The Benefits of Social and Labor Audits
Social and labor audits are becoming increasingly important for many organizations. This is because buyers desire some assurance that they are purchasing products from an organization that’s socially, environmentally, and ethically responsible. In addition, organizations are concerned that suppliers in their supply chain may not have proper policies and procedures in place related to one or more of the following: health and safety, labor, environment, and ethical practices. This article will provide information on what social and labor audits are, what they entail, and how they can benefit an organization.
What is a Social and Labor Audit?
Social and labor audits are also referred to as ethical audits, and they can be done for any type of organization. They are performed to provide some assurance that appropriate policies and procedures are in place related to issues, such as health and safety, environmental sustainability, and labor regulations. These audits look to assess if the organization’s social and ethical practices align with the buyer’s expectations; the buyer may be an individual or an organization.
A social and labor audit follows a few typical steps. This entire process can take as much, or as little time as preferred by the auditor and auditee. The normal steps followed are:
- Opening Meeting
- Health and Safety Tour
- Employee Documentation Review
- Employee Interviews
- Closing Meeting
- Audit Report
A key component of the audit is the Health and Safety Tour which involves a walk-through of the entire facility (or facilities) to observe the physical working conditions of the employees and identify health and safety concerns. During this step of the social and labor audit process, auditors will use an audit checklist to document areas that are functioning well and areas that have room for improvement. The items to cover in the checklist are decided based upon the scope of the audit.
Identification of significant issues may result in a failed social and labor audit. Some examples of issues are lack of proper safety or personal protective equipment, poor pay, sanitation, exposure to chemicals, poor air quality, lack of proof of age, poor attendance records, environmentally unfriendly policies and practices, low pay, and long work hours. Yes – these types of issues do exist here in the U.S. It is important to note that a social and labor audit is not an extensive audit and is based upon inquiry, observation, review of policies and procedures, and limited review of employee documentation. Since a social and labor audit is not a statutory compliance audit, it comes with a smaller price tag.
Benefits of Social and Labor Audits
Social and labor audits are rising in importance due to our global economy. Organizations and buyers want to protect their brands and reputations. Socially conscious buyers are looking for a measure of assurance that what they are purchasing is from an organization that is socially and environmentally responsible, as well as ethical, in their practices. Organizations often do not have the opportunity to visit their suppliers’ sites or even meet with the suppliers in person. The social and labor audit provides an independent third-party assessment of the conditions at their suppliers’ facilities.
Having a positive result from social and labor audits for the suppliers in an organization’s supply chain shows their due diligence in striving to be socially, environmentally, and ethically responsible. These audits can also identify issues that may pose a risk to the organization, both financially and reputationally. Having suppliers who align with the organization’s brand image is important to maintain an organization’s reputation. Supply chain issues are a major risk to any organization and can catch an organization by surprise if adequate due diligence is not performed. A social and labor audit is an excellent tool to help to reduce supply chain risk. Similarly, an organization’s transparency with environmental, social, and ethical responsibilities can have a heavy influence on customers’ perceptions of the organization, which might also have an impact on customers’ decisions to do business with the organization.
For more information regarding our social and labor audit services, be sure to visit our Social and Labor Audits Services page and don’t hesitate to reach out to a member of our internal audit team, such as Elaine Nissley.
About the Authors
Cecily joined McKonly & Asbury in 2023 and is currently a Senior Consultant in the firm’s Consulting Services group.
Elaine is a Principal with McKonly & Asbury. Her primary responsibilities include management of the Internal Audit & Management Consulting Services group. Elaine handles client relationships and is accountable for the deliv… Read more
