Learning the Standard Industrial Classification (SIC) basics can help businesses gain a better understanding of the U.S. economy. SIC codes are four-digit codes used to identify various industries within the business marketplace.
For more than 60 years, SIC codes have been instrumental in helping businesses gather and analyze information about the U.S. marketplace. Since the first introduction of the Standard Industrial Classification system, there has been a wide range of revisions to reflect the evolving business environment. Consider the following tips to help you learn more about the Standard Industrial Classification (SIC) basics.
1. Read about how SIC codes help with industrial classification.
2. Learn where to find SIC codes.
3. Compare SIC codes with the North American Industry Classification System (NAICS).
Use SIC codes to learn more about business industriesSIC codes are used to index businesses based on their primary business activities. While this is one of the most accurate company coding systems available, the system does have its flaws. The way in which the system codes companies isn't regulated, which means that each source can index companies as they see as most appropriate. This creates company SIC code inconsistencies from one source to the next, so the first step in learning the basics is understanding how these codes are used.
Bureau of Labor Statistics website.
Find accurate standard industrial classification listingsBecause the U.S. government established SIC codes, there are several government resources from which to obtain SIC code listings. For example, when learning the basics of SIC codes, the Securities and Exchange Commission can explain how these codes are used for assigning review responsibility as it pertains to the company's EDGAR filings.
Securities and Exchange Commission website for more SIC information and a SIC code listing. You can also find a SIC code listing and information about industries by visiting the U.S. Department of Labor website.
Evaluate differences between SIC codes and the NAICS coding structureDespite changes in SIC codes, the system has received criticism regarding its accuracy and ability to keep up with the rapidly evolving business environment. As a result, the NAICS, which was introduced in 1997, is gradually being used more and is taking the place of the SIC code directory. The NAICS uses a six-digit coding structure that identifies industries in the United States, Mexico and Canada. Because both systems are widely used, many directories will segment companies by a standard industrial classification number and a NAICS code.
U.S. Census Bureau website. Learn more about the differences between SIC codes and the NAICS coding structure by visiting the University of Pittsburgh website.
- One of the major problems of the SIC code system is that it was designed to identify company processes instead of the type of business in question. This creates problems when attempting to evaluate competitors in a particular industry, because top companies based on business type could be listed under an entirely different SIC code.