The issue of fatigue associated with audits and standards is not new, but that weariness exacerbated by the pandemic is beginning to stretch industry to its seams. It is a question of standards, compliances and audits. Or rather, an overdose of them.
The covid-19 pandemic has, to put it even mildly, wreaked havoc of unimaginable proportion. For over a year now shops have been downing shutters, pulling them up again as things get better, only to down them again. Supply chains have been splintered at crucial points, patched through subsequently, only to find new chinks in the links. Orders come with riders, many still not paid for.
Tens of thousands of garment workers in manufacturing countries have been left without a livelihood, most of them now teetering on the brink of devastation. Foreign policies dictate too many trade issues for comfort, and protectionist approaches have been mushrooming to counter domestic obligations and apprehensions. The well-oiled machine of a globalised industry suddenly seems like a relic of a distant part; broken and dysfunctional. Very glorious, and all too surreal. Industry is under severe stress, and this is compounded by the slew of compliances that need to be abided by. Many of them overlap, some are binding. The “audit fatigue” that was earlier discussed once in a while is now driving industry up the wall. There is—perhaps like never before—a dire need to standardise the standards in that they become streamlined and tractable.
This is what took the form of an announcement during a side session organised at the OECD (Organisation for Economic Co-operation and Development) Forum on Due Diligence in the Garment and Footwear Sector held online in the first week of February. Major industry associations—the International Textile Manufacturers Federation (ITMF) and the International Apparel Federation (IAF)—unveiled at the event their joint initiative: the SCI, or Standards Convergence Initiative. The ambitious SCI plan, in their words, is meant to serve as a global industrywide platform to discuss and develop a strategy as well as the tools to accelerate the reduction of audit and standard fatigue in the clothing and textile industries.
An initiative for the times
Any industry needs to heed the laws—no two arguments about it, and specific industries need to adhere to laws specific to them. But for an industry, as globalised in nature and geographical spread as textiles-apparel-fashion, there are bound to be so many that you remain entangled in them. In other words, an effort to disentangle the wires had been coming. For a while.
The joint press release issued by the IAF and ITMF pointed out, “The auditing conduct of standard holders, along with brands, retailers and other buyers’ decisions determines if we are moving firmly in the direction of less unnecessary overlap of audits and standards. Therefore, one of the first steps of the SCI, in collaboration with the International Trade Centre (ITC), is to create transparency in the conduct of the main standard holders, brands and retailers and 3rd party standard holders, measuring to what extent they are contributing to the reduction of audit and standard fatigue.”
The IAF secretary-general, Matthijs Crietee, gives the backdrop to the plethora of problems that led to the SCI, “For the IAF, audit and standard fatigue has been flagged as a major problem by a majority of its member associations, particularly those representing mostly manufacturers. It is not only the cost of tending to many unnecessary audits every year. Potentially more costly is never quite knowing what standard a new client will use and therefore overshooting on improvement or, inversely, underperforming and missing orders. Audit and standard fatigue are perhaps the clearest examples of the wider problem of fragmented rules and regulations in our industry. As the global federations for the apparel and textile industries, reduction of this fragmentation on a global level will always be part of the IAF’s and ITMF’s mission.”
The ideas, of course, took some time to take the form of the SCI. Informs Christian Schindler, the ITMF director-general: “The ITMF and IAF started developing the idea a few years back when audit and standard fatigue was omnipresent in the industry. When looking at audit fatigue and standard fatigue it is evident that they are interwoven. If there was only one global standard for social compliance, there would only be the need for one audit per company. With more standards competing with one another, the number of audits increased alongside.
“Since brands and retailers wanted to differentiate themselves from one another, it was not to be expected that the number of standards could be reduced anytime soon even though many of the standards resembled one another. Hence, the industry as whole started looking whether the number of audits could be reduced by avoiding duplicative data compilation at the factory level. This was the moment when brands, retailers, producers, standard holders, auditing companies and other stakeholders got together and started in 2015—what is today known as the Social & Labor Convergence Program (SLCP).”
