providing adequate notice or compensation for work already done), leaving workers and Suppliers in the lurch

Typically, Buyers—especially consumer-facing brands—attempt to manage labor standards in their supply chains by requiring their Suppliers to respect a Supplier code of conduct. Although these codes contain human rights provisions that we would expect, such as no forced or trafficked labor, no child labor, paying a minimum wage and respecting international and local labor laws, and upholding good health and safety standards, they have also served to perpetuate the myth that the Supplier alone is responsible for the human rights performance of the supply contract. But this isn’t true.

As the examples above and the COVID-19 pandemic have shown, the Buyer’s behavior matters, too. And how the Buyer treats its Supplier in the course of their commercial/contractual relationship can have profound implications for workers’ human rights. This is why we need the Buyer Code.

Major companies and apparel brands already have human rights commitments and Supplier codes of conduct. Why is the Buyer Code necessary?

Almost every company or brand-name firm will have a Supplier code of conduct, usually posted on their website. Use of Supplier codes began in the 1990s as a way for Buyers to respond to labor abuses in their supply chains; they emerged principally to address Buyers’ concern that a discovery of human rights abuses in their supply chain would damage their reputation and repel consumers.

Supplier codes have been useful in setting out the human rights standards that we would all like to see upheld throughout the production process, especially for goods that we then purchase, bring into our homes, wear, use, or otherwise consume. But they are also flawed and limited in that they are written and developed by Buyers and place all of the responsibility for upholding human rights and ensuring good working conditions on the Supplier, without making any reference to the Buyer’s own behavior or establishing anything approaching a commitment for the Buyer to behave responsibly.

For many decades, the use of Supplier codes of conduct has perpetuated the dangerous myth that Suppliers are the only guilty party if labor rights violations are found in the supply chain. This incomplete viewpoint has allowed human rights abuses and low standards to persist in many supply chains, such as for apparel, food, and electronics.

The Buyer Code changes the conversation: It outlines standards and principles to which Buyers can and should commit in their own operations, their own contracts, and their own engagement with Suppliers in order to uphold human rights and ensure fair conditions for workers laboring in their supply chains. The Buyer Code thus identifies Buyer-specific commitments that, if taken seriously, could have major positive impacts on human rights in global supply chains.

What industries does the Buyer Code of Conduct apply to?

The Buyer Code can be adopted by (or required for) Buyers operating in any industry, from apparel and agriculture to mining and electronics. Industry-specific provisions can of course be added, as needed. For the purposes of this Cheat Sheet, we discuss the Buyer Code’s particular relevance to the fashion industry.

Who developed the Buyer Code?

The Buyer Code was developed by a working group of the American Bar Association’s Business Law Section led by David Snyder, Professor of Law at American University Washington College of Law and Susan Maslow, Partner, Antheil Maslow & MacMinn, LLP.

In addition to the Buyer Code, the working group developed a set of about 30 model contract clauses (the MCCs) that can selectively be incorporated (by Buyer or Supplier) into international supply contracts. The MCCs are designed to improve the human rights performance of those contracts by incorporating human rights due diligence principles at every stage of the Buyer-Supplier relationship.

The working group’s Principled Purchasing Project, which generated the Buyer Code and the MCCs focused on contractualizing Buyers’ responsibilities, was led by Sarah Dadush, Professor of Law at Rutgers Law School and Olivia Windham Stewart, a Business and Human Rights Specialist.

The entire “Contracting for Human Rights Toolkit” prepared by the working group is available here.

What are some examples of how the Buyer Code works to support human rights?

The Buyer Code is designed to influence the way a Buyer conducts business and, in turn, to improve working conditions. Here are some examples of how this might work:

  • Responsible pricing: Currently, it is not uncommon for Buyers to offer prices to factories and other Suppliers that are too low to cover the costs of production. Accepting low prices can lead to Suppliers violating labor rights by, for example, underpaying wages, forcing workers to work overtime, or failing to invest in or uphold social and environmental standards. Under the Buyer Code (section 3), the Buyer commits to negotiating with the Supplier to agree to a fair price for goods that covers all of the costs of production, including costs associated with upholding responsible business conduct. At a minimum, the price must include minimum wages, statutory benefits, and health and safety costs required by applicable law or collective bargaining agreements.
  • Honoring contracts: During COVID-19, dozens of apparel brands canceled or changed the payment terms of their contracts without engaging in dialogue with Suppliers and without any regard for the human rights impacts that such abrupt changes could create. Under the Buyer Code (section 6), Buyers commit to paying all Suppliers in accordance with the terms agreed upon at the outset of the contract. Any changes will only be made by mutual agreement with the Supplier after ensuring that they would not trigger violations of the Buyer’s own human rights commitments.
  • Humane pace of work: Often Buyers request unrealistic delivery times or last-minute changes to orders that make it extremely hard for the Supplier to manufacture and deliver the goods without requiring workers to put in excessive overtime or subcontracting the work to another site. Under the Buyer Code (section 4), the Buyer commits to collaborating with Suppliers on an order timeline that allows both parties to uphold human rights and does not trigger excessive working hours or unauthorized and unregulated sub-contracting.

