What is Standard Industrial Classification?

Standard Industrial Classification (SIC) is a system of codes that the United States government uses to sort and categorize companies by their primary industries and business activity. Developed in the 1930s, SIC codes were designed to provide the government with a uniform, consistent way to gather, analyze, and share economic activity data across all agencies and departments.

Despite their widespread adoption and acceptance, SIC codes were largely phased out by the late 1990s, due to inconsistencies in categorization and an inability to keep up with economic changes. They were officially replaced by the North American Industry Classification System (NAICS), although both remain in use today.

How SIC codes work

Under the SIC system, companies are classified into industries using a system of four-digit codes. The system is hierarchical, with companies first being assigned into one of 10 major divisions as defined by the United States of Library of Congress:

  • Division A: Agriculture, Forestry, And Fishing
  • Division B: Mining
  • Division C: Construction
  • Division D: Manufacturing
  • Division E: Transportation, Communications, Electric, Gas, And Sanitary Services
  • Division F: Wholesale Trade
  • Division G: Retail Trade
  • Division H: Finance, Insurance, And Real Estate
  • Division I: Services
  • Division J: Public Administration

An 11th major division, Nonclassifiable, is also applied.

Once grouped into divisions, companies are then sorted into more detailed major groups (identified by a two-digit code) and industry groups (identified by adding another two-digit code to the preceding one).

For example, a company that makes breakfast cereal would be assigned to:

  • Division D: Manufacturing
  • Major Group 20: Food and Kindred Products
  • Industry Group 204: Grain Mill Products

Within Grain Mill Products, this company would be given an SIC code of 2043: Cereal Breakfast Foods.

How SIC codes are used

Since their creation, SIC codes have been used by most U.S. government agencies, including the Office of Management and Budget (OMB), the Securities & Exchange Commission (SEC), and the Census Bureau. This system is also practiced among private enterprises for a variety of financial and marketing purposes.

Common uses for SIC codes include:

  • A source for know your business (KYB) verification for existing and new B2B customers.
  • Business classifications for tax and legal filings.
  • Standardized government reporting on economic indicators, trends, and performance.
  • Part of underwriting decisions by banks and financial institutions.

Current Status of SIC codes

In spite of several revisions, the SIC system suffered from inconsistent logic, inaccurate classifications, and an inability to stay afloat with changing technologies. It was last updated by the U.S. government in 1987, and was gradually de-emphasized over the following two decades. In 1997, the six-digit North American Industry Classification System (NAICS) was introduced to not only provide a more consistent, accurate classification system, but also one that could be shared with the U.S.’s closest trading partners: Canada and Mexico.

Despite the SIC’s official retirement, it is still used and referenced by numerous companies and government agencies. NAICS has not been able to fully replace it, and many companies today will have both an SIC and an NAICS code.