If CSR is to have a future, organisations must fix the problem of audit failure…
The £28 T-shirts produced for book charity Worldreader proclaimed “girl power”, but the sentiment rang hollow for the Bangladeshi machinists sewing them. As the media revealed in March this year, many were paid as little as 42p an hour and were working in a culture of sexual harassment and regular beatings.
It would be an embarrassing story for any brand, but for this one it is particularly awkward in the context of social auditing says Dominique Muller, policy director of campaigning charity Labour behind the Label. “The brand was considered a leader in terms of working conditions in its factories,” she says. The supplier Dird Composite Textiles was monitored by the Fair Wear Foundation, a Dutch multi-stakeholder initiative that is classed as “better than most” in its operations.
For decades, major brands have used auditing of factories to mitigate human rights risks in their supply chains. But frequent cases of violations across sectors, and in both emerging and developed economies, are forcing a rethink.
“Corporate social responsibility [CSR] has had 30 years to prove itself, and it has failed,” says Greg Asbed, co-founder of the Fair Food Program in Florida. The international self-regulation policy became part of an ISO guideline in 2010, and has been adopted and adapted across various national regulations.
Muller agrees. She is in regular dialogue with brands about abuse in garment factories, but tends to receive a PR-friendly response citing their code of conduct, regular audits and that they strive to ensure that ‘all workers are treated fairly’. “It’s meaningless,” she says. “Industry has voluntary audits and voluntary standards. And for the brands, that means they can continue business as usual.”
Audits have been credited with raising standards in some locations, but they are unregulated, vary widely in quality and length, and are highly susceptible to corruption and cheating. And they only provide a snapshot of a workplace.
Professor Andrew Crane of University of Bath School of Management has been studying social auditing for decades, and over five years ago has been pointing out how they fail to detect forced labour in UK construction and food production supply chains. His research has even found the commercial eco-system of compliance itself was fuelling ‘soft forms’ of corruption. He says audit firms, financially reliant on their clients, were “implicitly or even explicitly encouraged not to detect incidents of forced labour”, and were reluctant to report cases to the authorities for fear of losing business.
His research has found forced labour to be most prevalent at and below tier 4 of the sub-contracting supply chains in food and construction sectors, where formal business intersects with informal supply of labour.
Crane’s findings on auditing are no surprise to Shayne Tyler, group compliance director for Fresca Group, which supplies fresh produce to major supermarkets. Tyler has been battling exploitation in agricultural supply chains since the 1990s, despite the sector being regulated through requiring temporary worker licensing. Over the years Tyler has helped hundreds of people escape exploitation, ranging from non-payment of wages or illegal recruitment fees to full-blown human trafficking. He says the vast majority of his discoveries happened outside of an audit. “We use the same growers as our competitors, but how come we were spotting these problems and they weren’t?” he says.
Tyler admits audits “have a positive but limited impact”. Criminals, he says, are more likely to target organisations “that choose not to audit at all”. However, he urges businesses to get into the mindset of entrepreneurial criminals, who will quickly learn to adapt to whichever audit protocols are being used.
“For them, it’s a business model. Whatever you do, they will be finding ways to get around it,” he says.
For example, many audits now check accommodation details to see whether large numbers of workers are at the same address – an indicator of exploitation. But Tyler believes criminals have wised up to this and are now sending workers from the same address to different factories to evade detection.
“The last time I found a house of multiple occupancy was 2008. I haven’t found any since, as the gangs know I’m looking.”
In poorer regions, audits are often circumvented by small business owners and local corruption. Crane and Associate Professor Vivek Soundararajan, also from the University of Bath, have been part of a multi-university team studying South India’s garment industry, and found many examples of “ubiquitous institutionalised cheating” of audits.
They found many factory owners are warned of inspections in advance, giving them time to coach workers and prepare the facilities. And some have strategies for surprise visits, such as playing the national anthem when the auditor arrives. This is a signal for temporary workers, or those that don’t have the right documents, to leave (brands often stipulate all workers must be on a permanent contract, but this rule is habitually flouted). “Everyone knows it happens,” says Soundararajan.
