|Managing for the 3rd Millennium:
The Social Accountability Challenge
Miguel Torres Curado
Aguinaldo dos Santos
Social and ethical questions are growing in importance and will have to be adequately tackled by companies in the years to come. For companies social and ethical accounting are emerging as basic instruments to answer to demands of improved transparency and accountability from various stakeholders. As a result of this trend, at present there are already several organisations accredited to audit facilities for conformance to SA8000 as well as a growing number of SA8000 third-party certified companies.
This is the moment to both increase awareness of the issues raised by
SA8000 and discuss the attitude towards yet another movement towards certification,
at the light of the mixed experiences with standards such as the ISO9000
and ISO14000 series.
Keywords: Social Accountability, Ethics, Standards, Certification,
"Injustice anywhere is a threat to justice everywhere."
1. IntroductionAbout 300.000 children work illegally in the United Sates, some linked to prestigious companies like Heinz, J.C.Penny, Sears, Wal-Mart or Campbell. The list of violations is long, children (mostly white) are to be found working in construction sites in New York or harvesting grapes in California. U.S. industries profit from the work of children in savings of 137 million Euros each year. These data were revealed in a study carried by The Associated Press (AP et Kruse, 1998), which sent shock waves across corporate America. Similar problems can also be found in our side of the Atlantic, ranging from Lisbon to Vladivostok (vide e.g. ILO, 1998).
Child labour is just one example of unethical company behaviour, others abound. Across the western world such problems were often discarded as afflictions of 3rd world countries, but a new conscience of ethical business practices is emerging which recognises the extent of the existing problems.
Nowadays, with an ever increasing frequency, companies are coming under scrutiny from governments, shareholders, customers, trade unions, human-rights groups, and others to prove that their activities are conducted in a way which is socially acceptable to those who may be touched by it.
The notion of ‘social accountability’ is not a new one. International organisations, trade unions, human-rights lobbyists and regulators have long strove to eliminate the inequities of the workplace. Child labour and prison/forced labour continue to be pivotal issues in many areas of the world. Most of us will buy goods manufactured under conditions that we would never admit. Illegal labour and discriminatory practices are still usual, even in the ‘developed world’.
Several initiatives have been developed to tackle the issue of ethical business behaviour, among the most relevant are:
Similarly to ISO9000 and ISO14000 (the international quality and environmental management systems series of standards, respectively) SA8000 is formulated to allow audit and certification by a third-party certification body. However, and unlike the ISO9000 and ISO 14000 series, this new standard embraces not only system requirements but also tangible performance requirements.
A scheme for SA8000 accreditation and certification has been set up, to provide a corporate focused solution and, by making use of independent auditors, try to achieve the credibility absent from some other initiatives in this field. The SA8000 principles intend to have a supply chain effect, being applied internally within a company but also used as a tool to manage suppliers.
In an age dominated by the media, public image has become
a pivotal concern. In such a context for many companies just behaving ethically
is no longer enough. SA8000 certification aims at providing external evidence
that a company is "doing the right things right" (SGS-ICS, 1998).
2. Where Does SA8000 Come From?SA8000 results from a 4 year work launched by the Council on Economic Priorities Accreditation Agency (CEPPA), an agency of the Council on Economic Priorities (CEP). The CEP is a non-governmental organisation in the field of corporate social responsibility, it was established in 1969 and is based in New York.
The advisory board of the CEPPA has representatives from a broad spectrum of organisations, including manufacturing and service companies, financial institutions, management services companies, customer and supplier corporations, other non-governmental organisations, trade unions and academia. Among those contributing to the development of the standard were representatives from Toys "R" Us, Avon Products, OTTO-Versand, KPMG, Body Shop, Amnesty International, National Child Labour Committee, Sainsbury’s, University of Texas, Belgian Workers Federation, Abrinq, International Textile Garment and Leather Workers Federation, Eileen Fisher, Grupo M.S.A., Amalgamated Bank, Reebok and SGS-ICS.
The development of SA8000 was not a governmental or sectorial scheme, and allegedly efforts were made for it not to be dominated by any individual interest group, however it is evident that the advisory board is largely dominated by representatives from the business and financial milieu.
The goal of the CEPPA was to publish an auditable international standard for socially responsible business. The standard reflects the conventions of the International Labour Organisation (notably the seven core conventions), the Universal Declaration of Human Rights and the UN Convention on the Rights of the Child. The standard also demands compliance with national and other applicable laws, regulations and other requirements to which the company subscribes.
This standard is meant to be applied across the north-south world divide, irrespective of the organisations size, ownership (public, private, etc.) or whether it is profit or not-for-profit.
