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Social Audits No Cure for Retail Supply Chain Labor Abuse

Laws Proposed in EU, Elsewhere Should Require Smart Mix of Measures

Bangladeshi worker at a garment factory on the outskirts of Dhaka, Bangladesh, on November 2, 2022. © 2022 Habibur Rahman/Abaca/Sipa USA (Sipa via AP Images)

(Brussels) Social audits and certifications of suppliers are not enough to prevent and remedy labor rights abuses in global supply chains, Human Rights Watch said in a report released today.

The 28-page report, “‘Obsessed with Audit Tools, Missing the Goal’: Why Social Audits Can’t Fix Labor Rights Abuses in Global Supply Chains,” highlights the problems with social audits and certifications for suppliers, including in the apparel sector, and is focused on labor rights abuses. Policymakers in the European Union and elsewhere considering legislation to regulate how corporations respect rights and environmental standards in their own operations and global value chains should not rely on such audits or certifications as proof of compliance.

“Policymakers and companies should not confuse social audits and certifications of suppliers with proof of human rights and environmental due diligence,” said Aruna Kashyap, associate economic justice and rights director at Human Rights Watch. “Companies should be aware of the problems around social audits and certifications and make smart choices about how they invest resources for human rights due diligence.”

Many global brands and retailers source their products from factories across the world and rely on social audits, private inspections, of suppliers and certification schemes based on such audits to assess compliance with voluntary codes of conduct. These codes have been developed either by brands themselves, through multistakeholder initiatives, or under specific auditing or certification programs.

They enshrine international labor rights standards to various degrees. Social audits and certifications, while increasingly common, are also controversial because they are not seen as truly independent, but rather heavily influenced, and often financed, by the brands and suppliers themselves.

Human Rights Watch interviewed 20 current or former auditors, many of whom have spent over a decade conducting social audits of suppliers across numerous countries and various industries, including apparel, and other experts from the apparel industry. Human Rights Watch also analyzed social audits reports and reviewed academic analysis of social audit reports.

Social audits spanning only a few days and any resulting certifications present greater risks that labor abuses, especially issues like discrimination and harassment, forced labor, child labor, and freedom of association, will go undetected, Human Rights Watch found.

Several auditors and industry experts said that “traditional” or “standard” social audits spanning just a few days are more commonly used than expensive “deep-dives” that are conducted by “boutique firms.” They said that the pressure to drive down costs limits the time that auditors have to interview workers offsite in safe settings and to investigate, follow leads, and gather evidence of labor abuses. As one expert said, “deep dives” are commissioned by brands “only if brands think they have a very sticky, messy problem.”

Conflicts of interest between the auditing firm and their paying client can cloud the social auditing process. Auditors in various countries said that pressure from clients influenced the audit. Several felt the pressure was even higher when suppliers, rather than brands, paid for and appointed auditing firms. Auditors said they were asked to delete findings or transmit more serious findings orally or separately in emails, but not in the social audit report itself.

Human Rights Watch and other organizations have found that many suppliers, eager to get good social audit reports or be certified, attempted to hide actual working conditions during audits. The risk of audit deception was higher when advance notice of an audit was provided.

Several auditors said that numerous auditing consultancies across many countries help “game” the social auditing system, assisting factories to “prepare” for the actual audit by coaching workers and management on how to answer questions and helping to generate fake documentation.

Human Rights Watch found that business practices designed to keep costs low or reduce the time needed to manufacture products can drive labor abuses by creating perverse incentives for suppliers to utilize audit consultancies to “prepare” for the audit and to provide deceptive information.

Even the most robust investigation can only report findings and suggest corrective actions to the party that paid for the audit, whether it is a supplier, brand, or multi-stakeholder body. Remediation depends on how the supplier, and brands sourcing from the supplier, respond to the findings.

Companies sourcing from suppliers should, at a minimum, support the implementation of corrective actions, lay out a series of warnings and consequences, and, in the event of lack of progress, cut business ties in a responsible manner that minimizes harm to workers, Human Rights Watch said.

The social audits and certification industry is largely opaque, Human Rights Watch said. Social audit reports about suppliers are not public. In the case of certification, the lack of transparency means there is no information about why and how a particular facility was certified. It fails to build trust with relevant stakeholders, especially workers, or to enable local unions and workers’ rights organizations to monitor progress of corrective actions.

In addition to publishing findings and corrective actions, companies opting to use social audits and certifications should disclose who paid for the audit and what the costs covered. They should also disclose who appointed the firm to conduct the audit; the audit team’s composition, gender diversity, and relevant language skills; and expertise in relation to the standard being used to verify. They should describe the methodology used, including whether in-depth interviews with workers were conducted offsite, and the scope of the audit, including the time allotted and issues it covers.

Laws should require companies to use a smart mix of tools to conduct human rights due diligence, developed in consultation with stakeholders, especially affected populations like workers’ unions and community-based organizations. They should require companies to disclose their supply chains and develop effective and accessible independent grievance redress mechanisms in the country where companies are sourcing. They should also require companies to ensure that their purchasing practices are consistent with human rights responsibilities. If companies opt to use social audits and certifications, laws should require that the social audit report and corrective actions are published.

Finally, laws should also require companies to develop clear policies and processes to remediate and support remediation, and procedures to escalate action when improvements do not occur, including a responsible exit from a supplier with an emphasis on minimizing harms to workers and communities.

“Companies should not rely on social audits and certifications to prove adherence to human rights standards in their own operations or global supply chains,” Kashyap said. “Policymakers and regulators should not exempt companies from administrative penalties or civil liability because they have used auditing or certification programs.”

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