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Are Social Compliance Audits Useful in China?

January 26, 2016

 by Renaud Anjoran


A few weeks ago I responded to a Q&A on ChinaImportal on the topic of social audits in China. Two of the questions were particularly relevant to this blog's audience.

1. Have working conditions improved?

Yes but it is mostly driven by market forces. There are fewer workers willing to join factories, and they can pick their employer. Offering safer and more comfortable working conditions is a good policy to attract and retain employees.

Government regulations also force new factory buildings to take fire safety into account, and existing factories sometimes have to make new openings when necessary.

Have audits from customers helped? In most cases, only marginally. Factory managers prefer to conceal the truth. Some big factories, which sell to a multitude of large retail chains that each has its own social compliance policy, have to prepare more than 5 separate sets of books! And, to make matters worse, many auditors are taking bribes and distorting reality.

Overall I think many brands and retailers are using social compliance audits in a way that is not useful. Which gets us to question 2...


2. What are the alternatives for socially conscious buyers?

If you work in a large company and top management asks for a report that makes them look good, nothing useful will come out of it. Many auditing firms will be happy to help you, or you can do it internally (a less commonly adopted solution). You will come up with a standard and, truth be told, your suppliers will learn how to play your game.

If you need to run audits (e.g. because your customers ask for it) but you want the fundamentals to improve, you can provide coaching to the factories. But you will need to set small and specific goals to each factory based on their situation, and you will need to be patient.

(To speed things up, you could pair your managers' visits to each factory with a "show me what you have done in the past month about social compliance" discussion, and you could include social improvements in your suppliers' evaluation system.)

If you consider your suppliers are true partners and you want to help them improve, make sure to work with companies that are open to changing the way they are working. I can see two ways to do this.

  • One original example is Tchibo, a German 3.4 billion euro retailer that sells 3,000 products. They have been applying their Worldwide Enhancement of Social Quality Programme for a few years, with positive results. The first step is to facilitate dialogue between management and workers.
  • There are ways to improve processes so that safety, quality, and staff morale go up, while at the same time raising (sometimes doubling or tripling) the number of units made in one labor hour. When this type of initiative is carried out, not only your suppliers will make more money and be more reliable, but you will probably never have serious problems about safety or excessive hours in your supply chain. (Note that, in the Tchibo programme, consultants are often called in to apply this type of project).


22 Signs Of Good Factory Management in China eBook

Topics: Ethical Sourcing

Renaud Anjoran

Renaud Anjoran

15 years experience in China.
Partner, China Manufacturing Consultants.
Worked with hundreds of factories in China.
Certifications: ASQ CQE & CRE; ISO 9001 & 14001 lead auditor.
Author of well-read blog, Quality Inspection Tips.

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