Part 2 in a series examining the use of on-site audits in the supply chain
As discussed in our previous blog post on “The Limitations and Evolving Role of On-site Supplier Audits: 4 Reasons They Are Starting to Miss the Target”, audits are far from perfect, yet they remain a relevant tool when used appropriately. Driving change requires going beyond audits: Simply increasing the number and efficiency of on-site audits is not enough. Creating real transparency over the long-term and driving meaningful improvement in practices requires a more holistic approach that includes a multi-layered assessment and engagement program. As such, audits can be more effective when integrated into a comprehensive process alongside other supplier assessments, engagement, and improvement programs.
Site-audits are not effective as a monitoring tool
Audit reports can be a useful input when they are part of a more comprehensive sustainable procurement program. Audits provide only a “compliance snapshot in time”, and often fall short in identifying persistent labor issues due to numerous causes discussed in the Part 1 of this series. Labor issues, including some of the worst forms of slavery, are exacerbated by the fact that companies simply can’t be expected to understand the unique social, political and economic variables in the numerous regions around the world where a majority of supply chain activities occur. Furthermore, audits are often ineffective when attempting to use them in a continuous monitoring role because they don’t include inputs from expert external stakeholders regarding these complexities. Engaging external stakeholders, including NGOs, trade unions and local governments can provide the appropriate supply chain visibility necessary to assess compliance with internal standards and procedures.
Integrating on-site audits with holistic assessment programs
For example, HEINEKEN has combined on-site audits with the EcoVadis Supplier CSR Assessment as part of a broader process for monitoring its suppliers’ CSR management systems.
A supplier code of conduct and risk assessment are used to segment high risk suppliers requiring stronger engagement.
HEINEKEN uses EcoVadis to conduct CSR assessments, and set a score threshold for performance. The EcoVadis assessment takes into account internal supplier documentation and any applicable 3rd party audits to verify the deployment of policies and procedures. In addition to the assessment methodology, EcoVadis monitors adverse news from external stakeholders, including media and NGO reports.
Suppliers identified with a low score (high risk) are considered candidates for on-site audits. Also, as part of this process, Heineken’s suppliers who are near the acceptable rating threshold are engaged and provided with an improvement plan.
(HEINEKEN CPO David Spacey describes their sustainable procurement program in this webinar→ )
Through this multi-stakeholder approach, on-site audits are used as part of a broader evaluation, and also become more strategic – both in terms of resource requirements and allocation. Resources (time, money and manpower) are prioritized, as the focus turns suppliers that are deemed to benefit from an on-site view to better understand performance, or suppliers that require the implementation of improvement plans.
Boosting ROI and driving results
Through this holistic process, the buyer is able to identify in advance any suppliers with significant areas of concern that require specific attention (i.e. areas of improvement identified beforehand). On-site auditors are thus better prepared, the audits are tailored to the suppliers’ requirements, and emphasis will be focused on the identified weak points.
When on-site audits are not financially feasible, (in the case of small suppliers, for example), a CSR assessment through document audit is often a more relevant first step. Using combined processes for suppliers’ assessments yields a higher return on investment, as resources are better allocated and more efficiently used to bring more focused and meaningful results. The EcoVadis CSR assessment also provides a rating with benchmarks of suppliers’ performance compared to a global database of over 25,000 supplier scorecards. This works both to build awareness and motivation by showing suppliers where they stand in comparison to their peers. Suppliers can also share the scorecards of their CSR performance (which can take into account any audit results that were included in the assessment) with other clients, thus increasing efficiency through mutual recognition, minimizing costs, and reducing “survey fatigue”.
Last but not least, stakeholders’ consultations are also included in the CSR assessment – providing a holistic picture of the supplier’s activities impacts.
By shifting the role of audits into being a component of a broader and more holistic ongoing monitoring process, audits can be put to effective use in the mission to improve supply chain sustainability.
Many thanks to Michael Smith and Stephanie Jacquin,
both CSR Analysts at EcoVadis,
for their collaboration on this article