Standards. Love or loathe them, but to ignore them may jeopardize your company’s global competitiveness.

Over the last 10 years, prominent influential organizations have devised standards that set minimum compliance levels for the way companies treat shareholders to the way they treat endangered species. Corporate citizenship performance standards such as the UN Global Compact, Social Accountability 8000, and the Equator Principles, to name a few, show up in a variety of ways and places. Companies that adopt the Global Reporting Initiative (GRI) framework often treat the menu of indicators like a roadmap of compliance standards. The same can be true for companies that pursue top scores on socially responsible investment (SRI) ratings such as the highly competitive Dow Jones Sustainability Index.

Until now, standards have had a mixed record. Literally thousands of standards exist, although only two or three dozen have achieved any notoriety. But there’s reason to believe that corporate citizenship standards will become more central to corporate life than less.

That’s because it’s one thing if the United Nations comes asking your company to adopt a code. But it’s another if the banks that provide debt capital to your company and your major business customers demand that your company adhere to standards.

Take the example of the International Finance Corporation (IFC). The IFC is an extremely important, unique global institution. As part of the World Bank Group, the IFC fights poverty by making profitable loans. These loans are expected to support projects that will generate growth and development in countries with high poverty and low GDP. These loans make financing projects in these countries more attractive to banks and other lenders, as well as to companies in industries such as oil, lumber, mining, and construction. 

A few years ago, the IFC took up the cause of corporate citizenship. It helped generate the Equator Principles – a set of standards for lending institutions, be they public or corporate, to follow before they back a new project. The Equator Principles focus largely on the environment. Numerous global financial companies like ABN-Amro, Barclays, and Citigroup have adopted the Equator Principles. If a project looks profitable but conflicts with the environmental standards the Equator Principles define, the lender is expected to decline to make the loan.

If you work for a global bank or a natural resource company, chances are you know about the Equator Principles. There’s talk about extending these principles to any project, whether found in the less developed world or among wealthy countries.

But with the active encouragement of NGOs, the IFC took up the challenge to expand its standards. The IFC is close to launching new, comprehensive corporate citizenship standards that look at social performance, stakeholder accountability, governance, and broad economic impact. The standards have been available for comment on the IFC’s web site.

While that’s happening, the International Standards Organization (ISO) is deep in a multi-year process to create global standards for social responsibility. Line managers at your company almost certainly know and respect the ISO. Its ISO9000 standard has become a requirement in many industries to certify that your company and its suppliers manage with quality. ISO14000 is getting to the tipping point to ensure good environmental management. In a couple of years it is likely that ISO26000 will establish requirements to certify that your company and its suppliers manage with care for society.

As this is happening, some big corporate movers are committing to standards as well. Wal-Mart is taking sustainability seriously. McDonald’s is holding suppliers to account for environmental, supply chain, and community practices. Dell, HP, IBM and others require their major suppliers to adhere to a supply chain code of conduct. These companies together represent over a trillion dollars in revenue. As the adage goes, it only takes a single leader to move an army.

If standards are the answer, what’s the question?

If you haven’t looked at these standards yet, take a minute to review them. You’ll find that they are more similar than different. But they all pose unique challenges. And they raise the issue, if standards are the answer, what’s the question? And what should your company do?

Standards deal first with the challenge that governments are doing a lousy job of enforcing laws and regulations. Most companies worth their salt have responded to this by developing a code of conduct. Sometimes they are called “guiding principles for business,” sometimes they are the ethical code. Whatever they are, if your company doesn’t have one yet, or if the code doesn’t reflect the principles represented in leading standards, then your company should think seriously about getting with the program. 

Standards deal next with the fact that all the major institutions of society – government, NGO, and corporate – are falling short of ensuring that the weakest are protected and the voiceless are heard. Standards work as a forcing mechanism to push companies into action. They start by making sure companies do no harm, and then encourage businesses to help improve the welfare of all.

Here standards become especially problematic. They walk a fine line between prescribing rules of behavior, such as noting "this is the wage your suppliers should pay employees," to encouraging the principles by which your company should abide (e.g., “reflect on whether the wages your suppliers pay to their employees are fair”). In between there is a wide space for interpretation. It leads corporate counsels to warn of impending lawsuits for those companies that sign on to standards and for heads of public affairs to view standards as the blueprint for future regulation.

The answer may or may not be for companies to adopt standards. But the question they put forth is how we can ensure that the aggregated decisions of a number of individual corporations don’t exacerbate problems of human rights, environmental sustainability, and community development? And, as the major source of wealth creation and jobs in the world, how can we optimize the potential for the private sector to be an entity for the world’s benefit?

If these are the questions, are standards the answer?

Standards are valuable. They define the rules of the game, and everyone needs consistent rules. Unfortunately, too often standards distract from the central questions and lead to a fight over what the rules are. Whether your company signs on to standards, or resists the pressure to comply from lenders and customers, standards provide a roadmap for your company to identify what issues should become priorities for corporate citizenship. Look through leading standards and ask yourself, which of these issues could affect our business in the near future? Which already have? What are we doing that could make the issues prioritized in this standard worse? What are we doing that could make them better? And what do we need to do about it today?

Whether your company adopts standards or not, it ignores them at its peril. With the right vision and attitude, standards can become a tool for forward looking strategy that not only complies with society’s expectations, but becomes a tool for strategic planning and issues management as well.