Events for ETI Members
ETI Members' Roundtable 1
ETI & Corporate Social Responsibility
(with follow-on discussion on pros & cons of different auditing companies)
ETI Secretariat, London
19th February 2002
- Background and purpose of roundtable
- Who participated?
- Key points from presentation on "ETI & corporate social responsibility"
- ETI & CSR: key discussion points
- Pros & cons of different auditing companies: key discussion points
- Proposed follow-up for ETI
- For further information…
- Advance Flyer
Background and purpose of roundtable
The objectives of this first roundtable were to provide members with:
- An overview of where ETI sits in the wider context of corporate social responsibility (CSR), and how it relates to other initiatives (e.g. SA8000, AA1000, GRI);
- The opportunity to ask questions about specific codes and initiatives in ETI's priority sectors (i.e. food and clothing sectors);
- A forum for members to discuss and assess different providers of auditing services.
Further information on other CSR initiatives was one of the areas prioritised
by members in the ETI corporate members' learning needs assessment carried
out last year. The discussion on different audit providers was requested
at the corporate members' meeting on 31st January (2002).
Who participated?
Overall there were 21 participants (not including Secretariat staff), representing 11 companies, 5 NGOs and 1 trade union organisation.
Key points from presentation on "ETI & corporate social responsibility"
The presentation was made by Man-Kwun Chan (Research & Information Manager, ETI Secretariat), who has 4 years' experience of research and consultancy in ethical trade and CSR in the food and natural resources sector. Presentation slides are available from Man-Kwun on request (mankwun@eti.org.uk).
Scope of CSR
Definition of CSR: two key concepts behind CSR are (a) the triple bottom line (taking responsibility for social and environmental as well as financial impact of a company), and (b) stakeholder accountability (companies are accountable to other stakeholders beyond its shareholders).
Responsibility to whom?: CSR implies taking responsibility for the impact of one's business operations not only on shareholders and consumers, but also on employees (indirect as well as direct), local communities, supply chain partners, wider society and the environment. Note that ETI only touches on 2 of these areas (indirect employees, and suppliers to some extent).
Responsibility for what?: CSR implies taking responsibility for how your company contributes not only to shareholder value and consumer satisfaction/safety, but also to improving working practices/standards, environmental impact, economic growth and social development. CSR also implies ensuring good corporate governance. Note that ETI only works on one of these areas i.e. working practices.
Ways of taking responsibility: there are a range of approaches and tools used in tackling CSR. These include public reporting, stakeholder engagement, community involvement, corporate philanthropy, managing supply chain relations, exerting financial leverage to influence government policies or other companies (e.g. ethical investment), consumer education, codes of conduct and standards, and incorporation of CSR principles into core business operations. ETI focuses on improving implementation of codes of conduct, and indirectly on improving supply chain relations.
Labour codes in focus: key differences between codes
Different labour codes can be distinguished by their ownership (which stakeholders are involved in initiating/managing it), industry scope (generic, industry/sector specific, company specific), geographical scope (international, regional, national - North, national - South), process vs. performance standards, extent and quality of monitoring, verification & reporting requirements, and capacity-building aspects (extent and type of support to retailers, suppliers and/or workers for code implementation).
Implications for ETI - informal observations
Ownership: ETI's tri-partite approach is both its strength (credibility) and its weakness (efficiency). Other multi-stakeholder code initiatives tend to have full stakeholder representation at the strategic level, but not at the operational level - can ETI learn from these other approaches? Is there also room for representation from other worker organisations and relevant academics/researchers?
Industry-specific guidance: Industry-specific codes - rather than generic codes such as the ETI Base code - tend to provide better guidance on code implementation. Can ETI provide industry-specific guidelines to support its generic Base Code?
Lessons on monitoring: as well as internal learning, can ETI also learn from the practical monitoring experience of other initiatives such as SA 8000?
"Independent" verification: general confusion remains about what is meant by independent verification. Can ETI play a more pro-active role in defining this?
Capacity-building: providing support to retailers (members) is an explicit part of ETI's role. Can ETI also develop a more strategic approach to providing support to Southern partners?
ETI & CSR: key discussion points
Review/comparison of codes: Has someone done a comparison of different labour (and other) codes in the UK? Is there anyone in the UK government who is responsible for reviewing UK and international codes on a regular basis? No-one was aware of anyone within government who took on this role. However, DFID did commission a review of UK codes (see Further Information, below). This is a good report, but somewhat dated (1998).
Legal obligations: Are there actually any legal obligations for companies to implement CSR principles? Voluntary CSR initiatives (including codes) emerged often because of gaps in legislation and/or its enforcement. However, some areas of codes are covered by legislation e.g. EU legislation on pesticide maximum residue levels, and historically laws often emerge from widely accepted "voluntary" standards.
ETI Base Code versus industry-specific codes: one company's experience was that the (industry-specific) International Council of Toy Industries (ICTI) code provided better practical guidance than a general code such as the ETI Base Code.
Off-the-shelf code versus developing in-house code: one view was that companies do not want to go through lengthy process of developing their own code - they want to be able to adopt an off-the-shelf package. Others argued that this is difficult because different companies have different priorities, depending on types of supplier, countries of operation, different internal company structure.
Integrated versus separate social & environmental codes/audits: one view that social and environmental auditing could be combined because of considerable overlap of subject matter (e.g. pesticide use on farms), and participatory data-gathering techniques used for social auditing can also be very useful for collection of environmental information. Others felt that audit functions should be separated - social and environmental issues require very different skills, and difficult to find individuals with both sets of skills.
Pros & cons of different auditing companies: key discussion points
ETI Workbook - guidance on selecting auditors: reminder that the Workbook (Section 5: Inspections) provides guidance on what makes for a good social auditor, and pros and cons of different types of auditors (in-house: quality team vs. technologists vs. specialist ethical auditing staff; commercial auditing companies).
Key audit providers used/known by members: KPMG, BVQI, SGS, ITS, Verité
Problems: (a) do not get value-for-money; (b) huge variation in quality of individual auditors within one company; (c) quality depends a lot on whether or not the company has a presence in the specific country (and country coverage is patchy); (d) poor co-ordination between HQ/UK and country offices.
Reasons for problems: (a) too few providers so too little competition - the audit companies can get away with poor quality and high charge-out rates because there are few alternatives; (b) providers don't have a good knowledge of the ETI Base Code and what ETI considers to be good practice in terms of social auditing; (c) often lack of industry knowledge.
Possible solutions: see section below.
Proposed follow-up for ETI
Independent verification: can ETI prepare guidelines on independent verification? (what is verification, what counts as independent, what is good practice). Note from Man-Kwun: there is a section in the Workbook on independent verification. The content is currently limited, but this section will be developed as learning on the subject improves.
Country pilot on building local auditing capacity: suggestion from one participant that ETI could consider setting up a pilot in one country to build local auditing capacity, with a view to ETI members being able to use good quality and trusted local auditors in that country.
Member companies to share information on independent audits commissioned on common suppliers: Companies often find they have commissioned an independent audit of one of their suppliers, only to find that another customer has also recently commissioned an audit of the same supplier. Can ETI member companies share information on which suppliers they have audited to avoid duplication of effort? (see specific action point below).
Briefing of audit companies: suggestion that ETI could organise a meeting with key commercial audit companies to brief them on the ETI Base Code and what ETI considers as good practice in social auditing.
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