There are two elements to consider here, and they are not synonymous. Points out Crietee: “It is important to note that we are speaking about audit fatigue and about standard fatigue. Both are important, and because in parallel to reducing overlaps in audits the industry is also working on moving beyond audits, standard fatigue is probably even more important. The fact that there are different standards is not necessarily a problem. Actually, the industry is so diverse, it needs a variety of standards. The problems arise where these standards overlap, but not quite, so that manufacturers have to deal with unnecessary and costly varieties of the same theme.”
The pent-up frustration had been building up for a while, leading to the tipping point. Says Schindler, “The trigger factor was that buyers (brands/retailers) realised that they are doing duplicative work—more or less compiling the same data over and over again without any additional positive impact. In fact, to the contrary, both producers and buyers were wasting resources (money and time) for repetitive audits that did not improve 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.”
The SCI was initiated jointly by the IAF and ITMF. The ITC has become a collaboration partner helping the SCI to actually measure and observe whether or not convergence between standards is taking place or not. Nevertheless, the IAF and ITMF are just two organisations. There are many, many more at the international level and countless at the country levels. The question could be of how they are planning ahead on bringing as many people/organisations on board as possible.
Crietee iterates bare facts and allays the qualms: “The IAF and ITMF are not just any organisations. We are the only global federations that exist for our industries. It is not that we need to get every stakeholder on board the SCI; that would be impossible. You can’t let the very fragmentation that you are trying to fight get in the way of the solution. So, the idea of the SCI is to make transparent to the industry which standard holders are working hard to become part of the solution. It is up to the standard holders themselves to reduce audit and standard fatigue. We are using our networks and position to shine the light on these processes, to spur the standard holders along and where possible, together with some of our partners, to help them make the improvements.”
Schindler adds: “The IAF and ITMF have large memberships of associations around the world that are representing the vast majority of all existing textile and apparel companies.” The membership of the IAF, established in 1972, now include apparel associations from more than 40 countries representing over 150,000 companies—a membership that represents over 20 million employees. Its associate members are prominent companies or institutes in technology, business services, retailing, logistics, culture and education. The ITMF, on the other hand, is one of the oldest industry associations across the spectrum, having been originally established as the International Federation of Master Cotton Spinners’ and Manufacturers’ Association in 1904. Rechristened in 1978, the ITMF today represents the broadest possible segment of the world’s textiles and allied industries.
Yet, what would cross one’s mind immediately is this: what was the reaction/ feedback that the two organisations got from the people since the initiative was announced. Especially since this was announced at an online event where many would have given their feedback then and there.
The feedback, says Crietee, “particularly as you can imagine from some of the large standard holders that have been working on the reduction of audit and standard fatigue, has been very positive.”
The SCI process had already been set in motion in 2020 with the presenting of the initiative’s concept and objective at the OECD Forum on Due Diligence in the Garment and Footwear Sector. Says Schindler: “This year the OECD event could only be held virtually, but received a lot of attention and interest. It is clear to most people in the industry that audit fatigue and standard fatigue are real. While it is widely accepted that standards for social compliance are important for the industry to protect workers and to improve working conditions, it is also clear that a proliferation of similar standards is making it very difficult and costly for producers.”
Disentangling the threads
It’s a mare’s nest out there—some 40–50 different standards and certifications of different kinds, and for different geographies. Those are just as important to have on board too. So, how are the IAF/ITMF working on this? How are they even keeping the standard/certification bodies in the loop about this? One cannot be ploughing a lonely furrow on this.
Responds Crietee: “This is an excellent question, and it is actually even worse.
This is because many large brands and retailers still use their own, proprietary standards. So, this is an important element of the SCI. We are calling on large brands and retailers to drop their proprietary codes in favour of third-party standard holders. This is the first and very important step in reducing standard fatigue. Then, to help the 40–50 different third-party standards that you speak of: harmonise where possible and where desirable is where our collaboration with the ITC comes in. The ITC has built the global Standards Map Database, and together we are exploring how this unique tool may be used in a global project.”
