What Is Independent Industry Self-Regulation and What Are Its Benefits?
Mar 15, 2023 by Justin Connor, Executive Director, Center for Industry Self-Regulation
In my role as Executive Director of BBB National Programs' Center for Industry Self-Regulation, I have observed that the greatest challenge facing industry self-regulation is awareness.
Not only is awareness low among the general public, but awareness about what industry self-regulation is, how it works, examples of its success, and how it has improved our lives is also lacking within the professional legal community of in-house counsel and external counsel who represent business and industry.
In general, overall awareness is very high for “hard law,” such as state and government laws agency regulations and the corresponding power of government to enforce it with a legally binding structure. What is less known and often misunderstood is just how much “soft law” mechanisms, such as independent industry self-regulation, with its industry guidelines, codes of conduct, standards, and other best practices, improve our everyday lives without being codified into binding law.
Indeed, for the first tens of thousands of years of human history, self-regulation and the creation of social norms preceded the construction of formal law and regulation, which only hit the scene about 3,800 years ago. And even today, daily human behavior is guided more by self-regulation and ethics than by the study of and compliance with civil and criminal code - a task left to the lawyers among us.
With the growing realization that now is the time and place for industry self-regulation in the U.S., complemented by the increasing understanding that self-regulation can serve as a key lynchpin of our economic system, BBB National Programs created The Center for Industry Self-Regulation in late 2021.
Then, to help expand awareness, knowledge, and the intellectual underpinnings of independent industry self-regulation, BBB National Programs’ 501(c)(3) non-profit, the Center for Industry Self-Regulation, partnered with the George Mason University Antonin Scalia Law School in June 2022 to host a Research Roundtable with its Center on Law and Economics.
A request for papers went out to leading scholars with the goal of identifying new and important contributions in the field of industry self-regulation. Many outstanding scholars submitted proposals for consideration, and seven significant and compelling topics were selected, including contributions from scholars in law, business, and economics.
The interdisciplinary nature of the conversation turned out to be valuable and constructive, as the scholars, along with four attorney commentators, came together for a lively and vibrant session in which the discussants had read each paper in advance. Each scholar presenting a paper went before the full group and accepted comments and constructive criticism followed by a full debate of the paper’s ideas. From there, each scholar took this feedback back to their university to further refine their ideas and enhance the papers prior to publication in November 2022.
One of the takeaways from the Roundtable was that, although industry self-regulation comes in a variety of forms, it is important to distinguish independent industry self-regulation from a company’s own self-run compliance activities.
Industry self-regulation refers to a particular industry coming together to generate its own creative and workable solution to a problem rather than having it imposed by government through legislation or regulation. Such solutions can take various forms, such as the development and enforcement of codes of conduct, industry standards, professional certification or seal programs, pledge programs with enforcement, or the creation of independent dispute resolution mechanisms.
The differentiator is the factor of “independence,” meaning that an external third party, such as BBB National Programs or a similar Self-Regulatory Organization (SRO), creates transparency and accountability, and may include a dispute resolution component to fully address all issues arising and ensure meaningful and high-quality self-regulation. This independent oversight also generates credibility with governmental regulators about the program and helps achieve relevant policy goals.
Independent industry self-regulation supports business in being able to set meaningful principles in relation to its own conduct and practices while also demonstrating its commitment to high standards of professionalism and ethical behavior. It also allows for more flexibility and responsiveness to changes within the industry, given that the industry itself is often better positioned to understand and address its own needs and challenges.
With industry driving its own success and improvement, proactive companies can restore and/or create a powerful relationship based on trust with the public, consumers, and regulators. I invite you to learn more about independent industry self-regulation and how it can empower business accountability by reading the work of our Roundtable scholars and exploring our website, including the activity of our Incubator projects.