Glossary of ethical trade terms

Those involved in ethical trade use a certain amount of jargon that may be confusing for outsiders. Unfortunately, there is as yet no widely accepted “terminology guide”, and so two people can use the same term to refer to quite different things.

Over the years, ETI has developed its own “glossary of ethical trade terms” to create some degree of consistency with which terms are used within our membership. We include this glossary to help users decipher terms used within this Website, and to aid understanding of ethical trade literature more generally. It is not our intention to suggest that we have the “definitive” definitions for any of the terms included below.

Assessment

A study to determine whether, and to what extent, labour practices comply with the provisions of a code of labour practice. The term can refer to the study of a workplace but can also apply to more general studies such as to an industry within a country.
A "study" means a systematic investigation covering all points of the relevant code. Where this concerns a workplace it means a study involving the gathering of robust verbal, documentary, visual and physical evidence. Preliminary studies meant for detecting the likelihood that code provisions are not being observed are referred to as risk assessments and are understood to be less robust. Where such assessments do not involve the actual inspection of the workplace they are referred to as desk-based risk assessments.

Assessor

A person who performs assessments or inspections. The term has no implications with respect to the qualifications of the individual or whether the individual is an employee of any particular kind of organisation.

Audit

A thorough formal examination of the labour practices of a particular workplace or company, based on corroborated evidence. The essence of an audit is the examination of evidence and the cross-checking of the evidence to establish its truth. This in turn implies the observance of established rules and procedures concerning the gathering and evaluation of the various kinds of evidence.

Code implementation

The policies, procedures and activities that a company needs to put in place in order to implement a code of practice. This includes raising awareness about the code, understanding labour conditions in the supply chain, monitoring labour conditions in supplier workplaces, and ensuring that appropriate corrective actions are implemented if problems are found.

Code initiatives

Organisations, such as ETI, whose role is to establish and/or encourage the implementation of codes of labour practice.

Code of practice/conduct

In the context of ethical trading, a code of practice (or code of conduct) is a set of standards concerning labour practices adopted by a company and meant to apply internationally, and, in particular, to the labour practices of its suppliers and subcontractors.

Collective bargaining

The right to collective bargaining refers to the right for workers’ organisations to negotiate with employers or employers’ organisations on behalf of their members to determine working conditions and terms of employment.

Continuous improvement

As a management concept this term usually refers to a system of constant or ongoing incremental improvements to a process or product based on constant or ongoing examination and evaluation of the process or product. Used in this traditional sense the concept could be applied to ethical trading management systems.

The term is controversial however where it refers to changes in situations involving non-compliance with provisions of the ETI Base Code or similar codes of labour practice that are based on minimum human rights standards. Interest in using this term in these situations arises from concern that suppliers may be unable to observe all code provisions immediately and that encouraging suppliers to make improvements is more responsible than abandoning the supplier and the workers the code is meant to protect.
N.B. It is more accurate to use the term ‘continual improvement’.

The problem is that violations of human rights are not treated in a relative manner. For instance the abomination of slavery is not affected by the number of slaves in any situation. For this reason the founding ETI members have agreed that, in the context of non compliance with code provisions, the notion of continuous improvement refers to time bound agreements for corrective actions provided that these corrective actions do not involve serious breaches of the code.

Corporate Social Responsibility (CSR)

A concept of business ethics based on the idea that companies have stakeholders who are broadly defined as anyone or group affected by the activities of the company. The idea of CSR is that a company should be accountable to its stakeholders. For this reason the subjects of CSR focus on how companies should identify and “engage” stakeholders and how they should determine, measure and report the impact of their activities on others. (The terms social auditing and social reporting emerged in this context.)

Desk-based risk assessments

A preliminary assessment by a sourcing company of its suppliers. The desk-based risk assessment normally takes the form of a questionnaire sent to suppliers with the intention of highlighting the areas of greatest risk in terms of labour practices. If part of a systematic process, it forms part of the sourcing company’s monitoring strategy.

ETI Base Code

The code of labour practice, based on key conventions of the ILO, that ETI requires its members to uphold. Its content was negotiated and agreed by the founding trade union, NGO and corporate members of ETI. It is accompanied by a set of general principles governing its implementation.

Fair trade

“Fair Trade is an alternative approach to conventional international trade. It is a trading partnership which aims at sustainable development for excluded and disadvantaged producers. It seeks to do this by providing better trading conditions, by awareness raising and by campaigning” (FINE definition of fair trade, as quoted in Traidcraft Exchange Fair Trade Factsheet May 2003).

Fair trade differs from ethical trading in that its primary focus is on improving trading relationships rather than labour practices, it engages primarily with marginal producers, and aims to establish an alternative trading model rather than working within the confines of conventional international trading relationships.

Freedom of association

The right of all workers to join or form a trade union of their own choosing and carry out trade union activities without interference from their employer or from public authorities.

Global Union Federations (GUFs)

Formerly known as International Trade Secretariats: These are international associations of trade unions organised by industry (sector) or by occupation. The memberships of these organisations generally are national trade unions. The number of GUFs has declined from a high of thirty-three in 1914 to ten today, due mainly to mergers. The GUFs are independent, autonomous organisations but have a mutually recognised relationship with the International Confederation of Free Trade Unions. At present two GUFs are members of the Ethical Trading Initiative.

ILO and ILO Conventions

International Labour Organisation. The ILO is the UN specialised agency which seeks the promotion of social justice and internationally recognised human and labour rights. It formulates international labour standards in the form of Conventions and Recommendations setting minimum standards of basic labour rights. ILO Conventions have the force of international law, and states that ratify them are required to incorporate the principles in national law and to ensure the implementation of the law. In addition, all ILO member states, regardless of ratification, are obliged to respect, promote and realise the principles contained in the core ILO Conventions, which address freedom of association and the right to collective bargaining, forced labour, child labour, discrimination and equal remuneration.

