Voluntary Codes in CSR

Voluntary Codes in CSR

Apart from government regulations, to develop sustainable business practices, which create both shareholder and societal value, there are various voluntary codes, which are formulated by international NGOs, business associations and UN agencies to guide businesses towards developing responsible practices.

• Oecd Guidelines for Multi-national Corporations
  
• ILo Conventions
  
• ISO 9000 and ISO 14000
  
• SA8000
  
• UN Draft Principles for Behaviour of Trans-national Corporations
  
• LEED

“A voluntary code of conduct is an important element of corporate social responsibility (CSR) commitments on the part of businesses. The objective of the creation of voluntary codes of conduct for companies is to establish public trust in their business practices by demonstrating commitment and efforts to meet the type of behaviour that corresponds to societal expectations.”

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Oecd Guidelines for Multi-national Corporations

The Organisation for Economic Co-operation and Development (OECD) celebrated its 50^th anniversary, but its roots go back to the rubble of Europe after World War II. Determined to avoid the mistakes of their predecessors in the wake of World War I, European leaders realised that the best way to ensure lasting peace was to encourage co-operation and reconstruction, rather than punish the defeated.

The OECD Guidelines for Multinational Enterprises are the most comprehensive set of government-backed recommendations on responsible business conduct in existence today. The governments adhering to the Guidelines aim to encourage and maximise the positive impact MNEs can make to sustainable development and enduring social progress.

The OECD Guidelines for Multinational Enterprises (MNEs) are recommendations to enterprises made by the Governments of OECD member countries. Their aim is to ensure that MNEs operate in harmony with the policies of the countries where they operate.

These voluntary standards cover the full range of MNEs’ operations. The Guidelines cover the range of MNE activities. The guidelines aim at good corporate practice and increasing MNEs social accountability.

They guide MNEs for designing general operational policies, formulating appropriate information disclosure and systems for finance, taxation, employment and environmental regulation.

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ILo Conventions

The Core Labour Standards enshrined in the ILO Declaration on Fundamental Principles and Rights at Work (1998) are the basic minimum human rights enshrined within the ILO’s eight specialised conventions.

The eight core Conventions are:

• Forced Labour (1930)
• Freedom of Association and Protection of the Right to Organize(1948)
• Right to Organize and Collective Bargaining & EqualRemuneration (1951)
• Equal Remuneration Convention, 1951
• Abolition of Forced Labour (1957)
• Discrimination (Employment and Occupation)(1958)
• Minimum Age Convention (1973)
• Elimination of the Worst Forms of Child Labour (1999)

ILO Conventions and recommendations cover a broad range of subjects concerning work, employment, social security, social policy and related human rights. In today’s globalised economy, international labour standards are essential components in the international framework for ensuring that the growth of the global economy provides benefits to all.

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ISO 9000 and ISO 14000

The ISO issues guidelines for voluntary standardisation for an extremely wide variety of areas, primarily for technical aspects. ISO guidelines are accredited with these standards. More recently, they have developed environmental management standards ISO 14000 series.

In addition, the ISO 9000 is a quality management system. ISO is currently in the process of developing an ISO standard for CSR. The guidance standard will be published in 2010 as ISO 26000 and is meant for voluntary use.

ISO 9000

The ISO 9000 family addresses various aspects of quality management and contains some of ISO’s best known standards. The standards provide guidance and tools for companies and organizations who want to ensure that their products and services consistently meet customer’s requirements, and that quality is consistently improved.

Standards in the ISO 9000 family include:

• ISO 9001: 2008 – sets out the requirements of a quality management system
  
  
• ISO 9000: 2005 – covers the basic concepts and language
  
  
• ISO 9004: 2009 – focuses on how to make a quality management system more efficient and effective
  
  
• ISO 19011: 2011 – sets out guidance on internal and external audits of quality management systems.

