Your CODE ranking effectively represents your contribution to your Panopticon, as well as your social standing and rights.
CODE 1 Sinners are considered to be beyond useless, and have little to no Entitlements. Their Cell is dark, gloomy, and dirty. They are forbidden from leaving their Cell, bar for Operations. All but the most useless resources are confiscated from them at the end of Operations (They do, however, receive Entitlement Points and a sentence reduction for handing over these materials). They are observed constantly by their Accessory.
CODE 8 Sinners on the other hand, are considered praiseworthy individuals, who have worked hard for their Panopticon, and are afforded a meager amount of respect from all, Even Proppa. These Sinners live in clean (if barren) Cells, have the option of leaving their Cell without the supervision of their Accessory, have access to a vast wardrobe and can claim any material they wish after an Operation.
Your CODE level can be increased by taking the CODE Exam after achieving a number of goals.
Passing the CODE Exam will mean a new cell and more Entitlements, such as the right to retain better materials at the end of Operations, or the ability to leave your Cell and converse with fellow Sinners or even Citizens.