Two common industry classification systems include SIC and NAICS. These systems originated in North America and are often used to describe businesses worldwide.
The North American Industry Classification System or NAICS (pronounced "nakes") is a classification of business establishments by type of economic activity (i.e. process of production). It is used by government and business in Canada, Mexico and US. The system's focus on the process of production allows for better differentiation economic outputs generate by manufacturing versus services than previous systems.
The Standard Industrial Classification (SIC) is a classification of business establishments by overall largest product lines (i.e. output of production). It was established by the US in 1937 and was last updated in 1987. This system was designed during a manufacturing focused economic era and best discriminates manufacturing focused industries.
The SIC system is also used by agencies in other countries, e.g., by the United Kingdom's Companies House. In the US government, SIC has been replaced with NAICS, which was first released in 1997. Some US government departments and agencies, such as the Securities and Exchange Commission continue to use SIC.
Each digit in the SIC and NAICS codes (reading left to right) indicates a level of specificity. Take this example from SIC:
- The first two digits “01” indicate the major group ( “Agriculture Production - Crops”)
- The first three digits “011” indicate industry sub-group (“Cash Grains”) which includes wheat, rice, corn, etc.
- The entire 4 digit code “0115” indicates a specific product group (“Corn”)
- NAICS is generally better for service businesses.
- SIC is generally good for describing manufacturing and other industrial businesses
Please note, the Core Industry attribute is custom built and optimize for modeling. It is not an SIC or NAICS attribute.