How can Ethical Trading Managers go 'beyond the audit'?

  • Written by Laura Houghton
  • Published on 8th November 2018
  • CategoryBlog

Going beyond the audit.

Regular factory audits are now considered to be a bare minimum requirement for high street fashion brands and although these audits can be useful in identifying physical or material breaches, such as occupational health & safety or shortcomings in documentation, as an IDH report states, they "do not create the change necessary to ensure sustainable improvement to employment practices". 

The ETI also argues that, “at best, auditing can point to specific breaches of ethical standards. At worst it can perpetuate a culture of deception, with suppliers hiding the true picture from their customers out of fear of losing precious orders if they fail to ‘pass' an audit”. 

I have a huge amount of admiration for today's ethical trading managers, particularly those working for apparel brands with global supply chains. They are faced with a number of sizeable challenges at a time when NGOs, consumers and legislation (such as the UK Modern Slavery Act) is putting them under increasing pressure to go 'beyond the audit’.

The challenge starts at home

Firstly, ethical trading practitioners' modus operandi can often be at odds with the margin-driven teams that hold much influence during tough trading environments, like the one we currently find ourselves in. When a brand’s sourcing strategy is treading the delicate balance between profit, quality, speed-to-market and sustainability, it can often be the latter that is compromised unless an ethical trading culture is fostered from the very top of the company.

Secondly, it seems quite common for ethical trading teams to be seriously under-resourced within mid-tier high street brands, in particular. Often, they comprise a ‘team' of one individual and at worst, ethical is not even represented with a full time employee at all. I recently met with an ethical trading manager within one such high street brand who within weeks of our meeting, I was shocked to hear had been made redundant. The company is now left with no one focused on ethical. Not much work happening 'beyond the audit' within that brand’s supply chain, we can assume!

The global political challenge

Ethical trading managers are ultimately tasked with ensuring that their company’s Supplier Code of Conduct is adhered to across hundreds, if not thousands of factories. These factories are usually distributed around the world in countries where governments are reluctant to introduce a fair living wage let alone legislation like the UK Modern Slavery Act. After all, such governments are often competing for foreign investment and increasing the costs & complexity of doing business within their country could jeopardise this external funding.

When faced with such a dispersed network of factories and the complexity of political challenges within each country, it seems understandable why under-resourced ethical trading teams continue to rely on ‘tick box’ factory audits. With such limited resource and political influence, what else is there to do?

The Tier 2 (and beyond) challenge

Given the scale of the challenge in ensuring their tier 1 garment manufacturers are ethically compliant, it’s no surprise that ethical trading teams are rarely, if at all, focused on what’s happening within their secondary & tertiary supply chain. These are often factories supplying branded labels, trims, hangers and packaging to their garment manufacturers. Although it’s quite common for brands to have some nominated tier 2 suppliers, they don’t typically order directly from these suppliers and rather, leave this to their garment manufacturers. 

This is where a key, and often over-looked, risk for the brand lies. Unfortunately, those garment manufacturers who, as the ETI states, are sometimes "hiding the true picture from their customers”, are also using secondary suppliers who are completely unknown to the brand, let alone nominated or approved. Garment manufacturers will procure components from unapproved suppliers at a fraction of the cost of nominated suppliers and these costs are often kept low because the unapproved suppliers are flouting social & environmental standards.

Unfortunately, our research has found that this drive to increase margins leads some garment manufacturers to source packaging & components from unapproved (and perhaps unethical) factories up to 80% of the time! It doesn’t matter how many audit certificates an ethical trading manager has been able to collect for nominated suppliers, if those suppliers aren’t ultimately being used, they’re not worth the paper they’re written on. This issue remains to be the big ‘elephant in the room’ for many brands who are so busy auditing tier 1 factories that they neglect the fact that millions (if not billions) of components with their branding on are being produced in factories completely unknown to them.

The systems challenge

Through our work with many high street fashion brands I’ve been staggered to find that most ethical trading teams still manage much of their important supplier data on spreadsheets. Given the breadth of data they’re often looking to store and manage (various certifications, product data, risk levels, remedial actions etc.), it’s no surprise that most ethical trading managers are ‘fire-fighting’, working reactively and lacking the actionable insights that can enable them to be more effective in their roles.

Simple things like being proactively alerted to audits that are due to expire within the next 90 days currently aren’t possible. Let alone being notified when a seemingly ‘trusted' garment manufacturer is procuring components from unapproved or unsustainable sources.  I met with a major brand this week that has a goal to be using 100% sustainable cotton by 2020. When I asked them how they currently ensure the cotton being used by garment manufacturers is from sustainable sources they openly said that they can’t guarantee this as it’s largely based on trust! 

In the absence of software designed specifically to support the work of ethical trading teams, it’s no surprise that those team members are often grappling with data and struggling to find the insights or time to go 'beyond the audit’. At Segura, we don’t do the critical work that ethical trading managers should be doing; such as helping suppliers build their management skills and systems, addressing inappropriate purchasing practices and critically, helping build mature systems of industrial relations that enable workers to start to shape their own destinies.

However, what we do provide is software specifically designed for ethical trading teams to help them increase supply chain transparency, manage their important supplier data better and be alerted to events that carry more meaning than another tick-box audit.

Originally Published 10/10/2016