Characteristics of codes of conduct

The number of codes of conduct has increased immensly during the last two decades and several different sectors are now governed by codes – especially the sectors of energy, minerals and mining, forestry, chemicals, textiles, apparel, footwear, sporting goods, and coffee and cocoa (Vogel 2008:262). This has led to a great development in the characteristics and content of codes of conduct (Pearson & Seyfang 2001:55). In order to analyse strenghts and weaknesses of DONG‟s code of conduct, I find it relevant to explore characteristics of codes set forth in the theory as these provide strengths and weaknesses as well.

4.4.1 Issues addressed (and not) in codes of conduct

Codes of conduct may consist of general principles of good business conduct or more specific rules depending on the purpose of the codes. Codes related to labour standards are often based on the International Labour Organisation‟s (ILO)¹² core standards (O‟Rourke 2003:7, Pearson &

Seyfang 2001:61). Issues highlighted in the media are almost always included, such as child labor/minimum age of workers (Pearson & Seyfang 2001:55-56, Haufler 2001:76-77, Vogel 2008:269). Traditional labour concerns are becoming more commonplace: freedom of association, collective bargaining, health and safety, no forced labour, and no discrimination, while independent monitoring, information on standards, and no physical abuse receive less attention (Pearson & Seyfang 2001:62-63). Proper employment contracts, no sexual harassment, and non-wage benefits legally due receive minor attention, whereas other non-wage benefits, reproductive rights, indigenous peoples‟ rights, and topics of particular relevance to women are rarely mentioned (ibid, Haufler 2001:76-77, Vogel 2008:269). According to Pearson and Seyfang, this difference in the degree of attention is based on the fact that codes are adopted as a response to NGO campaigns and aim at developed country stakeholders rather than tackling the problems faced by workers in the supply chain (2001:56). This means that companies adopt codes as a defense mechanism against adverse publicity (ibid:64). Furthermore, Pearson and Seyfang argue that issues most likely to be included in codes instigated by NGOs are independent monitoring and payment of minimum wages and/or living wages (ibid), while workers‟ organisations prioritise no discrimination, equal remuneration, health and safety,

12The ILO is the international organisation responsible for drawing up and overseeing international labour standards which are set in Conventions and Recommendations. The ILO has 183 Member States. (www.ilo.org)

reproductive rights, provision of information on standards, no physical abuse, non-wage benefits, and health service provision (ibid). Both NGOs and workers‟ organisations protect the right to freedom of association, the right to organise, and collective bargaining (ibid). Some codes go beyond the ILO conventions and include security of proper employment contracts (Pearson &

Seyfang 2001:64).

4.4.2 Four different code of conduct strategies

According to Bondy et al. codes of conduct are often developed by top-management or a company representative with little or no external input (2008:437). On the contrary, van Tulder et al. divide codes of conduct into four different categories where external input varies from no external input to involving stakeholders (2009). Codes are viewed as an operationalisation of CSR strategies (ibid:399); therefore, four different CSR strategies each forms four different codes of conduct strategies. This is relevant for this thesis in order to analyse which code of conduct strategy DONG uses because this may influence the effect. Figure 4 provides an overview of the four different CSR and code of conduct strategies:

Figure 4: Four different code of conduct strategies Adopted from van Tulder et al. 2009 and modified

As figure 4 shows, the four CSR strategies forms each their type of code of conduct strategy.

Van Tulder et al. classify codes by their specificity and compliance (2009:402). Specificity indicates how elaborated a code is on several dimensions; how many issues it covers, how focused it is, the extent to which it refers to international standards and guidelines, and to what

In-active Re-active Active Pro-active

Reflects the classical notion of CSR based on Friedman; that companies only have a responsibility to generate profit, in other words corporate self responsibility. Companies look inward (inside-in) and are concerned with

„doing things right‟

according to the law.

Focus is on the end result.

Monitors the environment and manage primary stakeholders to keep mounting issues in check, i.e. corporate social responsiveness with an outside-in orientation.

Motivation of CSR is based on negative duties wherein companies are compelled to conform to informal stakeholder-defined norms of appropriate behaviour which they cannot be held legally liable for if violated.

Inspired by ethical values and positive duties that are realized socially responsible regardless of actual or potential stakeholder pressures.

Strongly inside-out oriented set on doing „the right thing‟, i.e. corporate social responsibility.

Involves external stakeholders when an issue arises. Business practices are interactive with an „inside-out-outside-in‟ orientation.

Focus on long-term sustainability for company, sector, and supply chain, i.e.

corporate societal responsibility, and long-term relationships.

„what is required‟

Economic responsibility Narrow CSR

„what is desired‟

Social responsibility Broad CSR

In-active Re-active Active Pro-active

Internal codes that imply low specificity and low compliance measures, thus the implementation likelihood is low.

Specific supplier codes with more specificity, but rather vague compliance.

Implementation likelihood is medium to low.

General supplier codes which are much more detailed in compliance mechanisms even though the specificity does not need to be high since it may be coupled with adherence to more general standards, like

international standards, or a limited number of issues.

Implementation likelihood is medium to high.

Joint codification initiatives based on dialogues to operationalise chain responsibilities.

Specificity and

compliance is high with the highest

implementation likelihood.

Chain liability Chain responsibility

Code of conduct strategy CSR Strategy

extent aspects of the code are measured (ibid). Compliance is generally enhanced by clear monitoring systems in place combined with a more independent position of the monitoring agency and the possibility of these organisations to formulate and implement sanctions (ibid).

The degree of specificity and compliance influences implementation likelihood (ibid:399).

The first two code strategies, in-active and re-active, are formed due to a narrow CSR strategy which focuses on Friedman‟s perspective of economic responsibility which implies low specificity and low compliance of the code strategy, although the second has more specificity than the first. These two strategies represents a liability regarding supply chain management, and interaction with stakeholders is low and usually one of confrontation and/or evasion (ibid:402).

The next two strategies are formed in the light of a broad CSR strategy based on Freeman‟s stakeholder perspective, which focuses on social responsibility. An active code strategy is much more detailed in compliance mechanisms, but specificity does not need to be high. Pro-active code strategy requires active involvement with stakeholders, as they try to operationalise chain responsibilities much more; consequently, pro-active codes score high on both specificity and compliance and have the highest implementation likelihood (ibid). In other words, in order to enhance code of conduct effectiveness companies must implement a pro-active CSR strategy that forms a pro-active code of conduct strategy due to involvement of external stakeholders.

4.4.3 In sum

Although codes of conduct vary greatly in content, initiatives highlighted in the media are most often included. Codes developed under influence of NGOs often include issues companies so far have avoided while initiatives important for workers are still widely ignored. Code characteristics indicate whether the code was established for risk-aversive reasons or to actually improve social responsible behaviour in the supply chain. Therefore, the code strategy, formed by the CSR strategy, is important because the in-active and re-active strategy focus on companies‟ self-interest wherein the supply chain is a liability, while the active and pro-active strategy go beyond legal obligations and focus on social responsibility as a mean to improve social responsible behaviour in the supply chain, i.e. the supply chain is a responsibility.