Step 6: Benchmark against selected external codes and standards
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Government-mandated or other external codes are unlikely to be a viable alternative to voluntary business principles developed by the company itself, although these may have significant value as external benchmarks. Some companies choose to express public support for one or more of these external codes. It is for an individual company or industry sector to decide what the most useful benchmark codes are and to develop their own understanding of how business principles relate to external codes and guidelines, and to societal expectations. Support for external codes can be time-consuming since they may imply additional commitments. Companies should be selective, bearing in mind their own needs. ICC can provide guidance on the implications of supporting some of the existing international code offerings.
Government-mandated or other external codes and initiatives
The Guidelines for Multinational Enterprises of the Organisation for Economic Cooperation and Development (OECD) are non-binding recommendations to enterprises, made by the 37 governments that adhere to them. These guidelines are negotiated between adhering governments, industrial/employers federations through the Business and Industry Advisory Council (BIAC) to the OECD and trade unions through the Trade Union Advisory Council (TUAC) to the OECD. Their aim is to help Multinational Enterprises (MNEs) operate in harmony with government policies and with societal expectations. The guidelines are one part of a broader OECD investment instrument: the Declaration on International Investment and Multinational Enterprises. The recommendations contained in the OECD guidelines provide guidance on appropriate business conduct across the full range of MNE activities. They are supported by implementation procedures, through national contact points in the participating countries, which comprise all 30 OECD member countries, and seven non-member countries (Argentina, Brazil, Chile, Estonia, Israel, Lithuania and Slovenia). In addition, the guidelines are complemented by commentaries that provide information on and explanation of the texts and implementation procedures. Finally, there are interpretations of how certain provisions of the guidelines should be understood. These are the result of deliberations in the OECD Committee on International Investment and Multinational Enterprises.
The Global Sullivan Principles of Social Responsibility provide a framework by which socially responsible companies and organizations can be aligned. A distinguishing feature of these principles is a commitment to promote fair competition, including respect for intellectual and other property rights. The principles are intended to embrace businesses’ existing codes of conduct and work in conjunction with them. The principles aspire to have companies and organizations of all sizes, in widely disparate industries and cultures, working toward the common goals of human rights, social justice and economic opportunity.
Each endorser of the Global Sullivan Principles makes a commitment to work towards the aspiration that all of the Principles represent, including the implementation of internal policies, procedures, training and reporting structures. Endorsing companies and organizations are asked to take part in an annual reporting process to document and share their experiences in bringing social responsibility to life. The reporting format is intended to be flexible, transparent and easy to complete. All reports submitted will be made available on the Global Sullivan Principles website.
ICC marketing codes, are self-regulatory instruments whose principles are generally accepted and followed by business and can be found in most national and sectoral codes. These codes promote high standards of ethics in marketing and advertising by self-regulation against the background of national and international law. They aim to create a balance between the interests of business and consumers, whilst maintaining freedom of choice for business between different marketing tools.
ICC Rules of Conduct on Extortion and Bribery in International Business Transactions seek complementary and mutually supportive action by governments, intergovernmental bodies, and the business community to combat extortion and bribery in international trade. As a result of these rules, corporations in a number of countries have been prompted to establish or strengthen their internal rules of fair practices, taking as a model the ICC rules. The rules are complemented by a practical guide to their implementation and other anti-corruption initiatives, entitled “Fighting Corruption: A Corporate Practices Manual” that has been fully revised and updated in 2003. The ICC rules have also led to close cooperation between ICC and OECD on corruption work, particularly the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The two instruments are seen as complementary, with the 1999 revision of the ICC Rules containing a preface on the implications of the Convention and dealing with the additional problem of private-to-private sector bribery.
The Global Compact, while not a code as such, can also be a useful “learning forum” for companies as they develop their approach to responsible business conduct. The Global Compact was originally an initiative of the Former Secretary General of the UN, Kofi Annan to unite the UN and business in support of nine principles in the areas of human rights, labour and the environment. ICC was the first business organization to respond. The Global Compact seeks to advance responsible corporate citizenship so that business can be part of the solution to the challenges of globalisation. In this way, the private sector – in partnership with other social actors – can help realize the Secretary-General’s vision: a more sustainable and inclusive global economy. As a voluntary initiative, the Global Compact now seeks wide participation from a diverse group of businesses and other organizations, including UN agencies, labour and civil society. To participate in the Global Compact, a company:
- sends a letter from the Chief Executive Officer (and endorsed by the board) to UN Secretary-General Ban Ki-moon, expressing support for the Global Compact and its principles;
- sets in motion changes to business operations so that the Global Compact and its principles become part of strategy, culture and day-to-day operations (described below);
- is expected to publicly advocate the Global Compact and its principles via communications vehicles such as press releases, speeches, etc.; and
- is expected to publish in its annual report or similar corporate report (e.g. sustainability report) a description of the ways in which it is supporting the Global Compact and its nine principles.