ISO 14000

The ISO 14000 family addresses various aspects of environmental management. It provides practical tools for companies and organizations looking to identify and control their environmental impact and constantly improve their environmental performance.

ISO 14001:2004 and ISO 14004:2004 focus on environmental management systems. The other standards in the family focus on specific environmental aspects such as life cycle analysis, communication and auditing.

ISO 14001:2004

ISO 14001:2004 sets out the criteria for an environmental management system and can be certified to. It does not state requirements for environmental performance, but maps out a framework that a company or organization can follow to set up an effective environmental management system.

It can be used by any organization regardless of its activity or sector. Using ISO 14001:2004 can provide assurance to company management and employees as well as external stakeholders that environmental impact is being measured and improved.

The benefits of using ISO 14001:2004 can include:

• Reduced cost of waste management
• Savings in consumption of energy and materials
• Lower distribution costs
• Improved corporate image among regulators, customers and the public

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SA8000

Launched by Social Accountability International in 1997, SA 8000 is a standard addressing labour and workplace conditions. SA8000 builds on ISO 9000 auditing techniques, specifying corrective and preventive actions; encouraging continuous improvement; and focusing on management systems and documentation proving these systems.

SA8000 certification is done by independent, external auditors and relates to the company’s actual performance in regard to labour conditions rather than published performance.

It is one of the world’s first auditable social certification standards for decent workplaces, across all industrial sectors. It is based on conventions of the ILO, UN and national law, and spans industry and corporate codes to create a common language to measure social compliance.

It takes a management systems approach by setting out the structures and procedures that companies must adopt in order to ensure that compliance with the standard is continuously reviewed. Those seeking to comply with SA8000 have adopted policies and procedures that protect the basic human rights of workers.

Below are the nine elements in the SA8000 Standard:

Child Labour

No use or support of child labour; policies and written procedures for remediation of children found to be working in situation; provide adequate financial and other support to enable such children to attend school; and employment of young workers conditional.

Forced and Compulsory Labour

No use or support for forced or compulsory labour; no required ‘deposits’ – financial or otherwise; no withholding salary, benefits, property or documents to force personnel to continue work; personnel right to leave premises after workday; personnel free to terminate their employment; and no use nor support for human trafficking.

Health and Safety

Provide a safe and healthy workplace; prevent potential occupational accidents; appoint senior manager to ensure OSH; instruction on OSH for all personnel; system to detect, avoid, respond to risks; record all accidents; provide personal protection equipment and medical attention in event of work-related injury; remove, reduce risks to new and expectant mothers; hygiene – toilet, potable water, sanitary food storage; decent dormitories – clean, safe, meet basic needs; and worker right to remove from imminent danger.

Freedom of Association and Right to Collective Bargaining

Respect the right to form and join trade unions and bargain collectively. All personnel are free to: organize trade unions of their choice; and bargain collectively with their employer.

A company shall: respect right to organize unions and bargain collectively; not interfere in workers’ organizations or collective bargaining; inform personnel of these rights and freedom from retaliation; where law restricts rights, allow workers freely elect representatives; ensure no discrimination against personnel engaged in worker organizations; and ensure representatives access to workers at the workplace.

Discrimination

No discrimination based on race, national or social origin, caste, birth, religion, disability, gender, sexual orientation, union membership, political opinions and age. No discrimination in hiring, remuneration, access to training, promotion, termination, and retirement.

No interference with exercise of personnel tenets or practices; prohibition of threatening, abusive, exploitative, coercive behaviour at workplace or company facilities; no pregnancy or virginity tests under any circumstances.

Disciplinary Practices

Treat all personnel with dignity and respect; zero tolerance of corporal punishment, mental or physical abuse of personnel; no harsh or inhumane treatment.

Working Hours

Compliance with laws and industry standards; normal workweek, not including overtime, shall not exceed 48 hours; 1 day off following every 6 consecutive work days, with some exceptions; overtime is voluntary, not regular, not more than 12 hours per week; required overtime only if negotiated in CBA.

