It is not a new issue that audits and standards can be tiresome. However, the COVID-19 pandemic has exacerbated this fatigue. Standards, compliances, and audits are all important. Or, rather, a glut of them. Recently, the Standards Convergence Initiative was announced. Subir Ghosh.
It is not a new issue that audits, standards, and compliance fatigue are causing the industry to be stretched to the limit. Standards, compliances, and auditors are all important. Or, rather, a slew of them.
To put it mildly, the COVID-19 epidemic has caused havoc on an unimaginable scale. For over a year, shops have been lowering shutters and then raising them as soon as the situation improves. The supply chains were splintered in key places and then patched up, only to discover new flaws. Many orders come with riders who have not yet been paid.
The majority of garment workers are now on the verge of ruin. To make matters worse, foreign policies have dictated too many issues of trade. Protectionist measures are now a common response to domestic concerns and obligations. A globalized industry that was once a well-oiled machine now seems to be a relic from a distant time, broken and dysfunctional. It’s all very surreal. The industry is in a state of stress, and the compliances are making it worse. Some overlap, and some are mandatory. The “audit exhaustion” that has been discussed occasionally in the past is now driving industries to the wall. It is now more important than ever to standardize standards so that they are streamlined and tractable.
In the first week of February, a side session on due diligence for the garment and footwear sector was held at the OECD Forum. The International Textile Manufacturers Federation and the International Apparel Federation, two major industry associations, announced at the event the launch of their joint initiative called the Standards Convergence Initiative (SCI). According to their ambitious plan, the SCI is intended to be a global platform for industry-wide discussion and development of a strategy, as well as tools, to reduce audit fatigue and standard fatigue within the textile and clothing industries.
A new initiative for our times
No doubt, any industry must adhere to the law. Specific industries also need to follow their rules. But for an industry as globalized in nature and geographical spread as textiles-apparel-fashion, there are bound to be so many that you remain entangled in them. It was inevitable that the wires would be untangled. It has been a while.
In a joint press release, the IAF, ITMF, and others pointed out that “the auditing conduct by standard holders along with brands and retailers, and other buyers decisions, determines whether we are moving in the right direction towards less unnecessary overlap between audits and standards.” The SCI, in collaboration with the International Trade Centre, has taken the first step to ensure transparency in the conduct of the main standard holders. This includes brands, retailers, and third-party ordinary holders.
Matthijs Creietee, the IAF secretary general, explains the background to the multitude of problems that led to the SCI: “For the IAF audit and standard fatigue was flagged as a significant problem by the majority of its members, especially those who represent mostly manufacturers. The cost of conducting many unnecessary audits each year is not the only issue. It could be more expensive not to know what standard will be used by a new customer and, therefore, overshoot on improvements or, in the inverse, underperform and miss orders. The audit and standard fatigue problems are the most obvious examples of fragmented regulations and rules in our industry. “As the global federations of the apparel and textile industry, reducing this fragmentation at a global scale will always be a part of IAF and ITMF’s missions.”
It took some time for the ideas to become the SCI. Christian Schindler is the ITMF’s director-general. “The ITMF, IAF, and other organizations started working on the idea several years ago when audit fatigue and standard fatigue were omnipresent. Audit fatigue and standards fatigue are closely related. There would be only one audit required per company if there were only one traditional global for social compliance. As more standards competed with each other, audits also increased.
Since brands and retailers were trying to differentiate themselves, it wasn’t expected that there would be a reduction in the number of standards anytime soon, even though they resembled each other. The industry began to look at ways in which the number of audits might be reduced. This was done by avoiding the duplication of data collection on the factory floor. In 2015, brands, retailers and producers, standard-holders, auditing firms, and other stakeholders came together to start what is now known as the Social & Labor Convergence Program.
Two elements are involved, but they aren’t synonymous. As Crietee points out: “It’s important to remember that we’re talking about audit fatigue and not standard fatigue. Standard fatigue is more important than audit fatigue because the industry is working to move beyond audits at the same time as it reduces overlaps. It is not necessarily a bad thing that there are so many different standards. The industry is so varied that it requires a wide range of standards. These standards are not the same, and this creates problems for manufacturers who have to deal with multiple versions of the same product.
The frustration was building for some time and eventually reached a tipping point. Schindler says, “The trigger was when buyers (brands/retailers) realized they were doing duplicate Work – more or less compiling data again and again without any positive impact. Both producers and buyers wasted resources (money, time) on repetitive audits, which did not improve the working conditions.
