MOST people have heard that on April 24, 2013, the Rana Plaza building complex collapsed killing 1,134 people and injuring around 1,800 workers. What not so many people know is that two factories in the building went through the auditing process of the Business Social Compliance Initiative before the collapse, without drawing any attention to possible workplace safety risks. It was a similar story with the fire at the Ali Enterprises textile factory in Pakistan in September 2012, which claimed the lives of 260 workers. A few weeks before the fire, the Italian auditing company RINA issued a SA8000 certificate for the factory — a marker of high fire safety standards.
Due to the outsourcing of production in the textile industry since the 1990s and the increased emphasis on labour and human rights, international retailers have begun to require audit certificates from factory owners as a precondition for a commercial relationship. In the absence of effective factory inspection by state authorities, which often lack adequate resources to conduct rigorous inspections, the monitoring of the labour, health and safety situation at workplace is, thus, frequently conducted by private audit firms.
Disasters ranging from the factory fires at Ali Enterprises in Pakistan and Tazreen in Bangladesh to the collapse of the Rana Plaza building have, however, tragically revealed a number of flaws in the current practice of private certification: independent and diligent audits seem rare and require, at best, a sort of ‘checklist compliance.’ In defending its failure to note the problems with the Rana Plaza building structure, the auditing firm TÜV Rheinland referred to its assignment and claimed that it was not asked to inspect the building’s safety. This is a typical shortcoming of social audits. Problematic choices about the scope of the audit are all too often hidden in seemingly technical choices about the design of audits. Subcontracting factories are also generally excluded from auditing procedures. Certifiers, financed by the very same businesses they have to assess, are bound by contradictory incentive structures. Ultimately, certificates generate a high level of consumer trust while incurring almost no legal risk. It is not defined who takes responsibility for the content or impact of audit reports. As they are not generally made public, there is no way for interested or independent parties to oversee the audit process or determine its accuracy. And the workers, who are the assumed beneficiaries of the whole auditing enterprise, have no means of verifying such reports or holding auditors accountable.
Despite notorious shortcomings, the continuing practice of social audits is too often understood as an effective means of monitoring working conditions, thereby allowing retailers to rely on auditing reports in claiming to have met their corporate social responsibility. Consequently, no incentives are given to undertake structural measures such as a change in purchasing practices (ie price or deadlines). Even though the problems associated with audits have been known about for a long time, they are not likely to disappear any time soon. On the contrary, audits are a favoured tool of corporate social responsibility and ‘sustainable’ manufacturing.
The responsibility of social auditing companies has often been overlooked. For example, even though several brands have contributed to the Rana Plaza Trust Fund, established by the International Labour Organisation to meet the claims of the survivors and families of the deceased, none of the auditing companies that conducted social audits in the factories in the building donated, even though they are part of the garment industry and profit from the precarious conditions in these workplaces that necessitate their involvement. In order to push for more accountability, the ECCHR and its partner organisations filed a complaint with the corporate platform BSCI concerning the audit conducted at the factory ‘Phantom Apparel’ in the Rana Plaza building. The BSCI is the largest labour standard compliance initiative, with more than 1,900 corporate members, including many large international companies, such as Adidas, Puma, El Corte Ingles, Metro, Migros, and Otto. In comparison, multi-stakeholder initiatives such as the Ethical Training Initiative, Social Accountability International, or Fair Labour Association have less than 100 member companies.
Instead of opening an investigation in order to assess the quality of the audit at Phantom Apparel and take steps to ensure accountability, the BSCI merely offered to participate in a forward-looking conversation in order to improve social audits in the future. During a meeting with the ECCHR, the BSCI representatives acknowledged that audit reports are only of limited use to those working in global production and supply chains and agreed with the demand that workers should have a more prominent role in the BSCI framework. They also agreed that the question of responsibility of auditors needs to be clarified and that there is a need to discuss sanctions for cases in which audits are substandard, such as the potential exclusion of a company from the BSCI pool of accredited auditors. (Meeting held on November 19, 2015 at the offices of the ECCHR in Berlin, with Foreign Trade Association director general Christian Ewert and BSCI managing director Darrell Doren. Note on the meeting is available on the ECCHR web site.) However, at the same time, there was a general refusal to discuss the specific audit report, reasoning that it was a confidential document, property of the auditor’s client. This excuse is at odds with provisions in the BSCI’s own framework contract, in which producers consent to distributing data to third parties in situations where non-governmental organisations or complainants are in dialogue with the BSCI. No remedy was offered to the survivors of the collapse or the family members of deceased workers.
While the BSCI did not show any willingness to pursue a serious investigation, others have been more eager to hold auditors accountable for their reports. In the case of the factory fire in Pakistan, the multi-stakeholder initiative SAI, responsible for the administration of the SA8000 certificate and accredited the auditing company RINA, did, indeed, look into the matter. They performed an independent investigation and issued a report analysing the performance of the auditors that conducted the audit at the Ali Enterprises factory. Also, RINA stopped issuing SA8000 certificates in Pakistan. In addition to the SAI internal investigations, an Italian prosecutor opened a criminal investigation into the SA8000 certificate issued by RINA to the Ali Enterprise factory and ordered an independent assessment to be conducted by fire experts. Furthermore, in Canada, a tort claim is pending on behalf of the survivors and family members of deceased workers from two factories in the Rana Plaza building, which raises questions about the audit conducted by the company Bureau Veritas.
Auditor liability should be a minimum condition for future audits and would ideally lead to changes in the relationship between retailers, factories, workers, and auditors. However, this will only be the case if auditor liability is not only a theoretical possibility that exists on paper, but is also demanded in practice by retailers, governments, and workers. In a remarkable move, the retailer KiK recently initiated changes in its auditing commissioning practices. According to an interview with a KiK representative on Just Style, ‘KiK is the first company in Germany and possibly in Europe with a contract in place with its auditing firms, which makes them legally liable for their findings on the ground for a period of three months following the audits.’ Thus, if an auditing company visits a factory and fails to spot that a fire extinguisher has expired, ‘we can go back to the auditing firm and ask them to pay a penalty,’ according to KiK (Just-style.com, April 11, 2017).
Be that as it may, the fact remains that the auditing system should not replace worker-based monitoring in collaboration with strong workers’ organisations. Still, as long as social audits are here to stay, the verification of audit reports and the accountability of auditors should be taken seriously. Using liability mechanisms can only be part of a wider strategy of the local and international unions that seek to change the power imbalance between international buyers and auditing companies and local unions and workers in the production countries. Ultimately, without adequate measures of quality control, oversight and accountability, private compliance initiatives such as BSCI should be abandoned.
Dr Carolijn Terwindt, graduate in law and anthropology from Utrecht University, joined the ECCHR in 2012 in the business and human rights programme where she works closely with workers and their families in Pakistan and Bangladesh on cases of corporate liability in the textile industry.