Saturday, September 25, 2010

The Independent, Third-party Factory Audit

We employ a third-party social compliance audit firm to conduct social and environmental audits of our factories. In some cases, the purpose of these audits is to check our primary auditor's performance and in others, we rely entirely on these third-party audits. Through using a third-party audit firm, we aim to introduce a neutral party to avoid conflicts of interest and to ensure that we bring in an impartial perspective that does not have a financial stake in our relationship with the supplier.

On Friday, I accompanied our third-party audit firm for a shadow audit in China. It was the first time I'd visited a factory with a neutral party (instead of a company-appointed representative or a company employee) and it proved to be fairly educational.

From the outset, the tone of the visit was very different. Usually, auditors have a pre-existing relationship with factory management. The auditors have been to the factory before, they've worked together over the years and it's a collegial, if not friendly, relationship. With a third-party audit firm that has no previous relationship, the visit has a much less friendly tone.  It's strictly professional and both sides clearly are assessing each other throughout the visit.

The factory staff seemed much more nervous than on other audits I've shadowed. It could have been because this was the first time we had ever asked the factory to be audited, or it could have been my presence, representing a customer. Whatever the case, the entire day took on a much more formal environment than I was used to.

When it came time for lunch, the factory management team offered to take us to lunch, but our audit firm steadfastly refused. Typically, I will break bread with the factory managers to build our relationship and to discuss matters like production levels, hiring challenges, compliance issues, etc. in a more casual setting. Our audit firm has a policy to have lunch on its own, again to avoid any conflicts of interest.

And in the closing meeting, when we typically discuss next steps, corrective action plans and timing for implementation, we ended up pointing out the violations we'd found and leaving it at that.  We cannot guarantee that the audit firm will return to ensure that the corrective action plans have been implemented. In some cases, companies will send their own representatives to ensure follow-up. In this case, we could only say what we'd found and the conversation never turned to remediation or true improvement.

Friday's visit really highlighted for me some of the shortcomings of the third-party audit system. I still believe they play an important part of any social compliance program, but to rely completely on them would probably not truly work toward improving factory workplace conditions.

1 comment:

  1. Interesting article indeed. Can you point out the shortcomings that you noted in using third-party auditors?