Could it have been about only the audit fatigue factor, or also that there are far too many standards/certifications? Says Schindler: “As I outlined earlier, the increasing number of standards–both third-party standard holders and proprietary standards by brands/retailers–led to an explosion of audits at the producer level.”
IAF and ITMF jointly initiated SCI. ITC is a partner in the SCI, helping to measure and monitor whether there is convergence or not. The IAF and ITMF, however, are only two organizations. Many more are involved at the international and national levels. It could be a question of how they plan to bring as many people/organizations as possible on board.
Crietee reaffirms the facts to calm fears: “The IAF and ITMF are not any ordinary organizations. We are the only global industry federation. We don’t need every stakeholder to join the SCI; that would be impossible. The very fragmentation you’re trying to combat can get in the path of a solution. The SCI’s goal is to show the industry what standard holders are doing to be part of the solution. The ordinary holders are responsible for reducing audit and common fatigue. Our networks and positions allow us to bring light to these processes and encourage ordinary holders to improve.
Schindler continues: “The IAF has a large membership around the world, representing the vast majority of all existing textiles and apparel companies.” The IAF membership, founded in 1972, includes apparel associations from over 40 countries, representing more than 150,000 companies, a membership that represents approximately 20 million employees. The IAF’s associate members include prominent companies and institutes from the technology, business service, retailing, logistics, culture, education, and logistics sectors. ITMF is one of the oldest associations in the industry, originally founded as the International Federation of Master Cotton Spinners’ and Manufacturers’ Association in 1904. The ITMF was renamed in 1978 and now represents the entire textile and related industries around the globe.
What comes to mind is: what has been the response/feedback that both organizations have received from the public since the announcement of the initiative? This is especially true since the initiative was announced during an online event, where many people would have provided their feedback there and then.
The feedback has been positive, according to Crietee. “Especially as you can imagine, from some of those large standard holders who have been working on reducing audit and standard fatigue.”
In 2020, the SCI initiative was already in motion with the presentation of its concept and goal at the OECD Forum for Due Diligence on the Garment and Footwear Sector. Schindler says: “This year, the OECD event was only virtual, but it received a great deal of attention and interest. Most people in the industry know that audit fatigue is real. “While it is generally accepted that social compliance standards are important to the industry in order to protect workers and improve working conditions, there is no doubt that a proliferation of similar standards makes it difficult and expensive for producers.”
Untangling the threads
There are 40-50 standards and certifications, all of which have different types and apply to other regions. These are also important. How are they working on it? How are they even keeping the standard/certification bodies in the loop about this? This is not a problem that one person can solve.
Many large brands and retailers continue to use proprietary standards. This is a very important part of the SCI. We call on retailers and large brands to abandon their proprietary codes for third-party standards. This is a very important first step to reduce standard fatigue. Our collaboration with the ITC is needed to help harmonize the 40-50 third-party standards you mention. The ITC created the global Standards Map Database. Together, we are exploring ways to use this unique tool in a worldwide project.
Schindler describes it in a threadbare way: “The ITC developed the Standards Map, which is a modular that provides comprehensive, verified, and transparent information about standards for environment protection, worker rights, economic growth, food safety and quality, and business ethics. The Standards Map contains more than 300 different standards. In the textile and garment industry, 85 standards are in fact applied. Social compliance is governed by between 30 and 50 standards. This Standards Map lets everyone see all the different standards and which ones meet specific criteria. The ITC regularly verifies the ITC’s information and updates it on a regular schedule (every 1 to 2 years). The Standards Map is a great tool for analysing and comparing standards against specific criteria. While comparisons between standards might sometimes be difficult, the direction–convergence or divergence–can be observed.”
It would be a huge and complex task to synchronize the different standards and certifications. Next, there are the timelines and roadmaps.
Crietee shares: ‘In fact, synchronization is a huge task. But it does not need to be done to its fullest extent in order to have a serious positive impact on the market. The majority of the market will be covered by 10-15 of the biggest third-party standards holders. Brands and retailers will have to do their part, either by participating in the project or dropping their proprietary codes. It is a process that will continue, but we expect to start the standardization project in 2021 or 2022.
Schindler explains how this will play out in practice: “The SCI’s objectives are that, when there are minor differences between standards, they should be aligned or recognise the criteria of each other. It would be a great move if retailers and brands would abandon their proprietary standards to adopt standards from third parties. We are working with ITC to operationalise the four criteria, by looking at different indicators from the ITC Standards Map. We will publish the first results within a few months.”
