Corporate social responsibility initiatives should look closely at Wal-Mart’s new supplier policies, announced earlier this week. To get subcontracting under control is essential if they are to retain their credibility. Otherwise one can ask with much justification whether social audits, certifications or other reports are always really reliable.
When a supplier that has been audited and approved by a brand or retailer moves production to another site without even notifying the buyer, we are dealing with deception which also pulls the rug from under any social audits or certifications. This happened in Bangladesh when orders were moved without authorisation by a supplier to the Tazreen garment factory. A devastating fire at this workplace took over 110 lives last November.
Wal-Mart’s new instructions to suppliers should put an end to this kind of wild subcontracting. If a supplier gets caught, the game is over and the business relationship ends.
Problems will of course remain even if subcontracting comes under control. Supply chains can be long, from commodities to product components, before work reaches audited plants and factories. Tracing is difficult, but new RFID technologies should make it easier. Swiss specialist retailer Switcher, a leader in corporate responsibility, already enables consumers to trace the history of the garment which they buy by entering its label number on the company’s website.
Wal-Mart’s new rules are a major step in the right direction.
In Pakistan, where fire devastated the Ali Enterprises plant in September, leaving well over 200 garment workers dead, a private auditing firm had granted the factory an SA8000 Certification only weeks earlier. Neither SAI nor the controlling agency SAAS knew this. Also here, subcontracting was involved. The large Italian company had outsourced the social audit to a local contractor.
In both cases the system did not function and control was lost. Wal-Mart has acted swiftly, will the CSR schemes and initiatives and the social auditing community follow suit?
Auditing companies subcontracting out their social audits is reportedly common in the industry. In most cases this would probably not cause problems, and the audits be professional and correct. Still, there is the question of lacking controls, oversight and responsibility. The tragic catastrophes in Pakistan and Bangladesh should be reason enough for even radical action.
Schemes and initiatives should consider whether not also subcontractors would have to be authorised by the control structures that have been set in place. This also means that auditor training and competence would be better secured. There may also be countries where conditions are such that reliable auditing and this also certification is impossible.
Through my engagement in SAI, I have suggested that the importance and status of theSA8000 certificates should be raised. The certificates should be securely printed and individually numbered, and the numbers should be registered centrally first when an empty certificate is given to a certification agnecy and then again when it issues the certificate to a supplier workplace. This would tighten controls, define where responsibilities for certifications are, and protect the system agains fraud and abuse.
I have also suggested that social auditing systems should consider learning from financial auditing, where auditors are both qualified and prepared to follow a company even between the audits. This would also mean that management would have a discussion partner when taking corrective action and launching other remediation activities.
Yes there could be conflict of interest issues at times, but it would still be better than letting situations deteriorate between the snapshots that are taken during the days of audit. It would of course add to costs, but in many cases this investment would be necessary. On the other hand it will be supported by the ongoing work within GSCP to drive convergence of these schemes and initiatives and cut the number of audits through a built-in mutual recognition of reports and certificates.
All this does not mean that brands and retailers would be able to give up a direct involvement and monitoring of conditions. Already the UN Guiding Principles expect them to apply due diligence in their supply chains which not even the most reliable audit schemes can compensate.
The most important thing would still be to involve workers themselves and empower them to participate in making sure that conditions are correct. How this is done when there is no trade union in place requires careful consideration, to ensure that it does not become an alternative to workers’ right to regular social dialogue and collective bargaining.