---
type: "Learn"
title: "Standard Industrial Classification (SIC): What It Is and Uses"
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# Standard Industrial Classification (SIC): What It Is and Uses

Standard Industrial Classification (SIC) codes are four-digit numerical codes assigned by the U.S. government that categorize the industries to which companies belong, while also organizing industries by their business activities. The SIC codes were created by the U.S. government in 1937 to classify and analyze economic activity across various industries and government agencies, and to promote uniformity in the presentation of statistical data collected by various government agencies SIC codes have also been adopted in places outside the U.S., including in the U.K.However, Standard Industrial Classification codes were mostly replaced in 1997 by a system of six-digit codes called the North American Industry Classification System (NAICS). The NAICS codes were adopted in part to standardize industry data collection and analysis between Canada, the United States, and Mexico, which had entered into the North American Free Trade Agreement.Despite having been replaced, government agencies and companies still use the SIC standardized codes today for classifying the industry that companies belong to by matching their business activity with like companies.

## 1\. Core Description

-   Standard Industrial Classification (SIC) is a government-built system that assigns a four-digit code to label a company’s primary industry based on its main business activity.
-   Created in 1937, Standard Industrial Classification helped agencies and researchers report economic activity in a consistent, comparable way across long time periods.
-   Even after NAICS largely replaced it in 1997, Standard Industrial Classification remains widely used in legacy datasets and some filings, but it should be treated as a starting label rather than a full business-model map.

* * *

## 2\. Definition and Background

### What Standard Industrial Classification (SIC) means

Standard Industrial Classification (SIC) is a four-digit numeric coding system originally created by the U.S. government to categorize businesses by **primary business activity**. The key idea is simple: instead of describing a company with vague industry names, SIC assigns a standardized number so different datasets can “talk to each other” using the same classification language.

SIC is **activity-based**, not brand-based. A company is meant to be coded according to what it mainly _does_ to generate revenue (or operating receipts), not how it markets itself, not where it is listed, and not what investors _think_ it is.

### Why SIC was created in 1937

Before Standard Industrial Classification, different agencies often used inconsistent industry labels. That made it difficult to compile national statistics, compare industries, or analyze trends over time. SIC introduced a stable hierarchy that allowed government bodies to group firms with similar functions for:

-   economic measurement and reporting,
-   regulatory supervision and benchmarking,
-   research and policy analysis.

### What changed in 1997: NAICS replaced SIC (mostly)

In 1997, SIC was largely superseded by the **North American Industry Classification System (NAICS)**. NAICS uses a six-digit structure and is designed to reflect a more service- and technology-heavy economy. NAICS also aligns classification across the United States, Canada, and Mexico, improving cross-border comparability of official statistics.

Even so, Standard Industrial Classification did not disappear. Many company databases, older time-series datasets, and some regulatory contexts still display SIC, mainly because it is stable and historically deep.

* * *

## 3\. Calculation Methods and Applications

### How SIC codes are “assigned” (not calculated)

Standard Industrial Classification is not a financial ratio and does not have a mathematical formula. It is a **classification decision**: the company (or a regulator or data provider) is mapped to the SIC description that best matches its **dominant activity**.

In practice, the assignment often follows a “primary activity” rule:

-   Identify the business line responsible for the largest share of revenue (or operating receipts).
-   Match that activity to the closest SIC description.
-   Apply one code as the headline label, even if the company operates multiple segments.

### SIC structure: what each digit means

SIC is hierarchical and becomes more specific as digits are added:

-   2 digits: Major group
-   3 digits: Industry group
-   4 digits: Specific industry

Example often cited in finance: a bank may be categorized as **SIC 6021 (National Commercial Banks)**.

This hierarchy is why Standard Industrial Classification can support both broad screening (for example, using the first 2 digits) and more specific peer grouping (using all 4 digits).

### Where Standard Industrial Classification shows up in real workflows

Standard Industrial Classification is used by multiple types of institutions because it is a convenient “index key” for organizing records.

#### Regulators and public agencies

Agencies use SIC to group entities into comparable buckets for supervision, disclosure review, enforcement targeting, and macro-level statistics. For example:

-   **SEC**: EDGAR company profiles commonly include a SIC field, helping users group filers by industry.
-   **OSHA**: workplace safety datasets often reference industry codes for benchmarking incident patterns.

#### Data vendors and platforms

Many vendors keep Standard Industrial Classification because it is widely recognized and helps normalize company records across:

-   corporate actions,
-   filing histories,
-   backfilled datasets where NAICS may not exist consistently.

Because older datasets were built around SIC, it often remains the “bridge key” for longitudinal work.

#### Investors and analysts

Investors use Standard Industrial Classification for:

-   quick peer screening (“show me companies in the same SIC”),
-   computing simple industry averages (margins, valuation multiples, leverage),
-   sector concentration checks in a portfolio,
-   factor or backtest datasets that depend on consistent classification over long spans.

### A simple example of SIC-based peer benchmarking using TTM data

A common analytics pattern is:

-   define a peer set using Standard Industrial Classification,
-   compare **TTM (Trailing Twelve Months)** metrics to reduce seasonality.