Is the Buyer Code enforceable?

Yes, but only once it is incorporated into a contract for the sale and purchase of goods, aka, a supply contract, and then the Buyer Code becomes legally-binding and enforceable. That means that if a Buyer does not act in accordance with the terms of the Buyer Code, the Supplier that is party to the contract would, in theory, be able to take the Buyer to court for breach of contract. However, the decision to incorporate the Buyer Code into supply contracts is currently voluntary. A brand / Buyer could of course post its commitment to adopt and respect the Buyer Code on its website as a signal of good intentions, but unless it is included in the contract, the Buyer Code would not be enforceable as a matter of contract law.

Another, possible “backdoor” way to enforce the Buyer Code is not through contract law, but consumer protection law. If a Buyer “falsely advertises” its commitment to responsible purchasing practices, that could amount to a type of consumer deception that could, in turn, possibly be litigated in court. We have seen instances of consumer-led litigation for “slave chocolate,” not actually-dolphin-safe tuna, and “slave shrimp,” among others.* So far, these false and deceptive advertising claims have been unsuccessful in the US courts, but that could change.

How do brands sign on or commit to the Buyer Code? Can only American brands adopt it?

Any brand or Buyer can commit to the Buyer Code, regardless of where they operate or where they’re headquartered. Brands might publicize their commitment to the Buyer Code and publish the Buyer Code on their website. But to make the Buyer Code enforceable contractually, it would need to be incorporated into the supply contract. For different ways of incorporating the Buyer Code into the supply contract, take a look at the Model Contract Clauses (MCCs) developed by the ABA working group described above. The Buyer Code is referred to throughout the MCCs as Schedule Q.

How do we get the fashion industry and other industries to adopt Buyer Code?

It will likely require a coalition of motivated brands, but also investors, trade unions, industry associations, citizen NGOs, and governmental organizations to move the entire fashion industry and other industries to adopt the Buyer Code. Though there is no legal obligation for companies to adopt the Buyer Code, consumer pressure and government pressure could soon change this reality. Buyers are increasingly incentivized—if not mandated—to change their contracts to include human rights provisions. Brands that adopt the Buyer Code early could be ahead of the curve.

What happens if a brand that has committed to the Buyer Code is found to be in violation of it?

Under traditional supply contracts, the only parties who are eligible to receive remedies for breach of contract are the two parties to the contract, namely the Buyer and the Supplier. This approach does not work where the breach involves a violation of workers’ human rights. In those instances, remedies should flow to the victims of the violation, meaning the workers themselves, not the parties to the contract. And we certainly would not want either the Buyer or the Supplier to somehow make money on the back of a human rights violation. This is why the Buyer Code (and the MCCs) place human rights remediation ahead of typical contract damages, giving priority to remediating the harm to victims in whatever way is most suitable. Thus, the Buyer Code (and the MCCs) ensure that victims are the primary beneficiary of remediation.

Human rights remediation can include financial or other types of compensation for victims. It also aims to address the root cause of the issue so as to ensure that the violations stop and do not recur. For example, the Buyer or the Supplier might stop engaging in certain types of conduct, like poor purchasing practices for the Buyer or specific violations at the Supplier level, such as attacks on organized labor.

What are human rights and what counts as a human rights violation?

Human rights are defined internationally by the UN Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Human Rights at Work. Human Rights are broad and protect people from everything from gender discrimination and violence to securing their right to education and fair pay. For example, Article 22 of the UN Declaration states that, “Everyone who works has the right to just and favorable remuneration ensuring for himself and his family an existence worthy of human dignity.” Article 24 guarantees the right of Rest and Leisure. Suffice it to say many pockets of the international supply chains do not currently protect or advance human rights.

Will the Buyer Code end human rights violations in the fashion industry?

No, the Buyer Code won’t end human rights violations on its own. The Buyer Code is only one piece, but a unique and central piece, of the work that needs to be done in order to strengthen the frameworks for holding Buyers to their human rights commitments.

* For a summary of some of the relevant cases, see Sarah Dadush’s articles, Identity Harm (2018) and The Law of Identity Harm (2019).

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