Auditing working conditions

Breaking through the conspiracy of silence

Auditors helping factory managers to falsify records on wages paid and working hours. Workers trained to provide the ‘right' answers when asked how they are treated. Child workers knowing that when they hear certain music being played, that means the auditors are coming and they need to leave by the back exit. Where did ethical trade all go so wrong?

From the mid 1990s onwards, retailers and brands rushed to commission audits of their suppliers' workplaces in a bid to prove to consumers and campaigners that their products were ‘ethical'. The third-party audit business is now estimated to be worth around US$50 billion (£25.5 billion), with companies typically devoting up to 80% of their ethical sourcing budget on auditing alone.

But there is overwhelming evidence that the predominant approaches to auditing that companies have adopted, which typically involve commissioning third party auditors to carry out inspections, followed by ‘corrective action plans', are failing to deliver any real change to workers' lives.

Instead, the value of auditing has been undermined by low quality inspections, poor value for money, unnecessary duplication of audits, inconsistent corrective action plans and, perhaps more worryingly, a rapid growth in ‘audit fraud'.

In fact, audit fraud is now so common that a whole new industry has developed to facilitate it. For example, factory managers in China can now buy software packages that allow them to keep multiple sets of records, or get trained on how to falsify their records. The reality is that suppliers are developing an ever more sophisticated and wide range of practices, all with the single aim of hiding the truth and presenting an alternative reality to suppliers.

Meanwhile, workers around the world continue to be bullied and harassed, forced to work excessive hours, for wages they can barely survive on.

Where did it all go so wrong?

Our members have identified several reasons why audits are not delivering change for workers - and in some cases are actually having a negative impact.

Inadequacy of most audit methodologies

Time and again, audits fail to reveal a true picture of what conditions are like. Most audits represent a snapshot of a given point in time - in other words, they don't show the situation before or after an audit. Not only that, standard audit methodologies rarely allow for digging deep to discover the root causes of workers' rights violations, or for assessing the risk of future violations. For example, a typical audit may reveal the existence of child labour, but it will not identify the reasons why children are working.

Weak quality control over external auditors

Many companies employ external, or ‘third party' auditors to carry out site inspections. In many cases ethical trade managers have limited budgets available to pay them, so quality is compromised. They also often lack the bargaining power to get the individuals they want and in any case, there is a limited supply of experienced auditors with the necessary range of skills required.

Too many audits

Suppliers have been complaining for years about the amount of audits they have to go through, which has contributed to ‘audit fatigue.' The problem is that many companies won't accept audits commissioned by other companies, sometimes because they use different codes. To help combat audit fatigue, the past few years have seen the emergence of industry-wide audit sharing initiatives, such as SEDEX.

Use of audits to ‘police' suppliers

Many companies - particularly US-based brands and retailers - continue to adopt a ‘zero tolerance' approach to auditing, threatening to drop suppliers if they fail to make the grade. This has encouraged suppliers to deceive auditors and brands in order to retail business.

Audits help diagnose - they don't cure

But the main reason why audits are not driving change to workers' conditions is that they were never intended to do so in the first place. Companies need a tool for diagnosing workers' conditions, but to create lasting changes to workers' conditions must involve work at a whole range of levels, including examining their buying practices - eg, the prices and lead times they give to suppliers; helping suppliers build effective management systems, and encouraging them to recognise and engage positively with trade unions.

The future: Beyond auditing

Retailers and brands must continue to keep track of where their products are being made, and of the working conditions of the people who make them. But we need urgently to develop better and more intelligent ways of understanding workplace labour conditions, and what steps can be taken to prevent labour abuses from occurring in the first place.

In the next few years we aim to identify the factors which contribute to or hinder clear understanding of working conditions, and to develop ways of helping companies to develop better intelligence about what's really happening in their supply chains.

We will also pioneer new approaches to ethical trade that build supplier companies' capacity to provide a decent working environment, and that remind them that their workers are their most valuable asset.

What skills do auditors need?

In our members' experience, good auditing teams should have:

  1. Male and female members —It is particularly important that inspection teams include women where the workforce is predominantly female
  2. Knowledge and understanding of the production process, the materials used and how production records are kept
  3. An understanding of wage systems and record keeping
  4. Knowledge and understanding of the ETI Base Code, relevant international labour standards, applicable laws and regulations
  5. Knowledge and understanding of the local situation, including relevant local culture or customs
  6. Knowledge and understanding of health and safety standards and practice, including industry-specific standards and best practice
  7. The ability to speak the language/s used by the workers concerned
  8. The ability to record and report in a transparent and professional manner
  9. The ability to conduct effective interviews — particularly important with worker interviews
  10. The ability to detect non-verbal cues from interviews (for example, body language, facial expressions)

Workplace audits: what goes wrong?

  • Weak quality control over auditors
  • Poor value for money
  • Multiple audits of the same supplier
  • Inconsistent corrective action plans
  • Failure to identify serious labour problems
  • Prevalence of fraudulent practices.