SA8000 aims at encouraging companies and other organisations to implement, maintain and improve socially correct workplace practices in all the domains they can control or affect. A significant number of organisations have introduced ‘rules of conduct’, but in most cases they are rather subjective and difficult to audit. SA8000 is inspired on a ISO9001 management system and therefore is designed for auditability.
The CEPAA also has the rôle of accreditation body, thus providing accreditation to third-party registrars.At the time of writing three of the largest registrars globally are already accredited: SGS-ICS, DNV and BVQI. The first ever SA8000 certificate was presented in June 1998 to Avon Products, a number of other companies have followed suit. On the consultancy front the reaction was fast, and now a number of consultancy companies are offering SA8000 related services.
Nevertheless, the standard’s requirements say nothing about the quality of the product or service, that is clearly outside their scope. The product or service may be mediocre, but if it was produced in an SA8000-certified site, basic rules of working conditions have been honoured.
SA8000 has requirements regarding healthy and safe working
environment; risk detection and prevention of accidents and injury; regular
H&S training; clean, safe and sanitary support facilities as well as
access to potable water.
Figure 3: Portugal - Accident in Construction Site
In those countries where local laws affect these rights, the company should attempt to find ‘parallel means’ to enforce them.
Following ILO convention 135 the standard protects the personnel representatives, by allowing them access to fellow workers and preventing their discrimination.
As some other previous documents, the standard is totally
silent about the right of the workers to strike.
Figure 4: South Korea - Demonstration for Union Rights
The occurrence of behaviour, which is deemed sexually coercive, threatening, abusive or exploitative, shall not be allowed by the company.
It should be noted that room is left here for discrimination
to occur in terms of age, language, marital status, etc.
Many other unfair disciplinary practices need to be addressed
(e.g. deprivation of work, lowering of standards in working conditions,
Figure 5: Brunei - Caning on a Dummy.
Overtime shall occur only on an exceptional and voluntary basis and be remunerated at a premium rate. Workers shall have at least one day of rest in every seven.
No false apprenticeship schemes or other attempts to by-pass labour laws, social security legislation and regulations are permitted.
SA8000 certification theoretically provides assurance that the goods or services have been produced and delivered in accordance with a commonly accepted and socially acceptable set of values.
However, whatever the phrasing used, the bottom line is that SA8000 certification is being marketed as an image and reputation product, for numerous industries with a somehow tarnished image. Therefore the first benefit to be considered by companies is in terms of improved public perception of their activities.
Naturally, for the socially responsible organisations, SA8000 will allow them to create a demarcation from their peers, who do not meet the standard. It is expected that entrenched practices such as using sweatshop and child labour should be reduced following of SA8000 implementation.
SA8000 is an instrument for closing the gap between business and the evolving values of society (albeit the values of the Occidental society). Through the auditing of human matters, instead of financial or quality issues, SA8000 certification strives to materialise the concept of social accountability.
Today companies are under ever increasing coercion from their stakeholders to pledge their efforts to socially correct and legal workplace and acquisition practices. The velocity of media impact means that businesses need to be more flexible and transparent, as problems in one site or with one supplier may derive severe consequences for the whole company. Even the most socially responsible companies may feel the need to publicly demonstrate commitment to basic human values in the workplace after freak events are amplified out of proportion by the media.
SA8000, and the third-party certification scheme associated
to the standard, intend to relieve customer organisations from having to
design individual supplier requirements or regularly audit their suppliers
in the area of social accountability. Those behind the SA8000 certification
scheme expect that these benefits represent significant cost savings, outweighing
the cost associated with certification.
The inclusion of social ethics in the strategic thinking of managers faces the barrier of the trade-off paradigm. The trade-off paradigm can be defined as the notion of rigid compromise relationships between competitive variables. Within the trade-off paradigm the achievement of good performance in social ethics can only be obtained at the expense of performance on one or more other competitive variables. Consequently, managers are used to believe that improvements in social ethics are likely to increase costs or reduce speed or reduce flexibility or, in certain situations, impact negatively on the quality of the products and services.
Despite the intuitive appeal of this way of thinking, the recent history has shown the fall of the trade-off notion. High quality products are produced nowadays while costs are held constant or reduced. The validity of the trade-off notion has been investigated by Mapes, New et Szwejczewski (1997) using a database of 782 UK companies, gathered from the Best Factory Award. One of their main findings was that not only there is an absence of trade-offs but also good performance on one measure seems to lead to good performance in other measures. However, at the present moment there are no scientific studies that allow us to generalise the same findings to investments in implementing, maintaining and improving social ethics in organisations.
