Are codes of conduct and standards important for SMEs in developing countries?

UNIDO, the United Nations Industrial Development Organization, has commissioned SOMO to carry out research into the importance of codes of conduct and standards for small and medium enterprises (SMEs) in developing countries. The project is based on research conducted in the clothing industry in Turkey, the furniture industry in Brazil and the leather industry in India. Local researchers interviewed over 100 businesses in these countries. Based on the findings of this study, UNIDO will publish a handbook in the latter half of this year in collaboration with SOMO on codes of conduct and business standards. The handbook is designed to help businesses in developing countries establish their own codes of conduct and enhance their market opportunities.

Small and medium enterprises in developing countries have to contend with a proliferation of standards and codes of conduct that, for the most part, are imposed on them by larger retailers, such as IKEA, H&M and Marks & Spencer. These standards and codes are generally established to guarantee the quality and safety of the products but also often ensure decent working conditions in the factories. More and more codes of conducts are also addressing human rights and corruption.

This is seen as a positive development, as it encourages enterprises in developing countries to implement sustainable and corporate socially responsible policies in the workplace. There is a downside, however. These types of standards often become trade barriers for many businesses. Already faced with the legal requirements imposed, they then have to cope with an enormous number of business codes as well. Successful businesses in the Turkish clothing industry, for example, adhere to numerous codes of conducts imposed by European and North American clothing companies. Codes that contain an extremely diverse range of stipulations which are generally incompatible with one other. Having said that, many codes do contain a number of common elements, such as workers’ rights and environmental management.

The handbook developed by UNIDO and SOMO will describe the most significant trends in codes of conduct and business standards and is designed to help businesses in developing countries see the wood for the trees. For example, an enterprise could decide to adhere to a very ambitious code of conduct and use this to its advantage in negotiations with a retail competitor. Another strategy would be for enterprises to develop their own code of conduct containing elements from a variety of different codes.