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Original article appeared in Just Style on 7 May 2020
Potential risks in the post-coronavirus environment are likely to make social compliance audits more important than ever, according to Randy Rankin, client development director in the Consumer Products Testing Assurance Services practice at Eurofins.
The global coronavirus pandemic has fundamentally changed life and business. Supply chains and related management practices are among the areas most affected by this global crisis. As recently as six weeks ago, it was unimaginable that retail stores would be closed for weeks, factories would halt production, and workers would be left without a source of income. The dimensions of the pandemic and the associated tragedies are enormous and there will be lingering effects even after the health and humanitarian issues draw to a close.
One area within supply chain management that is being challenged and reconsidered is quality interventions - whether inspections or audits. In many areas, there are logical efforts to leverage technology to remotely engage with factories and consider both products and processes. In the absence of being able to meet in person, these changes could be leading towards new and more effective and efficient ways of working.
During the pandemic, there are concerns that companies will not be able to access production facilities to perform quality interventions consistent with historical practices. Lockdowns and travel bans can impact the ability to get to a facility and execute some audit or inspection efforts - which has accelerated development and acceptance of technology-facilitated remote interventions. With that said, in the current environment - with governments in sourcing countries closing factories - there is not an opportunity or need to engage at the factory level. The experience in post-pandemic China suggests that as factories begin to resume operations, it is possible and in many instances prudent, for quality interventions to be executed by credentialled local professionals who are able to gain access to the facilities.
Social compliance auditing
One dimension of quality that does not readily lend itself to remote or technology-enabled intervention is social compliance auditing. A social compliance audit involves interaction with individuals throughout the facility - looking for insight into conditions and the associated activities that create those results. Understanding IF and WHY a particular condition exists is critical to providing a company with information on performance relative to any standards - including working conditions. Fundamentally, this is the difference between the binary tick box/checklist approach and an audit protocol that provides a perspective and assurance beyond the day of the audit. In many cases, this interaction is as simple as asking workers nearby to a fire exit about conditions: Is this door always unlocked? Who unlocks it and when do they do it? Conceptually, this type of dynamic interaction could be done remotely - but it will be a challenge for any audit process.
Unlike many other types of quality interventions, a critical and nuanced element of a social compliance audit is the direct, individual, confidential engagement with workers to understand conditions and experiences in the factory. Both the content of the dialogue and the selection of the workers to be considered in the course of a social compliance audit make an in-person engagement critical to obtaining the appropriate and necessary insights to evaluate the performance of the facility.
A well-performed social compliance audit includes a series of individual, confidential interviews with workers to understand experiences and conditions in the factory. The ability of the auditor to create a rapport, engender some level of trust, and engage the individual workers in a dialogue potentially including very personal and sensitive issues is critical to the success of the audit process.
Attempting to do this remotely - presumably through some device provided to the worker from a representative of the factory - is not conducive to getting the type of engaged dialogue that is the objective of these critical audit elements.
Additionally, the process of selecting workers to participate in interviews is critically important to getting the best information. During a factory tour, it is incumbent on the auditor to identify both a cross-section of workers for interviews and those workers that may be of particular interest whether as a result of being nearby to something of interest, or engaged in a particular activity of interest, or showing an interest in speaking through something as simple as eye contact. Fundamentally, the auditor needs to be alert and engaged during the time on the factory floor in ways that are not logically possible when the observations are a view from a camera controlled, presumably, by a representative of the factory.
While the ability to execute technology-enabled social compliance audits remotely may be limited, there is no doubt that the experiences related to the coronavirus will impact these interventions.
There will be changes to supply chains in the wake of the pandemic. It is a fact that at all levels in the value chain, some businesses will not survive. As a result, there will be new relationships to be developed - which should logically include consideration of the prospective partner's ability to meet a broad set of requirements - including standards related to working conditions. Whether an existing partner or a new partner, one of the critical considerations for brands and retailers will be how production facilities responded during and immediately after the crisis, as there will be real risks related to wages, benefits and employment terms. This will likely be particularly the case in markets where there is significant job loss and there is an excess of available labour.
