How Auditor Working Conditions Limit Supply Chain Transparency
Improving the training and protection of supply chain auditors results in more honest, thorough, and effective reports.
Carolyn Geason-Beissel/MIT SMR | Getty Images
Companies are under increasing pressure to improve supply chain transparency, particularly around working conditions in remote factories. Government regulations, the best practices of peers, and attention from outside stakeholders all make it increasingly critical that leaders ensure that partners producing goods for the company operate fair, safe, and equitable workplaces.
A key tactic in fostering such supply chain transparency is to implement on-the-ground, in-person reviews of factories and other workplaces. These social compliance audits are part of a huge global industry, valued at as much as $80 billion and conducted by both international auditing firms and smaller local auditing and certification firms and nongovernmental organizations (NGOs).
Audits, however, are far from perfect and often miss blatant abuses, such as child labor. Identifying poor working conditions in supply chains is difficult for many reasons, including deception by employers. However, our research has identified one surprising way to strengthen the effectiveness of audits: improving the working conditions of the auditors themselves. While this is an obvious benefit to the individual practitioners in the field, it also contributes to more honest, thorough, and effective audits.
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The Supply Chain Auditing Business
A comprehensive auditing program involves investigating supply chains that can be several tiers deep, with a complex web of potentially hundreds of suppliers and subcontractors around the world. Tesla, for instance, said in its 2023 impact report that it screened 13,018 suppliers and interviewed 3,645 workers at those companies during that year alone.
The benefits of untangling the supplier web can be substantial. Activist stakeholders and many consumers want to know how products are made. Supply chain transparency is a precursor to improving consumer trust and reducing reputational risk.
Supply chain transparency is a precursor to improving consumer trust and reducing reputational risk.
Maintaining a clear line of sight through complex supply chains requires constant vigilance. Suppliers and subcontractors can change, sometimes without notice or authorization, and poor working conditions are a dynamic and growing problem. Emerging technological solutions, such as using artificial intelligence or DNA as a “minuscule bar code,” can help identify a product’s origin and whether it’s from a known and approved source. Technology, however, is best thought of as a supplement to, rather than a replacement for, on-the-ground human auditors.