The Financial Express
Swasti Lankabangla Swasti Lankabangla

Questioning the role of social auditing  

Questioning the role of social auditing   

Global social audit firms are under fire for protecting the interest of international brands at the expense of the safety of millions of factory workers across the world, particularly in the developing countries. The accusation is pointedly directed at audit firms engaged in dealing with labour-intensive readymade garment (RMG) factories.

Last week, Clean Clothes Campaign (CCC), a global worker rights group launched a report titled "Fig Leaf for Fashion: How social auditing protects brands and fails workers." The report exposed that the multi-billion dollar social auditing industry, meant to be a corporate social responsibility tool, was operating to protect brand reputation and profits while aggravating risks for garment workers. It held social auditing industry responsible for a number of fatal accidents in the RMG sector in countries including Pakistan, Bangladesh, Vietnam and Malaysia. Citing examples of corporate negligence, it offered an extensive analysis of the corporate controlled audit industry and its failings in a host of well known business-driven social compliance initiatives. The report said, "The social audit industry has failed spectacularly in its proffered mission of protecting workers' safety and improving working conditions. Instead, it has protected the image and reputation of brands and their business models, while standing in the way of more effective models that include mandatory transparency and binding commitments to remediation."

The important questions here could be: what actually is the role of social audit firms and how they get into the wrongdoing they are allegedly held responsible for?  It may be pertinent to refer briefly to the link between the manufacturing enterprises and the social audit firms in a broad and general perspective.

As companies expand their manufacturing and sourcing capabilities around the world, supply chain workplace conditions are increasingly scrutinised, particularly in developing countries. The conditions under which products are manufactured have become a dimension of quality and an important part of the business value proposition. Lack of orderly process for managing risks related to supply chain social compliance can have a direct impact on a company's financial results, especially for companies in consumer markets where image and brand names are critical assets. These aspects are examined and evaluated by social audit firms. They are expected to possess expertise and resources to support companies throughout the process of developing an effective social compliance programme, performing independent audits of compliance-related processes and controls, and reporting on results. They are also to evaluate suppliers' compliance with a variety of social compliance standards, standard industry practices, and applicable laws and regulations, including various corporate codes of conduct.

The aforementioned CCC report cited incidents of factory fire, building collapse and other fatal accidents in Pakistan and Bangladesh in recent times where thousands of workers lost their lives due to unsafe working conditions. But the factories had been assessed and declared safe by several auditing companies, including TÜV Rheinland, Bureau Veritas, and RINA, using the standard, methodology and guidance of leading compliance initiatives such as amfori BSCI and SAI, the CCC said in a statement.

The report citing cases of two major factory accidents - Ali Enterprises in Pakistan and Rana Plaza in Bangladesh -- said accredited auditors had considered these facilities safe just weeks or months before they were reduced to ruins. In case of Rana Plaza, the audit farm TÜV Rheinland failed to notice the safety flaws in the factory and even stated that the building was of 'good construction quality'.

These foreseeable and avoidable disasters exemplify systemic failures of corporate-controlled social auditing. The report says the industry is operating with impunity; there were few, if any, negative repercussions on the auditing companies and social compliance initiatives involved in these deadly disasters. "The industry has been able to keep these many failings under the radar because of its notorious lack of transparency and the opaque chains of accountability which preclude sharing any outcomes with the outside world, including the workers whose rights, lives and health are at stake," said the report. It appears that social auditing firms have wronged the workers, factory owners and countries in many parts of the developing world only to ensure gains for the international brands who hire them.

That social auditors, because of the money they see in the business, can rarely be expected to rise up to the needs of independent assessment is no doubt a practice bred by greed and profit motives for ages. Countries like Bangladesh had to pay heavily for their failure in doing their jobs right, and the process of factory remediation is still on at high costs. But it was not in the knowledge of many that social auditing firms had given a go-ahead to the international brands to procure from these factories, ostensibly to facilitate sourcing at low prices in total disregard to the working environment and safety concerns. The government, too, is responsible for its utter negligence in enforcing various structural standards and building codes crucially important for housing thousands of workers in unsafe factory buildings.

Now that the issue has been highlighted quite strongly as part of corporate social responsibility of the manufacturing firms, it does embrace a lot of other issues that rights group at home and abroad have been repeatedly referring to. Collapse of factory building or fire incidents are extreme occurrences, and freeing factories from the threats of such disasters does not mean that work places are safe. In fact, the concept of safety is more than just being free from life-threatening situations. What is important is that social auditors must look into all aspects of corporate responsibility and if possible, tie up the missing link between brands and manufacturing units towards building a sustainable and mutually reinforcing relationship.



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