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Supply Chain News: Supplier Audits for Labor and Environmental Practices often Scammed, Human Rights Watch Report Finds


Deception, Collusion, Disincentives

Nov. 16, 2021
SCDigest Editorial Staff

Are supplier audits, primarily in developing countries relative to adherence to a brand company’s requirements for working conditions, environmental practices and more, largely sham exercises riddled with deception, collusion and ineffectiveness?

Supply Chain Digest Says...

To amend unfair buying practices, and improve the utility of social audits overall, HRW called for further legislation, such as Germany’s supply chain due diligence law.

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That is the conclusion of a new report from the Human Rights Watch (HRW), a global organization that tracks and protects human rights in some 90 countries, titled “Obsessed with Audit Tools, Missing the Goal.”

"The social audit and certification process is riddled with conflicts of interest, loopholes, and other problems that render it an inadequate tool to ensure respect for human rights and environmental standards," the report alleges.

The report is based on interviews with 20 current or former auditors, 23 suppliers and brand representatives in the apparel industry, 46 garment workers in Myanmar and India, and representatives from worker rights organizations.

One auditor told HRW that “There a is a lot of elaborate worrying and planning if you really want to do something deep [audits],” adding that “It takes time. And time is not part of this whole game. They [the auditing industry] get all obsessed with their audit tools and their reports and they miss the goal which is to uncover the abuses.”

The new research found that when a suppliers know an audit is coming they often collude with audit firms to remove signs of abusive practices before the inspection is conducted.

Since the brand companies often require that vendors pay for the audit out of their own pockets, it encourages additional collusion between the manufacturers and the auditing firms, the report noted.

One auditor told HRW that “I don’t think brands even read the report. I did an audit and one year later I met someone from the brand and it was clear that they weren’t even reading the audit report. I don’t see their will to improve the working conditions here.”

The research found that human rights risks increase when brands are squeezing suppliers on prices, which can impact working conditions at a factory.

“Practices to drive down prices, demand discounts, or reduce the time needed to manufacture products merely encouraged suppliers to attempt to game the system,” the report says.

Perhaps surprisingly, the report says brand companies often are not at all that interested in actually fixing problems at vendor factories, encouraging suppliers to provide deceptive information.

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To amend unfair buying practices, and improve the utility of social audits overall, HRW called for further legislation, such as Germany’s supply chain due diligence law, which aims at ensuring companies comply with human rights with respect to their business activities throughout their global supply chains.

HRW said social audits must not be treated as substitutes for regulatory compliance, and future requirements should include supply chain disclosure, independent brand grievance mechanisms, fairer buying practices, publication of social audits and corrective actions, clear processes for supplier support, and ultimately a responsible exit from a supplier when necessary.

The report ends with HRW arguing that, given these significant limitations and challenges around the use of social audits and certifications to detect labor abuses in supplier factories, “policymakers and regulators should not treat social audits and certifications of suppliers as sufficient proof of human rights and environmental due diligence by brands and retailers.”

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