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Overview of global developments and Office activities
concerning codes of conduct, social labelling and other
private sector initiatives addressing labour issues

Executive summary

1.  At the request of the Working Party on the Social Dimensions of the Liberalization of International Trade, the Office prepared an overview of global developments and Office activities concerning codes of conduct, social labelling programmes, and shareholder and other private sector initiatives. The initiatives at issue are distinguished by their non-governmental, or private, character and their focus on labour practices in the context of public demand for social accountability among business partners in globalized contractual or equity arrangements. Among the leaders of such initiatives are individual enterprises, non-governmental organizations, employers' and workers' organizations and various enterprise associations. In addition, voluntary enterprise initiatives with governments and inter-governmental organizations may involve operational programmes, guidelines for enterprise social policies or technical standards. The results of the proliferation of private sector initiatives are particularly critical for developing country enterprises, especially those of small and medium scale, which must find cost-effective ways to make the technical and managerial changes needed to obtain access to foreign markets or to sell to large international buyers who impose social requirements. The preparation of the overview included a review of more than 200 operational and model codes, a dozen social labelling programs, and secondary literature.

2.  The social concerns at the root of the phenomenon under review are a welcome development, yet a number of limitations appear inherent in the very nature of the initiatives. A lack of transparency and of participation by the supposed beneficiaries is attributable to their unilateral origin. Selectivity in the nature of the labour issues addressed as well as an absence of uniformity in the definition of principles underlying best practices result in a disparity between the goals of many initiatives and the universal principles underlying fundamental labour standards. This disparity is borne out in a review of the content of codes and labelling programs, described below. Further limitations in measuring the impact of labour-related goals result from a lack of standardization of labour criteria and methods of implementation, as well as the variability of the external and internal environments of the enterprises concerned. Such limitations have been exposed in a review of codes, labels, investment-fund screening programmes and shareholder initiatives focusing on labour practices.

3.  The selectivity apparent in the fundamental labour issues addressed in codes suggests that the content of the codes is largely decided in ad hoc negotiations between various interested parties with various levels of access to information and bargaining power. In the codes reviewed, references to various fundamental labour issues can be estimated as follows: freedom of association and collective bargaining (15 per cent of codes had relevant references); forced labour (25 per cent); wage levels (40 per cent); child labour (45 per cent); freedom from discrimination (two-thirds); and health and safety (three-quarters). Diversity in the definition of the principles in the codes arises from the fact that most of their authors tend either to create their own definitions of principles in codes or social labelling requirements ("self-definition") or, in some instances, refer to national law, international labour standards or industry practice. Disparity between self-definitions and international labour standards is particularly apparent, as demonstrated especially by the treatment of freedom of association. No more than one-third of the codes reviewed bore any reference to international labour standards generally or to the principles enshrined in specific ILO Conventions or Recommendations. A single code referred to the Tripartite Declaration on Multinational Enterprises and Social Policy, and another to the 1998 ILO Declaration on Fundamental Principles and Rights at Work.

4.  The wide variety of methods of implementation, including internal management systems and external monitoring or inspection, makes it virtually impossible to verify the credibility of the claims made. Similarly, the lack of standardization of criteria and procedures for implementation impede the ability to assess the concrete effects of such initiatives, or to compare the outcomes in different enterprises, systems of certification and labelling programmes. The content of labour provisions in codes naturally affects the type of criteria, and even procedures, used for internal monitoring or external inspection. Recognizing this, some independent inspection companies have requested assistance from the ILO in using international labour standards to set basic criteria for inspection and to advise on the content of codes to be the subject of inspection.

5.  Selectivity of focus and diversity of implementation are particularly notable in the operation of social labels, which are rooted largely in the concerns of consumers, the media and civil society. Social labelling programmes focusing on labour practices operate primarily in export markets involving retail trade and with market "niche" products, especially those bought and consumed publicly or associated with social identity (clothing, footwear, food) or discrete production processes (tea). As workers' organizations become more involved, some labelling programmes originally aimed only at non-labour issues have added labour issues to their agendas. Unlike the developing international system of standardization for eco-labels within the International Organization for Standardization (ISO), the market has been ineffective to date in developing a uniform and generally accepted set of standards which could help promote the benefits and prevent the risks of social labelling efforts, both for supposed beneficiaries such as child workers, and participating enterprises and other interested parties. The Appendix to the paper summarizes in tabular form the general features of a dozen social labelling programmes.

6.  A review of ILO activities discusses some relevant research and operational programmes. In addition, a great diversity marks the requests and demands made to the Office for various types of assistance, to which the Office has replied in a limited fashion, largely by providing information on ILO standards. These requests, among other circumstances, reflect an apparent need for an external source of reference and legitimacy, but the prospect of a privatized and impartial system for standardization of content and verification of the initiatives appears unlikely. In assessing the possible impact of the initiatives on ILO objectives, the study observes that, depending on the circumstances, private initiatives and international labour standards can operate both in parallel and in competition with one another in relation to governments and enterprises. In leaving to the Working Party an assessment of whether better complementarity can be envisaged between these initiatives and an inclusive process of social progress, the overview considers various possible ILO positions, which indeed may evolve gradually as experience develops. The positions range from a minimalist approach to facilitate further research and discussion; a role in providing support services to enterprises seeking to adopt initiatives or to adapt to initiatives; and a proactive position, which could include adopting a text recommending good practices in voluntary social initiatives, to a verification system for enterprises wishing to voluntarily subscribe to commitments based on such recommendations.

Geneva, 4 November 1998.