Workers are often complicit through fear of losing work or lack of awareness of their rights. Crane says: “Many workers don’t regard themselves as exploited. They often think that this is better than what they had before.”
Auditing does not detect systemic problems, such as sexual harassment or unsustainably low wages, adds Muller.
“There is a level of ongoing sexual harassment that is normalised,” she says. “But only serious cases will come up. And take Bangladesh: workers are being paid wages that are not adequate to live on. It’s totally outside the audit system, yet it should be [in it]. If you look at all the brands’ codes of conduct, they all mention living wage.”
But Crane believes that brands’ conflicting priorities can act as a disincentive for suppliers to improve. CSR departments expect suppliers to maintain expensive certifications and upgrade facilities, but procurement teams show little long-term commitment to a supplier and will continue to put pressure on prices. As a result, many suppliers view the auditing and certification process with cynicism.
“They see it almost as ‘protection money’ to stay in business. Some refer to it as ‘the mafia’,” Crane says.
Soundararajan adds: “There is a lot of fear at the bottom of the supply chain that business will move at any time.”
Giving workers a voice
Despite these problems, Crane says some brands are showing real commitment to tackling issues. Pilot projects are emerging and some organisations are experimenting with apps that could support ‘worker voice’ initiatives including via WhatsApp.
Crane explains: “The challenge is, how do you put that kind of access into the hands of the workers that need it most? It’s always easier to reach those that are less at risk.”
Crane sees exciting possibilities in worker-driven social responsibility (WSR), where workers design their own protection mechanisms, and brands are legally responsible for upholding codes of conduct within their supply chains.
The WSR Network is a global movement that covers worker groups in several industries, including agriculture and the apparel sector. Theresa Haas, director of transnational strategies says: “Where the WSR model has been implemented, it has been tremendously effective in addressing human rights abuses in their supply chains.
“Over the next five to 10 years we would like to see WSR agreements in every industry and every major supply chain. There are labour rights crises happening in supply chains around the world. This is the model that brands should be adopting if they truly want to address those abuses.”
Playing the audit system
Despite standards having risen in the region, academic researchers including Andrew Crane and Vivek Soundararajan of University of Bath found widespread evidence of audit cheating in Tirupur, Tamil Nadu, which accounts for 50% of India’s knitwear exports.
Grooming and coaching workers
Owners teach workers what to say in interviews, helping temporary workers appear to be permanent staff
Those who may answer badly, or don’t have the correct documents, are told to stay away on audit day, or fired then re-employed later
Managers keep one set of books for themselves and a falsified record for inspections to hide violations
Failing to declare or pay overtime
Workers are habitually forced to exceed the 48-hour-a-week legal limits, but only permanent workers are paid overtime, often below regulated amounts
Owner managers may falsify documents to appear small and avoid the more stringent requirements of a larger business
Owners will bring in non-conforming suppliers to meet deadlines, but will not declare this to the brands
Owners show auditors around a certified factory, but fail to declare other non-certified units
Health and safety lapses
Workers are routinely instructed to use safety equipment during the audit, then allowed to stop afterwards
Some owner managers only employ people from their own religious group or caste, expecting they will be more loyal and reluctant to complain
How to improve auditing
Engage with workers outside of the workspace and take time to build trust – you may need as long as half a day for the truth to emerge.
Share audits and data more widely
Audits need to be publicly monitored and workers should also have input on remediation issues, says Muller.
Educate workers on their rights
Educate workers and reinforce the culture in the workplace. “If a worker goes to a two-hour workshop on the first day and that’s it, then nothing will come of it,” says Crane.
Train staff on signs of exploitation
Tyler trains 80% of his workforce to spot signs of exploitation, such as never talking about what they did at the weekend, lack of food for lunch. “It would take a manager a long time to spot if anything was wrong, and by then the damage is done. But co-workers are on the frontline, they can pick things up very quickly.”
Buyer responsibility: a worker-driven revolution