5 Step Guide to Effective Social & Environmental Audit ProgramsMay 07, 2019
Major human rights abuses can still be witnessed in global supply chains, today, with dramatic examples being easy to find online under the topics of modern slavery, forced labor, child labor, labor rights violation, etc. In this article, I outline 5 crucial steps to designing and implementing practical, relevant, and effective social & environmental audit programs.
The Status Quo of Social & Environmental Audit Programs
More and more industries set out social audit programs as a requirement in oder to address and prevent ethical problems in their supply chains. While this is a very positive trend, many of today’s social programs are still based on a set of fixed requirements, assuming that the same type of issue and same level of risk can be found throughout global supply chains. Some large industry alliances still focus on establishing “benchmarked norms”, intended to be applied to a wide range of different companies across different industries, located in different regions of the world.
Instead of performing hundreds of audits based on the same old checklist, often developed by expert parties located thousands of miles away, companies will increasingly need to bring flexibility to their social audit programs to address different levels of risk in different context and situations. After years of factory social audit programs based on third-party voluntary schemes such as SA 8000, several new industry-specific initiatives are currently in development to address social issues in complex global supply chains with new challenges to be addressed. Some outstanding examples are:
- Seafood Task Force
- Responsible Minerals Initiative
- OECD Due Diligence Guidance for Responsible Business Conduct
- Social Issues in Seafood – RISE Roadmap for Improving Seafood Ethics
Designing and Implementing Practical, Relevant, and Effective Audit Programs
From my experience I can tell that, in line with Jack Ma’s vision for the future of manufacturing, the future of audit and inspection programs is based on a flexible approach focused on a clearly identified set of relevant risk factors and priority requirements defined for and adapted to each of the links in the supply chain. I believe that flexibility, responsiveness, and efficiency in the implementation of social audit programs is key to ensuring successful implementation with a clearly positive and measurable impact over time.
The following 5 steps are useful guidance for social audit programs to be successful and effective in addressing clearly identified social issues.
1. Understand the Risk Factors within Your Specific Supply Chain
While this first step appears to be logical and really straightforward, it is important to realize that only very few companies and even corporations have a clear understanding of the potential risk factors within their supply chains. Paying an independent auditor to check if a factory has appropriate exit doors or working fire extinguishers is one thing. Understanding the recruitment process implemented by a supplier, on the other hand, is far more complex—especially if migrant workers are involved.
Therefore, spending time to identify the different risk factors that need to be addressed at each stage of the supply chain is essential to developing and implementing an effective social audit program that will focus on clear objectives and measurable performance targets.
2. Define Simple and Clear Objectives with Measurable Targets
This second step follows directly from the previous one and is just as obvious. However, you would be surprised how many industry initiatives start working on the development of a long, complex set of requirements without a clear target or measurable objectives. Most initiatives assume that a perfect world needs to be achieved with the immediate eradication of human or labor rights abuse. While this is commendable, of course, the lack of clear objectives, measurable targets, and precise time frames all too often results in the initiative failing to deliver any significant changes on the ground.
3. Involve Your Suppliers in the Development of Social Audit Requirements
Simplicity and focus are key to successfully implementing and scaling any social audit program. Global supply chains are complex, and so are manufacturing processes and quality control. Therefore, adding complexity is not an option when efficiency and competitiveness are crucial for all actors in today’s global supply chains. On the contrary: to ensure the buy-in of all suppliers along the supply chain, social audit requirements need to be easy to understand and practical to implement. This is best achieved by actively involving suppliers in the development of social audit requirements.
4. Pilot Your Scheme with a Significant Number of Suppliers
Companies rely on pilot testing to link development steps with implementation and communication steps. Similarly, any social audit program should be considered as a continuous process with constant pilot testing and reviews of the program’s effectiveness. There is no point in implementing a program which does not demonstrate measurable improvements. At the same time, no program can consistently improve performance without being assessed, revised, and improved periodically.
5. Invest Massively in Raising Awareness & Communication
Today, the primary objective of most audit programs is to add value to a business through … communication; communication with clients, stakeholders, investors, etc. Managed communication ensures a certain level of ‘controlled’ transparency, which is the main reason for most corporations to publish a sustainability report, today. The successful implementation of an audit program will result in social performance improvements that can be measured and communicated to all the relevant internal and external stakeholders, ensuring that their expectations are met or, even better, exceeded. Appropriate communication can support improved understanding of the program’s objectives amongst supply chain partners. It can be used as a tool to motivate participants and ensure that expectations are adequately managed, in line with the business’ strategic objectives.
The comparison of an audit program with an IT company, which I initially suggested, is, of course, far-fetched and abstract. Nevertheless, it looks like there might be some similarities: first, develop a strong program, make it look simple and practical, test it to make sure it performs above expectations, and, finally, communicate extensively.