When your SMETA auditor arrives, everything they measure is based on a single underlying framework: the ETI Base Code. When your buyer talks about ‘ethical trade standards,’ ‘labor compliance,’ or ‘responsible sourcing,’ they are almost certainly referring to the ETI Base Code.
And yet most Indian MSME factory owners and compliance managers have never read it. They know SMETA. They know SEDEX. But they do not know the foundational document that both of them are built on.
This is a gap worth closing — because understanding the ETI Base Code directly helps you understand what your auditor is looking for, what your buyer cares about, and what you need to implement in your factory. This guide from Greendot Management Solutions explains all nine clauses in plain language with practical guidance for Indian exporters in 2025.
1. What is the ETI Base Code?
The ETI Base Code is a set of labor standards developed by the Ethical Trading Initiative (ETI) — a UK-based alliance of companies, trade unions, and NGOs that works to improve the lives of workers in global supply chains. Founded in 1998 and based in London, ETI includes members such as Marks & Spencer, Tesco, the Co-op, Primark, and hundreds of other global brands.
The ETI Base Code draws directly from the conventions of the International Labor Organization (ILO) — the United Nations agency that sets global labor standards. It translates those ILO conventions into nine practical, auditable clauses that apply to any factory, in any country, in any sector. Both SMETA and SA8000 use the ETI Base Code as their primary reference standard. When you undergo a SMETA audit, every finding is mapped back to one or more clauses of the ETI Base Code. Understanding the code is therefore directly equivalent to understanding what your SMETA auditor is measuring.
2. The 9 Clauses of the ETI Base Code — Explained for Indian Factories
| # | Clause | What It Requires | India-Specific Risk Areas |
| 1 | Employment is freely chosen | No forced, bonded, prison, or trafficked labor. Workers free to leave. No deposits or document retention. Workers not required to pay recruitment fees. | Contract labour and migrant workers recruited via agents; deposit schemes; document retention by labour contractors |
| 2 | Freedom of association and collective bargaining | Workers’ right to form and join unions and bargain collectively. Where legally restricted, alternative representation permitted. No anti-union discrimination. | Many Indian factories discourage unionisation; worker representatives often management-appointed rather than worker-elected |
| 3 | Working conditions are safe and hygienic | Safe working environment based on knowledge of hazards. Systems to prevent accidents. Sanitation. PPE. Trained H&S manager. Regular safety training. | Machine guarding removed; expired fire equipment; PPE not used; inadequate sanitation especially for female workers |
| 4 | Child labour shall not be used | No workers under 15 (or local school-leaving age if higher). No hazardous work under 18. Policy and remediation plan for any child found working. | Age verification missing for contract/casual workers; young apprentices in hazardous environments |
| 5 | Living wages are paid | Wages meet legal minimum at minimum. Regular payment. Full itemised payslip. No illegal deductions. Workers should be able to meet basic needs. Moving toward living wage. | Wages at or below minimum wage; OT not calculated correctly; informal deductions not disclosed in payslips |
| 6 | Working hours are not excessive | Max 48 regular hours per week. Voluntary OT not to exceed 12 hours per week. At least 1 day rest in 7. Industry benchmarks or law (whichever stricter) to apply. | Systematic OT beyond legal limits, especially in export-peak seasons; no rest days during rush orders |
| 7 | No discrimination is practised | No discrimination in hiring, pay, access to training, promotion, or termination on grounds of gender, caste, religion, race, age, disability, or union membership. | Pay gaps between male/female workers; caste-based informal discrimination in role assignment; preference for male workers in senior roles |
| 8 | Regular employment is provided | Workers not deprived of legal employment rights through home-working, excessive fixed-term contracts, or sub-contracting. Workers have stable, legal employment arrangements. | Over-reliance on contract labour to avoid providing statutory benefits; home-working without formal employment relationship |
| 9 | No harsh or inhumane treatment is allowed | No physical, sexual, psychological, or verbal abuse. No corporal punishment. No threats of violence. No humiliating or degrading treatment. No intimidation. | Verbal abuse by supervisors; intimidation to prevent workers from raising grievances; aggressive behaviour during peak production periods |
3. The ETI Base Code and SMETA 7.0 — How They Connect
SMETA 7.0, launched in January 2025, replaced the generic ETI Base Code principles with specific, measurable Workplace Requirements for each clause. This was a major change from previous SMETA versions — auditors now have precise, standardized criteria to assess rather than broadly interpreting the code themselves.
