The future of responsible sourcing: the role of the social audit

Social audits of global factories have been around for over 25 years now. A lot of time, money and effort were spent in early years on “check the box” exercises to ensure that every supplier signed the Code of Conduct, audits were conducted at all necessary sites, and that those sites submitted a CAP that confirmed all issues were “fixed”. The approach gave companies better visibility into factory working conditions, and helped reduce the most egregious violations, but the needle never truly moved on improvement until we shifted the discussion with factories to be more partnership oriented, began encouraging transparency and a continuous improvement approach to understand and address wages and hours, and required factories with severe issues to engage outside support for remediation – typically intensive, year-long programs focused on management systems improvement on both social and business performance. Even now, there is not enough of this work being done in global supply chains.

With the emergence of new due diligence requirements globally, there is increasing focus on the role of the social audit and an expectation for greater focus on remediation. After recent discussions with clients about what these requirements mean for their programs, a few words of advice:

1. Do not conflate monitoring and remediation. Audits and corrective action plans are monitoring, not remediation. Do not expect facilities to make sustainable improvement to critical issues if you are focused only on audits and CAP. Corrective Action Plans are defined as an audit activity, not advisory/capacity building, and for a reason. The primary objective of CAP is to provide a communication channel between the factory and its client to acknowledge the violation, and confirm that there is a plan in place to make corrections.
2. Social audits are not the only form of monitoring. With the emergence of due diligence requirements comes the need for companies to create a formal risk assessment process, and a tailored approach to monitoring based on the supplier risk profile. For lower risk suppliers, consider lighter touch approaches, such as SAQs. For higher risk suppliers, consider more in-depth assessments and engagement.
3. The tool you use matters. For companies that use custom audit tools, many of these tools are not updated with any regularity to reflect emerging trends, risks, and best practices. Companies need to question whether there is value in continuing to maintain custom audit tools, or whether it is a better approach to transition to a tool managed by a third party, such as the ELEVATE Responsible Sourcing Assessment (ERSA) tool, or an industry scheme assessment. There is also a benefit to using a tool that is user friendly and familiar to auditors, as it allows auditors to spend less time navigating the tool and more time conducting the audit.
4. …but don’t rely on the tool alone.There are other factors that may be even more important to the audit process, including how you communicate requirements to suppliers, whether adequate staff days have been allocated, and auditor quality and training.
5. Remediation approach needs to be strategic and impactful.Historically, Responsible Sourcing has been monitoring–centric, with capacity building and remediation engagement ad hoc, at best. New regulations require a greater balance between monitoring and remediation, and demonstration that program efforts have addressed the risks identified. A few options for a strategic approach to remediation:

• • When critical issues are identified, consider deep dive remediation programs as a condition of ongoing engagement. In some situations, this may be offered in place of immediate termination.
  • Consider company relationship to supplier. For strategic suppliers where the relationship is critical to business success and continuity, take steps to better understand factory management systems and level of sophistication, and support capacity building where gaps exist.
  • Consider topical, scalable capacity building solutions that may correlate to improved compliance throughout the factory, such as human resources management, worker-management communication, gender inclusion, and effective grievance mechanisms.

6. Get out of your comfort zone. As Responsible Sourcing professionals, we are in a period of unprecedented volatility, and there is a clear gap between new requirements and current approach. Do not be afraid to shed ways of working that no longer serve company need. Incremental adjustments are not enough, now is the time for bold thinking and new strategies.