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Why Less Might Be More When it Comes to Factory Audits

In a globalized supply chain where clothing production is typically outsourced to developing nations with low-wage labor and shaky social and environmental protections, audits have become a non-negotiable means of managing risks and protecting brands from potential scandal. With multiple, often disparate standards for assessing compliance, however, it isn’t unusual for one supplier to field dozens of audits from different brands in a single month, draining time and money that could be better invested elsewhere.

Audit fatigue is a huge problem,” Janet Mensink, executive director of the Social & Labor Convergence Program (SLCP), told Sourcing Journal. “There is a broad consensus that auditing alone does not improve working conditions yet, until now, a disproportionate amount of resources [has] been dedicated to auditing.”

The SLCP emerged at the tail end of 2015 after a group of garment industry stakeholders, including the International Labour Organization’s Better Work program, Fair Trade U.S.A. and Worldwide Responsible Accredited Production, decided to tackle the twofold problem of reducing the audit burden on manufacturers and freeing up millions of dollars every year for improving labor conditions. Their efforts led to the creation of the Converged Assessment Framework (CAF), a robust, harmonized tool meant to replace repetitive and frequently duplicative social and labor audits. Already, the SLCP can point to its first “concrete” case studies of audit reduction at the factory level, Mensink said.

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“SLCP has helped reduce the audit burden and helped us redirect our resources toward supply-chain improvements,” said Abhishek Bansal, head of sustainability at Arvind in India. “So far during the past couple of years, we have already seen several of our clients accepting the SLCP-verified data in place of proprietary audits.”

Fatoş Hüseyinca, social compliance director at Yesim Textile in Turkey, says the SLCP allows the company to carry out a self-conducted pre-assessment before actual verification by a third party, saving time and money. “During this assessment, we become aware of the issues that need to be improved and take action,” she said.

Though a platform is only as good as its adoption, momentum for the SLCP is building. Earlier this month, 33 brands and retailers, including Adidas, C&A, Gap, H&M, Target, REI, Zara owner Inditex and VF Corp., publicly stated their acceptance of SLCP-verified assessments in lieu of conducting their own social audits on suppliers. More crucially, the Sustainable Apparel Coalition (SAC), the fashion industry’s leading alliance for sustainable production, has integrated the CAF “as the backbone” of its Higg Facility Social & Labor Tool, which scores manufacturers on criteria such as working hours, wages and benefits, employee treatment, community empowerment and health and safety.

“One of the bigger challenges in the past is that when you have dozens of assessments, you often also, coming out of those, have dozens of different plans on how to improve,” Jason Kibbey, CEO of Higg Co, the SAC spinoff that manages the Higg Index, previously told Sourcing Journal. “If customers are making 10, 20, 50, 100 different types of requests, none of those impact areas actually improve. And so what we want is to help facilities have one single plan for improvement that all of their customers recognize.”

Covid-19 has only accelerated the need for efficiently sourced social and labor data, Mensink said, particularly now that resources across supply chains are being stretched to their breaking points. Because suppliers own their CAF results, they can readily disseminate information to their business partners and implement any plans necessary to address critical gaps the audits have identified. Indeed, the SLCP, which is operational in 30 countries, has seen a “steep increase” in the number of factories that have started assessments since August. By 2023, the SLCP hopes to be the foundation of some 25,000 verified assessments per year.

“Efficiency is at the heart of our vision and mission,” Mensink said. “The SLCP system has been set up to maximize data-sharing opportunities; this means facilities don’t need to do repetitive and time-wasting social audits as they can share their SLCP data with all stakeholders.”

REI, an SLCP signatory since the initiative’s inception, says its pilots of the CAF have demonstrated a scale of coverage, quality of output and integrity of process that “met or exceeded” those of its own proprietary audit tool. While the CAF is a self-assessment tool, the inclusion of an independent third-party verification process “results in a credible and reliable source of data against which we can easily map to our code of conduct,” said Lyn Ip, the outdoor retailer’s global head of supplier sustainability. Since the CAF is conducted annually and follow-up conversations are still needed to review results, REI’s level of engagement and communication with its suppliers has not shifted, she said.

“We have already begun to see the benefits of rolling out the CAF to our core supply chain, from reduced audit fatigue reported by supplier partner facilities to having the tool be a focal point of conversation that our partners lead with not only REI but all of their buyers,” Ip said.

Over time, she noted, REI hopes to be able to use aggregated SLCP-verified data to better understand issues not only in its own supply chain but also across the apparel, footwear and textiles sectors, allowing it to “support collective actions that result in sustained positive change for workers and their workplace environment” in a more systemic way.

Transitioning from proprietary audits to a standard-agnostic tool isn’t an easy ask of many brands and retailers. “It requires them to modify their internal processes and organization,” Mensink conceded. “For this reason, the pace of change has been different for every company.”

Then there is the criticism directed at social audits at large. Though audits, as a form of human-rights due diligence, are meant to cast a light on frequently obfuscated supply chains, labor groups such as the Clean Clothes Campaign say “corporate-controlled, for-profit auditing firms whose priority is mitigating reputation risk” have afforded little more than a “fig leaf” that shields brands but fails workers.

“Corporate-controlled social audits are not only ineffective as tools to detect, report and remediate worker violations in apparel supply chains, but can even exacerbate dangerous working conditions and obstruct, delay and/or undermine more credible and effective remedial measures,” Christie Miedema, campaign and outreach coordinator at Clean Clothes Campaign, wrote in a 2019 report. “By relying on inadequate methodologies which produce flawed, unverifiable outcomes, these audits provide false reassurances around worker safety and deflect attention away from the underlying mechanisms and power imbalances within brands’ supply chains, which often contribute to the violations rather than preventing or mitigating them.”

Though one of the “new kids on the block” in the social compliance landscape, the SLCP elects its council members from the project’s 200-plus signatories, creating a governance structure that is “heavily enterprise-dominated with no active trade union representation” and raising the question of how to ensure the “quality, reliability and veracity” of its data.

“The SLCP’s main source of information is data provided by factory management, which can stand in the way of identification and documentation of labor-rights risks and violations,” Miedema said. “SLCP has developed a verification oversight system, but it remains unclear to what extent this mechanism will be capable of preventing the same mistakes as made by similar mechanisms in the past.”

Auditing’s critics are correct that a multitude of factors can jeopardize the efficiency of social and labor assessments, Mensink said, which is why data quality is a “top priority” for the SLCP. The project, she notes, invests “significant resources” to safeguard against such risks, working with a verification oversight organization (VOO) to ensure that all SLCP-approved verifier bodies and verifiers meet a “strict set of criteria and closely follow our verification protocol.” The VOO also conducts a range of quality assurance activities.

“We are also always evolving and enhancing our policies to further enhance quality and to be alert to the issues of the day,” she said. “All of the SLCP’s policies and procedures are publicly available on our gateway: we encourage stakeholders to read our verification protocol and our quality assurance manual, and to engage with us directly if they have feedback or suggestions.”

Ultimately, the SLCP can help brands become better companies, Mensink said. Besides cutting back on audit redundancy, it also empowers suppliers “by putting them in the driving seat of their social and labor assessments” and providing a “strong foundation” for dialogue between brands and manufacturers when it comes to remediation and follow-ups.

“Overall, by switching to the SLCP, brands free up resources at both brand and manufacturer level that can be reinvested in activities to create lasting improvements to working conditions,” she added. “For the fashion industry as a whole, the SLCP can be a foundation for greater collaboration, transparency and better buying practices.”