Schindler explains it threadbare: “The ITC has developed the Standards Map which is a module that offers comprehensive, verified and transparent information on standards for environmental protection, worker and labour rights, economic development, quality and food safety, as well as business ethics. The Standards Map comprises more than 300 standards for different industries. Eighty-five standards are actually applied in the textiles and garment industry. Between 30 and 50 standards are relevant when it comes to social compliance. This Standards Map allows everyone to look at all the various standards and see which standards are meeting different criteria. All the information about the various standards is updated by the standard holders themselves and verified by the ITC on a regular basis (every 1–2 years). The Standards Map provides an excellent tool to analyse and measure standards against certain criteria. While comparisons between standards might sometimes be difficult, the direction—convergence or divergence—can be observed.”
All said and done, it would be a humongous and complicated task to synchronise different standards and certifications. Then come the roadmaps and deadlines.
Crietee shares: “Indeed, synchronisation of standards is a humongous task, but it needs not to be carried out to the fullest extent to have a seriously positive impact on the market. Starting with perhaps 10–15 of the largest third-party standard holders will cover the major part of the market. And of course, brands and retailers have to play their part and either participate in this project or drop their proprietary codes. This is a continuous process, but we are looking for the second half of 2021, first part of 2022 before we could start a standard synchronisation project.”
Schindler underlines how it is going to play out on the ground: “The objectives of the SCI are, first, whenever there are small differences between standards, the standards should try to align them between each other or should recognise each other’s criteria. Second, it would be highly welcome if brands and retailers would give up their proprietary standards in favour of third-party standards. We are currently working with the ITC on operationalising the four criteria by looking at various indicators of the ITC’s Standards Map. We plan to publish a first set of results in the next few months.”
As pointed out, the SCI has identified four criteria to use as a yardstick to judge standard holders’ commitment to reduce audit and standard fatigue:
•Willingness to harmonise standards,
•Compliance with OECD and ILO guidelines,
•The use of existing platform to avoid audit duplication, and
•Global certification of auditors.
Schindler elaborates on the guidelines bit: “The OECD and ILO guidelines are the most comprehensive and most recognised. We are not directly working together with the OECD and ILO. But we refer to their guidelines as a basic reference. We are grateful that we could present the SCI at the OECD events in 2020 and 2021 because many important stakeholders attend these events. This allows us to meet and connect with different stakeholders of the industry.”
The ITC’s role is detailed by Crietee: “The collaboration with the ITC sits at the heart of this initiative. But, as I mentioned, the core of our work consists of shining our light on positive actions. We do this primarily by connecting our four criteria to the ITC’s Standards Map Database. For an important part, we can use all of the data about the standard holders that is already present in this database to generate a score on adherence to the SCI’s four criteria. Additional data on adherence to the criteria comes from interviews and in certain cases, as in the compliance with the OECD’s due diligence guidance, through an assessment of the OECD itself. Not all of our four criteria can be applied in the same way to each standard holder, and we are incorporating allowances for that. But for the most part, our collaboration with the ITC enables us to turn an otherwise very time consuming and costly assessment into a manageable process.”
Schindler clarifies: “The ITC will take the four SCI criteria and will check with the help of indicators of the Standards Map which standards are actually meeting these criteria. There will be no judgment by the ITC. It will be the SCI that will take the results and analyse them and come up with conclusions.”
An existing body of work
The SCI, in some ways, builds on an initiative mentioned earlier—the SLCP. The SLCP, which saw the light of day in 2017, offers tools and a system to measure working conditions in global supply chains. This multi-stakeholder initiative includes data sharing and replaces the need for repetitive social audits. The idea was similar: it “increases transparency in supply chains, reduces the need for social audits and ultimately allows users to redeploy resources into improving working conditions.”
It’s been a few years now since the SCLP was launched to cut down on the fatigue factor over industry audits/compliances, etc. But do such initiatives work? Has the SCLP worked?
