International Conference on EntrepreneurshipRiga, Latvia, 24 March 1999
Turiba School of Business
Managing for the 3rd Millennium:
The Social Accountability Challenge

Miguel Torres Curado
University of Salford, Dept. of Surveying, England
Instituto Superior Técnico, Dept. de Engenharia Civil, Portugal

Aguinaldo dos Santos
C.Eng., MSc
University of Salford, Dept. of Surveying, England
The Built and Human Environment Research Institute

 During the last decades the global business environment suffered the effects of successive waves of management requirements. Companies have adapted, or are trying to adapt, to quality and environmental management standards and to occupational health and safety legislation and standards. The recent publication of the standard SA8000 on "Social Accountability" is a harbinger of events to come.

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, SA8000

"Injustice anywhere is a threat to justice everywhere."

Martin Luther King Jr., 1963

1. Introduction

About 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:

  • OECD Guidelines for Multinational Enterprises;
  • The Caux Principles
  • Principles for Corporate Global Responsibility (UK, Canada and US);
  • Ethical Trade Initiative (UK);
  • The International Code of Ethics for Canadian Business;
  • Corporate Code of Responsibility for Transnational Companies (New Zealand).
However these are not standards against which companies can be gauged. Filling this gap SA8000, or "Social Accountability 8000", was published in October 1997. As a complement a guidance document meant to aid in the interpretation and implementation of SA8000 has also be drafted.

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.


3. What's Covered in SA8000?

SA8000 has nominally been developed to advance the cause of socially responsible business. It is a four part document.The first three parts deal with scope, interpretation and definitions. The fourth part enumerates minimum requirements concerning child labour, forced labour, health and safety, freedom of association and collective bargaining, discrimination, disciplinary practices, working hours and compensation, as well as the management systems to achieve these requirements. These requirements are summarised below.

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.

    3.1 Child Labour

    Child labour is banned, allowing only for the exceptions included in ILO convention 138 and recommendation 146. Requirements are established for minimum age (15), work hours, young workers (those under 18), school attendance, workplace conditions and remediation of children.

    Figure 1: India - Child Labour (Construction)

    3.2 Forced Labour

    The use or support of involuntary, or under menace of penalty labour, is not allowed - as established in ILO conventions 29 and 105. The frequent practice of controlling workers by sequestering their documents (e.g. Passports, work permits) is also forbidden. As with previous documents, very little useful detail is provided for this requirement. The issue of slave labour and slave trade is not explicitly mentioned.

    Figure 2: Mauritania - Slave Worker

    3.3 Occupational Health & Safety

    The standard imposes the appointment of a senior management representative for the H&S of all personnel. This representative shall be accountable for the implementation of the H&S clauses of the standard.

    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


    3.4 Freedom of Association and Right to Collective Bargaining

    The right of the personnel to create and become members of trade unions of their choice must be respected by the employer, according to ILO convention 87. The company must also allow for collective bargaining.

    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


    3.5 Discrimination

    Following ILO conventions 100 and 111, no discrimination in hiring, compensation, access to training, promotion, termination, retirement, is permitted on the basis of:
    1. Race;
    2. Caste;
    3. National origin;
    4. Religion;
    5. Disability;
    6. Gender;
    7. Sexual orientation;
    8. Union membership;
    9. Political affiliation.
    The employer cannot interfere in the exercise of the rights of personnel to observe tenets or practices, or to meet needs relating to any of the previously listed categories.

    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.

    3.6 Disciplinary Practices

    Companies abiding to SA8000 must not use or support the use of corporal punishment, mental or physical coercion as well as verbal abuse. Once again the requirement is quite vague and subject to multiple interpretations. Areas such as mental and verbal abuse need to be more detailed, in order to be auditable.

    Many other unfair disciplinary practices need to be addressed (e.g. deprivation of work, lowering of standards in working conditions, isolation, etc.).

    Figure 5: Brunei - Caning on a Dummy.


    3.7 Working Hours

    Compliance with applicable laws and industry standards is demanded. Working time must not be more than 48 hours per week (on a regular basis) and never in excess of 60 hours per week.

    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.

    3.8 Compensation

    The workers’ payment shall not only meet legal and industry minima, but also meet basic needs plus some discretionary income.No disciplinary deductions are allowed. Regular and detailed information on wages and benefits must be supplied to the workers.

    No false apprenticeship schemes or other attempts to by-pass labour laws, social security legislation and regulations are permitted.

    3.9 Management Systems

    Assuming a posture similar to ISO9001, based on corporate responsibility, control, and continuous improvement, SA8000 requires top management to act in the following areas:
    1. Policy for social accountability;
    2. Management review;
    3. Company representatives;
    4. Planning and implementation;
    5. Control of suppliers;
    6. Concerns and corrective actions;
    7. Outside communication;
    8. Access for verification;
    9. Records.

