Reading the latest report on ethical trade auditing from the Ethical Trade Initiative (see analysis)
companies might be forgiven for throwing their hands up in despair. A
bleak picture emerges of commercial auditing firms offering poor value
for money, shortage of good auditors and even fraudulent practices.
Why, companies might ask, do we bother?
Unusually in CSR, everyone involved agrees on what good ethical trade
auditing should be: trusted audit teams with local expertise asking the
right questions of the right people in the right way, reporting what
they find, proposing necessary improvements, and following these up.
The difficulty is making that happen.
Institutional investors, non-governmental organizations and consumers
alike rely on the information that the auditors collect, particularly
in respect of working conditions in developing countries. For this
reason, the solution ETI members appear to be leaning towards – to
bring ethical audits in-house – is not the right one, except perhaps as
a short-term measure. As with financial auditing, ethical audits lack
credibility when conducted by a company itself without external
verification. In this area, perceptions matter hugely, and any cost
savings are likely to be cancelled out by increased reputational risk.
One big problem at present is the scarcity of qualified auditors.
Bringing audits in-house will not bring relief. Training in-house
auditors is subject to the same limitation: not enough highly
experienced people in the market to do the training.
Other problems lie at the door of companies themselves. Arguably the
thorniest are the tight delivery deadlines that companies impose on
their suppliers and the multiple audits to which suppliers are
subjected by different customers, all of which can make it hard for
suppliers to comply with the rules. The zero tolerance of infractions
practised by some US companies in order to prove responsible corporate
behaviour borders on over-zealousness. A more relaxed approach,
following the example of the Ethical Tea Partnership (see page seven),
is more likely to produce the desired results. What matters is not so
much how many factories are visited and how many boxes get ticked as
the quality of the audits. The same principles apply to ethical audits
as to other corporate information gathering systems. Companies should
explain this to all stakeholders.
Ultimately, suppliers survive by the grace of their customers. As such,
companies are responsible for their suppliers. Blaming suppliers and
auditors will not do. At the root of present shortcomings is a lack of
qualified personnel and of uniform standards and procedures. A system
for training, certifying and regulating auditors is urgently needed.
Both companies and auditing firms must delve below the symptoms to the
causes to remedy the situation.