To that, Janet Mensink, the SLCP executive director, responds, “The SLCP is a non-profit driven multi-stakeholder initiative with a distinct vision. Our mission is to implement a Converged Assessment Framework (CAF) to support stakeholders in their effort to improve working conditions in global supply chains. We benchmark success in several ways, all linked to our strategic plan. In this we’ve set ourselves four clear measurable aims and key performance indicators (KPIs): industry adoption, allocation of resources towards improvement programmes, to become the number one source of credible social data and lastly, to become selfreliant as an organisation.”
The SLCP has been measuring progress on each aim through its annual Learning & Evaluation report (available for signatories). A summary would soon be released in its public annual report.
Obviously, while the pandemic has been a challenge for the entire industry, “last year we were able to scale operations to 30 countries and complete 1,400 verified assessments. We also saw the first indications of saved resources being redeployed to improvement programmes. Also, the other aims are well on their way. Our findings are substantiated by an increased acceptance of our verified data, where now more than 40 brands, retailers and organisations have publicly committed to accept SLCP versus their own proprietary tools. Moreover, from our annual Signatory Survey, we see that our signatories have reinforced their commitments and are weaving SLCP into their internal systems and operations.”
It’s one thing about what has been achieved; quite another about what remains to be done. This becomes more significant as the industry grapples with a pandemic that is still unfolding.
Mensink agrees: “The current global situation highlights even further how important it is that we work collaboratively to improve working conditions and look at ways to reduce audit fatigue. In a recent survey, 72 per cent of our signatories indicated that the SLCP has increased relevance in the post-pandemic world. We feel that 2021—our third year of operations—will be a turning point for SLCP. We have just released an updated version of the CAF. We collaborated with Better Work to make the tool more relevant and user-friendly and created a Law Overlay for some countries. We will soon launch jointly with Better Work in three key production countries. Based on the nominations we received, we are confident that we can scale our adoption in 2021 and start seeing the impact of improved working conditions in supply chains.”
Then there is the context of the SCI. Given that both the ITMF and IAF are industry association signatories to the SCLP, it would be interesting to see the syncing of ideas and objectives? And should it be so, how would the SLCP’s CAF work with the SCI?
The SLCP official remarks: “The ITMF and IAF have been SLCP supporters from the start. The aim of the SCI is to reduce the complexity in social audits and social standards. Being strategic partners, the SCI has been developed in close coordination with the SLCP. The SCI’s strategy towards standard holders (thirdparty standard holders like Business Social Compliance Initiative—BSCI, Sedex Members Ethical Trade Audit—SMETA, Fair Wear Foundation—FWF, Fair Labor Association—FLA, or Worldwide Responsible Accredited Production—WRAP, but also proprietary standards from brands/retailers), is based on four criteria. One of them is to use existing platforms for conducting audits. In this context, the SLCP’s CAF has been identified as the major global effort to eliminate duplicative social audits at the facility level.”
She quotes the ITMF/IAF’s commitments on this: “We are strong supporters of the SLCP and our members already see the benefits of different brand partners accepting the same set of SLCP verified data. We want to go to a place where manufacturers work with one single data collection and verification, instead of 20 audits for 20 different brands/retailers.”
The SLCP is clear: it does not make value judgments about data. But all that data is behind the SCLP Gateway. Can it help matters if such data were to be publicly accessible?
Mensink contends: “The SLCP believes in the power of transparency: using credible and comparable data to inform decision and policy to drive action. The SLCP verified assessments provide a reference to ILO Conventions and national labour laws. The updated CAF and the assessment reports will highlight non-compliances against national law. The SLCP provides transparency in the sense that all facilities that have gone through an SLCP assessment are publicly available on the Gateway.
In line with our vision on facility ownership and accountability, it is up to the facility with whom they want to share the verified data set. On a more aggregated level though, the SLCP is prioritising ‘Data Insights’. We are expecting to develop this workstream in the next one-two years together with our partners. This is a strategic goal for the SLCP, and as we grow and scale, the data pool will be robust enough to provide industry-wide insights.”
