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Auditing firms shouldn’t provide cover for the inaction of global brands on low wages

Published in: Equal Times
Garment workers in a factory await a visit by Prime Minister Hun Sen outside of Phnom Penh, Cambodia, August 30, 2017. © 2017 Heng Sinith/AP Photo

The Covid-19 pandemic has exposed the brute commercial power brands and retailers wield over garment and textile factories. It has been a harsh reminder that brands and retailers hold significant influence when it comes to whether suppliers can keep workers employed or pay them on time.

A supplier in Cambodia told me about his ordeal. A global conglomerate that he regularly supplied contributed up to 60 per cent of his factory’s production. When the pandemic struck and it was time for the company to pay for its order, the buyer stopped communicating. The goods were already manufactured and shipped. He was forced to cut his staff’s salaries and suspend his workers.

What has become increasingly clear is that the auditing firms hired to inspect suppliers for labour standards compliance operate with their hands tied. Auditors don’t have the mandate or oversight over purchasing practices that are at the root of many labour rights abuses.

Auditors and brands cannot credibly claim that social audits are geared to get to the ‘bottom of the problems’ or perform ‘root cause analyses’ that generate appropriate corrective action plans. This is especially true when it comes to workers’ wages and benefits, working hours, and precarious contracting practices.

When brands delay getting order specifications to factories or give final orders that vary hugely from what was originally projected, suppliers use different methods to meet the brand’s production deadlines. These range from forcing workers to work excessive overtime, to hiring daily-wage or short-term contract workers, or subcontracting without the brand’s knowledge.

When buyers do not pay prices that factor in workers’ minimum wages and related benefits, this exacerbates abusive cost-cutting by suppliers.

Years of ignoring the overarching commercial power of brands and retailers has contributed to friction between auditors and suppliers. Suppliers are resentful when they come under tremendous pressure from brands and retailers to improve their labour practices when prices and other buying practices are unfair. They often complain that social audits feel like ‘police visits’. Some suppliers even admit to double book-keeping to pass audits.

Auditors have their own complaints. Some of the auditors that I have spoken to bemoan the acrimonious exchanges they have had with factory managers, who quiz them about the ‘evidence’ they rely on for audit findings. Auditors who are diligent and try to do their best are tired of constantly trying to outsmart factory managers.

One former auditor said he had devised new ways of asking workers questions about working conditions. Workers are often coached, to give the ‘right’ answers to auditors, so he rarely asked them direct questions about their working hours or weekly day off. Meandering questions about what workers did on Sundays and what they did after factory hours often revealed clearer insights about the actual working conditions.

It’s time for wage transparency and improved working conditions

Many brands and retailers appear content with focusing on suppliers’ complaints about audits and their ‘audit fatigue’ from too many inspections each year, without significantly addressing the elephant in the room. They don’t recognize, or admit, that it is their own purchasing practices that drive abusive working conditions.

Auditing firms have human rights responsibilities under the United Nations Guiding Principles on Business and Human Rights. They have a responsibility to acknowledge and publicise the limitations of what they are able to do while taking measures to strengthen methods to capture supplier practices accurately.

They should take steps to ensure that they do not inadvertently allow brands and retailers to mischaracterise what social audits achieve. Auditing firms should clearly state, publicly and privately, that their analyses do not address root causes because auditing firms do not examine buyers’ purchasing practices.

Brands that truly support workers’ rights in their supply chains should stop relying on social audits to drive labour compliance, especially regarding wages and working hours.

Companies should collaborate and pool resources that drive wage transparency. Supplier-level wage transparency, through initiatives like Gajimu in Indonesia – a program that collects and publishes garment workers’ wages based on information from workers – should be scaled up. Tracking and publicly reporting the wages earned, the average working hours, and the types of contracts that workers are hired on through worker-centric methods, can go a long way in driving reforms.

Wage transparency alone will not automatically improve working conditions.

Companies with global supply chains should collaborate and adopt country-specific wage ladders, demonstrating the steps they have taken to pay workers living wages. Each company should publish how they are incrementally moving up the wage ladder with revised prices.

Without making significant headway on these fronts, no brand can claim they have processes that are fit to tackle intractable problems of low wages and excessive working hours. Auditing firms should firmly call out this situation and refuse to be a part of it.

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