The SCI has identified four criteria that can be used to measure the commitment of standard holders to reduce audit fatigue and to adhere to standards:
*Willingness to harmonize standards
*Compliance to OECD and ILO Guidelines
*Use of existing platform in order to avoid audit duplication
* Global certification of auditors
Schindler explains the following: “The OECD guidelines and ILO guidelines have the highest level of recognition and are the most comprehensive.” We do not work directly with the OECD or ILO. We use their guidelines for a starting point. We are thankful that we were able to present the SCI during the OECD event in 2020 and 2021, as many key stakeholders attended these events. It allows us to connect and meet with different stakeholders in the industry.”
Crietee explains the role of the ITC: “The collaboration between the ITC and this initiative is at its core.” As I said, our core work is to shine a light on positive action. This is done primarily by linking our four criteria with the Standards Map Database of the ITC. We can also use the information about standard holders already in the database to calculate a score for adherence to SCI’s criteria. Interviews and, in some cases, such as compliance with OECD due diligence guidelines and an assessment by the OECD themselves, provide additional data about adherence to the SCI criteria. We are making allowances to ensure that not all four of our criteria can be applied the same way for each standard holder. Our collaboration with the ITC allows us to manage a process that would otherwise be very time-consuming and expensive.
Schindler clarifies, “The ITC will use the four SCI Criteria and check which standards actually meet these criteria using the indicators on the Standards Map.” The ITC will not pass judgment. The SCI will analyse the results, and then come to conclusions.”
A body of existing Work
In some ways, the SCI builds on a previous initiative, SLCP. The SLCP was launched in 2017 and offers tools to measure the working conditions of global supply chains. This multi-stakeholder project includes data sharing, and eliminates the need for repeated social audits. It was a similar idea: “it increases transparency in supply chain, reduces the requirement for social audits, and allows users to redeploy their resources towards improving working conditions.”
The SCLP has been around for a few decades now, and was created to reduce the fatigue factor associated with audits/compliances in the industry. Do such initiatives Work, though? The SCLP has it worked?
Janet Mensink is the executive director of SLCP. She says, “The SLCP has a multi-stakeholder, non-profit initiative that has a distinct vision.” Our mission is the implementation of a Converged Evaluation Framework (CAF) in order to support stakeholders’ efforts to improve working conditions within global supply chains. Our strategic plan enables us to benchmark our success in a number of ways. We have set four clear and measurable goals and key performance indicator (KPI) for this plan: Industry adoption, allocation resources to improvement programmes, becoming the leading source of social data, and finally, becoming self-reliant as an organization.
Signatories can access the annual Learning & Evaluation Report (available to measure progress) of the SLA summary of. It’s yearly and will be published soon.
While the pandemic was a challenge to the industry as a whole, “last years we were able scale operations into 30 countries and completed 1,400 verified assessments. The first signs of resources saved being redirected to improvement programs were also evident. The other goals are also well on track. Our findings have been substantiated with an increase in acceptance of our verified information, where more than forty brands, retailers, and organisations now publicly commit to accept SLCP versus proprietary tools. Moreover, our annual Signatory Survey shows that our signatories are reaffirming their commitments, and are integrating SLCP in their internal systems and processes.”
What has been accomplished is one thing, but what needs to be done is another. It is even more important as the industry continues to grapple with a pandemic.
Mensink is in agreement: “The global situation underscores how crucial it is to work together to improve working conditions, and to look for ways to reduce audit exhaustion. A recent survey revealed that 72 percent of signatories believe the SLCP is more relevant in a post-pandemic environment. We believe that 2021, our third year in operation, will be a turning-point for SLCP. Recently, we released an updated version. Better Work helped us make the tool user-friendly, relevant and more useful. We also created a Law Overlay that is specific to certain countries. Soon, we will launch in three major production countries jointly with Better Work. We are confident, based on the nominations that we received, that we will be able to scale our adoption by 2021 and begin seeing the impact of improving working conditions in supply chain.”
There is also the SCI context. It would be interesting to see if the SCLP’s objectives and ideas are synchronized with the ITMF, IAF and other industry associations that have signed the SCLP. How would the SLCP CAF’s CAF interact with the SCI if this were to be the case?