In terms of the practical ways in which companies pursue the principles, the Global Compact offers engagement opportunities to all participants through the following:
- Global policy dialogues: Each year, the Global Compact convenes a series of action-oriented meetings that focus on specific issues related to globalisation and corporate citizenship. The meetings bring businesses together with UN agencies, labour, non-governmental organizations and other groups to produce solutions to contemporary problems. Issues addressed have included The Role of the Private Sector in Zones of Conflict and Business and Sustainable Development.
- Local networks: The Global Compact encourages the creation of local structures and networks at the country or regional level. Such networks are designed to support the implementation of the nine principles; mutual learning and information exchange; the convening of local/regional dialogues on globalisation issues; partnership projects; and the recruiting of additional companies. The Global Compact Office and UNDP facilitate and support the process leading to the formation of these local structures.
- Learning: Companies are invited to share examples of corporate practices on the Global Compact web portal. In addition, participants are encouraged to develop in-depth case studies and analyses, and to use these for learning activities in the corporate and academic worlds. Local, regional and international learning events support knowledge sharing.
- Partnership projects: The Global Compact encourages companies to participate in partnership projects that are aligned with UN development goals with UN agencies and civil-society organizations.
Another useful reference is the criteria used by various sustainability/corporate responsibility indexes, which evaluate or rank companies’ performance on economic, environmental and social grounds. Such indexes can be used by individual or institutional investors to compare companies’ efforts and achievements in corporate responsibility. Companies themselves may also use these indexes to compare their corporate responsibility performance with those of their peers.
Some of these indexes include:
(Note: These indexes serve different purposes and may use different criteria. They are not comparable between themselves.)
Principles developed by the company itself
It should again be emphasized that the question of external codes should not be one of the first considerations in the process of an internal programme for responsible business conduct (see step 4). In most instances an “off-the shelf” approach in establishing business principles could prove to be a counter-productive way of dealing with this subject. These external codes are primarily useful as benchmarks, in the sense that they give an indication of the type of issues that can be covered in individual company principles, and of the way these issues can be dealt with in the context of individual company principles.
Industry sector codes
Certain industries or sectors face common challenges, which may be in areas such as the environment, labour standards or human rights. Such industries may develop initiatives and formulate codes which companies and in some cases their suppliers can support.
Examples of such sectoral initiatives include:
Express public support
Companies should take great care in assessing the potential consequences of expressing public support for an external code. Such an expression of public support could be regarded as a commitment, for example in connection with the marketing of the company’s products. Such a commitment, if proven false, may be admissible in court as misleading.
Expressing support for a given code may be linked to business or investor relations such as customer-to-supplier, supplier-to-customer or investor-to-business. Benchmarking a company’s business principles against the code in question may waive the need for formal adherence to the code.
Societal expectations evolve over time and therefore need to be reassessed periodically. In considering societal expectations, it may be useful for the management of a company to involve stakeholders such as those identified in step 3. It may be particularly useful to consult employees, since experience shows that employee morale is often affected by disharmony between a company’s behaviour and societal expectations.
Some codes may include reporting requirements in addition to a company’s normal business reporting procedures. Such additional reporting requirement s may involve periodic reports on how a company implements a specific code or supports particular initiative. In some cases, such additional reports may be drawn from material produced by a company for its normal business reporting procedures. Examples include the Global Compact and the Global Sullivan Principles.
There are a great number of codes available today and that number continues to grow. Many of these codes overlap to a certain extent, but may require different follow-up or reporting systems. Some codes may, in whole or in part, not be relevant for certain companies or industries, but may nevertheless require specific follow-up measures when adhered to. Companies should chose carefully the codes they support or adhere to in light of their specific circumstances.
ICC can provide guidance
ICC has national committees in over 80 countries that are the focal point for ICC member companies in their country. National committees are encouraged to act as a reference point for ICC member companies on issues of responsible business conduct, for example through the establishment of a “commission on business in society” at national level. This will provide companies with a forum to discuss business in society issues in the context of national societal expectations, and a link to the ICC International Secretariat and the work of the Commission on Business in Society at international level.
Global companies may find it useful to participate directly in the international ICC Commission on Business in Society to share experiences with representatives of multinational companies with a solid knowledge of the subject at the global level. These companies can do so by becoming members of the ICC national committee in their country, which can then nominate their representative to the international ICC Commission on Business in Society.
(click to view practical examples)