NEW YORK – Just recently, a landmark legal case was brought by garment workers against UK retailer Tesco and social auditing firm Intertek. The claims were made by Burmese migrants who say they were made to work up to 99 hours a week on unlawful wages and in what amounted to forced labour conditions at a Thai factory making clothes for Tesco’s F&F fashion range.
This story has generated huge negative press for both Tesco and Intertek, one of the world’s foremost auditing companies which is well known in textile supply chains.
The Tesco news comes on the heels of an already rough year for the auditing industry that saw one of the world’s largest certifiers of organic cotton, Control Union, suspend India Organic auditing for integrity issues on the heels of a government investigation.
Meanwhile, Social Accountability International (SIA) also recently suspended Indian operations of auditing giants Bureau Veritas Certification, RINA, SGS, and TUV Rheinland for inappropriate consultant-client relationships.
Against this backdrop, the auditing industry’s self-appointed governance group, Association of Professional Social Compliance Auditors (APSCA), has faced a wave of backlash this year from individual auditors across the supply chain, organising under the banner of the Association Of United Auditors, over allegations of abuse of authority and an operating a system that “does not support auditors or workers.”
Intertek operates in what is widely known as the ‘social auditing’ industry. This sees the auditing of supplier factories for fashion contracted out to third parties which, in theory, notify brands and retailers when a supplier is breaching a set of minimum standards and guidelines.
The social auditing space has come in for much criticism in recent years. Tragedies such as Rana Plaza in Bangladesh and Ali Enterprises in Pakistan were both instances of factories in fashion supply chains where hundreds of lives were lost in the weeks and months after a social audit had passed the buildings fit for purpose.
At the time of these tragedies, there was much soul searching within the industry and a feeling that things needed to change. At the very least, we needed more transparency and accountability and a brighter light shining on murky global fashion supply chains.
Remarkably, the social auditing model has not changed at all since these tragedies. Many of the same mistakes are still being made, and claims that the social auditing model is ‘broken’ or ‘not fit for purpose’ are regularly made. There is also the perception in some quarters that the social auditing industry is dominated by a handful of large players which have little incentive to alter what is ultimately a highly lucrative business model.
Having observed this industry at close quarters for more than a decade, I firmly believe there is one issue we need to address above all else: independence – or lack thereof.
Are third party social audits in fashion supply chains truly independent? Are they completely unbiased? Are consultants within the industry operating completely objectively or is there any incentive to give a factory a clean bill of health?
This issue of independence is more vital than ever. Not only does independence ensure the right calls are made for the right reasons but full independence in this sector will, moving forwards, be vital in order to comply with impending due diligence laws.
It is my observation that fashion’s social auditing model could fall foul of impending due diligence laws in the US and EU the issue of independence is addressed.
More than ever, businesses are under pressure from investors, government regulators, activists, and the public to demonstrate due diligence and disclose the impacts of their products and supply chains on the environment and human rights.
In response to this, the self-reporting of environmental and human rights metrics by fashion retailers has become widespread. However, the credibility and accuracy of some reporting has been called into question due to a lack of independence of associated measurement activities.
These measurement activities include, but are not limited to, materiality, tracing, audits, assessments, inspections, validations, and verifications undertaken by internal or external resources (individuals and service providers).
Independence is focused on the avoidance of relationships and actions that could, or could be seen to, compromise objectivity. The likelihood of accurate measurement results increases with the degree to which the measurement activity is independent. In turn, trust can be built, and potential harm reduced when accurate results are used in decision making and in support of external communication. Independent and credible measurement activities are needed to provide additional assurance that a company’s strategies and disclosures can be trusted.
In order to address some of the limitations of fashion’s social auditing model, in early 2022, a group of individuals and organisations came together to identify challenges that must be addressed in evolving global Environmental and Human Rights Measurement (EHM) activities from a mostly voluntary to a regulated mandatory due diligence landscape.
While we found a variety of issues and gaps, we felt the lack of Independence that exists in the majority of contracted EHM services (e.g., social auditing) to be the most pressing.
This is, in no small part, due to the negative impact that non-independent measurement activities are having on the credibility of corporate programmes and related external communications (e.g., Greenwashing and Social Washing).
This led to the formation of the Independence Pledge Coalition (IPC). The mission of the IPC is to be a multi-industry, multi-stakeholder group that advances credible and independent measurement and reporting of environmental and human rights due diligence in global product value chains.
The IPC has developed the Independence Pledge. The IP aims to provide a blueprint for industry best practice around social auditing while offering the first steps towards building a business model which has genuine teeth and meets the requirements of regulators.
The Independence Pledge consists of five principles. These are:
1. Independence – When contracting environmental or human rights supply chain due diligence measurement activities, prioritize the use of independent parties.
2. Impartiality – Proactively take steps (i.e., internal policies, risk assessments, internal dialogue, etc.) to limit and mitigate existing and potential conflicts of interest that exist in your supply due diligence measurement activities.
3. Transparency – Support a transparent process for the public disclosure of applicable service provider names for independently verified environmental or human rights supply chain due diligence reports and associated claims.
4. Advocacy – Require all contracted environmental and human rights supply chain due diligence measurement service providers to join the Independence Pledge Coalition as Signatories.
5. Declaration – Publicly support and communicate your organisation’s commitment to the Independence Pledge.
Find out more and sign up here: https://www.independencepledge.org/public-comment/
About the Author
Andre Raghu is CEO of HAP
