The principal goal of
ethical trade is to "provide a vehicle for promoting internationally recognised labour standards and fundamental human rights in developing country workplaces." In practice, it "seeks to encourage voluntary codes of conduct amongst large producers with subsidiaries or suppliers in developing countries. The codes of conduct and related standards are intended to benefit workers' rights and human rights, and to help meet other social and environmental development goals."
(Duncombe, R. and R. Heeks,
An Information Systems Perspective on Ethical Trade and Self-Regulation,
Information Technology for Development, 10, 2003, p. 123, visited 2009-07-10)
In order to ensure
ethical trading, socially responsible companies follow ethical sourcing policies and commit their suppliers to respect codes of business ethics and internationally recognized guidelines which are based on International Labour Organization and United Nations' recommendations and cover issues such as health and safety at work, freedom of association of workers, the right to collective bargaining, wages and working conditions, child labour and non-discrimination.
"Large multinational companies [participate] in
ethical trading initiatives not only due to humanitarian concern about adverse labour conditions, but also for direct commercial reasons. Ethical codes of conduct have often been embraced by companies in reaction to direct consumer pressure, or in reaction to criticism from organisations campaigning on behalf of consumer or worker groups.
Ethical trade has also been used to form the basis of a positive corporate image, and as a means of creating increased stability within the commercial environment of globalised firms, particularly within supply chains."
(Duncombe, R. and R. Heeks,
An Information Systems Perspective on Ethical Trade and Self-Regulation,
Information Technology for Development, 10, 2003, p. 123, visited 2010-07-10)
Since companies can draw up their own ethical charters and then call themselves "ethical," social auditing is needed in order to ensure the accountability of
ethical trade practices. There have also been attempts to consolidate disparate codes and auditing and verification procedures within an agreed common benchmark standard.
In response to this, Social Accountability International (SAI) has created the SA 8000 standard which is an "auditable certification standard based on international workplace norms of International Labour Organisation (ILO) conventions, the Universal Declaration of Human Rights and the UN Convention on the Rights of the Child."
(Social Accountability International,
Overview of SA8000, visited 2010-07-10)
Some people refer to "
ethical trade" as an umbrella term for all types of business practices that promote more socially and/or environmentally responsible trade. Others, such as Ethical Trading Initiative, which is an alliance of UK retail companies, non-governmental organizations and trade unions working to improve conditions in the supply chains of its corporate members, use the term in a much narrower sense, referring specifically to the labour practices in a company's supply chain.
Ethical Trade, Transparent Trade, Fair Trade
Ethical trade is linked to the concept of transparent trade, that is to say the practice by which companies give consumers free access to information regarding its operations and importation and supply chains (e.g. financial and social investments, raw material traceability, production, transportation, storage and distribution, etc.). However, unlike
ethical trade, transparent trade does not require a company to follow any pre-established norms.
Ethical trade and fair trade go hand-in-hand for those who want to shop with a conscience. Both practices aim to benefit the lives of workers in some of the world's poorest countries, yet they are based on different principles.
Ethical trade is about improving the conditions in which goods are produced, whereas fair trade is about improving the income that goes to the farm workers at the beginning of a supply chain, thus ensuring that the producers receive fair compensation and sustainable employment.