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Who Do Audits Really Serve?

Audits are ostensibly a necessary part of achieving a more compliant fashion industry, but they are also viewed as a necessary evil.

Why does every brand have its own set of audit demands that puts the supplier back to square one each time? Why is there such inconsistency in the level of transparency a brand demands? Who do audits really serve? And who has the time and money to manage this whole thing?

These questions and more were addressed at a Kingpins New York panel: “Beyond Auditing and Certification Culture,” featuring panelists Zaki Saleemi, VP strategy, sustainability and innovation, Crescent Bahuman; Jason Judd, executive director of Cornell University’s ILR Global Labor Institute; and Andre Raghu, CEO of supply chain due diligence platform HAP International. The panel was moderated Alden Wicker, sustainable fashion journalist and author of “To Dye For: How Toxic Fashion Is Making Us Sick.”

The case for audits and certifications has certainly improved since a Nike scandal made sweatshops a household word 20 years ago, but audit efficacy still has a ways to go. Consumer focus on worker conditions makes this especially urgent, but a lack of industry standards or mandates make achieving perfection a slippery prospect.

“If I were to write a book, I would call it ‘The Myth of Certifications: Shattered Dreams,'” said Raghu, noting that it’s never quite clear what the intent of the audits are and who they are serving in actuality.

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“It seems as though the certification industry is in a perpetual pilot. And when you try to get answers as to who it’s supposed to protect—is it workers? is it the brand?—it seems impossible,” he said. “How can labels exist in this space if we can’t get answers on what the programs are intended to do? The key is to address the end result of the process to eliminate redundancy.”

The problem is that just as the word “sustainability” is often open to interpretation—with every company defining it on its own (often self-serving) terms—the same can be said about auditing.

“The [audit] system is not a system,” said Cornell’s Judd. “It’s a confusion of programs. It is program-rich and system-poor.”

The other problem with the murky audit and certification world is that there can be too many people to point fingers at, with little to no accountability. “It’s like a circle of culpability—where each player just passes the blame to the next,” Judd said. “It’s like a game of musical chairs where chairs are never removed. All the players always find a place to sit again.”

In the finger pointing, brands and retailers call on national governments to enforce labor laws, governments point at employers who in turn complain about prices paid by buyers and ever-higher demands from workers and brand CSR teams, then brands blame retailers, industry competition, pressure from investors and even customers, saying ‘”they won’t pay more for things made in better working conditions.’”

Take the landmark suit against Tesco. “There’s plenty of blame to go around there,” Judd said. “The sourcing director and COO for brands buying in a notoriously lax regulatory environment like Mae Sot, Thailand should know what’s going on there. Saying ‘we didn’t know’ or blaming your $600-a-pop audit firm is not a serious response.”

And how accurate can an audit truly be when workers in a facility are “groomed and coached” by their bosses to tell auditors what they want to hear, said Crescent Bahuman’s Saleemi, noting there are “very few companies with zero tolerance for that sort of behavior,” making it more of an uphill climb for the honest ones. In the Tesco suit, “unlawful” conditions led one worker to accidentally slice his arm moving heaving machinery in preparation for a planned audit.

Panelists were optimistic about pending EU and other legislations that will hold companies accountable and put more pressure on supplier due diligence, but there is still skepticism about what happens in the interim before such mandates.

Eliminating redundancy

One of the biggest supplier gripes is having to do a big audit for one brand with all its finicky requirements, then having to do another for a different brand with its own set of criteria, or worse, the same. Sometimes, it’s literally the same worker from the audit company returning to the supplier a week on behalf of another brand.

In addition, said Raghu, there are just too many “checklist” items. “One brand says you have to have a door that opens in, while another says you have to have a door that opens out. Instead, we should look at the attributes the market feels are important.”

Vertical Pakistan-based mill Crescent Bahuman produces a million jeans a month, or 12 million a year, and Saleemi expressed frustration with the system. He stated that 21 percent of his working time is spent in audit with close to $75,000 to $100,000 dollars per annum spent carrying out 22 to 26 audits. “And that’s with just four to five customers. Imagine if you have double the clients and double the output.”

There have been efforts to streamline and reduce redundancies in the auditing process by forming alliances where companies can share information. Some brands and retailers will work with friendly competitors to share audit reports instead of doing their own from scratch from the same supplier. Or maybe they will give a “pass” to a supplier recently audited by a retailer they know.

Judd suggested the industry dig into the Social & Labor Convergence Program (SLCP) as a way to consolidate audits and remove redundancies. The program aims to eliminate audit fatigue by sharing comparable and verified high-quality data that increases transparency and eliminates audit fatigue to free up and redeploy resources.

“Scoring of factory performance on labor issues has to be based on outcomes and results, not inputs—e.g. does factory X have a policy posted regarding Y?” Judd said. “Cornell GLI is at work on 20 hard measures of factory outcomes that regulators, investors, brands and suppliers themselves and unions can use to measure more than compliance, but impact and real progress.”