The practical implication: under SMETA 7.0, ambiguity is eliminated. An auditor in Gujarat applies exactly the same workplace requirements as an auditor in Hyderabad or Chennai. Your compliance must be demonstrably clear against each specific workplace requirement — not just ‘broadly aligned’ with the ETI Base Code.
| ETI Base Code Clause | What SMETA 7.0 Now Requires | Old SMETA 6.1 Approach |
| Freely Chosen Employment | Specific checks on recruitment agreements, agent contracts, and deposit evidence | General auditor assessment of ‘forced labour risk’ |
| Freedom of Association | Verification that worker representatives are genuinely worker-elected, not management-appointed | General check that a grievance mechanism exists |
| Safe & Hygienic Conditions | Structured MSA review of H&S management system maturity — not just audit-day conditions | Inspection-based assessment of physical conditions |
| Living Wages | Gender-differentiated wage analysis; comparison against living wage benchmarks — not just minimum wage | Minimum wage compliance check only |
| Working Hours | Digital record verification; OT consent evidence; worker interview cross-check | Document review of attendance registers |
4. Living Wages — The ETI Base Code Clause That Is Evolving Fastest
Clause 5 of the ETI Base Code — living wages — is the most dynamically evolving area of the standard, and the one where global buyers are placing increasing pressure on Indian suppliers.
The distinction between minimum wage and living wage is critical:
| Concept | Definition | India Context |
| Minimum Wage | The legally mandated floor below which no employer may pay | Varies by state and category. Currently INR 176–500+ per day depending on state and skill level. |
| Living Wage | The wage required for a worker to cover basic needs: food, housing, healthcare, education, with some savings | Estimated at significantly above minimum wage in most Indian industrial cities |
| ETI Base Code Clause 5 Requirement | Wages must meet minimum wage at minimum; buyers and suppliers should work toward living wages over time | SMETA 7.0 can raise a CAR (Collaborative Action Required) when wages are below living wage benchmarks |
For Indian factories, the living wage gap is most visible in textile, garment, and food processing sectors. Pharma and chemical companies with skilled workforces typically have lower risk here — but all factories should benchmark their wages against the Anker Methodology living wage estimates for their region.
5. What Buyers Are Now Asking For — ETI Base Code in 2025
Buyers who are ETI members (including most major UK retailers and FMCG brands) are now required to demonstrate active progress against all nine clauses of the ETI Base Code — not just compliance. This means:
- They need evidence that their suppliers are not just meeting minimum standards but improving year on year
- They are using SMETA 7.0 audit data on Sedex to measure this progress systematically
- They are increasingly willing to issue Collaborative Action Required (CAR) findings and work with suppliers on systemic issues like living wages, responsible recruitment, and discrimination
- They are publishing annual ETI impact reports that include data from their Indian supply chains
For Indian suppliers, this means: your ETI Base Code compliance is no longer a private audit result. It is data that feeds directly into your buyer’s public ESG reporting, investor disclosures, and regulatory compliance. The stakes have risen significantly.
Frequently Asked Questions
Q1: Is the ETI Base Code a law?
No. The ETI Base Code is not a law — it is a voluntary standard adopted by ETI member companies. However, it draws directly from ILO conventions, which are international law ratified by India. The ETI Base Code does not replace local Indian labor law — it supplements it. Where Indian law is stricter than the ETI Base Code, Indian law prevails. Where the ETI Base Code is stricter, it sets the buyer’s expectation.
Q2: Do I need to separately certify against the ETI Base Code?
No. The ETI Base Code is not a standalone certification. Compliance with it is demonstrated through SMETA audits (the most common route), SA8000 certification, or BSCI audits — all of which use the ETI Base Code as their primary reference.
Q3: What is the living wage benchmark for my region in India?
Living wage benchmarks for India are published by the Anker Research Institute using the Anker Methodology. They are available by region and occupation type. Your buyer may reference specific benchmarks — ask them which living wage dataset they use when evaluating your wages. Greendot Management Solutions can help you conduct a living wage gap analysis for your factory location.
