Why Social Compliance Audits Often Don't Work, But Can I had a good discussion with Bergson Wang, who has worked in the CSR (corporate social responsibility) departments of Adidas and Puma. There is one thing both of us believe: Using social compliance audits does not work if the goal is to improve working conditions.

The auditing system is broken

Systematic audits are the solution chosen by the vast majority of brands that follow a social compliance policy. They allow brands to tick the ‘CSR’ box. However, this system is not effective, for two reasons.

 

First, the information contained in the audit reports is wrong.

If I take a wild guess, here is my estimate:

  • 30% of the time, auditors get bribed and ignore some “inconvenient” evidence (that percentage is very high because, if the audit shows good things, the manufacturer can expect a lot of business).
  • 50% of the time, auditors don’t look deep enough, or the problems are very well hidden — remember, CSR audits deal with people and papers; employees can be instructed to lie and records can be fake.
  • 20% of the time (and I am probably optimistic), the manufacturer deserves to get an acceptable grade (with or without corrective actions to implement).

And why can’t most manufacturers respect the “compliance” criteria? Because their customers are constantly pushing for lower costs!

I pointed to a study of the perverse effects of social audits in a previous article.

 

Second, big companies are happy with the audit-and-rate system.

They appoint a third party that conducts social compliance audits. The suppliers pay for the audits. In some cases, the auditing company has to give a part of the fees back to the buying company, as part of the deal.

If the buyer has its own audit team, they still charge their suppliers for audits. It quickly becomes a profit center!

So, it costs them nothing. And it gives them the information they need for their annual report: “90% of the subcontractors we use are 70% compliant or above, and these numbers are better than last year”.

 

Do SC audits improve working conditions?

Here and there, yes, but in a limited manner.

I only advise doing social compliance audits to expose and avoid the companies treating their employees in a terrible manner (which also negatively impacts on quality) and avoiding taxes (which means they might disappear anytime).
Don’t fool yourself — the staff won’t see night-and-day changes due to an audit.

 

What big importers would do, if they truly cared about improving working conditions

What do manufacturers need? Guidance and gentle pressure to improve, coming from their biggest customers.

And it is starting to happen. Tchibo, a huge German coffee chain that also sells clothing, household items, and electrical appliances (purchased from about 1,000 suppliers in Asia), was leading the way a few years ago.

That program was initiated with about 100 key suppliers in China and other Asian countries. It was entirely voluntary. Suppliers that accepted to give it a shot were not audited for 2 years.

Manufacturers got advice from consultants, who came to the factory every 3 months (at the buyer’s cost). These consultants facilitated communication between the management and the staff of the factory.

If the factory owner took this initiative seriously, it was believed that ultimately he would save money and it would yield the following benefits:

  • No more audits to pay for this customer
  • Better staff retention at CNY, a more experienced workforce, better morale and engagement, better quality, better efficiency…

 


Thinking of arranging a factory audit?

Here at Sofeast, we’ve been providing comprehensive factory audits for over a decade.

You can see the individual audit types and their features in the table below, although note that we can provide bespoke audits tailored to your unique requirements. Just contact us to discuss your needs.

sofeast factory audits overview

On the topic of this post, we do provide social compliance audits which focus on:

  • Safety
  • Respect for the environment
  • Legal compliance

This is an excellent audit to select if you are seeking to select good suppliers, know about sustainability risks in your supply chain, and protect your business’s hard-won reputation.

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