Yesterday I had a good discussion with Bergson Wang, who has worked in the CSR (corporate social responsibility) departments of Adidas and Puma.
There is one thing both of us believe: using audits does not work if the goal is to improve working conditions.
The system is broken
Systematic audits is the solution chosen by the vast majority of brands that follow a social compliance policy. However, this system is not effective, for two reasons.
First, the information contained in the audit reports is wrong.
If I take a wild guess, here is my estimate:
- 30% of the time, auditors get bribed and ignore some “inconvenient” evidence.
- 50% of the time, auditors don’t look deep enough, or the problems are very well hidden — remember, CSR audits deal with people and papers; employees can be instructed to lie and records can be fake.
- 20% of the time (and I am probably optimistic), the manufacturer deserves to pass (with or without corrective actions to implement).
And why can’t most manufacturers respect the “compliance” criteria? Because their customers are constantly pushing for lower costs!
I pointed to a study of the perverse effects of social audits in a previous article.
Second, big companies are happy with the audit system.
They appoint a third party that conducts the audits. The suppliers pay for the audits. In some cases, the auditing company has to give a part of the fees back to the buying company, as part of the deal.
If the buyer has its own audit team, they still charge their suppliers for audits. It quickly become a profit center!
So it costs them nothing. And it gives them the information they need for their annual report: “90% of the subcontractors we use are 70% compliant or above, and these numbers are better than last year”.
What big importers would do, if they cared
What do manufacturers need? Guidance and gentle pressure to improve, coming from their biggest customers.
And it is starting to happen. Tchibo, a huge German coffee chain that also sells clothing, household items, and electrical appliances (purchased from about 1,000 suppliers in Asia), is leading the way.
Their new program was initiated with about 100 key suppliers in China and other Asian countries. It is entirely voluntary. Suppliers that accept to give it a shot are not audited for 2 years.
Manufacturers get advice from consultants, who come to the factory every 3 months (at the buyer’s cost). These consultants facilitate communication between the management and the staff of the factory.
If the factory owner takes this initiative seriously, it is believed that ultimately he will save money:
- No more audits to pay for this customer
- Better staff retention at CNY, a more experienced workforce, better morale and engagement, better quality, better efficiency…
You can read more about this program here.