Beyond compliance: Why audit alone is not enough

Social audits have been a long-standing tool used by businesses as a route to identify and address risks to workers. 

In an era where a business's approach to human rights is increasingly under scrutiny, whether for internal process improvement, investor assurance, or compliance with evolving legal frameworks, audits can play a role but fall short as a tool when identifying human rights risks.

It is increasingly important to adopt a due diligence approach due to the recognised limitations of audits as the only tool. 

Many companies are still heavily reliant on auditing and compliance as their main area of work in their approach to human rights.

The problem

From the Association for Professional Social Compliance Auditors, who suggests that “auditing firms generate over US$300 million per year conducting social audits of suppliers in global supply chains” - This figure gives you a very top-level glimpse of how much time and money goes into these activities.

Research carried out by Human Rights Watch suggests that although there are numerous issues created by a “reliance on audit approach”, below are the ones that frequently arise when speaking to both brands and suppliers;

Cost to the supplier – Varying significantly in cost from $645 to as much as $3,700 per audit, fees are often influenced by who pays, which can also affect the depth and impartiality of the audit. On occasion, supplier paid audits have found lowers issues and risks as opposed to when a brand is paying.

Duplication –A factory, farm or supplier may be subjected to numerous audits by different buyers which can create duplicative audits and “audit fatigue" in any given year. 

Effectiveness – Suppliers understandably want to receive positive audit results for fear negative audits will jeopardize their business. This means that certain elements of the day-day reality for workers may be “hidden” at the time of audit. Typically, social audits often last a couple of days, which can lead to superficial findings. Human Rights Watch stated that “ A 2021 publication analyzing 21,041 social audit reports between 2011 and 2017 across different sectors revealed that these audits generated a low number of findings on a range of issues, including child labor, discrimination, forced labor, freedom of association, and harassment and abuse”. This suggests the inadequacy of brief audits and or indicates that these audits are not robust enough to capture critical human rights abuses.

Remediation – There is a significant challenge in remediating issues that are identified during audits. Most of the time, the supplier or brand is responsible for acting on audit findings, but there is often a lack of commitment to rectify issues or root causes are not addressed in collaboration with the buyer. 

How ETI helps businesses go beyond audit

As a membership organisation, ETI has over 25 years' experience supporting businesses to understand what it means to “go beyond audit” and adopt a due diligence approach to identifying and addressing human rights issues across global supply chains.

The ETI Base Code is based on the conventions of the International Labour Organisation (ILO) and is an internationally recognised code of labour practice. All ETI’s work is structured around the UN Guiding Principles, enabling member companies to adopt a step-by-step due diligence approach. 

Our Human rights due diligence (HRDD) framework is just one of many practical tools supporting companies to do this. The framework provides a four-step due diligence process, enabling a beyond audit approach.

1. Access actual and potential human rights risks
2. Identify leverage, responsibility and actions
3. Mitigate risk and remediate workers
4. Monitor, review, report and improve

Our company members benefit from further, more detailed support. 

ETI membership supports company members to:

• Develop a human rights strategy – ETI has a framework aligned with the UN Guiding Principles that enables companies to adopt a due diligence approach to identify and address risks.
• Access good practice and expertise – ETI has been working with businesses for over 25 years. Members learn from others, adopt tried and tested approaches and utilise our specialist thematic and geographical expertise.
• Collaborate with NGOs and trade unions – our approach supports companies, NGOs, and trade unions to address workers' rights issues together, offering a safe space environment to work together to tackle the challenges faced by workers.
• Effectively respond in a crisis – support to react in times of crisis and do this collaboratively with peers and suppliers ensuring that effective due diligence is adopted in times of crisis
• Join ETI projects and initiatives – ETI leads initiatives to address specific issues impacting workers and companies in supply chains globally
• Get training and advice – ETI offers training which enables individuals new to human rights to understand the landscape and learn from peers.

If a company wants a credible, robust approach to identifying and addressing human rights risk, aligning themselves with the requirements in legislation such as the CSRD, EU CSDDD and German Supply Chain Act, audit alone is not enough, or rather, ineffective.

Interested in becoming an ETI member? Contact membership@eti.org.uk to fine out more about how to join ETI.