Supply chain audits lack legal weight, says NGO

posted by Francis Churchill
30 January 2017

Auditing firms need to be held legally liable for incidents of worker abuse or health and safety failings that they fail to uncover, a human rights NGO has said.

Apparel companies that commission social audits of suppliers should make such liability a “minimum condition”, the European Center for Constitutional and Human Rights (ECCHR) said in a report.

“Auditing companies must suffer negative consequences if they deliver a deficient audit. Changing the incentives for the audit industry could simply and aptly be achieved by increasing the likelihood of liability,” it said.

Social audits have become a staple of corporate social responsibility policies in countries where governments lack the ability or political will to monitor standards themselves, the report said.

However, audits have “notorious shortcomings” because they only provide a snapshot of conditions in a factory, often lack transparency and sometimes there are conflicts of interest around funding.

“Despite the harsh and well-known criticism, for the moment, social audits seem here to stay,” the report said. “Therefore new legal and regulatory pathways are necessary to challenge both the performance and integrity of auditors and certifiers.”

Combined with the right structural reforms, including the development of local unions, the report said a liability mechanism could contribute to changing the power imbalances between international buyers, auditing companies and workers in production countries.

While there has been an increase in the number of formalised auditing guidelines and standards, the report said many of these focus on processes and neglect outcomes.

The report said most European and North American firms rely on voluntary codes of conduct, checked through social audits, as “an integral part of supply contracts and terms and conditions”, but these are not backed up with legal responsibilities.

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