Informal work/er

Informal work refers to work performed in an employment relationship that is not recognised or protected under legal or regulatory frameworks. The employment relationship is therefore not subject to standard labour legislation, taxation, social protection or entitlement to certain employment benefits (eg, paid annual or sick leave). Informal work is found in a range of situations including the following: where the job or employee is undeclared (eg, the employment of illegal immigrants); where the job is casual or of short duration; where hours of work or wages are below a certain threshold; where the employer is an unregistered enterprise or a person in a household; or where the employee’s place of work is outside the premises of the employer’s enterprise.

Inspection

A visit made to a workplace by an authorised outside organisation or individual for the purpose of checking whether a code of labour practice is being applied. The essence of an inspection is that it is a discrete activity (rather than a continuous one) conducted in a thorough, critical manner.

In the context of the ETI the term has applied to visits made on behalf of the sourcing company by representatives of that company, by commercial auditing firms engaged by that company or jointly with other organisations such as NGOs or trade union organisations. This last kind of inspection is sometimes referred to as a multi-stakeholder inspection.

Monitoring

In the context of the workplace, monitoring refers to the surveillance of labour practices against a standard by a person (or persons) with a continuous or frequent presence in the workplace and unobstructed access to management and staff.

Examples: A manager with a designated monitoring function, continuously or frequently in the workplace in question; an employee in that workplace with a designated monitoring function (e.g. a union delegate); a government or local authority official who is assigned to a particular workplace for monitoring purposes and is continuously or frequently present in the workplace.

"Frequent", in this context, means being present in the workplace sufficiently often as to be able to detect variations from normal behaviour.

The essence of monitoring is continuous observation, as, for example, in a heart monitor or a TV monitor. In the context of a code of labour practice monitoring means observing workplaces covered by a code to determine whether the provisions of the code are being observed. This can be contrasted with the term “inspection” or “audit” which can describe activities that are not continuous or necessarily repeated.

North/ Northern

A loose term used to describe high-income countries in the Northern hemisphere, including countries in Europe and North America.

Participatory approaches

In the context of workplace auditing, this refers to approaches that create awareness of labour issues, and provide the opportunity for both workers and employers to: share their ideas and perceptions about labour issues, identify problems and priorities for action, and be actively involved in planning and implementing workplace improvements.

Social auditing and social reporting

An audit of a company's performance and impact across a range of social indicators, including industrial relations, community impact, social dialogue, stakeholder consultation, observance of labour standards and contribution to social infrastructure. These terms were developed in the context of Corporate Social Responsibility (see definition above) and are meant to cover a wider range of a company’s performance than respect for minimum labour standards in the supply chain. They cannot be used interchangeably with terms such as monitoring, inspection and verification as used in the context of ethical trading.

Sourcing company

A company that purchases product from another company, for either direct or indirect onward sale to the consumer.

South/Southern

A loose term used to describe low-income countries south of Europe and North America, including countries in Africa, Asia and Central and South America.

Stakeholder

As developed for the concept of Corporate Social Responsibility the term refers to any individual, community or organisation that affects or is affected by the operations of a company. Stakeholders may be internal (e.g. employees) or external (e.g. persons performing work who are not employees, also customers, suppliers, shareholders, financiers, the community). In the context of ethical trade, the workers whose working conditions are the subject of codes of labour practice are recognised as having the greatest “stake” in ethical trading.

Supplier

A company that sells product to a ‘sourcing company’ (see definition above). In many circumstances, the supplier will be involved in manufacturing or processing. N.B. A company that performs an intermediary role, eg, a company that imports fresh produce from packhouses in Africa and then sells this on to supermarkets, may be considered both as a ‘sourcing company’ and as a ‘supplier’.

Third party (audit, assessment, inspection, monitoring, verification etc)

An audit or inspection carried out by a party other than the supplier (first party) or the sourcing company (second party).

The term “third party audit” (or inspection, assessment etc) can be misleading because it implies an independence that may not exist. In actual practice third party audits are usually conducted by organisations in some form of agency relationship with one of the parties. A third party audit would be independent only where the person paying for the audit is not able to influence the results by virtue of the fact that they are paying for the audit. This would also imply the existence of rules governing the audit process that were widely accepted as unbiased and robust.

Trade union organisation

There are two kinds of trade union organisations - those that have workers as members and those that have trade unions as members. This term is used to refer to both kinds of organisations. The first kind of organisation usually has as its main purpose representation of employees including collective bargaining with employers and is most often organised on a national basis by industry or sector. Sometimes these organisations are organised by occupation or by enterprise instead of by industry or sector.

The other kind of organisation groups trade unions. Where this is done at the national level they are referred to as national trade union centres (the Trade Union Congress is the national trade union centre for the UK). At the international level, the Global Union Federations are industry or occupation-specific organisations whose membership is made up of national trade unions who represent workers in that industry or occupation in different countries.

Finally, there are international organisations which have national trade union centres and GUFs as affiliates. These include the International Confederation of Free Trade Unions (ICFTU), the European Trade Union Confederation (ETUC) and the Trade Union Advisory Committee to the OECD (TUAC).

Verification

In the context of codes of labour practice verification concerns the impartial examination and certification of claims made about the actual observance of code provisions by suppliers or of claims made about the activities that a company undertakes to give effect to its code. The essence of verification is about the credibility of public claims. Verification implies a re-examining of the evidence in order to establish that previously reported results are accurate.