Simply, there are significant risks in the post-coronavirus environment and this will fundamentally make social compliance audits more important than ever.
The increased importance of understanding the working conditions and related practices will likely coincide with changes in supply chain relationships and increasing pressures on costs for all parties. One potential positive consequence of the crisis could be a movement towards more collaboration. In an environment that has historically been driven by individual company programmes or specific collaborative programme participation, the post-coronavirus environment could create an imperative to make significant progress here. Historically, the perceived impediments to collaboration have been based on what is being audited, how the audit is performed and what information is provided, and who is performing the audit.
Fundamentally, the core of virtually all thoughtful social compliance programmes is based on the same audit execution protocols - with the most significant differences centering on the specifics of requirements and a very limited number of unique requirements. There has always been an ability to simultaneously execute audit procedures for the benefit of multiple clients and report results based on different reporting guidelines and requirements - provided that all parties were aware of the sharing of execution. Simply, in most cases the process of measurement is generally the same; it is in evaluating and reporting results that there are differences. This was the case when the first collaborative audits were performed in Saipan in the late 1990s and is still the case today.
While still developing, the Association of Professional Social Compliance Auditors (APSCA), as the professional standards body committed to ensuring the competency of both individual auditors and audit firms, contributes significantly towards addressing concerns about who is performing the work. This process and the associated certifications and memberships should continue to develop a level of confidence to support increased collaboration.
As with other elements of quality programmes, there are multiple approaches that can be taken to collaboration. These range from:
Simply accepting work done on behalf of another buyer - presumably one with values and a programme construct that is generally aligned with the company's; to
Conversion of the results of an audit into the company's form and format - often referred to as equivalence; to
Prearranged and structured executions similar to the example cited above; to
Engaging with others to create a single protocol for execution and reporting - whether in a larger effort like the SMETA protocol on SEDEX or a multi-company effort.
Ultimately, the performance of social compliance audits are a form measurement - and provide the data to allow companies to evaluate risks, identify appropriate action steps, and measure alignment with values and progress. While there is clearly value in measurement, the real value comes from the actions that the process informs and there is no specific value in any single approach - provided the alternatives are all credible.
Through collaborative audit efforts, companies can obtain the information necessary to support key quality and compliance programme objectives, while minimising duplicative efforts and costs.
As a senior compliance executive noted recently: “Collaboration is really about understanding the compliance journey may not just be travelling in a specific, single lane but rather travelling in the right direction across multiple lanes." Ideally, the post coronavirus environment will be characterised by highly effective audit interventions that are performed for the benefit of multiple parties - reducing duplication of effort and increasing the value of the information to understand risks and effect change for workers.
About the author: Randy Rankin has over 25 years' experience in risk and supply chain management serving top-tier consumer products companies. During this period, he has been involved in the development of industry standard methodologies for consideration of working conditions in the supply chain; and the development of company perspectives on supply chain risk management issues including social compliance. Randy has significant, broad business experience and expertise in strategy, operations and finance in his roles as a consultant, as the owner of a global enterprise, and as an executive in the global testing and inspection space. He possesses extensive and first-hand knowledge of supply chain with direct experience in consideration of conditions - and the associated challenges - in most significant sourcing geographies including China, Vietnam, India, Bangladesh, Guatemala, and Mexico.
Randy has been an active participant with the Association of Professional Social Compliance Auditors (APSCA) including holding positions on the executive stakeholder boards, and is member of the social responsibility committee of the American Apparel and Footwear Association (AAFA). As global client development director in the Consumer Products Testing Assurance Services practice at Eurofins, Randy is responsible for developing client relationships and leading service teams responsible for supporting client efforts to identify and mitigate risks in the supply chain considering technical, social, environmental, and security risks.
He can be approached at RandyRankin@eurofinsUS.com.