Why are audits important in assessing supply chain conditions?
Brands often outsource their manufacturing processes – but they need more than their suppliers’ reassurance that the conditions and practices in their factories are up to scratch. Regulators usually go into such sites only if they have reason to suspect wrongdoing. Auditing is supposed to ensure that workers’ rights are routinely respected – and give brands an ethical “seal of approval” to reassure investors and customers. In reality, there is huge variation in standards and approaches. While some audits entail genuine scrutiny, critics say others can be seen as tick-box exercises designed to give brands deniability if problems later emerge.
Why are they important in Leicester?
There are hundreds of factories In Leicester’s sprawling textiles industry, many of them subcontractors making clothes for a brand that might not even know they exist. Standards, output and even the locations of these businesses are notoriously hard to track, and whistleblowers who may not have the right to work in the UK themselves but are prepared to go to the authorities are few and far between. Social audits look at issues from fire safety to workplace discrimination to standards at subcontractors – and, crucially in Leicester, whether workers are paid the minimum wage.
What’s in it for the supplier?
Audits are a hoop that factories typically have to jump through if they want to get a contract with a particular brand. If they refuse to do so, they won’t get the orders. But if they participate and the results are positive, they may then wish to share the audit with other prospective buyers.
Who conducts audits?
It depends on the brand. Some companies, such as Primark, are understood to have in-house teams that work exclusively on their behalf. Others, such as Asos, River Island and Marks & Spencer use a combination of their own teams and external specialists.
Are they all to the same standard?
Definitely not – but there are some common practices and benchmarks. Many fashion and textile companies have signed up to the Fast Forward programme, which means that auditors use a shared methodology and assess factories against set criteria. This will potentially identify compliant or leading practices, raise areas for improvement, or uncover serious issues. They may also be signed up to the Ethical Trading Initiative, an umbrella group that has a base code founded on the International Labour Organization’s benchmarks. Then there is the Smeta system, a template for audits that are then put on to the widely used Sedex platform for suppliers to share as they wish.
Boohoo’s response in full
“On 8 July, we announced an independent review of our UK supply chain in Leicester. This two-part approach saw us invest heavily in significant extra compliance and auditing resource to forensically investigate the allegations that had been made about mistreatment of people employed by garment manufacturers in the area. We also appointed senior barrister Alison Levitt QC to lead a comprehensive and fully independent review of our Leicester supply chain, which has included a public call for evidence.
The documentation that has been seen by the Guardian appears to be a selection of commentary from a limited number of the third-party audits that have been completed. Whilst we are deeply concerned by these findings, until these processes are concluded, we have had sight of all the facts and received Ms Levitt’s findings, it would be inappropriate for us to comment further.
The group is committed to delivering the highest standards of ethics, compliance and transparency, and we have committed to sharing an update on the findings of Ms Levitt’s review, our response, and the actions that we will take to address any failings at the end of September.
We will continue to offer our full support to raise standards where appropriate for the benefit of those employed in our supply chain, but will not hesitate to take more severe action when necessary. We can confirm that due to the nature of the non-compliance that we have found in a small number of manufacturers during this process we have immediately suspended trading with them whilst they take the appropriate action to resolve the issues identified within the timeline we have set. This includes some of the manufacturers identified by the Guardian, as our own investigations have highlighted similar issues.
We feel that it is important to give owners the opportunity to show demonstrable, measurable and significant improvement to protect the jobs of those employed, but if we are left in any doubt about an owner’s true commitment to drive change in the timeframe that we have set out we will have no choice but to terminate trading with them.
We recognise that walking away from every factory where an issue is found would have a catastrophic impact on the livelihoods of those employed in the sector. Instead, we are working closely with a number of organisations, including the GLAA and Slave Free Alliance, sharing our findings with them to support the important work that they do in ensuring that the rights of workers are protected and that everyone is treated fairly and paid appropriately.”
Boohoo has resisted membership of the ETI and does not subscribe to the Fast Forward programme. It has also refused to publish a list of its suppliers. It contracted the external auditors Verisio and Bureau Veritas in 2019 and has increased inspections in Leicester in recent weeks.
What shortcomings are there with audits?
Audits can be a critically important tool for businesses with a genuine interest in ensuring they have an ethical supply chain. It is important to note, though, that they provide a snapshot of issues at a particular time and may not account for subsequent changes in practices. Done badly, they can be a smokescreen for companies that have no serious intention of changing their ways.
Reformers are particularly critical of what they see as superficial tick-box audits carried out by inspectors under time pressure, and conducted at significant expense. These may, for example, examine a set of payslips and conclude that minimum wage is being paid, but fail to interview the workers who might tell them otherwise. In these cases, critics say, audits can be a lucrative whitewash, and there may be no incentive to report negative findings.
This means that while audits are vital, they may not be enough to gain a clear picture of the fair treatment of workers on their own.