Brands such as Wal-Mart, Tesco and Carrefour are joining forces to reduce the ethical audit burden for suppliers. But will their efforts work?

“Comply or die” has been the supply chain mantra of recent years as companies have scrambled to align competitive business strategies with responsible brand images. With supply chain ethics a yardstick of corporate responsibility, suppliers are expected to toe the line on social compliance. But given that Chinese factories can have up to 18 different clients, each with individual audit requirements, suppliers are understandably suffering audit fatigue.

Already under pressure from squeezed margins and short lead times, the burden of multiple audit compliance has produced little more than a culture of cheating among suppliers, says the CleanClothesCampaign, an international alliance of unions and NGOs. Double book-keeping, briefing staff on how to field audit questions and other elaborate cover-ups of labour rights abuses are commonplace among suppliers caught up in the snarl of monitoring, the campaign group says.

The growing consensus among brands, too, is that auditing alone cannot guarantee an ethical supply chain. Nor will it shield companies when it comes to supplier-related reputation risk.

A host of supply chain ethics initiatives have emerged to raise social and environmental standards through intensive work with suppliers, local government, NGOs and big buyers. But the Global Social Compliance Programme (GSCP) – a business-led scheme to improve working and environmental conditions in global supply chains, emerging from retail forum CIES – says a piecemeal approach to responsible sourcing will not achieve a macro solution.

Collective punch

GSCP, whose executive board includes representatives of supermarket giants Wal-Mart, Tesco and Carrefour, food producer Chiquita, furniture retailer Ikea and technology firm HP to name a few, argues that the growing number of ethical supply initiatives are too fragmented. Furthermore, it says scarce resources are being squandered on audit duplication rather than being channelled into supplier engagement on labour issues.

Instead, GSCP advocates aggregating best practice from existing social compliance initiatives and companies’ systems across industry sectors, to provide a universal, shared set of reference codes for buyers and suppliers. It says that by consolidating best practice into a single toolbox and by enabling existing supplier databases to “speak to each other”, the cost and incidence of audit duplication will be reduced, both for buyers and suppliers.

“We’re not here to replace anyone; just to build on existing efforts and to ensure we capitalise on best practice. In doing so, we can perform fewer, higher quality audits and invest the freed-up resources into training, capacity-building and better purchasing practices,” GSCP director Claudine Musitelli told Ethical Corporation at the programme’s recent board meeting in Paris.

Since its inception in December 2006, GSCP, which requires chief executive buy-in, has brought together 26 major brands with a collective buying-power of some $500bn, to compare best practice on supplier audits and engagement on labour issues.

To date, GSCP has produced a reference code for labour practices based largely on international conventions and guidelines. The code specifically addresses forced, bonded, indentured and prison labour; child labour; freedom of association and recognition of the right to collective bargaining; discrimination, harassment and abuse; health and safety; wages and benefits; and working hours.

GSCP also recently completed work on reference tools for audit systems and methodology, to be released this month, bringing the organisation closer to completion of its six-step plan. The remaining steps cover auditor competence, verification systems, data sharing and remediation.

The first three steps aim to develop reference tools based on international legal standards and best practice from existing systems. The next three will focus on building understanding, comparability and transfer of information between the different systems, with a completion target of December this year.

Double standards?

While the labour code itself is rigorous, it is not prescriptive. Companies joining GSCP are not asked to adopt the code or to guarantee its immediate implementation on the ground. Nor are there any reporting requirements or explicit expectations regarding members’ own performance.

This has raised concern among stakeholders, given GSCP members’ track record on addressing labour rights abuse in their supply chains and their workplaces. Wal-Mart, Ikea and Carrefour are currently being criticised by the International Textile, Garment and Leather Workers’ Federation (ITGLWF) and French NGO Peuples Solidaires for inaction on labour rights abuses at Turkish manufacturer Menderes Tekstil, a supplier shared by the three companies. Peuples Solidaires also challenged Chiquita subsidiary Cobal on violation of labour rights at its Coyal Plantation in Costa Rica in 2007.

Meanwhile, Wal-Mart’s long-standing opposition to collective bargaining and freedom of association for its own workers raises doubts about its commitment to supporting labour rights at supplier factories, the CleanClothesCampaign says.

According to GSCP, the absence of demands on potential and existing members fosters inclusion, which is critical to the organisation achieving its goal of transparency on best practice. “We already have major competitors sitting around the same table and we want more, to ensure that our shared suppliers are hearing the same message,” says Bonnie Nixon Gardiner, ethical sourcing director of HP’s supply chain social and environmental responsibility programme.

