“Major brands recognise that accurate data is the cornerstone of any successful strategy to improve supply chain ethics"

“Major brands recognise that accurate data is the cornerstone of any successful strategy to improve supply chain ethics"

Going "beyond" audits to manage ethical, social, and environmental compliance in global supply chains with a network of partners that needs no policing and little extra governance is still a long way off for many brands and retailers, a new report suggests.

Supplier audits are increasingly criticised as being toothless and inefficient, and even detrimental to the ethical and environmental state of supply chains.

But a new whitepaper from AsiaInspection (AI) suggests that instead of alternative approaches like replacing "boots on the ground" with high-tech solutions including self-assessment tools, involving NGOs, and conducting undercover investigations, long-term improvement in supply chain compliance requires a comprehensive strategy built on the foundation of reliable data.

And the compliance service provider not surprisingly argues that an important component of that foundation is represented by supplier audits, as they are one of the few methods of collecting supply chain data on the ground.

AI concedes that while many mature CRS systems are ready to take supplier relations to the next step, many brands do not yet have good visibility into the multiple tiers of their supply chains, and their compliance rates are "rather low."

Data collected by AI from over a thousand ethical audits conducted in 2016 shows that only 36% of factories were found compliant, while 27% had critical non-compliances, and the rest were in need of improvement.

"Major brands recognise that accurate data is the cornerstone of any successful strategy to improve supply chain ethics, and usually rely on a combination of supplier audits and external sources, such as NGO reports, to inform their compliance efforts," report authors explain.

Yet the sheer scale of global supply chains dictates the method for improving compliance within them. For example, Primark works with around 700 suppliers, M&S around 1,230 and H&M 1,900.

"Major brands and retailers work with hundreds of factories globally, and no external organisation or media outlet has the resources to monitor them all. These days, more and more brands are recognising their responsibility for their supply chain and take steps to improve it, especially in terms of human rights, safety, and environmental impact.

"Whatever a brand's supply chain sustainability strategy, it must be able to reliably measure and assess the situation on-site, benchmark the results, and clearly identify areas for improvement. Only then, based on available data, can brands determine their next steps, such as educating and training suppliers, involving NGOs, or rolling out risk mapping programmes."

The report does point out that incremental progress is present in supply chain ethics, primarily due to consistency and regular follow-up.

One example is Nike, whose audit programme has resulted in an increase of compliant ("bronze") factories from 70% to 86% in the past three years.

Creating improvement in the long term, the report explains, requires "a comprehensive and adaptable strategy" with "an arsenal of tools and a strong foundation of reliable data."

"Before going "beyond" audits, the brand should have a mature CSR strategy already in place, have a history of cooperation with their suppliers, and map multiple tiers of their supply chain," says Sebastien Breteau, CEO of AsiaInspection. "For many brands, this stage is still a long way down the road, as only 15% of them have good visibility into Tier 2 suppliers, and their compliance rates are rather low. Last year alone, we discovered critical non-compliances in up to one-third of the factories audited."

Apparel factory auditing appears in the firing line