Companies may create their code of conduct in response to governmental or NGO concern about the adequacy of the company’s social and environmental behavior. It's a beginning because it establishes that the company not only plans to operate to ensure its financial survival but plans to do so while maintaining certain standards of conduct.
The next phase is to start looking at the cost of fixing workplace or environmental abuses. For industries and situations where abuses are widespread, it may take years for a company to meet even minimal of environmental or social standards.
A company and its executives – or an industry-wide coalition of companies seeking to improve practices – must therefore decide how much to invest in CSR, i.e., how high its voluntary standards should be set and how urgently compliance timetables should be conceived. The company and industry response will depend only partly on the ethical concerns of its executives -- it will depend also on how deeply rooted and extensive existing noncompliances are and how expensive it may prove to end them.
The most basic step is to articulate a company code or mission – or, for an industry-wide group, an industry-wide code or mission. Many companies develop their own. Developing a company’s own detailed code may prove to be an expensive and unnecessary step if, as many companies do, the company proceeds to adopt an MSI standard. The public relations and internal-efficiency value of an industry code or MSI standard is much greater than that of a company code, even though some companies developed a high-quality company code before the MSI standards were available.
The company code typically articulates its mission in a way that recognizes that it sits at the intersection of three circles – markets, ethics and law, the common element of which is reciprocity (quid pro quo, fairness to stakeholders). The sustainable company must make a profit, must obey the law and must operate in an ethical way.
Among the many company codes that have been written, the following are of special interest: Aeon (Japan), Coop Italia, Dole, Hasbro, Mattel, McDonald’s, Nike, Otto Versand (German), Phillips-Van Heusen, Reebok, Timberland, Toys R Us, Disney and Voegele (Swiss). Smaller and less well-known companies with codes include Kesko (Finnish), Switcher (Swiss), Cutter & Buck, Eileen Fisher and Patagonia.
When the Council for Responsible Jewellery Practices was first set up, it drafted an industry code of conduct. Many of its members, like Rio Tinto, already had a company code of conduct and some produce well-regarded CSR reports.
The main weakness of individual company codes is that without some standards their proliferation adds to the confusion. Unique company codes make it difficult for suppliers trying to sell to multiple buyers, for consumers comparing company policies and practices, for retailers trying to factor CSR into their procurement, and for workers seeking to determine their rights.
In an attempt to sort through the confusion and look at the actual content of company codes, the ILO and OECD a few years ago discovered that only two-thirds of company codes they reviewed addressed workplace discrimination. Fewer provided for workplace safety. Only one-fifth addressed freedom of association or training. Fewer than 20 percent required one day’s rest in seven. Fewer than one-third commited the company to monitor implementation.
Two main corporate strategies for a company code therefore seem to have evolved:
- A company code may be a first step, preliminary to higher standards. In this approach, a company code is an acknowledged preliminary step before adopting an industry code or MSI standard. In this case, the company code will set standards somewhere higher than the level company is already achieving, but not at the level required by the industry code or MSI standard. The investment in the code should be kept to a minimum because the company will be reinventing the wheel.
- A company code may substitute for higher standards. Some company codes are designed give the company time to take a wait-and-see attitude toward adopting an industry-wide code or MSI standard. In this case, the company may feel under no pressure to set its standard above the level it is already achieving and the code’s main purpose is to be a place on the company web site where the company can refer NGOs and other inquiries.
Note: I wrote this originally in 2006. I have edited what I wrote and am reposting in the hope of prompting some feedback. The issues are still with us.