*{Responsible business conduct: an ICC approach [http://www.iccwbo.org/home/statements_rules/statements/2000/responsible_business_conduct.asp]

Group on Business in Society, 6 May 2000 

French version
       
Introduction}

As a consequence of changing social attitudes, concerns about possible impacts of globalization and increasing expectations of business' role in society, companies are increasingly making their values more explicit in the form of business principles, which set out how they carry out their business. The purpose of this paper is to provide practical advice to ICC  members on how to approach the issue of business principles, to situate individual company principles in the existing framework of generic business principles, government codes and new such initiatives, as well as broader societal values.

*partie=titre The rationale for business principles *partie=nil

The primary function of business is to create wealth and value for its customers, shareholders, employees and society at large. Today, this role of private enterprise in a market economy and the positive contribution of entrepreneurial initiative to environmental and social progress are increasingly recognized worldwide. Wealth generation and economic growth are the foundations of business's capacity to contribute effectively to improved environmental and social conditions.

Increasingly, companies have been making their values explicit in the form of business principles. They have also developed policies, implementation procedures and management systems to put these principles into effect. Such principles and practices are not a new phenomenon; many companies have had these in place for decades. However, the fact that in recent years more and more companies are making their business principles more explicit illustrates the importance companies attach to acting as responsible members of society.

Individual company principles are developed to suit the needs and circumstances of the particular company: its history and culture, the nature of its business and its business goals, geographical location(s), size and so on. The great variety of existing business principles is an indication that there cannot be a single, uniform, "model" set of principles applicable to all companies.

To be effective and relevant to an individual company's specific circumstances, business principles should be developed and implemented by the companies themselves. According to the United Nations Conference on Trade and Development (UNCTAD), there are currently 60,000 multinational enterprises in the world, which are faced with a range of very diverse conditions in individual countries in which they operate. Company principles must therefore be sufficiently flexible to reflect and cater to this diversity. A "one-size-fits-all" approach is incompatible with the great diversity that exists within business, although some of the generic business principles mentioned below provide a useful checklist of possible areas to cover.

Companies that do not have formal business principles often have unwritten values that guide their operations, and may have internal policies, monitoring, appraisal and reporting procedures.

Often, business principles themselves are supplemented by internal guidelines and procedures on specific issues such as environmental management, safety and occupational health, or ethics and integrity.

In the final analysis, it is the behaviour of the company that counts - not the existence of a formal set of business principles. So, whether or not a company decides to adopt and publish business principles, this should not be seen as the only indicator of its commitment to good corporate practices.

*partie=titre A framework for business principles *partie=nil

National and international law provide the essential framework within which business has to operate.

Companies also support, to varying degrees, general business codes produced by business and other organizations, and use these as benchmarks for their own business principles. Some of these are at the level of broad recommendations, for example:
the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises;
the International Labour Organisation (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy;
the Caux Principles (Caux Round Table); or
the Global Sullivan Principles. 

Others give more specific or sectoral guidance, for example:
ICC Rules of Conduct on Extortion and Bribery in International Business Transactions; 
the ICC Business Charter for Sustainable Development; 
various ICC marketing and advertising "codes";
the Responsible Care programme (chemical industry); or
the Coalition for Environmentally Responsible Economics (Ceres) Principles. 

There are many more.
Both these general and specific/sectoral business principles can serve as useful benchmarks for companies - particularly small- and medium-size companies - in the development of their own individual business principles. Codes and principles should be open to periodic revision to take into account the increasing pace of change, but should also be stable and reliable in order to maintain confidence and certainty for business over the long-term.

Various other principles, guidelines or codes have been produced for business by governments, intergovernmental agencies and non-governmental organizations (NGOs), including for example:
a draft code of conduct for European enterprises operating in developing countries (European Parliament); 
Inter-Faith Centre on Corporate Responsibility/Ecumenical Council for Corporate Responsibility/Taskforce on the Churches and Corporate Responsibility (ICCR/ECCR/TCCR) Principles for Global Corporate Responsibility: 
Benchmarks for measuring business performance; or 
Amnesty International's Human Rights Guidelines for Companies. 

At the last count there were more than 40 such initiatives - existing or in preparation.

As well as these initiatives directed specifically at business, there are various UN declarations of core values which, while primarily directed towards governments, are also relevant to business. These include:
the Universal Declaration of Human Rights (1948) (directed to 'all organs of society'); 
the ILO Declaration on Fundamental Principles and Rights at Work (1998); and 
the Rio Declaration on Sustainable Development (1992). 

These three declarations were specified by Kofi Annan in his speech at Davos in January 1999, laying down a challenge to business to adopt this framework of universally agreed values and principles in the areas of human rights, labour standards and environmental protection as a "Global Compact for the 21st Century". ICC has welcomed the challenge of the UN Secretary General, and various initiatives are underway between the UN, ICC and other business organizations to demonstrate how companies in their individual corporate practices are contributing to these values.

ICC recognizes the attention given by the United Nations to human rights. Although the establishment of the legal framework for protecting human rights and its enforcement is a task for governments, business has an interest in encouraging the improvement of social conditions, which are an important factor for stable development, and in providing an example of good human rights practices.

