Code of Conduct – Definition, Contents & Practical Tips for HR

A code of conduct is a written set of rules that establishes the ethical principles, behavioural expectations and compliance requirements of a company for all employees and managers. It serves as a binding guide for day-to-day conduct – from interactions with colleagues and handling conflicts of interest to data protection and anti-discrimination policies. In Germany, companies with 1,000 or more employees have been legally required to have a code of conduct since 2023 under the Supply Chain Due Diligence Act (LkSG).

What Is a Code of Conduct?

A code of conduct is an internal document that defines the values, norms and behaviours a company expects from its employees, managers and – frequently – external partners and suppliers. It makes implicit corporate culture explicit: what was previously taken for granted is written down in a binding form.

The term has established itself as an internationally recognised standard. In the English-speaking world it is sometimes used interchangeably with "code of ethics", though a distinction is worth drawing.

Code of Conduct vs. Code of Ethics

The two terms are often used synonymously in business. The difference lies in emphasis: a code of ethics articulates overarching value principles (e.g. "We act with integrity and transparency"), while a code of conduct is more concrete and behaviour-oriented – it describes how those values should be put into practice in everyday work. In practice, a well-crafted code of conduct typically encompasses both.

Legal Framework in Germany

LkSG: Mandatory for Companies with 1,000+ Employees

Since 1 January 2023, Germany's Supply Chain Due Diligence Act (LkSG) has obliged companies with 3,000 or more employees, and since 1 January 2024 also those with 1,000 or more employees, to implement preventive measures addressing human rights and environmental risks. Under §6 LkSG, this explicitly includes the introduction of a code of conduct setting out principles for the company's own operations and for its suppliers. A missing or incomplete code of conduct can lead to findings during audits by the Federal Office for Economic Affairs and Export Control (BAFA).

Co-determination: The Role of the Works Council (§87 BetrVG)

Where a code of conduct contains rules governing employee behaviour in the workplace – for example regarding the use of company communications tools, conduct in customer interactions or reporting obligations – the works council's co-determination rights under §87 of the Works Constitution Act (BetrVG) apply. This means that without the works council's approval, such a code may be legally contestable. It is therefore strongly advisable to involve the works council at an early stage of the drafting process – ideally during the conceptual phase.

DCGK and Listed Companies

The German Corporate Governance Code (DCGK) recommends that listed companies embed clear principles for ethical and legally compliant behaviour. While the DCGK is not a statute, companies must declare annually whether and how they comply with its recommendations (the so-called "comply or explain" principle). A code of conduct is regarded as a minimum standard of good corporate governance.

Contents of a Code of Conduct

Mandatory Contents (Minimum Standard)

A legally sound and practically effective code of conduct should cover at least the following areas:

Core values and ethical principles – Which values guide the company's actions? (e.g. integrity, transparency, fairness)

Anti-discrimination and respect – A clear commitment to equal treatment and a prohibition of harassment, bullying and discrimination (with reference to the General Equal Treatment Act, AGG)

Conflicts of interest – How to handle situations where personal interests may conflict with the company's interests

Anti-corruption and compliance – A prohibition on bribery and rules for accepting gifts and invitations

Data protection and confidentiality – Responsible handling of employee, customer and company data (with reference to the GDPR)

Reporting channels for violations (whistleblowing) – Since the Whistleblower Protection Act (HinSchG, 2023), companies with 50 or more employees have been required to establish internal reporting offices; the code of conduct should identify these channels

Recommended Additions

Depending on company size, industry and strategic objectives, the following additions are worth considering:

• Provisions on sustainable business practices (ESG)
• Social media and public communications guidelines
• Supply chain responsibility (particularly where LkSG obligations apply)
• Behavioural standards in an international context
• Diversity, Equity & Inclusion (DEI) – an explicit commitment to equal opportunities

Drafting a code of conduct that meaningfully addresses unconscious bias and anti-discrimination also lays an important foundation for fair HR decisions.

Creating a Code of Conduct – Step by Step

A code of conduct only has real impact when it is understood not as a pure compliance document, but as a living guide. The following steps support the creation process:

1. Analyse the status quo – Which values and behavioural expectations already exist (explicitly or implicitly)? Where are the gaps or risks?

2. Involve key stakeholders – Engage management, HR and the legal team early on – and, where co-determination requirements apply, the works council from the outset.

3. Define structure and content – Establish the mandatory areas (see above) and add any industry-specific provisions.

4. Use plain language – The code of conduct should be readable and comprehensible for all employees, regardless of their role or background. Avoid legal jargon.