For instance, an analyst might compare a company’s TTM operating margin against the median margin of its SIC peer group. This can be useful when building a first-pass understanding of whether profitability looks “in-family” or unusual relative to similarly labeled firms.

* * *

## 4\. Comparison, Advantages, and Common Misconceptions

### Standard Industrial Classification (SIC) vs NAICS vs GICS and ICB

SIC and NAICS are government classification systems primarily designed for statistics and regulation. GICS and ICB are market-oriented taxonomies designed for investors and index construction.

System

Main owner or ecosystem

Code depth

Best use case

Standard Industrial Classification (SIC)

Government and legacy datasets

4 digits

historical continuity, older filings

NAICS

U.S., Canada, and Mexico statistical system

6 digits

modern economic analysis, updated sectors

GICS

MSCI and S&P

sector to industry groups

investable peer comparison, benchmarks

ICB

FTSE Russell

sector to subsectors

listing and market classification, indices

A practical takeaway: Standard Industrial Classification is often best as a **baseline label** for comparability across long history, while NAICS may better reflect modern service categories, and GICS and ICB are often better aligned with how public markets cluster companies for portfolio decisions.

### Advantages of Standard Industrial Classification

#### Consistency for long time series

The biggest advantage of Standard Industrial Classification is **stability**. Because SIC is relatively fixed, it can be easier to run long-span research (multi-decade datasets) without constantly re-mapping changing definitions.

That consistency matters in:

-   academic studies using historical filings,
-   longitudinal industry risk analysis,
-   backtests where classification drift can distort results.

#### Simple hierarchy that is easy to operationalize

Four digits are easy to store, filter, and roll up. Many systems can use:

-   the first 2 digits for broader industry grouping,
-   all 4 digits for a narrower peer set.

### Limitations and drawbacks

#### Outdated coverage for modern business models

Standard Industrial Classification was designed in an earlier industrial era. Many modern activities, such as digital platforms, cloud-native services, and hybrid marketplace models, can map poorly. Analysts may be forced into “best-fit” codes that blur comparability.

This creates **classification noise**: companies that compete closely may land in different SIC buckets, and companies that are operationally quite different may share a broad SIC.

#### One code can oversimplify diversified companies

SIC typically assigns one primary code, but many public companies have multiple revenue streams. If a company’s segment mix changes after acquisitions or restructuring, the “one-code label” may lag reality or differ across data sources.

### Common misconceptions and classification errors

#### Confusing brand identity with primary business activity

A frequent error is assigning Standard Industrial Classification based on what a company is famous for, rather than what generates most of its operating receipts. Conglomerates, franchisors, and vertically integrated groups can easily be mislabeled if the analyst does not check segment information.

#### Confusing products with processes

SIC is often sensitive to _how_ a business operates (manufacturing vs wholesale vs services), not just _what_ it sells. Two firms can sell similar end products but fall under different SIC codes because their core process differs.

#### Treating SIC as a “complete business model description”

Standard Industrial Classification is a label, not a thesis. It can help you find a starting peer set, but it does not automatically capture:

-   customer concentration,
-   platform effects,
-   distribution economics,
-   regulatory exposure,
-   geographic mix.

* * *

## 5\. Practical Guide

### A repeatable workflow for using Standard Industrial Classification in investment research

The goal is to use Standard Industrial Classification for speed and comparability, while preventing false peers and missed competitors.

#### Step 1: Define the unit of analysis

Decide whether you are classifying:

-   the consolidated issuer,
-   a key operating subsidiary,
-   an establishment-level activity (more common in government datasets).

Write a one-line rule such as: “Classify by the primary revenue-generating activity at the consolidated issuer level.”

#### Step 2: Identify the primary activity using objective evidence

Use materials that describe operations and revenue sources, such as:

-   annual reports and segment notes,
-   management discussion of business lines,
-   revenue breakdowns by product or service.

Avoid relying on marketing language alone.

#### Step 3: Pull candidate SIC codes from authoritative sources

Use sources that commonly report Standard Industrial Classification, such as:

-   SEC EDGAR profiles and filings (where applicable),
-   official SIC manuals or reference tables,
-   reputable data vendor records (as a candidate, not absolute truth).

If you see different SIC codes across sources, treat them as hypotheses to be validated.

#### Step 4: Validate with peer reality checks

After you form a peer set by SIC, sanity-check whether the group is comparable by looking at:

-   revenue drivers,
-   cost structure,
-   margins and capital intensity,
-   key risks (credit risk, commodity exposure, regulation).

If a company looks like an outlier inside its Standard Industrial Classification peer set, the code may still be technically “allowed” but not analytically useful.

#### Step 5: Time-stamp changes for restructurings and pivots

If the company’s business mix changed materially due to a merger, spin-off, or strategic pivot, document:

-   the SIC used before the change,
-   the SIC used after the change,
-   the evidence for the transition.

This helps avoid mixing unlike periods in multi-year comparisons.