*partie=titre The primacy of individual company principles *partie=nil

As far as an individual company is concerned, by far the most important considerations are whether to make its business principles explicit, what these should contain and what arrangements should be put in place to ensure adherence to them. The possible legal implications of individual company principles should also be considered. The principles and associated arrangements that are developed are likely to be unique to that company, although in determining these there is much to be learned from the good practice of other companies.

In recent years there has been substantial growth in the number of principles, guidelines or codes produced for business by governmental and non-governmental organizations, with companies coming under increasing pressure to endorse these various initiatives. This has led more companies to think through whether they should develop their own business principles, what they should contain and to which of the external codes it is appropriate to lend their support.

Different companies look to different benchmarks to fulfil this role, depending on their particular circumstances (for example, industry sector, size of company, geographical location). Companies often look first to principles produced by business organizations such as ICC, or with the involvement of business - such as the OECD Guidelines for Multinational Enterprises or the Global Sullivan Principles.

*partie=titre A voluntary approach *partie=nil

How then should a company approach the issue of whether to develop its own business principles and how to respond to pressure to support or adopt external codes of conduct? Rather than reacting to outside pressures, a company's decision to adopt its own business principles should be motivated by the desire to express the values that guide its approach to doing business, and to disseminate these internally as well as externally if the latter is deemed appropriate. These decisions must rest with the company.

Business principles normally set out what companies see as their responsibilities to employees, shareholders, customers, business partners and other groups in society. Business principles commonly include a statement of mission, values and operating principles. Some contain more detailed statements of policy while some companies prepare separate materials on policies, management systems, implementation and monitoring procedures. The process of developing, adopting and implementing  individual business principles should be met with wide support within a company, and be based on broad internal consultation and communication. These are decisions for the individual company. When adopting business principles, priority consideration should be given to the development, implementation and monitoring of a company's own business principles. 

Government-mandated or other external codes are unlikely to be a viable alternative to voluntary business principles developed by the company itself, although as illustrated above, these may have significant value as external benchmarks. Some companies choose to express public support for one or more of these external codes. It is for an individual company or industry sector to decide what the most useful benchmark codes are and to develop their own understanding of how business principles relate to external codes/guidelines, the framework of UN values and societal expectations.

The method and extent of internal monitoring of compliance with its business principles, and of external reporting of performance, also have to be a matter for the company itself. Those outside the company will make their own judgments on the basis of corporate communications and their perception of the company's behaviour. All companies will, to some extent, have to take account of wider societal expectations - not least of their customers.

External verification of business processes and performance other than financial performance - in areas such as health, safety, environmental or more recently social performance - is still a relatively new practice. While for some sectors, external third party verification may be considered as necessary to satisfy accountability demands on the part of consumers and business partners, external verification should be left to the choice of individual companies. Furthermore, companies should not be held accountable for the overall behaviour of separate and unrelated companies that are contractors and subcontractors in increasingly complex supply chains.

The way to ensure a greater business contribution to environmental and social progress is not through more - and more prescriptive - codes and regulations. Business principles, be they formal or informal, play an important role in bridging cultural diversity within companies and in enhancing awareness of societal values and concerns. This is primarily a matter of persuasion and peer pressure rather than prescription. Business considers that demands by potentially unaccountable external groups seeking to impose codes and assert the right to independently audit companies' compliance are counterproductive. The diversity of voluntary business initiatives and principles is both a resource and a source of innovation for addressing societal challenges. Their voluntary nature enables companies to find solutions and make improvements that regulations and command and control approaches could not have set in motion.

*{Annex

Selected sources of background information on business principles, guidelines and codes

A working party of the Trade Committee of the Organization for Economic Co-operation and Development (OECD) has produced an extensive inventory of codes of corporate conduct. Entitled "Codes of corporate conduct: an inventory" (TD/TC/WP(98)74/FINAL, 99 pages), the paper presents an overview of codes of corporate conduct based on information submitted by OECD member governments and non-governmental sources. This inventory comprises 233 codes, the majority of which were issued by individual companies. The document is available in pdf format on the OECD website at www.oecd.org. The OECD Guidelines for Multinational Enterprises are also available on the OECD website.

The Working Group on Global Business Ethics Principles of the Conference Board has produced a report entitled "Global Corporate Ethics Practices: A Developing Consensus" (Research Report 1243-99-RR, 48 pages). This report analyzes the trends and procedures being used to formulate and implement global business ethics principles, and how the formulation of these codes has become a more dynamic and inclusive process. This report, based on meetings in North America, Europe, Asia, and Latin America, discusses: (1) trends pushing in the direction of emerging consensus regarding global business ethics principles; (2) procedures used by companies to formulate and implement global business conduct principles; and (3) company efforts to monitor and reinforce global business ethics principles. The report is available for sale through the Conference Board website at www.conference-board.org.

A selection of company principles can be found at the following corporate websites:

www.bpamoco.com
www.dow.com
www.kesko.fi
www.inggroup.com
www.nestle.com
www.pepsico.com
www.pg.com
www.sgsgroup.com
www.shell.com
www.unilever.com}