Over the past 15 years, I have been shocked by the large-scale malpractice that social compliance audits represent. I wrote about it in several articles:

• Social compliance audits in factories: perverse effects
• Social Compliance Audits: Fear, Lies, and Corruption
• Brands and Retailers: Please Stop Doing Social Compliance Audits in Asia

The auditing process is still badly broken. Most social audits are done for retailers and brands that want to be able to say something like “85%% of the factories working for us have scored at 70% of higher”. Suppliers are typically audited yearly. If a factory scores poorly, they can lose a lot of business.

As I reflect on why the situation hasn’t markedly improved, I concluded that TIC (Testing, Inspection, & Certification) firms should no longer be sent to conduct those types of social compliance audits.

Why TIC firms shouldn’t be doing social audits

There are several reasons for this.

But, first, we need to realize that it was not always this way. About 25-30 years ago, social compliance audits were done in far smaller numbers, and they were mostly conducted by the buyer companies themselves or accounting auditing firms (typically, KPMG, Price, Deloitte, EY). Then, as demand and pressure on prices grew, it fell into the lap of the quality auditing firms.

The problem is they are not a good fit for that type of work. Let me cover the case of social audits in China, since I have much more experience in that country, but many of the issues are the same (or worse) in countries like Bangladesh, Vietnam, etc.

1. No tangible evidence to look at

Social compliance auditing is quite different from management standards auditing. When you audit a manufacturer against the requirements of ISO 9001, for example, you look at their documents and the way they implemented the management system, but you can also look at the real practices on the factory floor. You can look at tangible evidence such as stickers on cartons, segregated materials, automated test equipment, whether a piece of machinery seems to be well maintained, and so on.

When you audit a factory for social compliance, in contrast, it’s pretty much all document-based. And the only other piece of evidence often is interviewing people. The problem is it just doesn’t work.

In a country like China, it really does not work.

Why?

Before an auditor comes and visits the factory, the workforce is briefed. They are strongly encouraged to tell certain stories to the auditor because the factory already knows the sticky points, such as the number of days off, the number of working hours, and so on.

The factory can also simply ask certain people not to come to work that day, or they can ask them to work in another place that is outside the scope of the audit. Problem solved.

Now, when an auditor picks, say five people, everybody can see who these five people are. And then, if something bad comes out in the report based on interviews, well, these 5 people will expect to be blamed.

So, what incentive do they have to tell the truth anyway? That is a very serious issue.

I wrote about this in The Value of Worker Interviews during Social Compliance Audits

2. Auditors don’t look for trouble, they are not investigators

What if an auditor has doubts? Very often, an honest auditor will feel that people may be lying. However, without tangible evidence, what should they do?

It depends on their training and the company’s procedures. And I am afraid it is managed in the same way as the auditing of management system standards (e.g. ISO 9001, ISO 14001, and so on). If no evidence that people are lying can be found, the auditor’s subjective feelings won’t be mentioned in the report.

ISO 19001 is clear – an auditor’s job is to obtain evidence and to evaluate that evidence objectively to determine the extent to which the audit criteria are fulfilled. No place for subjective feelings. The auditor is not supposed to act as an investigator. What they do is mainly a clause-by-clause check that everything is alright.

3. Politically sensitive topics get in the way

In China, certain topics are rather sensitive. For example, are certain workers coming from a certain Western province, and are they actually enrolled by force? That would be, if proven correct, a serious case of forced labor.

Now, let’s look at the realities on the ground. Most of the auditors on the ground are local. At least ninety-five per cent of them are Chinese citizens. What do they think of that? Are they actually going to report it?

Let’s assume they actually report it. I believe the biggest issue will be one level up. The technical supervisor who will review the report is actually likely to censor it for a simple reason. These audits are conducted predominantly by non-Chinese companies, and these same Western companies are authorized by the Chinese government to perform certain lucrative activities in the country. For example, they are accredited by the national accreditation body to perform certain laboratory tests, and certain activities even require a license.

Now, are these companies willing to take a risk? My opinion is, they are quite likely to remove any mention of a politically sensitive topic in any of their reports issued in China, in a preventive manner.

That doesn’t mean the Chinese government needs to ask them anything. They have an idea about the risks they run. After all, their whole business is about reducing risk. So, I am pretty sure they would systematically self-censor, and the client who receives the report will not know of certain findings.

4. A lot of business is at stake

A lot of retailers and brands, typically relatively large or very large companies, are those that book most social audits and require at least a certain grade on their own checklist or on a checklist developed by BSCI, Sedex, ICTI, WRAP, or some similar organization. No manufacturer that gets a bad grade is allowed to work for them.

That puts tremendous weight on these social audits. How can the auditing company keep their teams on the ground clean?

I believe it is impossible. End of discussion.

I just do not believe that a team performing thousands or tens of thousands of social audits a year, with a high amount of money at stake, can be kept clean.

Some of the auditors will undoubtedly turn a blind eye to obviously manufactured records and to inconclusive interviews that seem to be intended to deceive.

Imagine what it looks like from the factory’s perspective. They have potentially millions of dollars of orders at stake. Are they going to let an auditor come and give them a bad grade without trying to change their mind, whatever it takes?

Asking the question is answering it.

To make matters worse, many so-called consultants help the manufacturers by preparing them for those audits. These consultants often pick which TIC company will perform the audit.

(Yes, that’s right. It’s often possible, and it means these auditing firms are not independent. They are often paid by the manufacturer and picked by the manufacturer. How crazy is that?)

Well, that’s the same good old ISO 9001 certification process which has been badly broken for decades. Anybody who has had to perform due diligence on quality management systems in China will tell you that most certifications are not worth the paper they are printed on. And that’s not true only of China, of course.

Why would well-meaning companies reproduce that with social audits? I just do not understand.

So, if TICs are not involved, what should retailers and brands do?

First, they need to drastically reduce the number of audits they book. They need to focus their budget on providing guidance and support to their suppliers. They need to ensure they follow responsible purchasing practices.

Second, they can find talents in other industries. For example, as Volkswagen announced recently, they turned to companies outside the TIC industry for a highly sensitive audit:

The actual audit execution was undertaken by a Shenzhen law firm with extensive experience in social audits and international and Chinese labor law and accompanied on site by Loening [note: that’s a company focused on “Human Rights & Responsible Business”].

I wrote a bit more on that topic on Are Social Compliance Audits Useful in China?, for further reading…