Christian Ewert, Former President, amfori and current Global Director of Trusted Experts on Due Diligence (TEDD)
Andre Raghu. Former President of Global Sustainability Services, Intertek and Founder of HAP Int’l
Sophie Zinser, Senior Director of Worker Engagement at Labor Solutions
James McMichael, Former founding partner of Elevate and Founder of Mosaic Responsible Supplier Resource (RSR)
While the world of social auditing continues to be scrutinized for its shortcomings, the social audit industry continues to grow as European and North American regulators pass and enforce corporate “Due Diligence” laws. Add to this, the intense pressure from anxious stakeholders related to ESG reporting and performance—it’s safe to say social auditing and measurement are here to stay. The truth is social auditing, if done right, is required to meet the definition of due diligence as it is a vital tool for remediation.
The webinar with this expert panel of “Pros” turned out to be both insightful and compelling. Below is a brief summary of the questions posed to the panelists and their responses.
James McMichael has 20+ years of expertise working on supply chain social and labor issues and founded Mosaic RSR as the leading support platform for suppliers and buyers. This dynamic platform is a living resource with up to date local and national laws, mapped to international labour standards and supplemented with localized improvement guidance and remediation support. Prior to launching Mosaic RSR, James was a founder and managing partner at ELEVATE Global, a leading ‘boutique’ firm specializing in sustainability support services (strategy consulting, supplier assessments, training, and remediation support).
Andre Raghu is Chief Executive Officer of Boston-based HAP. HAP is a global supply chain due diligence and strategy company that uses proprietary deep learning technologies to lead the supply chain’s largest skills-based dynamic assurance network. Andre is a prominent industry thought leader in the field of supply chain due diligence strategy and sustainable development goals for global trade. His industry work has crossed multicultural as well as multilingual barriers, impacting legal norms, industry standards and improving overall working conditions across the supply chain. Mr. Raghu is well noted for his supply chain standards strategy work with US Customs and Border and Protection, US Department of Labor Wage and Hour Division, United Nations, McDonald’s Corporation, The Walt Disney Company, Walmart, Costco, Target, JC Penney, Marks and Spencer, Mattel, Nike, American Apparel and Footwear Association, Toy Industry of America, Ralph Lauren, Exxon Mobile, HP, Motorola, IBM, Google and more.
Sophie Zinser is Senior Director of Worker Engagement at Labor Solutions and leads their Worker Survey and Grievance tools, human rights due diligence consulting, and supports organizational strategy. Labor Solutions has spent the last 9 years focused on improving supplier and worker engagement to encourage local ownership over global data and build resilient supply chains through educating, connecting and engaging workers and suppliers. Founded in 2013, Labor Solutions is now active in over 25 countries serving more than 1.5 million workers and dozens of global brands + local suppliers.
Q: Is what has evolved as the social auditing industry good enough? Has it met the expectations of stakeholders?
A: Summary – In some ways and for some stakeholders it has met expectations. Somebody must be deriving value from it based on the amount of resources being spent. Seeing that such programs are directed (if not paid for) by global brands that are committed to this framework. However, based on the media and consumer activism, it’s very clear there is more to be desired from these programs.
The panelists agreed that this is due to a foundation and deep-rooted misalignment between stakeholders with regards to intentions. There is no alignment on purpose, goals and intentions for so-called ‘social audits’. For example, are social audits intended to protect a brand, protect workers, help factories improve, keep the audit business flowing, appease a buyer and keep orders coming, or to prove that offshoring is a mistake? For this reason, meeting expectations across all groups is near impossible and leads to overselling and over-promising what social auditing is and what it can deliver.
Q: What are your highest priorities in the current industry’s trends?
A: Sophie – The lack of worker voices involved in the process and the importance of building trust among all stakeholders. Worker-centric social audits are the rarity, not the norm. Therefore, workers see little value in participating with sincerity with social auditors. They don’t see the change that comes from them. The relationship between auditors, brands and workers is key.
A: James – Transparency. Record falsification and auditor bribery is a perfect example of where misalignment occurs. Most factories do not see auditing as a tool that can help them. Instead it is seen as a threat to their business. They also see it as a game, which in turn, can result in the auditor believing it’s a game. There must be alignment on intentions between all participants in the program. Otherwise a variety of negative systems arise that need band aids. Another big structural issue has been the migration to “factory-select and pay” programs along with report ‘equivalency’. Following the lead of many certification programs, brands over the past 15 years have migrated to a model where the auditee (the factory/supplier) both selects the audit firm that audits them and negotiates and pays them directly. This model has led to a race to the bottom on pricing, integrity and quality. It has also forced social audit firms to market and sell their audit services directly to factories. If factories don’t pass, they don’t get used again. This is a huge and obvious problem that needs to be dealt with.
A: Andre – There exists a lack of checks and balances. Many large social auditing firms are actively selling their services to factories, and then turning around and providing social audits for brand customers in a blatant conflict of interest and process integrity. APSCA has yet to enforce such conflicts of interests and may not be the right organization to do so anyway as it lacks independence as an industry association controlled and paid for by social auditing firms. However, they need to be a willing, proactive and outspoken partner in building social audit industry credibility. Wreckless implementation is another one. We continue to see the bundling of social standards into broader sustainability certification schemes. They don’t belong there as they are not being managed with credibility.
Q: How closely is what exists today aligned with what HRDD regulators want – what is the gap?
A: Summary – There is serious need to align intent and impact when it comes to social auditing. With social auditing at the core of Social Labor Programs, the intentions of this type of monitoring can be disconnected from the impact of how auditing (and remediation in particular) is performed. It often lacks meaningful impact despite its intention to improve labor conditions.
Furthermore, while regulators have a variety of motivators including trade maneuvering, it’s very obvious that most of these laws are being introduced because what has been done voluntarily is NOT enough. What has improved has not kept up with the growing concerns and the depth of problem. Every stakeholder group is screaming for more and regulators have woken up. What remains to be seen is whether brands will merely double down on the same model that hasn’t worked. Will regulators be savvy enough to know the difference and enforce real improvements on the ground. If US Customs & Border Patrol is any indication, they are not impressed with the current audit-centric model, they want more credible and impactful efforts.
Q: What do you see as a viable future for the social audit industry? How are your organizations working toward this future?
A: “Coming back to where you started is not the same as never leaving.” Terry Pratchett’s
- Be very clear on what you want to achieve and build that with partners that share intentions.
- Work hard to get on the same page internally with your audit partners. Seek partners that are open to this and add value to your intentions.
- Communication and tone with your suppliers is huge. Build respectful relationships that will serve to enhance the tackling of difficult issues together.
- Study what works and what doesn’t—we already know a lot and have experience to improve the system.
- Accept these are complex issues and a cookie cutter model built exclusively to be easy to implement doesn’t bring lasting value.
- Experiment, as the status quo is not good enough.
- Ensure your social audit reporting is a tool to drive improvement with the factory. It’s okay for the report to highlight risks, but it ALSO needs to facilitate understanding and positive action. Also, read the reports!
Stay tuned for more information on our next “Tips from the Pros” coming up on May 25th, with TEDD, Trusted Experts on Due Diligence (by VECTRA International).