ETHICAL AND SOCIAL STANDARDS ARE THE PATHWAY FOR SMALL AND MEDIUM ENTERPRISES TO COLLABORATE WITH LARGE CLIENTS This publication has been prepared by the Working Group for Business Ethics and Responsible Business Conduct Standards operating as part of the Advisory Board for Sustainable Development and Corporate Social Responsibility – a subsidiary body to the Minister of Investment and Economic Development of the Republic of Poland. Publication prepared by: Grażyna Miller, Danuta Kędzierska, Katarzyna Ordyńska, edited by Agnieszka Abec-Domańska and Robert Sroka PhD, coordinator of the Working Group for Business Ethics and Re- sponsible Business Conduct Standards. During his time coordinating the working group, Robert Sroka was professionally connected to E&Y. The group operated as part of the Advisory Board for Sustainable Development and Corporate Social Responsibility in 2017. Warsaw, 2018 WHY ARE ETHICAL AND SOCIAL STANDARDS THE PATHWAY FOR SMALL AND MEDIUM ENTERPRISES TO COLLABORATE WITH LARGE CLIENTS? ______________________________________________________________________ SMETA, SEDEX, amfori BSCI, EcoVadis, SA8000, ICS, ETI are just a few of the acronyms that thousands of small and medium enterprises (SMEs) have or will soon encounter during their commercial and investment talks with large companies from the FMCG, automotive, electronic or financial industries. These names are linked to standards, codes, norms and ethical and social audits, which are increasingly becoming the condi- tion for cooperation with international and domestic clients. Compliance with ethical standards Cooperation with large clients Compliance with HR standards Business development Compliance with environmental standards Quick searches for information in local sources do not offer many suggestions. The keywords that appear are: social audit, ethical standards, fair remuneration, no child labor, human rights, system of governance, second party audit, third party audit, etc. The first response is usually surprise and disbelief. What’s all this for? How much does it cost? What is the difference between this audit and an audit by authorities? Who will pay for this? Will I benefit? How will it affect my margin? Why should I agree to the evaluation of OHS, environmental, labor or anti-corruption practices in my own busi- ness? What consequences does this entail? ______________________________________________________________________ 4 | Why are ethical and social standards the pathway for small and medium enterprises to collaborate with large clients? SMEs may also encounter ethical and social re- opment and CSR– a subsidiary body to the Minis- quirements not only from prospective but also ter of Investment and Economic Development of existing clients. These new expectations may the Republic of Poland. soon become necessary to continue cooperation and to therefore maintain the current level of We hope to encourage you as employers to take sales. a pro-active approach to creating a company that is attractive to both employees and business _________________________________ partners. The SMEs that meet these requirements The knowledge presented here should strength- gain the opportunity to: en small and medium entrepreneurs to help them act as equal partners in the understanding 1. grow their business by entering of ethical and social partners with their Polish the supply chain of domestic and and international business clients. international corporations 2. raise management standards at the operating level in non-financial areas 3. build a more attractive, friendly and safe workplace for current and prospective employees 4. create a positive image of their own brand and contractors’ brands _________________________________ In this publication, you will find key information about: ► ethical and social standards, ► key challenges and issues faced by en- trepreneurs regarding the satisfaction of corporate requirements and international ethical and social standards, ► good preparation of a company to the sat- isfaction of audit requirements. This publication has been developed by the Working Group for Business Ethics and Respon- sible Business Conduct Standards operating as part of the Advisory Board for Sustainable Devel- WHY SHOULD YOU START WITH COMPLIANCE? The key condition for ensuring an adequate ► violation of the working time provisions workplace as required by international and cor- or provisions governing employee rights porate ethical and social standards is compli- related to parenthood, ance of practices with labor law, environmen- ► failure to keep the documentation in mat- tal law, construction law and other applicable ters related to the employment relationship industry-specific requirements. and personal files of employees, ► failure to pay salary or provide other per- formance to which the employee or his/ What should you pay special attention to? her eligible family member is entitled on the agreed date, groundless reduction of The most frequent instances of non-compliance the amount of salary or performance, or found during state-run audits include: unjustified set offs, ► failure to give a holiday leave to which an ► signing of civil law contracts in situations in employee is entitled or groundless reduc- which an employment contract should be tion of the time of such a leave, signed, ► failure to issue a work certificate to an ► failure to confirm in writing an employment employee, contract signed with an employee before ► failure to observe occupational health and admitting the employee to work, safety regulations or principles. ► termination or dissolution of an employ- ment relationship with an employee with- out notice, constituting a gross violation of the labor law, ► use of penalties against employees other than those set forth in the provisions of the labor law on disciplinary responsibility, WHAT ARE ETHICAL AND SOCIAL STANDARDS AND AUDITS? ______________________________________________________________________ Ethical and social standards or codes are collections of requirements developed by international organizations, industry organizations or single companies in order to de- fine the desirable conduct of business partners, mainly suppliers. These requirements usually pertain to areas such as: ► business ethics ► fair market practices ► anti-corruption ► human rights ► ensuring safety and promoting health at work ► care for the environment ► requirements for subcontractors in the above areas ______________________________________________________________________ On the other hand, the ethical and social audit is a tool to review whether the business partners actually satisfy the requirements included in the standards and codes. Most popular standards ance of working hours, equal treatment, respect for human rights such as not using forced labor There are many ethical and social standards and or child labor. codes that may form the basis for defining the scope of information to be reviewed during audits. SMETA (Sedex Members Ethical Trade Au- Those encountered most frequently by entrepre- dit) is the audit procedure developed based neurs from Central and Eastern Europe are pre- on the ETI Base Code. The audit concerns four sented below. standards: ► labor standards ETI Base Code, SMETA, SEDEX ► health and safety ► business ethics ETI Base Code is a code of conduct developed ► care for the environment by the Ethical Trade Initiative (ETI). The require- ments included in the ETI Base Code apply The audit may only be conducted by duly certi- mainly to the workplace area, including terms of fied entities. The results of SMETA audits may employment, freedom of association, health and be published in the form of a report on the SE- safety standards, remuneration levels, observ- DEX (Supplier Ethical Data Exchange) platform. What are ethical and social standards and audits? | 7 The report may be visible to the manufacturer’s 5. Fair remuneration counterparties. 6. Decent working hours 7. Occupational health and safety The popularity of SMETA audits is evidenced by 8. No child labour the fact that more than 280,000 such audits have 9. Special protection for young workers been conducted by 2018 and the SEDEX platform 10. No precarious employment contains more than 93,000 SMETA reports used 11. No bonded labour by counterparties, including the largest interna- 12. Protection of the environment tional entities, to learn to what extent their cur- 13. Ethical business behaviour rent or potential suppliers meet various ethical, social and environmental standards. The audit may only be conducted by entities holding suitable certifications and approved More information about the SEDEX platform and by amfori BSCI (including auditors approved by the SMETA audit methodology is provided at name holding the qualifications confirmed by https://www.sedexglobal.com/ amfori). In the case of amfori BSCI, it must be noted that an audit must be confirmed directly by the client/counterparty who is also an amfori amfori BSCI BSCI member. amfori BSCI is one of audit standards developed More information about the amfori BSCI Code of by the amfori organization (previously FTA). BSCI Conduct and audit requirements is available un- was created as an initiative associating more der the link: http://www.amfori.org/ than 2,000 companies, mainly from Europe, with a combined turnover of more than one trillion euro, which require their suppliers to meet the Social Accountability 8000 (SA8000) requirements included in the amfori BSCI Code of Conduct. The Social