Remuneration

Respect right of personnel to living wage; all workers paid at least legal minimum wage; wages sufficient to meet basic needs & provide discretionary income; deductions not for disciplinary purposes, with some exceptions; wages and benefits clearly communicated to workers; paid in convenient manner – cash or check form; overtime paid at premium rate; prohibited use of labor-only contracting, short-term contracts, false apprenticeship schemes to avoid legal obligations to personnel.

Management Systems

Facilities seeking to gain and maintain certification must go beyond simple compliance to integrate the standard into their management systems and practices.

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UN Draft Principles for Behaviour of Trans-national Corporations

These draft principles drawn up by a working group of the UN Subcommittee on Human Rights would provide an internationally binding set of principles by which TNCs should operate. The principles are broad in that they include aspects of non-discrimination, war crimes, workers’ rights, environmental protection, and consumer protection as well as interpreting TNCs’ responsibilities with regard to international law.

However, it remains to be seen whether the UN Human Rights Committee and eventually national governments will ever ratify these draft principles and thus make them binding under international law. It is also unclear what, if any, enforcement mechanism would be included in this mechanism.

The UN Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anticorruption:

Human Rights

• Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
  
  
• Principle 2: make sure that they are not complicit in human rights abuses.

Labour

• Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
  
  
• Principle 4: the elimination of all forms of forced and compulsory labour;
  
  
• Principle 5: the effective abolition of child labour; and
  
  
• Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

• Principle 7: Businesses should support a precautionary approach to environmental challenges;
  
  
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
  
  
• Principle 9: encourage the development and diffusion of environmentally friendly technologies.
  
  
• Anti-Corruption
  
  
• Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

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LEED

The LEED (Leadership in Energy and Environmental Design) Green Building Rating System® is a voluntary, consensus-based national standard for developing high-performance, sustainable buildings. LEED provides a complete framework for assessing building performance and meeting sustainability goals.

It emphasises state of the art strategies for sustainable site development, water savings, energy efficiency, materials selection and indoor environmental quality. LEED recognises achievements and promotes expertise in green building through a comprehensive system offering project certification, professional accreditation, training and practical resources.

To receive LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification. Prerequisites and credits differ for each rating system, and teams choose the best fit for their project.

Continuous Improvement

Behind the LEED program is an immense infrastructure developed to support the leaders in the industry as they innovate and create cutting-edge, high performance buildings. We make significant investments each year to maintain, operate and improve LEED and its delivery. No other rating system has an infrastructure that comes close.

Lifetime of Returns

LEED-certified buildings cost less to operate, reducing energy and water bills by as much as 40%. Businesses and organizations across the globe use LEED to increase the efficiency of their buildings, freeing up valuable resources that can be used to create new jobs, attract and retain top talent, expand operations and invest in emerging technologies.

LEED buildings have faster lease-up rates and may qualify for a host of incentives like tax rebates and zoning allowances. Not to mention they retain higher property values.

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GRI

Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines set a globally applicable framework for reporting the economic, environmental, and social dimensions of an organisation’s activities, products, and services.

• Dow Jones Sustainability Index
  
• FTSE4GOOD
  
• Smart Growth Network
  
• Equator Principles
  
• UN Global Compact
  
• Coalition of Environmentally Responsible Economies (CERES)

It is the most widely used and internationally recognised standard for corporate sustainability measurement and reporting. The cornerstone of the Framework is the Sustainability Reporting Guidelines. As a result of the credibility, consistency and comparability it offers, GRI’s Framework has become a de facto standard in sustainability reporting.

Sustainability is a journey. Along the way, organizations need to set goals, measure performance, and integrate a sustainability strategy into their core planning. GRI’s Reporting Framework allows all organizations to take the first steps towards a sustainable global economy.