The SLCP official states: “The ITMF, IAF and SLCP have always been supporters of the SLCP. SCI aims to simplify social audits and standards. The SCI and SLCP are strategic partners. Four criteria are used to determine the SCI’s approach towards standard holders. This includes third-party standard holders such as Business Social Compliance Initiative (BSCI), Sedex Members’ Ethical Trade Audit (SMETA), Fair Wear Foundation (FWF), Fair Labor Association(FLA) or Worldwide Responsible Accredited Product–WRAP but also proprietary standards by brands/retailers. One of the criteria is to use platforms that are already in place for audits. The SLCP CAF is the largest global effort to eliminate duplicate social audits on the facility level.
She quotes the ITMF/IAF commitments in this regard: “We are strong advocates of the SLCP, and our members have already seen the benefits of accepting the same set SLCP-verified data by different brand partners. We want to get to the point where manufacturers can work with a single data collection and verifying, rather than 20 audits of different brands/retailers.
The SLCP is very clear: It does not value data. All that data is hidden behind the SCLP Gateway. Would it be helpful if these data were made publicly available?
Mensink asserts: “The SLCP is a firm believer in the power and importance of transparency. We use credible and comparable data as a basis for policy and decision making. The SLCP verifies assessments refer to ILO Conventions as well as national labour laws. The CAF will be updated and the reports of assessment will show non-compliance with national laws. The SLCP offers transparency by making all facilities which have undergone an SLCP evaluation publicly available through the Gateway.
According to our vision of facility ownership and accountability it is up the facility to decide with whom to share the verified dataset. The SLCP prioritizes ‘Data insights’ on a larger scale. This workstream will be developed in the next 1 to 2 years with our partners. The SLCP has a strategic objective, and the data pool, as it grows and scales, will be robust enough for industry-wide insight.
The SLCP was signed by 51 brands/retailers and 42 manufacturers. There were also 81 auditing firms, 18 consulting firms, 29 standard holders, civil society organizations, six agents and 11 industry associations. The footprint is still expandable.
Mensink states, “Twenty five years of social audits have led to the agenda for decent work in supply chain being driven primarily by the private sector.” The SLCP is in line with UNGP (UN Guiding Principles Reporting Framework) and the OECD Due Diligence Guidelines. It recognizes that different stakeholders are responsible for protecting their citizens, including governments.
The SLCP collaborates with two UN agencies – the ILO (Better Work Programme) and the Trade for Sustainable Development Programme of the ITC (T4SD). The SLCP collaborates with the ILO in order to align the CAF to international labour standards, national labour laws and to consult with national constituents. With the latter it is possible to increase the sharing of data based on the tool. The SLCP, in collaboration with the ITC has developed the SLCP Gateway. This online platform allows the program to grow as more brands and suppliers use the system.
SLCP’s goal is to use data to reduce duplicate Work and improve working conditions, but also to create robust and credible data and analyses that can be a powerful tool for governments and other policy stakeholders. Mensink says: “Our number of signatories continues to increase and now exceeds 240. Our footprint can be measured best by the size of our operations and its impact on improving conditions at Work. We work with many signatories, stakeholders and others to achieve this. “The role of governments is crucial and the SLCP will continue and expand engagement with governments.”
The other side of audits
Audits can be a trap if they are too frequent.
In November 2020, a group of Pakistani researchers published a paper entitled ‘Conceptualizing Audit Fatigue in the Context of Sustainable Supply Chains’ in an open-access journal called Sustainability. Researchers stated: “Sustainability Audits are complex because they cover entire supply chains. This is due to the global nature and scope of sustainability audits, including financial, manufacturing, environmental, and social audits. This dilemma is exacerbated by the lack of consensus on sustainability standards, which leads to differences, variations, and multiple interpretations.
After reading volumes of literature, they concluded that the simplicity of the term “audit fatigue” has conveniently hidden its impact on audit outcomes. The increasing reliance of society on audits to make all kinds of decisions is based upon the assumption that audits can be objective, transparent, and independeThe. Increasing reports of audit fraud are challenging this trust fraud. This phenomenon is important for modern society if audit fatigue affects audit outcomes. There is still a long road to go before achieving the perfect audit report. Organizations will continue to make false sustainability claims and misrepresent the facts until then. Audit fatigue is an industry reality. Understanding relevant antecedents, consequences, and countermeasures can help reduce such incidents. This can improve trust in the audit report.”
