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How to conduct a social compliance audit of a China factory (Checklist)

Posted: August 22, 2013

Download a comprehensive social compliance audit checklist (PDF document).

This document details QC firm InTouch’s audit criteria for social compliance, which are modeled after the SA8000 standard. A table outlining the characteristics of high, intermediate and low risk factories in China is also included.

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:

  1. The physical facilities of the factory
  2. Employment policies and other documentation on file
  3. Employee interviews

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
A walk through of the entire facility – production area, warehouse, dormitories, canteen, etc – will give your auditors insight into the physical conditions the employees work in every day.

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.

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
A walk-through of the facility and documentation reviews yield valuable information, but there is no substitute for talking to the employees themselves. CSR is inherently a human-centric issue, so the people that work (and sometimes live) at the factory must be made a focal point of any investigation of working conditions.

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


Hand-written attendance records

Sometimes factories use hand-written attendance records. This makes it very difficult to determine if maximum working hours are capped at the legal limit or if the correct wages are paid. Automated punch card systems are far more accurate.

Applicable Chinese local laws

1. PRC Labor Law article 48: Employees, including those who are in probationary, training or internship period, shall not be paid lower than the local minimum standard.

2. PRC Labor Law article 41: The employing unit may extend working hours due to the requirements of its production or business after consultation with the trade union and laborers. However, the total extension in a month shall not exceed thirty-six hours.


Exposed electrical wiring

Exposed electrical wiring can pose a significant safety hazard to individual workers, as well as a fire hazard.

Applicable Chinese local laws

Rules on Administration of Fire Safety in Warehouses article 40: Electrical distribution wires should be placed in metal or flame-retardant plastic pipes for protection.


Inadequate personal protective equipment

Personal protective equipment is often not provided to employees, or the provided equipment is inadequate. These women are working with industrial adhesives and solvents, which requires the use of carbon-filtration masks instead of simple cotton masks as shown.

Applicable Chinese local laws

Safety Manufacturing Law article 37: Manufacturing units shall provide personal protective equipment to employees. Manufacturing units shall supervise and train employees to ensure they properly wear and use the personal protective equipment.


Lack of safety devices on machines

Wherever possible, machinery should be fitted with safety devices that prevent injury from projectiles or moving parts. For example, button machines should be equipped with eye shields to protect the operator.

Applicable Chinese local laws

Law of the PRC on Work Safety article 29: The design, manufacture, installation, application, inspection, maintenance, repair of and safety facilities shall comply with the national or industrial standards. Manufacturing units shall maintain and inspect the machinery regularly to ensure they are in good working conditions.


Unmarked chemicals

Whether they are being stored or are in use, chemicals must be labeled with the proper warnings and information labels.

Applicable Chinese local laws

Regulation of Chemical Safety Usage in Workplace, Article 12: Employers shall apply identification labels to all chemicals in use. For dangerous chemical, a safety label shall be applied and MSDS shall be provided to employees.

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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.

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