Some of the distinctive elements of GRI’s Framework – and the activity that creates it – include:

Multi-stakeholder Input

GRI’s approach is based on multi-stakeholder engagement; this is considered the best way to produce universally-applicable reporting guidance that meets the needs of all report makers and users.

All elements of the Reporting Framework are created and improved using a consensus-seeking approach, and considering the widest possible range of stakeholder interests. Stakeholder input to the Framework comes from business, civil society, labor, accounting, investors, academics, governments and sustainability reporting practitioners.

A Record of Use and Endorsement

Every year, an increasing number of reporting organizations adopt GRI’s Guidelines. From 2006 to 2011, the yearly increase in uptake ranged from 22 to 58 percent. New audiences for sustainability information, like investors and regulators, are now calling for more and better performance data. Annual growth in the number of reporters is expected to continue, as GRI works for more reporters and better reporting.

Governmental References and Activities

GRI was referenced in the Plan of Implementation of the UN World Summit on Sustainable Development in 2002. Use of GRI’s Framework was endorsed for all participating governments. Several governments consider GRI’s Framework to be an important part of their sustainable development policy, including Norway, the Netherlands, Sweden and Germany.

Independence

GRI’s governance structure helps to maintain its independence; geographically diverse stakeholder input increases the legitimacy of the Reporting Framework. GRI’s funding approach also ensures independence.

GRI is a stichting – in Dutch, a nonprofit foundation – with a business model that aims for a degree of self-sufficiency. Funding is secured from diverse sources; governments, companies, foundations, partner organizations and supporters.

Shared Development Costs

The expense of developing GRI’s reporting guidance is shared among many users and contributors. For companies and organizations, this negates the cost of developing in-house or sector-based reporting frameworks.

Bridge Building

GRI’s basis in multi-stakeholder engagement contributes to its ability to build bridges between different actors and sectors – like business, the public sector, labor unions and civil society – and to mediate.

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Dow Jones Sustainability Index

The Dow Jones Sustainability Indices were launched in 1999 as the first global sustainability benchmarks and is described as the first global index tracking the financial performance of the leading sustainabilitydriven companies worldwide.

The family tracks the stock performance of the world’s leading companies in terms of economic, environmental and social criteria. Company questionnaire is designed to assess opportunities and risks deriving from economic, environmental and social activities of companies.

Inclusion in the Index is a competitive process; selection is considered a mark of distinction for companies that want investors to see them as sustainability leaders.

The Dow Jones Sustainability Indices serve as benchmarks for investors who integrate sustainability considerations into their portfolios, and provide an effective engagement platform for companies who want to adopt sustainable best practices.

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FTSE4GOOD

The FTSE4Good Index Series was created by FTSE, a respected global financial index company based in Britain, in response to the increasing interest in Socially Responsible Investment (SRI). Its inclusion criteria measure the performance of companies that meet globally recognised corporate responsibility standards.

The visibility and reputation of FTSE4Good provides companies with a powerful vehicle to communicate their CSR achievements. FTSE indices are used extensively by a range of investors such as consultants, asset owners, fund managers, investment banks, stock exchanges and brokers.

The indices are used for purposes of: investment analysis, performance measurement, asset allocation, portfolio hedging and creation of index tracking funds.

FTSE4Good can be used in four main ways:

• Investment: As a basis for creating index-tracking investments, financial instruments or fund products focusing on responsible investment
  
  
• Research: To identify environmentally and socially responsible companies
  
  
• Reference: As as reference by which companies with a transparent and evolving global corporate responsibility standard can assess their progress and achievement
  
  
• Benchmarking: As a benchmark index to track the performance of responsible investment portfolios

All rights in the FTSE4Good Ratings vest in FTSE and EIRIS (“EIRIS”). “FTSE” is a trade mark of the London Stock Exchange plc and is used by FTSE under licence. “EIRIS” is a trade mark of EIRIS.