At the last count, the SLCP signatories included 51 brands/retailers, 42 manufacturers, 81 audit firms, 18 consultancies, 29 standard holders and civil society organisations, six agents, 11 industry associations and two national governments. The footprint can still be expanded.
Mensink says, “Twenty-five years of social audits in supply chains has led to the agenda on decent work in supply chains being driven mostly by the private sector. In line with the UNGP (UN Guiding Principles Reporting Framework) and the OECD Due Diligence Guidance, the SLCP recognises the role of different stakeholders, particularly that of governments, to protect their citizens.
“The SLCP is collaborating with two UN agencies—the ILO (Better Work programme) and the Trade for Sustainable Development Programme (T4SD) of the ITC. The SLCP works with the ILO to align the CAF with international labour standards and national labour laws, in consultation with national constituents and with the latter to scale sharing of the data based on this tool. With the ITC, the SLCP has implemented the SLCP Gateway, an online platform that allows the programme to go to scale with more and more brands and their suppliers who are using the system.”
A goal of SLCP is to use the data to reduce duplication and improve working conditions but to also create credible robust data and analysis that can also be a powerful input for governments and other stakeholders in policy discussions. Says Mensink: “Our signatory base continues to grow and has exceeded 240. However, our footprint is best measured by the scale of operations and reaching its intended impact on improving working conditions. To achieve this, we work closely with many stakeholders, signatories and beyond. The role of governments is paramount and therefore the SLCP continues and will expand the engagement with governments.”
The other side of audits
Too much of audits have their pitfalls, and not everything works.
A group of researchers from Pakistan explored this subject in a paper titled ‘Conceptualizing Audit Fatigue in the Context of Sustainable Supply Chains’ in the open-access Sustainability journal, published in November 2020. The researchers underlined: “Sustainability audits encompass entire supply chains and are very complex due to, first, the global nature of supply chains and, secondly, the expansive scope of sustainability, which may include financial, manufacturing, social, and environmental audits. Adding to this dilemma is the absence of a consensus on standards related to sustainability, resulting in differences, variations, and multiple interpretations.”
Delving through volumes of literature on the subject, they concluded: “The simplicity in the term ‘audit fatigue’ has conveniently concealed its impact on audit outcome. Society’s increasing dependency on audit for all sorts of decisions is based on the premise that audits are objective, transparent, independent, and generalisable. Increasing reports of audit fraud are challenging this trust. If audit fatigue has any impact on audit outcome, this phenomenon gains significant importance for today’s society. It is a long way before the perfect audit report in all senses is achieved. Until then, cases of misrepresentation and misleading sustainability claims by organisations will continue. Audit fatigue is a reality for the industry, and understanding relevant antecedents and consequences and finding countermeasures has the potential to contribute to reducing such incidents. This can contribute to improving trust in the audit report.”
Lead researcher Muhammad Kamran Khalid of the department of operations & supply chain management at Islamabad’s National University of Sciences and Technology, says he had always been interested in sustainability and the textiles sector was the ideal for this. “I realised that there are many standards (I myself have been looking at more than 40 in the textiles sector). Overall literature suggests more than a thousand standards, across different industries/sectors. I wanted to explore the possibility to consolidate these into one standard. Harmonization efforts in the form of Sedex, the Global Social Compliance Programme (GSCP), Fair Factories Clearinghouse, etc, also run into several dozen and have failed to reduce audit fatigue (as suggested by the literature).”
Khalid and his fellow researchers looked at the issue from the point of view of sustainability, but his observations would hold true across the board. Khalid puts them across in a nutshell: lack of appreciation for sustainability among suppliers, thus resulting in taking the audit process in a casual manner; looking at compliance as a burden (or, a means to the next business deal) and not as a need to improve the social and environmental impacts. He points to the “double standards” of Western brands who look the other way when a supplier does not meet the requirements in letter and spirit (as in the case of the Rana Plaza factory collapse), and says that both Western and other companies “are misreporting and greenwashing sustainability audits and reports.”
