Ethical audits and inspections of global supply chains for multinational corporations is “working” for corporations, but labor abuses, poor working conditions and environmental degradation within global supply chains remain widespread, according to a new report.

 

Many key questions and serious concerns hang over the ethical audit regime, say researchers from the University of Sheffield, Sheffield, South Yorkshire, England. They include: are audits effective in identifying non-compliance and driving up standards, what does the audit regime mean for governments and non-governmental organizations (NGOs), where does power lie within the audit regime, and, ultimately, in whose interest is the ethical audit regime working? To investigate corporate supply chains, researchers from the Sheffield Political Economy Research Institute (SPERI) at the University of Sheffield interviewed supply chain auditors, business executives, NGOs and manufacturers in North America, the UK and China, and also visited factories in the Pearl River Delta region of China.

 

“Recent disasters such as the Rana Plaza factory collapse in Bangladesh have put the spotlight on supply chains [of global corporations], but what has been less reported is that labor, safety and environmental abuses often take place within ‘certified’ and audited supply chains,” says Dr. Genevieve LeBaron, co-author of the report and Senior Lecturer in Politics at the University of Sheffield and a current visiting professor at Yale University. “Our interviews reveal how corporations have designed an inspection and auditing system for global supply chains that is ‘working’ for them, but badly failing workers and the planet.”

 

Among the key findings in the report are that some corporations have designed a system of self-regulation which allows their suppliers to cover-up abuses and easily cheat a weak inspection system. The research also found that audits may be ineffective tools for detecting, reporting or correcting environmental and labor problems in supply chains, and actually reinforce existing business models and preserve the global production status quo, the report explains. The report goes on to note that the audit system, with the involvement and support of NGOs, increasingly reduces the role of states in regulating corporate behavior and reshapes global corporate governance toward the interests of private business—and away from the public interest and social goods.

 

“Arguably, it’s the unsustainable business models of large corporations, which are reliant on cheap labor and environmental degradation, that drive abuses within supply chains,” says Dr. LeBaron. “And yet, corporations, by working with a growing audit industry, are presenting themselves as the solution to the abuses.”

 

This report should be a “wake-up call” for governments, international organizations and NGOs because it raises serious questions about the effectiveness, legitimacy and accountability of a system of supply chain monitoring that is increasingly being designed, implemented and reported on by corporations themselves, says Dr. LeBaron. Unless concerted effort is taken to strengthen non-corporate led inspections, it seems highly likely serious abuses will continue within the supply chains of major global brands, she says.

 

Co-authored by Jane Lister, Senior Research Fellow and Associate Director of the Centre for Transportation Studies at the Sauder School of Business, University of British Columbia, the report is the first publication in a new series of SPERI Global Political Economy Briefs. SPERI intends for the series to present the expertise of its academic researchers and enable SPERI to influence and contribute to public debates on major contemporary global political economy issues.

 

I’d like to know your thoughts on the study and the use of ethical supply chain audits. Do you think use of weak self-regulation allows suppliers to cover up abuses?