This page summarizes the Guiding Principles for Socially Responsible Outsourcing, developed by a team of consultants at Stanford Law School. To download the full report and appendices, please visit the Project Library.


THE PRINCIPLE

Disadvantaged Service Companies promote economic development in un-developed regions with untapped human capital. Disadvantaged Service Companies are:
 (1) Located in a "low-income" country as defined by the World Bank; or
 (2) Located in a "lower-middle-income" country or "upper-middle-income" country as defined by the World Bank and a majority of the Disadvantaged Service Company's employees are from a "low-income" region as defined by the Columbia Global Distribution of Poverty Dataset.

THE JUSTIFICATION

Principle One is meant to ensure that outsourcing wealth is directed at high poverty regions. Part of Samasource's purpose is to make sure that a larger portion of the money generated by outsourcing goes to people living in un-developed regions.

The Team chose to categorize all countries according to World Bank measurements of poverty.  While there are other measurements of international poverty, including the United Nations' Human Development Index, the World Bank standards most closely reflect Samasource's concern with per capita income, are consistently and readily available, and are simple to apply.  The World Bank defines a "low-income" country as having a gross national income (GNI) per capita of $935 or less.  Samasource has traditionally focused on countries in this income level, like Kenya, because poverty is such a devastating problem and because an increase in investment in the form of outsourcing projects will bring money, employment, and infrastructure.  Businesses in these "low-income" countries will therefore automatically qualify as being from an underdeveloped region.

"Middle-income" countries have a GNI per capita between $936 and $11,455.  These countries are less uniformly impoverished than "low-income" countries but still contain regions in which people live in extreme poverty.  For example, in China, which is classified as a "middle-income" country by the World Bank, there are regions where the GNI per capita falls well below $936.  Because these impoverished regions should be included, companies within "middle-income" countries are not automatically excluded from becoming Samasource Disadvantaged Service Companies.  Rather, if a majority of the employees of a Disadvantaged Service Company reside in an underdeveloped region within a "middle-income" country, the Company can qualify.
"High-income" countries have a GNI per capita in excess of $11,455.  Despite the fact that these wealthy countries have poor areas, the Stanford Team believes they fall outside the scope of the Sama Social Label, which seeks to redirect outsourcing dollars to areas of extreme poverty that presently do not benefit from outsourcing. It is well-known that while there is terrible poverty in places like New Orleans, Louisiana in the US, there are many places in rural Africa that lack even the most basic of human needs, such as clean water.

To determine whether a region in a given country is "low-income," the Guiding Principles advocate use of the Columbia Global Distribution of Poverty Dataset, which relies on child malnutrition and infant mortality data to measure poverty.  The poverty maps available from this Dataset break down "low-income" areas by regions within countries, allowing Reviewers to distinguish between a higher-income region in a country like China, and a region in that country that suffers from extreme poverty.  A "low-income" region within the Dataset has a child malnutrition rate of 10% or more, a figure derived from the Stanford Team's statistical analysis of the Dataset.  Reviewers may use the spreadsheet in Appendix A, which lists regions by malnutrition rate and country, to determine whether a Disadvantaged Service Company is located in one of these "low-income" regions.

THE PRINCIPLE

Disadvantaged Service Companies are committed to improving the welfare of people in their communities.  Disadvantaged Service Companies must meet at least one out of the following three requirements:
 (1) At least 1/2 of the Disadvantaged Service Company is owned by people living in the same region where 2/3 of the employees live; or
 (2) The Disadvantaged Service Company must reinvest a minimum of 40% of its annual revenue in employee compensation, employee training, community programming and/or employee benefits (e.g., health care services, child care, transportation, retirement plans, educational scholarships, recreational facilities, credit services); or
 (3) The Disadvantaged Service Company must be a legally registered non-profit corporation.

THE JUSTIFICATION

The intent of this exercise is to ensure that outsourcing dollars flow to poor regions and stay in those regions.  Samasource wishes to ensure that Disadvantaged Service Companies carrying the Sama Social Label spread the wealth from their outsourcing businesses both to their employees and to their communities.  The goal is to keep a substantial portion of a Disadvantaged Service Company's annual revenue in the Company's country or region.  

The Stanford Team envisions three different ways a Disadvantaged Service Company might be structured. It could be a mostly-locally (1/2) owned company with local employees.  Or it could be a corporation owned from afar but in which at least 40% of the revenue is funneled back into the community through wages or community programming.  Or it could be a non-profit corporation with a social mission. Ultimately, however, the point of this principle is to ensure that the money brought in by the outsourcing projects stays local.

In setting the first requirement in this Principle, the Stanford Team determined that if a majority of a Disadvantaged Service Company's shares are owned by people from the region where the Company operates, then a majority of the Company's revenue will stay in the community. This is the same standard used by the B Corporation.

In setting the second requirement in this Principle, the Stanford Team determined that if a Disadvantaged Service Company invests 40% of its annual revenue in its employees and communities, more of the Company's annual revenue will stay in the region than otherwise would have. The 40% goal is based on survey research on Samasource's current Disadvantaged Service Companies that have been verified and audited.  A 40% benchmark is a reasonable, attainable goal for "socially responsible" companies that will ensure regional wealth creation but also not threaten the economic viability of the Disadvantaged Service Companies.

In setting the third requirement in this Principle, the Stanford Team determined that if the Disadvantaged Service Company is a legally registered non-profit corporation, any annual revenue will automatically be reinvested in the community in which it operates.

THE PRINCIPLE

Disadvantaged Service Companies are socially responsible in all of their business practices.  Socially responsible businesses must follow the Sama Code of Conduct.

THE JUSTIFICATION

The Code of Conduct attempts to break the cycle of poverty by requiring Disadvantaged Service Companies to pay adequate wages, to invest in employees through on the job training and education, and to promote community development.  On the job training and education provides the portable skills necessary for individuals to escape poverty; training requirements also ensure that the Companies are investing in the human capital of un-developed communities.  In addition to providing training, Disadvantaged Service Companies also must have a stated and enforced zero-tolerance policy towards discrimination.  These requirements are included in the Code of Conduct and will raise Disadvantaged Service Companies' standards to globally recognized levels.  

The Code of Conduct also imposes wage requirements; Disadvantaged Service Companies must pay their employees a minimum hourly wage that will vary by country.  These wage levels were determined through analysis of the World Bank Poverty Line, the Fair Wage Guide, and country-specific minimum wage laws.  By combining Fair Wage Guide-recommended hourly wages with country income data from the World Bank, the Stanford Team established fair wages for each "level" of country (e.g., "low-income" or "middle-income") where a Disadvantaged Service Company operates.  For instance, Kenya is listed as a “low-income” World Bank country.  According to the Fair Wage Guide, the lowest fair hourly wage in Kenya is $0.42/hour (which is Kenya's legal minimum hourly wage).  Because Disadvantaged Service Companies should strive to pay more than the lowest fair hourly wage, we rounded the required hourly wage for "low-income" countries up to $0.50/hour.  These wage requirements are imposed so that Buyers can be sure that their outsourcing dollars are used to promote livelihoods through fair, living wages.

While we recognize there is an ongoing debate on the role of developing nations in fighting global climate change, and while we recognize that Disadvantaged Service Companies are not substantial polluters, the Code of Conduct still encourages the Companies to strive toward environmental sustainability.