But top leaders in the textiles sector, according to him, are an exception. “They have a deeper and long-lasting relationship with their clients and are willing to invest in sustainability-related infrastructure. This collaboration has reduced uncertainty about the future. However, smaller and medium enterprises are not too sure about such investments in uncertainties.” Besides, there are ripple effects that not everyone takes into account. Khalid raises the issue of sanctions on Xinjiang cotton, and says that those indirectly affect Pakistani mills who make products for H&M, Nike, etc (now being boycotted in China). This is beyond the control of the local textiles sector.”
The New Conversations Project (NCP) of the Cornell University School of Industrial and Labor Relations too had investigated the subject. In a series of papers, researchers Jason Judd and Sarosh C Kuruvilla underlined that even after three decades, data showed that industry has been slow to improve: “Traditional methods of labour standards improvement have been largely ineffective. Public regulation in countries that produce low-cost, labour-intensive products for global corporations and private regulation approaches—built around codes of conduct and auditing by global corporations—have all failed to significantly improve workers’ lives. Research on labour standards in global supply chains over the last decade, especially in the apparel and footwear industries, shows relatively little improvement on core labour standards such as freedom of association and collective bargaining, or in measures such as wages, hours of work and safety and health.”
Their research based on comprehensive evidence of violations from over 40,000 factory labour audits over time in 12 countries and 12 industries showed “that the average number of violations found in labour audits was almost unchanged between 2011 and 2018 across all countries and industries. In a breakout of labour issues, the only positive development was a slight decrease in average working hours.”
Three basic reasons for the tardy progress: private regulation allowing brands to police their own labour practices; companies not being serious about private regulation; and, implementation failures caused by reliance on poor factory audits. Judd and Kuruvilla identified a fourth reason: opacity. They argued, “The lack of transparency about the results of private regulation creates an opaque field where it is impossible for actors—whether they are companies, unions, multi-stakeholder institutions or industry critics—to see what works, and where, and under what conditions. There’s still an awful lot we don’t know about the results for workers after 25 years of CSR.”
The NCP researchers also discovered that the extent of unreliable information given to auditors was significantly higher than previously thought. They revealed, “Data shared with NCP by a leading auditing company classifies the information/ data given to its auditors by suppliers as completely reliable (trustworthy) or unreliable (not trustworthy). The average ‘unreliable’ rate in apparel is 41 per cent and 39 per cent for footwear over the 2011–17 time period.”
The malaise of frauds can throw a lot of good work to the winds. A fraud of gigantic scale in October last year had left the industry considerably agitated and disturbed. The Global Organic Textile Standard (GOTS) announced on October 31, 2020 that it had found proof of organic cotton fraud in India following an investigation. GOTS, which uncovered 20,000 metric tonnes of fake organic cotton, said it had collected considerable documentary evidence of systematic fraud and exploitation of the Indian government’s certification system of organic cotton production following surveillance audits by GOTS accreditation body IOAS, which was part of the GOTS quality assurance.
GOTS claimed to have taken corrective measures immediately. “Henceforth, all incoming TCs (transaction certificates) (for organic raw material) into the GOTS supply chain will be checked by GOTS itself for authenticity and credibility. A system for permanent data collection for raw material entering the GOTS supply chain and checks and reviews of CBs (certification bodies) is being developed,” the organisation said in the damage control statement.
For now, GOTS may have stemmed the rot, but it—like all other similar organisations— can ill-afford to be lax. If anything, the scandal is likely to make all standards authorities stricter than before.
Converging to a standard
The SLC, together with the SLCP, seem to be the way ahead. The audit fatigue and standard fatigue are facts (read, problems) that need to be sorted out. Besides, streamlining them (standards/audits/certifications), all these initiatives would also need to ensure that no loopholes remain. They would also have to factor in greenwashing scams and audit frauds.
It’s a tough task, and it would be a topsy-turvy road ahead. But’s worth a shot.
This article was first published in the May 2021 edition of the print magazine.