Keeping goods good: Managing risks from unethical work practices

Trends toward organic foods, health foods, or various restrictive diets have led to an increased focus on where food comes from. Predisposed to be suspicious from reading stories of global social inequality blipping through their smartphones, consumers nonetheless expect their food to have been screened for ethical purity.

When their suspicions are confirmed, consumers are quick to punish. They don’t just have the power to withdraw their custom. They can also broadcast negative opinions to huge audiences with the click of a few buttons, finding like-minded tribes to amplify their message faster than you can say ‘corporate social responsibility’.

Big-brand retailers, producers, manufacturers and suppliers are increasingly aware of this risk. Despite their best intentions, they acknowledge that the goods​ they make could inadvertently incorporate bads​. Even at several degrees of separation back up their supply chain, a sniff of unethical behaviour can badly tarnish their reputation by association and be financially painful. This is not just a third-world concern: the UK’s Modern Slavery Act, for example, reminds us that the problems persist even in first-world economies.

Customers want to make sure that all they’re doing is buying your product, not a whole load of extra reputational risk at the same time. Organisations generally want to do good for the sake of it, within the framework of staying profitable. However, there is also a strong element of enlightened commercial self-interest at stake.

The benefits are well understood. Helping to eliminate unethical behaviours contributes to the circular economy, making businesses more sustainable long-term. It enhances reputations. It protects brands against downside risks from the deep disruption and expense of regulatory breaches, tribunals and legal claims. It positions you as an employer of choice, helping with recruitment, retention, motivation and morale, which leads to better productivity – better quality, faster production, fewer errors and therefore quicker to market.

Conducting social audits

Fortunately, there are tools available to help you to detect and monitor the risk. One of the best known is SMETA, which stands for Sedex Members Ethical Trade Audit.

SMETA is an open-source protocol for conducting social audits, and is owned by non-profit organisation Sedex (Suppliers Ethical Data Exchange). SMETA sets out a best-practice social audit procedure based on the Ethical Trading Initiative (ETI) Base Code – itself derived from the International Labour Organisation’s (ILO) Standards and Conventions - and the UN Global Compact, with tried-and-tested standardised report formats. It has already been used an estimated 280,000 times and counting.

The protocol can be used for any size of business in any industry or sector, in any country. Reports can thus easily be compared, incentivising its use. At the discretion of the owner, they can also be easily uploaded to Sedex’s data exchange, an online system that allows suppliers to maintain data on ethical and responsible practices and to share the information with their customers.

While the system is a de facto​ standard, it cannot be certificated. Although there is nothing to stop companies auditing themselves, doing so is clearly prone to bias and lower quality outcomes. A better way is to ask a qualified, experienced third-party to conduct the audit.

A team of experienced lead auditors qualified to IRCA’s social systems lead auditor course are able to mediate all kinds of situations impartially, leading it to a satisfactory conclusion and producing reliable findings.

An auditor’s soft skills are almost as important as their technical knowledge. It puts interviewees at ease, helping them to open up without fear of come-back. An ability to read body language can raise suspicions, too, spurring the auditor to dig further.

Companies can opt for two audit options, covering labour standards and health and safety, with options to extend scope to cover entitlement to work, subcontracting, homeworking, assessment of environmental protection, and business practices, (i.e. covering corruption, bribery, fraud, and so on).

The process is straightforward, streamlined and readily affordable. The subject organisation completes a pre-audit questionnaire to communicate their particular size, needs and circumstances. This allows the auditor to tailor their audit appropriately.

Assuming the questionnaire results indicate that an audit will be useful, the subject organisation agrees with the auditor whether the audit will be announced, unannounced, or semi-announced – i.e., scheduled to happen at some point during a specified window of time. Each option has its benefits and downsides. For example, whereas the unannounced audit might be more likely to catch teams out in non-compliances, it is less likely that the process will come off as efficiently and quickly as an announced one. 

The duration depends very much on the size and complexity of the target organisation’s operation, but can last from half a day to several days. The auditor reviews documentary evidence in the form of written policies and procedures, interviews staff to check that they are implemented, and spends time observing staff at work, particularly machine operators or people working in hazardous conditions.

The process does not result in a pass or fail outcome, although it might generate a Corrective Action Plan Report where non-compliances are found. If no non-compliances are found, a final report is issued. If there are enough non-compliances, the subject organisation is given leave to take the appropriate corrective actions before being revisited by the auditor and a final report being issued.

‘Not just finding error’

To reflect the seriousness of the issues at stake, SMETA is deliberately tough. Auditors will see through temporary patches or lip service. Indeed, the subject organisation often needs three or more audits before they reach an acceptable level of compliance. And of course, standards can slip over time, which is why repeat audits are recommended every few years. If you’re having trouble retaining staff, for example, that might suggest a problem and be a good trigger for another SMETA audit.

That said, the process is not just about finding error. In acknowledgement of the difficulty of compliance in different economies, auditors are encouraged to highlight instances of good practice, where the subject organisation has gone beyond the code.

The object is to improve ethical standards generally. If a head brand finds that one of its supplier factories employs children in breach of the code, the spirit of SMETA is to help it to put the situation right. Depending on local conditions, the responsible corrective action might be for the head brand to help their supplier to set up a school in the factory.

The SMETA protocol does not stipulate a minimum level of acceptability – that is determined by the subject organisation’s customers. Thus, provided the subject organisation’s practices are legal, customers are often happy to carry on their business relationship despite lingering non-compliances.  For example, the law on overtime in the UK is lower than that set out in the SMETA code. Even though the supplier does not comply with the code, the customer is unlikely to have any objection to working with them, provided they are not also breaking the law.

SMETA is a force for good. It allows organisations to manage their risks effectively and to combat inequality by proactively improving working conditions generally. It’s not just the right thing to do for your customers, it delivers on your principles as a responsible business, too.