Policy statement
Responsible business conduct:
an ICC approach
Group
on Business in Society, 6 May 2000
French
version
Introduction
As a consequence of changing
social attitudes, concerns about possible impacts of globalization and increasing
expectations of business' role in society, companies are increasingly making
their values more explicit in the form of business principles, which set out
how they carry out their business. The purpose of this paper is to provide practical
advice to ICC members on how to approach the issue of business principles, to
situate individual company principles in the existing framework of generic business
principles, government codes and new such initiatives, as well as broader societal
values.
The rationale
for business principles
The primary
function of business is to create wealth and value for its customers, shareholders,
employees and society at large. Today, this role of private enterprise in a
market economy and the positive contribution of entrepreneurial initiative to
environmental and social progress are increasingly recognized worldwide. Wealth
generation and economic growth are the foundations of business's capacity to
contribute effectively to improved environmental and social conditions.
Increasingly, companies
have been making their values explicit in the form of business principles. They
have also developed policies, implementation procedures and management systems
to put these principles into effect. Such principles and practices are not a
new phenomenon; many companies have had these in place for decades. However,
the fact that in recent years more and more companies are making their business
principles more explicit illustrates the importance companies attach to acting
as responsible members of society.
Individual company principles
are developed to suit the needs and circumstances of the particular company:
its history and culture, the nature of its business and its business goals,
geographical location(s), size and so on. The great variety of existing business
principles is an indication that there cannot be a single, uniform, "model"
set of principles applicable to all companies.
To be effective and relevant
to an individual company's specific circumstances, business principles should
be developed and implemented by the companies themselves. According to the United
Nations Conference on Trade and Development (UNCTAD), there are currently 60,000
multinational enterprises in the world, which are faced with a range of very
diverse conditions in individual countries in which
they operate. Company principles
must therefore be sufficiently flexible to reflect and cater to this diversity.
A "one-size-fits-all" approach is incompatible with the great diversity
that exists within business, although some of the generic business principles
mentioned below provide a useful checklist of possible areas to cover.
Companies that do not have
formal business principles often have unwritten values that guide their operations,
and may have internal policies, monitoring, appraisal and reporting procedures.
Often, business principles
themselves are supplemented by internal guidelines and procedures on specific
issues such as environmental management, safety and occupational health, or
ethics and integrity.
In the final analysis, it
is the behaviour of the company that counts - not the existence of a formal
set of business principles. So, whether or not a company decides to adopt and
publish business principles, this should not be seen as the only indicator of
its commitment to good corporate practices.
A framework
for business principles
National
and international law provide the essential framework within which business
has to operate.
Companies also support,
to varying degrees, general business codes produced by business and other organizations,
and use these as benchmarks for their own business principles. Some of these
are at the level of broad recommendations, for example:
Others give more specific
or sectoral guidance, for example:
There are many more.
Both these general and speci
fic/sectoral business principles can serve as useful
benchmarks for companies - particularly small- and medium-size companies - in
the development of their own individual business principles. Codes and principles
should be open to periodic revision to take into account the increasing pace
of change, but should also be stable and reliable in order to maintain confidence
and certainty for business over the long-term.
Various other principles,
guidelines or codes have been produced for business by governments, intergovernmental
agencies and non-governmental organizations (NGOs), including for example:
At the last count there
were more than 40 such initiatives - existing or in preparation.
As well as these initiatives
directed specifically at business, there are various UN declarations of core
values which, while primarily directed towards governments, are also relevant
to business. These include:
These three declarations
were specified by Kofi Annan in his speech at Davos in January 1999, laying
down a challenge to business to adopt this framework of universally agreed values
and principles in the areas of human rights, labour standards and environmental
protection as a "Global Compact for the 21st Century". ICC has welcomed
the challenge of the UN Secretary General, and various initiatives are underway
between the UN, ICC and other business organizations to demonstrate how companies
in their individual corporate practices are contributing to these values.
ICC recognizes the attention
given by the United Nations to human rights. Although the establishment of the
legal framework for protecting human rights and its enforcement is a task for
governments, business has an interest in encouraging the improvement of social
conditions, which are an important factor for stable development, and in providing
an example of good human rights practices.
The primacy of individual
company principles
As far as an individual
company is concerned, by far the most important considerations are whether to
make its business principles explicit, what these should contain and what arrangements
should be put in place to ensure adherence to them. The possible legal implications
of individual company principles should also be considered. The principles and
associated arrangements that are developed are likely to be unique to that company,
although in determining these there is much to be learned from the good practice
of other companies.
