In this article, I am sharing pieces from the CSR-Monthly Newsletter from October. The topic of social audits and its role within the German Supply Chain Act, which will enter into force in a couple of weeks, is on many peoples mind. I am hoping this article can: clarify what we can achieve with social audits and also what role it can therefore play within due diligence requirements.
I would like to address the following questions:
What are social audits anyway?
For what purpose can they be used?
What are the benefits of social audits? And what can I not achieve with a social audit?
Let's start with the basics:
What is a social audit?
A social audit is an assessment of a farm or farm against a "standard" that contains principles and requirements (normally) in the areas of labor and human rights, environment, occupational health and safety and fair business practices.
How is a social audit carried out?
A social audit consists of the following 5 steps:
1. Opening Meeting
2. Site Tour
3. Interview with employees and management
4. Document Checks
5. Closing Meeting
A social audit is usually carried out by local auditors who know the local language. This is of great value, because social audits consist to a very large extent of interviews with employees. If we do not know the local language, it is much more difficult to understand the situation of the employees and to uncover gaps in the standard.
In addition, social auditors have completed an expert training and are therefore familiar with national and international labor standards as well as questioning techniques to apply when interviewing employees.
At the end of the social audit, an audit report is prepared, in which the status quo of the company on the above topics is presented. Measures to close possible gaps are also touched upon, even though the audited company has often a bit more time to draft what "preventative actions" are needed (after they have analyzed the root cause of the problem). In some social audits formats, such as SMETA, social auditors support suppliers after the audit to close the gaps and thus improve labor standards.
For what purpose can a social audit be used?
A social audit serves to determine the status quo of a farm or production with regards to labor and human rights, environment, health and safety and fair business practices.
We have to remember that the word "audit" comes from the latin word "audire", which means "to listen".
By listening carefully and cross-checking documentation, a social audit identifies strength of the audited company and also gaps that need to be closed in order to achieve the standard (e.g. code of conduct).
Companies use social audits for various reasons. I would like to describe three of them:
1. Prerequisite for cooperation
For companies that want to position themselves as leaders in the field of sustainability, it is very important that human rights and labor standards are adhered to by their suppliers. For many of these companies, social audits are used even before the cooperation to check whether the supplier is suitable. If the gaps to the company's standard are too big, the supplier may not be selected.
2. Client requirement
Many companies carry out social audits because their clients (usually bigger companies) demand them. It may be, for example, that a satisfactory SMETA audit is required by the client, which the company must carry out either at their own site or at its suppliers.
3. High risk of human rights violations
Due to increased regulation in the field of business and human rights in Europe and worldwide, more and more companies have to carry out a risk analysis. If the risk of human or labor rights violation is high, social audits are used to check whether the violation actually occurs or not. Although a social audit cannot provide 100% certainty (I will explain the reasons for this below), we come closer to the truth than if we only read through external data sources on the Internet.
What are the limitations of social audits?
Of course, there are also limitations to social audits. As explained above, Social Audits assess the status-quo. They give us the opportunity to take action to improve labor or environmental standards. Yet, Social audits do not automatically improve working conditions.
What else should we know about social audits?
The time of an audit is limited. Sometimes there is not enough time to check all the topics in detail. In the audit world, it is often said that "time is the auditor's greatest enemy".
Social auditors sometimes get indications that a situation is not up to standard (e.g. discrimination case), but there is not enough evidence that can be collected in the short time to write it down as a proper "gap in the standard". So just because something isn't in the audit report as a does not mean it does not exist.
A social audit is also a snapshot in time. However, productions are dynamic. Thus, it may be that the situation has changed 6 months after the audit (e.g. the supplier now works with a labor agency that does not pay employees the minimum wage).
Some audits also have a checklist character that is too rigid to uncover complex issues such as child or forced labor.
So social audits have some "limitations" or "character traits" that we should know about in order to use the them consciously.
Summary
Social audits primarily capture the status quo of an organization in terms of labor and environmental standards. In some cases, suppliers are accompanied to improve the gaps that are detected during the audit.
Social audits give us a starting point for improving labor standards.
We also must keep reminding ourselves that social audits are a snapshot in time. That the time for an audit is short and not all topics can always be verified in detail. We cannot see social audits as an all-cure tool, but more as what they are: an important and valuable tool in the due diligence process.
How do you currently use social audits? What other questions do you have about social audits?
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