4. The Arguments for SA8000 Certification

Both organisations and the public are confronted with a challenge when wanting to procure from socially responsible suppliers. Before SA8000 there was no global norm against which companies could be assessed.

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.

5. Social Ethics Vs. Competitiveness

    5.1 The Costs of SA8000 for the Company

    The costs of implementing SA8000 requirements and obtaining certification will be closely related to the dimension and complexity of the company, the type and location of the site as well as to how much the company has previously achieved in the social accountability field. The costs will fall in four main categories:
    1. Cost of management time used to evaluate the current situation and develop system policies, procedures, controls and records. Costs incurred if the company chooses to use external consultancy and training services.
    2. Cost of remedial actions taken in order to achieve conformance. For example, if audits reveal inadequate safety conditions the cost of safety equipment, loss of production time, or costs from other types of corrective actions.
    3. Cost of third-party certification audits and regular monitoring audits. As previously experienced with ISO9000 and ISO14000, certification costs may represent a significant expenditure for smaller companies.
    4. Cost of personnel involved in the current running, maintenance an upgrading of the system (e.g. the cost of the representative for health and safety).

    5.2 Challenging the Trade-offs Paradigm

    The sources of competitive advantage change continuously and very often a particular performance criterion evolves from being a winning criterion to become a qualifying criterion, vital for a company to remain in the market. Traditionally, cost, quality, delivery and flexibility have been used as the most basic and common performance criteria (Hill, 1992; Skinner, 1992). Additionally there are a number of other alternative performance criteria such as speed, consistency, acuity, agility, innovativeness (Stalk, Evans et Shulman, 1992), diversity, speed of production changes (De Meyer, 1992) uniqueness (Fleury, 1995), safety and morale. However, so far social ethics had not been seriously considered as a source competitive advantage in the business and academic community.

    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.

6. Questions about SA8000

The recent and present mixed experiences on the application of standards like ISO9001 should tame any temptation for euphoria about an initiative like SA8000. Sobriety must prevail. We are still at the beginning of the process, and already a number of questions arise. Among the most important are:

    6.1 Ethics on Evaluating Ethics

    First of all the way the standards was drafted. SA8000 was presented as a consensual standard, however unlike with the ISO standards, almost no public enquiry was done and scarce information was available public during the drafting process.

    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.

    6.2 The Global Factor

    SA8000 can be an effective instrument to drive improvements in the social ethics of companies’ worldwide. Indeed, with that in place, the customers will be able to exercise real power on the way companies run their businesses. However, there is a great incongruity between setting a list of global ethical practices and working at the same time with dainty global structures. The recent financial turmoil in Asia, Russia and Brazil, for instance, showed how inter-dependent our economies are becoming and how fragile the global financial structure is. Thus, while there is no such a thing as a global coherent structure and strategy, there will be always variations in the way companies perform in the social aspects.

    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:

Table 1 - Problems on the Generalisation of Theory XY (Hofstede, 1994)

  • work is good for people
  • work is necessary, but not a goal in itself
  • people’s capacities should me maximally utilised
  • people should find their rightful place, in peace and harmony with their environment
  • there are ‘organisational objectives’ that exist apart from people
  • absolute objectives exit only with God. In the world persons in authority positions represent God, so their objective should be followed
  • people in organisations behave as unattached individuals
  • people behave as members of a family and/or group. Those who do not are rejected by society.
  • 7. Does Your company Need SA8000?

    In the present business environment the issue is not so much whether a company should adopt ethical policies, but how it can be done effectively. As with other management standards before this, consultants and registrars are to be seen promoting SA8000 as the elixir that will bring about the solution of a company’s Social Accountability issues. But is SA8000 certification the best way to approach these issues?

    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.

    8. The Wider Picture: Sustainable Development

    Corporate social concerns should not be seen as an isolated effort, but integrated in the framework of sustainable development.

    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

    Managing for sustainability must integrate efforts in these three areas. Synergies are to be obtained from a choice of corporate strategy that focuses on the core questions of sustainability and does not waste resources with fragmental actions aiming at pleasing particular stakeholders.

    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.

    9. Final Remarks

    Social ethics is likely to become a winning performance criterion in the most competitive markets. Whether Social Accountability management becomes another flavour of the month remains to be seen. After all, the recent history has presented a constant switch of management emphasis through time, as it is illustrated in the Figure 7. Certainly, in order to keep in touch with current knowledge and because of competition, many companies will engage in the adventure of testing these new ideas. Eventually, if proved successful, they may even become the new imperative topic in the agenda of companies or, in the case of failure, they may be buried in the past as another useless buzzword.

    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.