Neither FTSE nor EIRIS nor their licensors shall be liable (including in negligence) for any loss arising out of use of FTSE4Good Ratings by any person. Distribution of the FTSE4Good Ratings and the use of the FTSE4Good Ratings to create financial products requires a licence from FTSE.

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Smart Growth Network

The Smart Growth Network (SGN) is a partnership of government, business and civic organizations that support smart growth. It was formed in response to increasing community concerns about the need for new ways to grow local communities while boosting the economy, protecting the environment, and enhancing community vitality.

Its focus is on community engagement and development, with emphasis on integrative solutions to a mix of community issues, such as traffic, housing, employment and environment.

Smart Growth is gaining attention in recent years because it provides alternative to single-issue focus; engages companies and stakeholders in productive problem solving. It is widely used by companies that seek to build strong community bonds.

Since its creation in late 1996, the Network has become a storehouse of knowledge about smart growth principles, facilitating the sharing of best practices and acting as a catalyst for implementation of ideas.

The Smart Growth Network is led by a core group of partner organizations. The SGN Web site, Smart Growth Online, features an extensive array of smart growth-related news, events, information, research, presentations, and publications.

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Equator Principles

The Equator Principles is a framework for financial institutions to manage environmental and social issues in project financing. The Principles are intended to serve as a common baseline for the implementation of individual, internal, environmental and social procedures and standards for project financing activities across all industry sectors globally.

The Principles were developed and adopted by IFC and 20 of the world’s leading banks, and quickly became a global market standard for availing project finance.

The EP apply globally, to all industry sectors and to four financial products (1) Project Finance Advisory Services, (2) Project Finance, (3) Project-Related Corporate Loans and (4) Bridge Loans. The relevant thresholds and criteria for application is described in detail in the Scope section of the EP

EPFIs commit to implementing the EP in their internal environmental and social policies, procedures and standards for financing projects and will not provide Project Finance or Project-Related Corporate Loans to projects where the client will not, or is unable to, comply with the EP.

While the EP are not intended to be applied retroactively, EPFIs apply them to the expansion or upgrade of an existing project where changes in scale or scope may create significant environmental and social risks and impacts, or significantly change the nature or degree of an existing impact.

The EPs have greatly increased the attention and focus on social/ community standards and responsibility, including robust standards for indigenous peoples, labour standards, and consultation with locally affected communities within the Project Finance market.

They have also promoted convergence around common environmental and social standards. Multilateral development banks, including the European Bank for Reconstruction and Development, and export credit agencies through the OECD Common Approaches are increasingly drawing on the same standards as the EPs.

The EPs have also helped spur the development of other responsible environmental and social management practices in the financial sector and banking industry (for example, Carbon Principles in the US, Climate Principles worldwide) and have provided a platform for engagement with a broad range of interested stakeholders, including non-governmental organisations (NGOs), clients and industry bodies.

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UN Global Compact

The UN Global Compact is a framework for business that are committed to aligning their operations and strategies with ten universally accepted principles. The universally accepted ten Principles are derived from:

The Universal Declaration of Human Rights; ILO’s Declaration of Fundamental Principles and Rights at Work; The Rio Declaration of Environment and Development; and the UN Convention against Corruption.

By doing so, business, as a primary agent driving globalisation can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere.

The Global Compact asks companies to embrace, support and enact their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption:

Human Rights

• Business should support and respect the protection of internationally proclaimed human rights;
  
  
• Make sure that they are not complicit in human right abuses.

Labour Standards

• Business should uphold the freedom of association and effectively recognize the right to collective bargaining;
  
  
• The elimination of all forms of forces and compulsory labour;
  
  
• The effective abolition of child labour;
  
  
• The elimination of discrimination in respect of employment and occupation.

Environment

• Business should support a precautionary approach to environmental challenges;
  
  
• Undertake initiatives to promote greater environmental responsibilities;
  
  
• Encourage the development and diffusion of environmentally friendly technologies.

