Why Tackling ‘Audit Fatigue’ Can Lead to More Sustainable Factories
The manufacturing landscape has altered considerably over the past several decades. In the 1960s, roughly 95 percent of apparel sold in the United States was manufactured domestically. Today, more than 97 percent of clothing and shoes Americans wear are made overseas. A similar change took place in Britain, where Richard Arkwright introduced a mechanical spinning machine that replaced human hands with wooden and metal cylinders, paving the way for the first industrial revolution in the 1760s. According to trade statistics, the United Kingdom imported 92.4 percent of its clothing in 2017, largely from developing economies.
Shifting production to distant countries with low-wage labor and even lower social and environmental standards has its potential issues, of course, which is why factory inspections have become an indispensable tool for managing risk—and safeguarding reputations—in the modern supply chain. But suppliers, faced with a proliferation of standards for measuring performance, frequently complain of “audit fatigue” because brands and retailers don’t always agree on the best framework.
American customers might want to use Worldwide Responsible Accredited Production (WRAP), while those from Europe may prefer certification by the Business Social Compliance Initiative, Ethical Trading Initiative or Social Accountability International, according to Hirdaramani Group, a Sri Lanka-based apparel manufacturer and one of Sourcing Journal’s 2019 Sustaining Voices honorees. Depending on the market, factories may have to comply with country-specific technical standards or tolerance limits for restricted substances. Brands and retailers have their own code of conducts suppliers are occasionally compelled to follow. And requirements can be obsessively granular, such as the height placements of fire extinguishers, which, again, can vary from customer to customer, Hirdaramani noted.
Audits cost money—an average of $2,000 per compliance check, according to Patrick Petch, commercial manager at Textimax, a vertically integrated knitwear facility in Peru that counts Armani, Hanna Andersson and Hugo Boss among its clients. With a few exceptions, factories pick up the bill. Because most clients don’t see an alternative for the compliance model, expenses can rack up, sometimes in excess of orders placed by a brand or retailer.
“It’s not only what you have to pay for the compliance but also what you have to do: the time, the preparation,” Petch told Sourcing Journal. The fact that individual auditors can have different opinions on what constitutes a violation doesn’t help, either. One inspector working on behalf of a prominent U.S. conglomerate didn’t see Textimax’s use of short-term contracts—which labor campaigners describe as exploitative but Petch defended as the opposite—as a problem. A second one did, however, and downgraded the facility from platinum level “to zero.”
That’s not to say standards aren’t necessary—quite the contrary. As flawed or perfunctory as some of them are, in many cases they’re all that prevent workplace conditions from collapsing into a Wild West free for all. “Certifications play their unique role, which is to have a third-party approach,” said Lewis Perkins, president of Apparel Impact Institute (AII), a spinoff of the Sustainable Apparel Coalition (SAC) in California. “But let’s not pay to have 10 people floating through doing audit work in a given month—you know, Nike comes in on Thursday, Adidas on Friday. It’s a great waste of time and resources and creates confusion.”
Perkins knows what he’s talking about. As a former president of the Cradle to Cradle Products Innovation Institute, he’s seen points of interest where Cradle to Cradle certification overlaps with standards such as Bluesign, Zero Discharge of Hazardous Chemicals, Fair Trade or Oeko-Tex. Eliminating these redundancies could be key to speeding up lagging progress in the industry.
“If certifications can agree to get to a point where data sharing is something that can be done easily because of blockchain technologies and/or permission-based data sharing, I think we can see also a reduction in the cost and labor that’s involved in certification,” he said. “Maybe auditors can be trained for more than one certification so we can look at how all these pieces plug together.”
AII had this in mind when it announced in April the formation of the Mill Improvement Alliance, which is pulling together “very similar but slightly different” water-efficiency standards administered by the Better Mills Initiative, the Natural Resources Defense Council’s Clean by Design (which AII now manages) and the Swedish Textile Water Initiative.
By agreeing on shared aims and metrics, the organizations are “measuring the same things and getting the same inputs and outputs,” Perkins explained. “And the more we’re consistently sharing the same resources among ourselves, the more likely we’ll be able to scale something that’s part of’ the same conversation. We’ve got to get data out of silos—that’s what optimization looks like.”
The newly formed Higg Co., another offshoot of the SAC that focuses exclusively on developing and promoting the Higg Index suite of sustainability-assessment tools, is another champion for robust, harmonized standards. More than 10,000 factories in nearly 70 countries worked with the Higg Index in the past year alone—an increase of around 25 percent over the previous year, according to Jason Kibbey, CEO of Higg Co.
As more businesses adopt the Higg Facilities Environmental Module, or FEM for short, Kibbey is seeing a gradual defragmentation, at least on the wastewater, energy and chemical-management sides of the supply chain. Despite efforts by the Social and Labor Convergence Project’s (SLCP) to create a common assessment framework with its nearly 200 signatories, which include Arvind Mills, G-Star Raw, Gap, H&M, Hirdaramani, Timberland and WRAP, brands are still, for the most part, using their proprietary assessments or working with initiatives that use proprietary assessments.
This needs to change, Kibbey said. To encourage progress, Higg Co. employed the SLCP framework as the basis of its Facility Social & Labor Module, currently in beta testing.
“One of the bigger challenges in the past is that when you have dozens of assessments, you often also, coming out of those, have dozens of different plans on how to improve,” he told Sourcing Journal. “If customers are making 10, 20, 50, 100 different types of requests, none of those impact areas actually improve. And so what we want is to help facilities have one single plan for improvement that all of their customers recognize.”
Adapting a single system across locales, languages and customs is easier said than done, but eventually Higg Co.’s goal is to create a universal assessment that can draw instant comparisons between “a factory in Sri Lanka to one in China to one in Honduras,” Kibbey said. Already the Higg Index references certain standards through a “credit” system.
“If you’re working with a [different] chemical management system, we still will give points and recognition for using that system,” he said. “We’re trying to be a little bit more agnostic to many of them. But we’re also in conversations with several different standards organizations to see how we can work together to reduce the data-collection fatigue and the audit fatigue.”
Something Kibbey would like to see more of is a greater sense of ownership of goals by factories, as well a narrowing down and centering of improvements that can be reasonably achieved each year. Experts say, too, that giving workers a stronger voice is central to keeping factories on track.
“I think that’s actually what’s going to move the needle in many ways more than just getting rid of multiple, frustrating, duplicative audits,” he said.