How to conduct a social compliance audit of a China factory (Checklist)
by James Guzzo
Corporate Social Responsibility audits, also commonly referred to as Ethical Sourcing audits or Social Compliance audits should be an integral part of every global supply chain. These audits are often conducted in such a way that suppliers are evaluated in their compliance with local laws. Some brands and retailers have additional standards and requirements that must be met by suppliers who wish to manufacture their products.
It is important to ensure that each participant in your supply chain (possibly even subcontractors) is evaluated to determine the conditions that their employees work under. Besides the obvious damage to individuals and communities that unethical manufacturing practices can lead to, they can also cause significant damage to your brand when they are publicized.
When conducting a CSR audit, auditors will need to address three key aspects of the supplier’s operation:
Below, I have described each aspect, and the types of common issues that are found during CSR audits throughout mainland China.
1. Complete facility walk-through
Local Chinese law requires that basic amenities be upheld at all factories: Enough space to move around and work in production areas, adequate ventilation, clearly marked and unobstructed emergency exits, sanitary cafeterias and restrooms, and easy access to potable water.
The majority of a supplier's compliance issues are usually discovered during this walkthrough. Common issues include machines lacking proper safety equipment, exposed or unmarked electrical wiring, chemicals that lack warning and information labels, and a lack of adequate personal protective equipment (PPE).
2. Thorough documentation review
Complimenting the facility walk-through, a documentation review will illustrate the kinds of policies and atmosphere employees are surrounded by. These are less tangible aspects of their employment situations (at least for observers) that have a huge impact on their daily lives.
Employee attendance records and payroll records are heavily scrutinized during this phase of the audit. Thorough auditors will request the previous 6 to 12 months of records for review. By comparing these records, auditors will be able to determine if the factory is adhering to labor regulations related to minimum wages, over time wages, and maximum working hours. Not surprisingly, non-compliance with those exact regulations are the most commonly reported issues from this stage of the audit.
Additionally, auditors will request all documentation regarding hiring practices and conditions of employment. Auditors will try to establish what the factory’s official policies are regarding discrimination, disciplinary action, retention of employee identification, termination conditions, and many important factors. These can be a good barometer for the attitude of employees towards management.
3. Employee interviews
Interviews with randomly selected workers will serve to gauge the employees understanding of the policies they work under and their feelings on the physical conditions as well, putting the information gathered in the steps above into much-needed context.
If employees report discrimination, or do not understand how their wages are calculated, feel that they are obligated to work excessive overtime, or bring up grievances about the state of their dormitories, these should all be considered red flags. Such claims will warrant further investigation, and suppliers should be counseled on how to resolve these issues as soon as possible.
Common issues found during CSR audits in China
James Guzzo is a Client Manager at InTouch Manufacturing Services , a QC firm that performs product inspections and factory audits in China for US and EU clients. James also writes for the QC-related blog, Quality Wars.