Antoine Bernard, director of the International Federation for Human Rights (FIDH), who sits on GSCP’s advisory board, says that in any case, “it is better to have these companies on board on [human rights] issues and international legal standards, than having them operate alone in the dark”.

Buyer beware

Training buyers remains a priority in ethical sourcing. Terry Babbs, international trading law and technical director at UK retailer Tesco and GSCP executive board member, says: “Identifying purchasing practices that create conditions for decent work and proper treatment of workers … is a primary aim of this group.”

HP’s Nixon Gardiner emphasises the need for a two-way conversation, in which suppliers can also “score the buyer” through a reverse scorecard process. She explains: “Policing suppliers through audits alone will not yield results. Along with it goes training and reporting – it’s a full engagement model.”

“A decent income is part of the package; it’s what we are committing to,” says George Jaksch, a director at Chiquita. This sounds promising, given that since 1995 real wages in producer countries have fallen on average by 25%, while working hours have increased by 25%, according to ITGLWF. But the reference code does not explicitly mention the complex notion of a “living wage”.

So is GSCP likely to succeed? According to Rosey Hurst, founder and director of consulting firm Impactt, the prognosis looks good. “There is every possibility that it will succeed,” Hurst says, adding that a scenario where everybody is working on the same, high quality improvement plan is long overdue.

“There is a lot of duplication and poor quality auditing going on out there. Freeing up resources and moving away from relentless and often pointless audits can only be a good thing,” she adds.

But Neil Kearney, general secretary of ITGLWF, says: “The last thing we need is yet another code of conduct on social auditing – GSCP’s adds to the 10,000 or so out there already, indicating that its members have learned little from the last 14 years’ experience on workplace conditions and how to improve them.”

Kearney adds: “Auditing doesn’t work. Where freedom of association and collective bargaining is concerned, discrimination and harassment of workers is as bad now as it was 12 years ago. Child labour has merely been pushed into the crevices and the percentage of migrant workers kept in bonded labour has actually increased.”

Enduring the downturn

Given that audit duplication is causing extraordinary inefficiencies, GSCP members stress that now, more than ever, the audit system needs to become efficient.

The group proposes to achieve this through information sharing between existing supplier databases. However, it has yet to decide how this can be done. As with any data-sharing exercise, there will be anti-monopoly considerations and suppliers will need to agree to information sharing. “If buyers collaborate and inadvertently boycott a given supplier there could be competition issues,” Nixon Gardiner observes.

GSCP is also working on an “equivalence tool” through which buyers and suppliers can benchmark their practices against the GSCP reference tools. In the past, such rating systems have been shown to improve performance among companies. Despite most members already being rated by various other initiatives, GSCP members have yet to agree on whether the benchmarking would be made public.

While GSCP is still in its infancy, the involvement of international organisations such as the United Nations, the FIDH and international union Uni-Commerce (all represented on GSCP’s advisory board) is significant.

“It would be a mistake for any stakeholder not to make the effort to understand what GSCP are doing. The focus here is not on audit; it is on remediation – victims’ rights to reparation and on improving purchasing practices,” Bernard says.

If companies do commit to achieving GSCP’s objectives, then in Jaksch’s words: “This is no longer a race to the bottom; it is a race to the top.”

Who does GSCP answer to?

“The Global Social Compliance Programme is not the most advanced when it comes to consulting or discussing with others,” says ITGLWF’s Neil Kearney.

The only non-members privy to GSCP discussions and work plans are the handful of organisations sitting on its advisory board. These include the International Federation for Human Rights, the United Nations Office for Partnership, CSR Asia and Uni-Commerce.

The advisory board is consulted on best practice guidance documents produced by the GSCP’s nominated work groups and its executive board. Wider-consultations on GSCP-agreed work plans mainly target industry experts, but are publicly available online.

“The GSCP provides a ‘safe place’ for members to discuss sensitive issues,” says a spokesman.

Stakeholders have questioned why high profile names in the field of supply chain ethics – such as ITGLWF and the International Union of Food workers (IUF) – are not on the executive and advisory boards.

Sue Longley of the IUF explains that her union has steered clear of GSCP because it disagrees with the “codes of conduct” approach. “These kind of initiatives often serve as a front for workers not to join a trade union,” she says.