5. Legal review – Before adoption, have the document reviewed by an employment law specialist or compliance expert.

6. Communication and training – Even the best code of conduct achieves little if it remains unknown. Introduce it during onboarding, provide regular training and ensure it is digitally accessible.

7. Regular updates – Review the document at least annually, and update it immediately when legislation changes (e.g. LkSG, HinSchG).

Code of Conduct and Corporate Culture

A code of conduct is more than a compliance document – it is a reflection of lived corporate culture and a signal to all stakeholders, both internal and external. Companies that articulate their values clearly in a CoC create a consistent basis for decision-making – from everyday interactions to hiring decisions.

Recruitment is often where a company shows how seriously it takes its code of conduct: those who commit to diversity and fairness as core values should ensure those values are also effective in the selection process. Cultural fit – the alignment between a candidate and the company's culture – cannot be assessed by intuition alone. Digital aptitude assessment platforms such as Aivy make it possible to measure cultural and personal fit on a scientifically validated basis, free from the influence of unconscious perception biases – a concrete contribution to the values a code of conduct sets out.

Frequently Asked Questions about the Code of Conduct

What is a code of conduct?

A code of conduct is a written document that sets out a company's behavioural expectations, ethical principles and compliance rules. It applies to employees, managers and often to external partners and suppliers as well.

Is a code of conduct legally required in Germany?

For companies with 1,000 or more employees: yes. The LkSG (§6) has required these companies to introduce a code of conduct since 2024. For smaller companies there is no statutory obligation, but a code of conduct is still recommended as a tool for shaping corporate culture and preventing compliance risks. Listed companies should also take the DCGK recommendations into account.

What should a code of conduct include?

The minimum contents are: core values, anti-discrimination principles, handling of conflicts of interest, anti-corruption provisions, data protection and reporting channels for violations. Depending on the company, ESG principles, supply chain responsibility or DEI guidelines may be added.

Does the works council need to approve the code of conduct?

Yes, where the code contains rules on workplace behaviour that engage co-determination rights under §87 BetrVG. Without works council approval, those parts of the code may be legally contestable. The recommendation is to involve the works council at an early stage.

What is the difference between a code of conduct and a code of ethics?

A code of ethics articulates overarching value principles; a code of conduct is more concrete and behaviour-oriented. In practice, the two terms are often used interchangeably. A well-crafted code typically incorporates both dimensions.

What happens when someone violates the code of conduct?

The consequences depend on the seriousness of the violation and should be clearly defined within the code itself – ranging from a formal warning to summary dismissal. Conduct that is also a criminal offence (e.g. corruption, data protection breaches) may additionally give rise to legal consequences.

How often does a code of conduct need to be updated?

The code should be reviewed at least once a year. Where legislation changes (e.g. LkSG, HinSchG, GDPR), an immediate update is required. Significant organisational changes such as mergers, entry into new markets or strategic repositioning are also occasions for a revision.

Conclusion

A code of conduct is not a bureaucratic obligation – it is a strategic management tool for companies of any size. It creates clarity around behavioural expectations, strengthens the trust of employees and external stakeholders, and provides the foundation for a rule-compliant, values-driven corporate culture. For companies with 1,000 or more employees, it is also a legal requirement under the LkSG.

HR professionals play a central role in drafting, communicating and maintaining the code – from working with the works council to integrating the code into the onboarding process. Companies that live by the values defined in their code of conduct create a consistent candidate experience and lay the groundwork for fair, discrimination-free hiring.

How to incorporate corporate culture and values into your recruitment process in an objective, scientifically grounded way is something the digital platform Aivy demonstrates in practice: Learn more about objective aptitude assessment

Sources

• §87 Works Constitution Act (BetrVG) – Works council co-determination rights. Federal Ministry of Justice, current version. https://www.gesetze-im-internet.de/betrvg/__87.html
• Supply Chain Due Diligence Act (LkSG), §6 – Preventive measures. Federal Ministry of Labour and Social Affairs (BMAS), 2023. https://www.bmas.de/DE/Arbeit/Lieferkettensorgfaltspflichtengesetz/lieferkettensorgfaltspflichtengesetz.html
• German Corporate Governance Code (DCGK). Government Commission DCGK, 2022. https://www.dcgk.de/de/kodex.html
• Whistleblower Protection Act (HinSchG). Federal Ministry of Justice, 2023. https://www.gesetze-im-internet.de/hinschg/
• General Equal Treatment Act (AGG). Federal Ministry of Justice, current version. https://www.gesetze-im-internet.de/agg/
• GDPR – General Data Protection Regulation. European Union, 2018. https://gdpr-info.eu/