Surely, the cost of having social ethics is not negligible and it affects in certain degree the other aspects of the business performance. Nevertheless, the fall of trade-offs in the world-class companies is a clear reminder of the enormous creativity that workers and managers have when subject to challenging situations. The continuously increasing competition and the scarcity of resources, simultaneously pushed companies (including some in Third World countries) towards more lean, agile, effective and flexible production systems (Shonberger, 1990). Now the challenge is for companies to perform well in all these aspects and still be ethically responsible, as it is already starting to happen with the environmental aspects.
The ethical question must also be raised in the application of the standard it self: Should a company be audited by another company, regarding its ethical performance? To aggravate things, so far no standard has been published regarding auditing practices.
The auditing system may disguise infractions and thus contribute to deceive stakeholders. To achieve certification, a company does not need to fulfil every requirement immediately. Instead, each site is allowed to improve practices and document progress in solving problems. The progress made by the company is monitored not by a totally independent body, but by service firms paid by the companies themselves. Pressure groups trusted by the workers may, but need not, be heard by the registrar. Work made at home is outside the scope of auditing. Moreover, should breaches be found, they may remain confidential. This may be used to mislead consumers, transforming the SA8000 in no more than a whitewash.
Further, at the crux of social accounting there is the issue of what ‘ethical business’ means. Frequently it is interpreted in terms of Occidental values, which may not be suitable globally. E.g. in some developing countries, sending home under-age workers may simply deprive a generation of professional training, since no formal education systems are available.
Finally, by definition social accountability cannot be limited to the workers, it comprises also the communities affected by a company’s activity. The specific requirements of the standard are worker focused and no significant dispositions regarding the community are listed, leaving room for gross ethical malpractice to happen.
Particularly small local companies that give high regard to their social responsibility may face the risk of marginalisation from world markets when confronted with companies working in more ethical friendly environments. Truly, SA8000 can be a powerful drive for improvement but it is unlikely that those companies will be able to influence larger structural variables such as government policies in the short term. Thus, while good ethical practices may be set globally, in some cases SA8000 would be more useful in the short term to promote continuous improvement towards the global ethical vision, rather than its full achievement.
Furthermore, the human related standards present in SA8000 are far more complex than the ones present in ISO9000. Indeed, global cultural differences strongly affect social ethics and, not surprisingly, it brings controversy. Standards and theories that have been written in individualistic Occidental cultures may make little sense or be counter productive in some Eastern or collectivist countries. Hofstede (1994) offers a good example in this respect, when comparing the cultural environment where Theory XY was developed and the correspondent cultural environment found in some Eastern cultures:
Certainly that if public image is a primary concern, SA8000 may prove very relevant to a company. In different circumstances companies may opt for developing their own codes of conduct, adopt sectorial codes of conduct or choose to follow initiatives similar to those listed in the introductory section of this paper.
Still, we are at a very incipient stage in the development
of Social Accountability management practices, new developments are happening
on a daily basis and it is difficult to forecast the way forward, so there
is even the risk of SA8000 certification becoming counter-productive if
the standard falls into disrepute.
Widespread concern with sustainability is a recent phenomenon. The trend began in Germany in the 1930s with innovative laws for environmental protection. The post-war economic expansion as well as the ideology behind the III Reich relegated that effort to the historical archives. Then, in the early 1960s an awareness emerged of the environmental crisis the world was facing.
The next ten years were marked by a general attitude that regarded growth and development as incompatible with environmental conservation (vide e.g. Ehrlich et al., 1970). After the first U.N. Earth Summit a gradual shift occurred, and in the 1980s the dark shadow of ‘zero growth’ was removed by the dawn of ‘sustainable development’. This concept was defined in the Brundtland Report (Brundtland, 1991) as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The second Earth Summit consecrated sustainable development in the "Rio Declaration on Environment and Development" and in "Agenda 21".
In this closing years of the XX century sustainable development has become generally accepted as composed by a holy trinity of environmental protection, economic development and social development.
Figure 6: Sustainable Development - the Holy Trinity
Often, the need to be publicly seen taking important actions
in one of the areas lead to the creation of isolated and disconnected systems
that become heavy burdens for the company.
Figure 7: Emphasis of Management Through Recent History
Although some consultants will persuade almost any audience that standards are God’s gift to management plenty of other approaches are available. Solutions for Social Accountability management should not be taken at face value.
The relevance of each approach cannot be judged per
se, but only within the context of each company and its environment.
Each approach may be valid and may have a role in the implementation of
appropriate social accountability practices, as long as the limitations
and repercussions of reductionist attitudes are fully recognised. However,
sometimes the approach followed may suit better the interests of the consultancy
practice selling it rather than the company where it is actually implemented.