In recent years there has
been substantial growth in the number of principles, guidelines or codes produced
for business by governmental and non-governmental organizations, with companies
coming under increasing pressure to endorse these various initiatives. This
has led more companies to think through whether they should develop their own
business principles, what they should contain and to which of the external codes
it is appropriate to lend their support.
Different companies look
to different benchmarks to fulfil this role, depending on their particular circumstances
(for example, industry sector, size of company, geographical location). Companies
often look first to principles produced by business organizations such as ICC,
or with the involvement of business - such as the OECD Guidelines for Multinational
Enterprises or the Global Sullivan Principles.
A voluntary
approach
How then
should a company approach the issue of whether to develop its own business principles
and how to respond to pressure to support or adopt external codes of conduct?
Rather than reacting to outside pressures, a company's decision to adopt its
own business principles should be motivated by the desire to express the values
that guide its approach to doing business, and to disseminate these internally
as well as externally if the latter is deemed appropriate. These decisions must
rest with the company.
Business principles normally
set out what companies see as their responsibilities to employees, shareholders,
customers, business partners and other groups in society. Business principles
commonly include a statement of mission, values and operating principles. Some
contain more detailed statements of policy while some companies prepare separate
materials on policies, management systems, implementation and monitoring procedures.
The process of developing, adopting and implementing individual business principles
should be met with wide support within a company, and be based on broad internal
consultation and communication. These are decisions for the individual company.
When adopting business principles, priority consideration should be given to
the development, implementation and monitoring of a company's own business principles.
Government-mandated or
other external codes are unlikely to be a viable alternative to voluntary business
principles developed by the company itself, although as illustrated above, 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/guidelines, the framework of UN values and
societal
expectations.
The method and extent of
internal monitoring of compliance with its business principles, and of external
reporting of performance, also have to be a matter for the company itself. Those
outside the company will make their own judgments on the basis of corporate
communications and their perception of the company's behaviour. All companies
will, to some extent, have to take account of wider societal expectations -
not least of their customers.
External verification of
business processes and performance other than financial performance - in areas
such as health, safety, environmental or more recently social performance -
is still a relatively new practice. While for some sectors, external third party
verification may be considered as necessary to satisfy accountability demands
on the part of consumers and business partners, external verification should
be left to the choice of individual companies. Furthermore, companies should
not be held accountable for the overall behaviour of separate and unrelated
companies that are contractors and subcontractors in increasingly complex supply
chains.
The way to ensure a greater
business contribution to environmental and social progress is not through more
- and more prescriptive - codes and regulations. Business principles, be they
formal or informal, play an important role in bridging cultural diversity within
companies and in enhancing awareness of societal values and concerns. This is
primarily a matter of persuasion and peer pressure rather than prescription.
Business considers that demands by potentially unaccountable external groups
seeking to impose codes and assert the right to independently audit companies'
compliance are counterproductive. The diversity of voluntary business initiatives
and principles is both a resource and a source of innovation for addressing
societal challenges. Their voluntary nature enables companies to find solutions
and make improvements that regulations and command and control approaches could
not have set in motion.
Annex
Selected sources of background
information on business principles, guidelines and codes
- A working party of the
Trade Committee of the Organization for Economic Co-operation and Development
(OECD) has produced an extensive inventory of codes of corporate conduct.
Entitled "Codes of corporate conduct: an inventory" (TD/TC/WP(98)74/FINAL,
99 pages), the paper presents an overview of codes of corporate conduct based
on information submitted by OECD member governments and non-governmental sources.
This inventory comprises 233 codes, the majority of which were issued by individual
companies. The document is available in pdf format on the OECD website at
www.oecd.org. The OECD
Guidelines for Multinational Enterprises are also available on the OECD
website.
- The Working Group on
Global Business Ethics Principles of the Conference Board has produced a report
entitled "Global
Corporate Ethics Practices: A Developing Consensus" (Research Report
1243-99-RR, 48 pages). This report analyzes the trends
and procedures being
used to formulate and implement global business ethics principles, and how
the formulation of these codes has become a more dynamic and inclusive process.
This report, based on meetings in North America, Europe, Asia, and Latin America,
discusses: (1) trends pushing in the direction of emerging consensus regarding
global business ethics principles; (2) procedures used by companies to formulate
and implement global business conduct principles; and (3) company efforts
to monitor and reinforce global business ethics principles. The report is
available for sale through the Conference Board website at www.conference-board.org.
- A selection of company
principles can be found at the following corporate websites:
www.bpamoco.com
www.dow.com
www.kesko.fi
www.inggroup.com
www.nestle.com
www.pepsico.com
www.pg.com
www.sgsgroup.com
www.shell.com
www.unilever.com