Muhammad Kamran Khalid, a lead researcher at the National University of Sciences and Technology in Islamabad who specializes in operations and supply chain management, said he had always been interested in Sustainability and that the textile industry was ideal. “I realized that there were many standards. I have been studying more than 40 standards in the textiles industry. The literature indicates that there are more than 1,000 standards in different industries and sectors. I wanted to investigate the possibility of consolidating these standards into one. Sedex’s Global Social Compliance Programme, Fair Factories Clearinghouse, and other similar efforts to harmonize have also been numerous. Still, they failed to reduce audit fatigue, as suggested in the literature.
Khalid and fellow researchers examined the issue through the lens of Sustainability. However, his observations are applicable to all industries. Khalid summarizes them in one sentence: Lack of appreciation for Sustainability by suppliers leads to audits being treated casually; compliance is seen as a burden or a way to get the next deal, and not as an opportunity to improve social and environmental impact. He criticizes the “double standard” that Western brands have when they ignore a supplier who does not follow the rules in spirit and letter (as was the case with the Rana Plaza collapse) and claims both Western and non-Western companies “are misleading and greenwashing sustainability reports and audits.”
According to him, top leaders in textiles are the exception. “They have a deeper and long-lasting relationship with their clients and are willing to invest in sustainability-related infrastructure. The future has become less uncertain because of this collaboration. Smaller and medium enterprises, however, are not sure about making such investments. Khalid brings up the issue of the sanctions against Xinjiang Cotton, and claims that these indirectly affect Pakistani mills which make products for H&M Nike etc. (which are now being boycotted by China). It is not under the control of local textiles.”
New Conversations Project, a Cornell University School of Industrial and Labor Relations project, also investigated the topic. Researchers Jason Judd & Sarosh C. Kuruvilla, in a series of papers, highlighted that data from the past three decades showed that there has been little improvement. “Traditional methods for improving labour standards have been largely unsuccessful.” The public regulation of countries that produce labor-intensive, low-cost products for global corporations, as well as private regulation based on codes of conduct and auditing from multinational corporations, have failed to improve the lives and conditions of workers. “Research on labour standards within global supply chains, particularly in the apparel and shoe industries, over the past decade shows that there has been little improvement in core labour standards, such as freedom of collective bargaining and collective representation, or measures such as wage, hours of labor, safety and health.”
The research, based on comprehensive evidence from over 40,000 factory audits in over 12 countries over time and in 12 industries, showed that “the average number of violations in labor audits remained almost unchanged across all countries and industry sectors between 2011 and 2018. The only positive change in labor issues was the slight reduction in average working hours.
There are three main reasons why progress has been slow: the private regulation that allows brands to monitor their labor practices, companies’ lack of commitment to personal regulation, and implementation failures due to poor factory audits. Judd & Kuruvilla identified the fourth reason as opacity. They said, “The lack of transparency about the results created by private regulation establishes an opaque field, where actors – whether they are companies or unions or multi-stakeholder organizations, industry critics, etc. – cannot see what works and where and under what circumstances. After 25 years of CSR, we still don’t understand the effects on workers.
Researchers at NCP also found that auditors were receiving far more unreliable data than they had previously believed. The researchers revealed that “Data shared by NCP from a leading auditing firm classifies the information/data given to its auditors as either completely reliable (trustworthy) or unreliable. In apparel, the average “unreliable” rate is 41% and in footwear, it’s 39% over the period 2011-17.
Fraud can cause a malaise that can ruin a lot of hard Work. An enormous fraud in October of last year left the industry agitated. Global Organic Textile Standard announced on October 31, 2020, that they had discovered proof of fraud in India after an investigation. GOTS found 20,000 metric tons of fake organic Cotton. It said that it had collected substantial documentary evidence of systematic fraud.
GOTS said that it had taken immediate corrective action. “GoTS will now check the authenticity and credibility of all incoming TCs for organic raw materials entering its supply chain. The organization stated in its damage control statement that it is developing a system of permanent data collection and review for CBs (certification authorities) and raw materials entering the GOTS chain.
GOTS has stopped the rot for now, but like all similar organizations, it cannot afford to be lax. The scandal will likely make standards authorities more strict than they were before.
Converging towards a standard
SLC and SLCP seem to be the best way forward. It is important to address audit fatigue and standard exhaustion. Besides streamlining them (standards/audits/certifications), all these initiatives would also need to ensure that no loopholes remain. These initiatives would also need to take into account greenwashing frauds and audit frauds.
This is a difficult task, and the road ahead would be very confusing. It’s worth trying.
