Frustration grows around supply chain audits and certifications

According to experts the certification system that's supposed to signify manufacturers’ compliance with labor standards is woefully inadequate and endlessly confusing. While the situation has improved since the 90s when the fashion industry was rocked by reports that Nike products were created in sweatshops with underage workers, the process still leaves much to be desired. During the ensuing 30 years, connections however fragile have been forged between global brands and garment makers and the expectation has evolved so that we speak of living wage instead of child labor.

But beyond that, said Andre Raghu, Chief Executive Officer of global supply chain due diligence and strategy company, HAP International, at Kingpins NY last week, “The certification industry has been in perpetual pilot.” Questions around who the process is designed to protect dominate professional conversation. Is it the brands or the maker? And how can consumers trust labels on products when the audits are conducted with unclear motivations and often on a superficial level.

Zaki Saleemi who owns the first vertically integrated jeans manufacturer in Pakistan, Crescent Bahuman, told the Kingpins audience, “In my organization 21 percent of working time is spent on audits, that’s about 20-26 audits costing 75 to 100,000 dollars per year.” This money goes into the auditors’ pockets, and the more successful his business becomes, the more he will be audited. It has become a lucrative cottage industry.

Consider this scenario: A brand has enlisted an auditor to inspect one of their manufacturers, an inspection which the auditor duly conducts over a number of days. Not long after, the same auditor returns to the same manufacturer to carry out the same audit, but for another brand. Even though he already has the base data, he starts again from scratch and brands are the ones that are overpaying.

The SLCP is a non-profit multi-stakeholder initiative that aims to eliminate audit fatigue in global supply chains, providing the tools and system for high-quality comparable data and increased transparency. During NRF, Retail's Big Show this week, FashionUnited spoke to Roger Mayerson, Vice President Strategic Industry Development at supply chain solutions firm Logility which works with SLCP data. To the question of who the audits are designed to protect, he replied, “The SLCP Corporate Responsibilities Standards are protecting the workers—which in turn protects the brands because they can communicate that they treat their workers fairly.”

Supply chain and the real value of certification?

While experts generally believe that brands value transparency and want to be compliant and on the right side of judgment, the lure of a stamp of approval distracts from meaningful change in labor standards within overseas factories. “When the goal is to achieve a certain number to pass inspection, everyone starts chasing that,” said Saleemi. “It becomes more about hitting a number than anything else.” Furthermore workers are commonly advised on how to respond to auditors in what has become a culture of grooming and coaching for the sole purpose of passing an audit with minimal inconvenience.

Manufacturers have their own frustrations. They complain that every brand has a different set of criteria and request that existing audits be shared among brands creating a base line which can then be tweaked thereby shrinking the costs and time wastage that so impacts their businesses.

“The SLCP has over 1000 questions. The brand can select one of three steps to undertake fully in the SLCP process, which can be influenced by which step their buyers request,” Mayerson told FashionUnited.

Another issue is that audits often do not address the root cause of the issues which keep auditors coming back. These can be tied to the natural environment in which the factory operates, the cash flow of the organization, the behavior of lax governments. Everyone agrees that audits should reflect real intelligence not a superficial glance which results in a temporary band aid on an ongoing issue.

Anticipation is high around the pending EU legislation which will hold companies and brands accountable for lack of compliance. The industry is also watching intently the litigation brought by 130 migrant workers from a Thai factory against British supermarket giant Tesco and their auditing firm Intertec. The workers allege “pitiful” workplace conditions that were “hazardous, unventilated and overcrowded.”

According to Jason Judd, Executive Director of the ILR Global Labor Institute at Cornell University which focuses on improving global labor practices, alternatives to the current system are already within reach because we saw glimpses of them during Covid. New unexpected alliances were forged when manufacturers and unions in Bangladesh, Cambodia and Myanmar banded together against brands such as Levis, Urban Outfitters and Walmart that were canceling orders of goods that had already been completed with devastating implications for garment makers.

“Get rid of the certifications and check lists and focus on attributes, then align those attributes with what companies, governments, stakeholders deem important,” said Raghu, who believes there is a need to build credibility around the certification process. “Use the infrastructure but apply a different thought process.”

Another positive step would be for brands to ensure their Chief Sustainable Officer sits in the C-Suite. “In a lot of companies, CSR has no power,” said Judd. “But when the merchandise is withheld or production halted, problems that previously seemed intractable suddenly get resolved.”

Despite the confusion, there are a couple of points that everyone agrees on: The audit tool does not always equate to accountability and the auditor’s stamp of approval does not necessarily lead to optimum labor conditions for garment workers. Something needs to change.