Anti-corruption

• Business should work against corruption in all its forms, including extortion and bribery.

The Global Compact is a leadership platform, endorsed by Chief Executive Officers, and offering a unique strategic platform for participants to advance their commitments to sustainability and corporate citizenship

The UN Global Compact works toward the vision of a sustainable and inclusive global economy which delivers lasting benefits to people, communities, and markets.

To help realize this vision, the initiative seeks to:

• Mainstream the Global Compact’s Ten Principles in business strategy and operations around the world; and
  
  
• Catalyze business action in support of UN goals and issues, with emphasis on collaboration and collective action.

With these objectives in mind, the Global Compact has shaped an initiative that provides collaborative solutions to the most fundamental challenges facing both business and society.

The initiative seeks to combine the best properties of the UN, such as moral authority and convening power, with the private sector’s solution-finding strengths, and the expertise and capacities of a range of key stakeholders. The Global Compact is global and local; private and public; voluntary yet accountable.

The benefits of engagement include the following:

• Adopting an established and globally recognized policy framework for the development, implementation, and disclosure of environmental, social, and governance policies and practices.
  
  
• Sharing best and emerging practices to advance practical solutions and strategies to common challenges.
  
  
• Advancing sustainability solutions in partnership with a range of stakeholders, including UN agencies, governments, civil society, labour, and other non-business interests.
  
  
• Linking business units and subsidiaries across the value chain with the Global Compact’s Local Networks around the world — many of these in developing and emerging markets.
  
  
• Accessing the United Nations’ extensive knowledge of and experience with sustainability and development issues.
  
  
• Utilizing UN Global Compact management tools and resources, and the opportunity to engage in specialized work streams in the environmental, social and governance realms.

International frameworks used to implement CSR at the business level are linked to: labour standards; International labour standards; Human rights: Global Compact, Human Rights Assessment; UN declaration: a mixture of the two – OECD guidelines, International Business Leaders Forum (IBLF); Sector initiatives: EUREPGAP, Ethical Trading Initiative or Codes of Conduct.

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Coalition of Environmentally Responsible Economies (CERES)

The CERES is a non-profit organization advocating for sustainability leadership. They mobilize a powerful network of investors, companies and public interest groups to accelerate and expand the adoption of sustainable business practices and solutions to build a healthy global economy.

CERES is uniquely situated at the nexus of the business, investment and advocacy communities. Drawing on the expertise of the CERES Coalition, they convene and direct stakeholder engagements with CERES network companies to find smart strategies and meaningful performance improvements on key environmental and social issues.

They unique engagement model features diverse teams of credible, external stakeholders that provide ongoing input to companies on policies, strategies, disclosure and bottom-line performance. The CERES report is a standardised format for corporate environmental reporting developed through collaboration by companies, institutional investors and environmental organisations.

The CERES report establishes the environmental performance data that should be disclosed, suggests methods of measurement, and helps companies quantify their environmental performance. The reports undergo a joint pre-publication review to ensure conformity to the standard.

The Global Initiative for Sustainability Ratings (GISR) is an independent, global, non-commercial, initiative whose mission is to is to create a world-class corporate sustainability ratings standard as an instrument for transforming the definition of value and value creation by business in the 21^st century in a way that aligns with the national and global sustainability agenda.

The last decade has witnessed the rise of sustainability as a defining element of responsible business strategy and performance. As organizations work to address the sustainability challenges of the 21^st century, financial markets must develop better ways to assess sustainability performance. CERES and the Tellus Institute have partnered on the Global Initiative for Sustainability Ratings (GISR) to create a non-commercial, generally accepted sustainability ratings standard that meets the highest standards of technical excellence, independence and transparency.

Tracking results, analyzing data and implementing actions that address sustainability risks and opportunities can no longer be treated as optional, but must instead become integral to a company’s way of doing business. Transparent information not only helps to decrease risk but also highlights sustainability opportunities that have enormous value potential.