Ethical trade as an approach to supply chain management has mushroomed in recent years. Northern companies are becoming increasingly concerned with the ‘ethics’ of their operations and the risks to reputation and productivity posed by bad employment practices in global supply chains. But can voluntary private sector codes really improve employment conditions in supply chains?

In this issue of Insights, we bring together not only current research but some stakeholder perspectives on the opportunities and challenges facing ethical trade. Ethical trade is one dimension of corporate social responsibility, bringing social issues into the mainstream of commercial supply chain management through the use of codes of conduct. It is sometimes confused with fair-trade which addresses terms of trading for smaller producers, and fosters greater responsibility in supply chain relations.

Ethical trade, on the other hand, focuses on workplace issues, requiring that suppliers in particular meet minimum employment, worker welfare and aspects of human rights standards.

Similar management systems are well established for product safety and environmental issues. Here, we focus on the social dimensions of ethical trade and its codes of conduct yet the separation of social and environmental standards is increasingly artificial in global sourcing agreements.

A plethora of codes are on offer. The most numerous are in-house codes such as Nike's or Gap's. 233 company codes were counted in 1999 and the figure is rising. Suppliers have to comply with and pay for a multitude of similar but different codes. Harmonising codes or establishing equivalence is on the agenda but has not yet halted the problem of 'code overload'.

At a broader level, industry-specific codes have also been developed. The US Apparel Industry Partnership/Fair Labour Agreement adopted by a number of leading US merchandising companies is a good example. Industry standards are not new, as ISO and EMAS environmental management systems show. Building on ISO principles, Social Accountability International (formerly CEPAA) has developed SA8000. This is an independent social standard that can be used as an auditable code throughout the private sector, as Kohl Kaufman explains. SA8000 was developed in collaboration with business and civil society stakeholders, while AIP/FLA also involved the US government.

Ethical trade is partly a response to consumer and campaigning group pressure in a globalised economy. Alliances of companies, NGOs, trade unions and other civil society actors are a feature of some approaches to ethical trade. Developing codes of conduct through a multi-stakeholder approach is a striking aspect of ethical trade, bringing together companies, NGOs, trade unions and some government departments. An example of this collaborative approach is the Ethical Trading Initiative (ETI) in the UK. The ETI's baseline code of conduct that corporate members from various industries must comply with as a minimum standard is more than just a code, as Rees' article shows. ETI aims to provide a learning environment and sponsors pilot projects in developing countries to test different methods of monitoring and verification.

Codes of conduct need to be assessed in terms of content, implementation and impact. A number of professional auditing companies have moved into this area, some accredited to audit specific codes such as FLA or SA8000. Suppliers audited against a specific code undergo an inspection, and where non-compliance is found, have to take remedial action or risk failing the audit.

Social auditing is a complex process, however, and it can be difficult to spot work place abuse, such as sexual harassment or forced overtime. Workers have little confidence in a process that appears to be linked with management, and fear that reporting issues could risk their jobs. Advocates of the multi-stakeholder approach argue that effective monitoring and verification of codes must involve local NGOs and trade unions in which workers have trust. Participatory social auditing, also a means of raising awareness and of facilitating behavioural change, can help reveal serious management problems, as Auret's article shows. But in many developing countries local organisations lack the capacity to participate: developing sustainable local systems of monitoring and verification remains an important challenge.

Do the advantages of multi-stakeholder approaches outweigh immediate constraints? Ethical trade is a largely northern driven process, reflecting Western ethical thinking and priorities. Southern-based initiatives, however, are expanding, raising the possibility of local ownership of codes. Collaboration poses challenges, as articles in this issue show.

id21 Research Highlight: 3 April 2001

Further Information:
Stephanie Barrientos
Institute of Development Studies
University of Sussex
Falmer BN1 9RE
UK

Tel: +44 (0)1273 606261
Contact the contributor: stephanieb@ids.ac.uk

Institute of Development Studies (IDS), UK

Mick Blowfield
Natural Resources Institute
University of Greenwich
Central Avenue
Chatham Maritime
Kent ME4 4TB
UK

Tel: +44 (0) 1634 880088
Fax: +44 (0) 1634 880066/77
Contact the contributor: yjp60@dial.pipex.com

Natural Resources Institute, Greenwich, UK

Other related links:
Who benefits from ethical trade? The South African experience

Consensus or conflict: what's in a code?

Changing standards? A field test for SA8000

Code compliance? Participatory social auditing in Zimbabwe

Death by a thousand codes. Is harmonisation possible?

Fresh off the shelf. Gender and horticulture in Africa

Learning by doing? Assessing multi-stakeholder approaches