Social auditing
For nearly a decade, multinational corporations and industry initiatives have relied upon factory audits as a means to ensure good labour practices in global supply chains. Tens of thousands of worksite audits later, Lisa Kantor asks: has this type of factory monitoring really improved workplace conditions?
While social auditing has driven some improvement, there is also an emerging consensus that these improvements neither tackle root causes nor are sustainable. In addition, many working in this arena have come to realize that monitoring can lead to unintended consequences – for example, that factory monitoring in China has largely served to inspire factories to create fictional records for the benefit of monitors.
What’s going wrong?
Factory monitoring can be compared to an annual medical examination in that after such an encounter you will not leave in any different condition than you entered it. Perhaps you will have identified a few new ailments or have been reminded that it is wise to change some behaviors. However, while the examiner can diagnose a problem, he cannot provide a quick cure to systemic conditions that have evolved over time.
A factory social audit is just such an examination. While it can create awareness of issues, it is unlikely to solve systemic problems in the factory or supply chain. As such, these audits do not tackle the root cause of issues but, rather, provide visibility to palliative solutions. Perhaps not surprisingly, these visits and resulting remediation efforts have not always yielded the desired changes. This has led to frustration among company managers and unsatisfied stakeholders, fatigue and even deception by factories as well as cynicism on the part of workers whose interests are ostensibly the ones being protected by this approach.
Responsible supply chain management
With this knowledge, why have we not seen a dramatic shift in – or away from – the audit model?
A recent Business for Social Responsibility (BSR) benchmarking study of nearly 20 apparel, toy and footwear companies found that internal staffing and factory monitoring costs made up the majority of company social compliance budgets. In one case, up to 80 per cent of funds were deployed to conduct factory audits. This continued reliance on monitoring likely stems from the fact that the current model is familiar, easy to communicate, and based on infrastructure investments companies and others are reluctant to scrap.
Times are changing
Even with this in mind, shifts are occurring. Companies have come to reframe expectations of the results from monitoring and are simultaneously exploring alternative or complementary models. New efforts are developing, including a package that emphasizes education and training for suppliers, along with further development of performance indicators, capacity building and worker education.
What is most interesting – and promising – is the growing recognition that profound and sustainable progress depends on the alignment of companies’ commercial goals with their social and environmental goals. While conducting a survey for the World Bank in 2004, BSR heard from numerous company representatives on both the buyer and supplier side that labour standards often work at odds with merchandisers. Until changes throughout the supply chain encompass both production and sourcing along with attention to labour standards, increased compliance levels will only be achieved sporadically.
Improving consistency
During this period of reliance on social audits in the global supply chain an industry of social monitors, factory auditors and workplace assessors has emerged. This work has contributed to a heightened awareness of global working conditions. However, unlike other industries such as the Securities and Exchange Commission, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board or the American Bar Association, this industry has not yet created consistent standards, agreed upon methodology or auditor accreditation processes.
Among a range of other opportunities, the industry of social compliance auditing would benefit from establishing a universal standard providing guidance on the behaviour and competencies of individuals responsible for monitoring factories. The absence of universal monitor qualifications, among other things, has contributed to inconsistent efforts. The establishment of such standards would increase efficiencies in this area. Furthermore, the creation of an accreditation process would add much needed governance and credibility to the industry and potentially promote retention of auditors by establishing greater professionalism and a career path. The industry has a great opportunity to more clearly and consistently define the skill-sets required to perform these factory assessments which is a natural step, among others, in the evolution of this industry.
Looking forward
Factory monitoring has been present at the creation of efforts to ensure good labour practices in increasingly complex supply chains. There were, and still are, good reasons to invest in this approach. The community of companies facing this issue will continue to use this mechanism to achieve, measure and demonstrate change.
But it is a tool and not the answer. For monitoring to bring the kinds of changes that are sought from all points of the value chain, it must continue to evolve into a teaching tool rather than simple enforcement. It will begin to be integrated into public-private partnerships and enhanced targeted public sector efforts. In ten years, with more of this type of change, monitoring won’t look the way it looks today, and perhaps factory conditions won’t look the same either.
About the author
Lisa Kantor is director advisory services for BSR. Visit www.bsr.org for more information.