### Case Study: Using Standard Industrial Classification to build a peer screen (illustrative, not investment advice)

This example is a **fictional workflow** intended to show how Standard Industrial Classification can be used with real-world data habits. It is not a recommendation to buy or sell any security.

#### Scenario

An analyst is reviewing a U.S.-listed bank and wants a fast peer set to compare efficiency and profitability using TTM metrics.

#### Process

1.  The analyst checks the issuer profile on SEC EDGAR and sees an SIC label consistent with commercial banking (commonly referenced example: **SIC 6021**).
2.  The analyst pulls a list of other issuers with the same Standard Industrial Classification and filters for similar size using public market cap data (to avoid comparing a community bank to a global institution).
3.  The analyst compares TTM metrics across the peer list, focusing on measures that banks commonly report:
    -   net interest margin (where available),
    -   efficiency ratio (where available),
    -   loan loss provision trends,
    -   capital ratios (from filings).

#### What the analyst learns (typical outcomes)

-   If the company’s TTM profitability is far above the SIC peer median, the analyst flags whether it is due to:
    -   business model differences (fee-heavy vs spread-heavy),
    -   risk profile (loan book mix),
    -   one-time items.
-   If the company is below peer norms, the analyst checks whether the issue is:
    -   cost structure,
    -   regional exposure,
    -   recent credit normalization.

#### Why SIC helps here, and why it is not enough

Standard Industrial Classification speeds up peer discovery. But the analyst still must validate comparability because two banks sharing a SIC can have very different:

-   deposit franchise strength,
-   asset mix and duration,
-   credit risk appetite,
-   geographic concentration.

### A quick checklist to avoid “false comparables”

-   Confirm the business segment that dominates revenue or operating income.
-   Look for multiple SIC labels across databases, and reconcile the differences.
-   If the peer set looks inconsistent, try:
    -   adjacent SIC candidates,
    -   NAICS crosswalk checks,
    -   investor taxonomies like GICS or ICB for an alternate view.

* * *

## 6\. Resources for Learning and Improvement

### Authoritative places to verify Standard Industrial Classification

-   **SEC EDGAR**: Useful for confirming issuer-reported industry labeling and seeing SIC in context alongside filings.
-   **U.S. Census Bureau**: Helpful for understanding official classification bridges and SIC to NAICS concordances used in statistical work.
-   **OSHA**: Many safety and inspection datasets are indexed by industry codes, which is useful when studying operational risk patterns by industry bucket.

### Practical learning approach

-   Start with Standard Industrial Classification to understand how hierarchical industry labels work.
-   Practice mapping companies you already know by reading a business description and deciding the primary activity.
-   Cross-check your mapping with NAICS and an investor taxonomy (GICS or ICB) to see how classification changes with purpose.

* * *

## 7\. FAQs

### What is Standard Industrial Classification (SIC) in plain English?

Standard Industrial Classification is a four-digit code that labels what a company primarily does. It is designed to make industry grouping consistent across filings, datasets, and historical comparisons.

### Is Standard Industrial Classification still used if NAICS replaced it?

Yes. NAICS largely replaced it in official statistical programs, but Standard Industrial Classification remains common in legacy databases and appears in some regulatory or market data contexts because it is stable and widely recognized.

### How does a company get a SIC code?

A SIC code is assigned by matching the company’s main revenue-generating activity to the closest SIC description. If the firm has multiple business lines, the code generally reflects the dominant activity.

### Can the same company have different SIC codes in different databases?

Yes. Different providers may interpret primary activity differently, may update classifications at different times, or may default to broader categories when information is unclear.

### What is the difference between Standard Industrial Classification and NAICS?

Standard Industrial Classification uses 4 digits and reflects older industry definitions. NAICS uses 6 digits, is updated more frequently, and is structured to better reflect a modern service and technology economy.

### Should investors use Standard Industrial Classification for peer comparisons?

It can be useful for a first-pass peer screen and historical consistency, but it should be validated with segment reporting and qualitative checks. Standard Industrial Classification is best treated as a starting label, not a complete description of competitive reality. Investing involves risk, and classifications alone do not address company-specific or market risks.

### Where can I look up a company’s Standard Industrial Classification code?

Common sources include SEC EDGAR issuer profiles, official SIC reference materials, and major market data platforms that ingest filing information. Cross-checking more than 1 source can help reduce mislabel risk.

### What is the biggest mistake people make with Standard Industrial Classification?

The biggest mistake is classifying by brand perception rather than primary business activity. Another frequent error is assuming the SIC code automatically produces a clean peer group without checking revenue mix and business model details.

* * *

## 8\. Conclusion

Standard Industrial Classification (SIC) is a four-digit, government-defined industry coding system created in 1937 to standardize economic reporting and enable consistent comparisons across time. Although NAICS largely replaced it in 1997, Standard Industrial Classification remains useful in legacy datasets, some filings, and peer screening because of its stable structure. For investors and analysts, a practical approach is to use SIC to anchor an initial peer set and historical context, then validate comparability with filings, segment data, and complementary classification systems to reduce outdated mapping and misclassification risk.


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