Step 4: Define business principles and policies

Corporate responsibility (CR) is gaining an increasing significance for businesses worldwide.

Step 4: Define business principles and policies

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Each company needs to think through its principles for itself (rather than just taking an existing code “off the shelf”). Some companies chose to do this through open dialogue and collaboration with selected stakeholders. Some companies’ business principles are high-level statements of principle; some contain more detailed statements of policy, while others prepare separate materials on policy, management systems, implementation and monitoring procedures. The underlying reasons why business principles make good economic sense should be borne in mind in defining the principles. Companies should consider legislation, social expectations, reputation indicators, risk management, bottom-line benefits, corporate and product image and strategic advantage.


To be effective and relevant to an individual company’s specific circumstances, business principles and policies should be developed and implemented by the company itself. Such principles have the advantage of bridging cultural diversity within enterprises and offering the flexibility to tailor solutions to particular circumstances, taking into account the widely differing conditions faced by individual companies in the various countries in which they operate.

The principles themselves and associated arrangements are likely to be attuned to the need and circumstances of the company concerned: its history, its culture, geographical location, size, sector, and so on.

A company should develop its own process for expressing its business principles, based on its goals and core values (see commentary on step 2). This process should be led by a team of executive managers within the company, with the engagement and full support of the company’s chief executive and board (see commentary on step 1). Employees and other stakeholders may also be consulted as appropriate (see commentary on step 3). It should be left to each individual company to decide how broadly to consult with stakeholders in the development of its principles. Whatever process is chosen, ultimately, what is important is to ensure that the principles command wide support within the company, and that they are effectively implemented through the establishment of management systems (see commentary on step 5).

Legal implications of company principles should be carefully considered. The adoption and especially the communication to various groups of interested parties (employees, customers, the public at large etc.) of the principles, values and goals of the company can in certain cases, or at least in certain legal systems, be considered as a legal commitment. Empty promises or claims could expose the company to liability.

The structure and contents of business principles will vary from company to company. Companies should select and prioritize issues to be covered in their business principles based on those issues that are most important to them and to their stakeholders, and that are most relevant to their sector and business activities.

In a publication entitled “Developing a code of business ethics” the UK-based Institute of Business Ethics draws a distinction between “issue-based codes” and “stakeholder codes”.

An “issue-based code” sets business principles with respect to the main domains where a company’s activities and conduct may have economic, social or environmental impacts (e.g., environment, workplace, human rights, integrity) (see for example Unilever’s Code of Business Principle).
A “stakeholder code” is structured with reference to the obligations acknowledged towards each stakeholder (see for example Land Securities’ Business Ethics Policy).

In developing business principles, there will be much to learn from the good practice of other companies, but ultimately the structure and issue coverage of the principles has to be decided by the company itself.

Individual company principles should express what the company believes is right according to its mission and core values. Company principles should therefore reflect as closely as possible how the company does business in a responsible way, and the key ground rules it sets itself for doing so. The underlying reasons why the business principles make good economic sense should also be borne in mind throughout the process of drafting the principles. A litmus test of any good individual company principles should be: “Does this make good business sense?” To be useful, company principles should contribute to the success of the business and to sound management.

One of the most complete sources of information on corporate responsibility initiatives is the database on Business and Social Initiatives (BASI) compiled by the International Labour Organization (ILO). This database is available online on the ILO website.

It includes comprehensive information on corporate responsibility initiatives, which address labour and social conditions in the workplace and in the community where enterprises operate. The database features corporate policies and reports, codes of conduct, accreditation and certification criteria, and labelling and other programmes. It allows customized searches to retrieve information on specific companies and organizations, countries, regions, business sectors and labour and employment issues.

As an indication of the types of issues covered by individual company codes, an OECD working paper that surveyed the issues covered in 233 codes of conduct, including 107 individual company business principles, organized these issues in the following broad categories:

  • fair business practices
  • rule of law
  • fair employment and labour rights
  • environmental stewardship
  • corporate citizenship

Another useful indicator of the type of issues that can be covered in individual company codes of conduct are the ten principles of the Global Compact, an initiative of the Secretary General of the United Nations to promote responsible corporate conduct (see commentary on step 6). Additional sources of information to assist companies in developing their business principles include:

  • “Creating a workable company code of ethics – a practical guide to identifying and developing organizational standards”: a publication by the US-based Ethics Resource Center

Some companies supplement their business principles by internal guidelines and procedures on specific issues, such as environmental management, safety and occupational health, or ethics and integrity. Therefore, while a specific issue might not be covered in a company’s business principles, it may be that the company has developed a separate detailed policy guideline on the issue for internal use within the company. Some companies may find it appropriate to communicate these internal guidelines to a broader audience outside the company -- for example by publishing them on their website.

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