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...implemented, this paper broadens the discussion by pointing out possible interrelations between the role of social capital and the diffusion of social standards. Therefore, an alternative concept of social capital is developed. It is shown that the right 'composition' of social capital is necessary 'ingredient' for spreading social standards in the supply chain and into developing countries. These considerations are illustrated with a practical example of a public-private partnership project in the German retail sector.
* Codes of conduct
* Corporate social responsibility
* Monitoring
* Multinational corporations
* Public-private partnership
* Social capital
* Social standards
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THIS PAPER IS CONCERNED WITH THE ROLE SOCIAL CAPITAL PLAYS IN THE process of the diffusion of social standards. This question arises in the following context. When confronted with the societal demand to act in accordance with corporate social responsibility (CSR), multinational corporations (MNCS) more and more often react by establishing voluntary codes of conduct for social standards (1) throughout their supply chain. Originally, at the beginning of this process, corporations often declined any responsibility for their supply chain (e.g. Locke 2003: 51). They established codes of conduct that were limited to the realms of their corporation and received no credible monitoring. In reaction to an intense public debate, an increase of critical campaigns and customers boycotts, more corporations now see themselves challenged not only to establish a code of conduct but also to establish a more credible external, independent system of monitoring for both their corporation and their whole supply chain, reaching far into developing countries. Several monitoring systems have been developed that try to optimise control and raise social standards within the supply chain.
This paper raises the question of whether controlling corporations through improved monitoring systems alone can be a successful way of establishing social standards within the supply chain and of helping to spread social standards in developing societies. Even if it were possible with the help of a monitoring system to establish compliance with a certain code of conduct, it is unclear whether the values associated with it would be accepted by developing societies and could therefore be implemented in a sustainable way. As the debate has concentrated strongly on the question of what monitoring systems look like and how they are implemented, I want to broaden the discussion by pointing out the possible interrelations between the role of social capital and the diffusion of social standards. In the prevailing debate this interconnection of social standards and social capital is widely neglected. It will be shown that the right 'composition' of social capital is a necessary 'ingredient' for spreading social standards throughout the supply chain and into developing countries.
The remainder of the paper is set out as follows. First of all, I will give a short introduction to the scope and limits of monitoring systems. As even elaborate monitoring may not be enough to spread social standards throughout the supply chain, I introduce the concept of social capital as a potential supplement to monitoring systems. In this way an alternative concept of social capital is developed. This will allow the ways in which social capital and the diffusion of social standards are interrelated to become clear. These considerations are illustrated with a practical example of the public-private partnership project 'Sector Model Social Responsibility' of the Foreign Trade Association of the German Retail Trade (Aussenhandelsvereinigung des Deutschen Einzelhandels [AVE]) in cooperation with the German development agency (Deutsche Gesellschaft fur Technische Zusammenarbeit [GTZ]).
The monitoring process of codes of conduct on social standards
The development of monitoring systems (2) can be seen as a reaction to the criticism that codes of conduct have been implemented in an unreliable way. There is a wide spectrum of different monitoring systems, ranging from internal to independent or external monitoring systems. Definitions of the terms within this spectrum also vary considerably. (3) Usually, 'internal' monitoring is defined as a form of monitoring conducted by the corporation itself. By this means the corporation integrates the monitoring into its normal quality management, which puts it on a more regular footing but keeps it in the corporation's area of responsibility. External or independent monitoring is more credible and is conducted by an independent organisation: for example, a nongovernmental organisation (NGO) (Fuchs 2000: 297ff.; IG Metall Vorstand et al. 2001: 62; Urminsky 2001: 32; Ascoly and Zeldenrust 2003: 8ff.).
Theoretically, these different monitoring systems can be seen as complementary. While internal monitoring, especially in the form of an integrated management system, can help to spread social standards throughout a company culture, independent or external monitoring can exert 'real' control in a more legitimate manner (ILO 1998: No. 66). However, there are various cases where it is difficult to find out how the monitoring systems work and whether or not they are credible. Therefore, there is an intense debate about how to improve the credibility and effectiveness of monitoring systems. Criticism often takes the following forms.
First, systems of monitoring codes of conduct are often limited to spot-check controls that are not very frequent. In many cases, during a one- or two-hour visit, monitors interview the management about employment issues and are guided around the premises. They are therefore only able to identify 'obvious' violations of the code of conduct. (4) As a result, no real and continuous pressure for...
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