Rethinking Sustainability Audits and Assessments Series: Part One

Welcome to Part One of ADEC Innovations’ “Rethinking Sustainability Audits and Assessments” series. Over the course of this three-part series, we will examine why the process of assessments and auditing often fails to provide business value to suppliers, and look at solutions for both suppliers and their buyers to improve performance and lower supply chain liability.

Transparency and accountability are a key part of achieving high environmental, social, and governance (ESG) performance. Regular supplier auditing is the most common way for many organizations to manage risk and gain visibility into their supply chains. But are current methods really fit for this purpose?

For suppliers, the audit process often feels punishing rather than rewarding, taxing their resources and providing little real business value. Frequent audits can therefore result in audit fatigue. To find an effective solution, buyers or brands in the supply chain can flip the current model of auditing on its head to combat fatigue, improve the efficiency of audits, and build better supplier relationships.

What problems exist in the auditing and assessments process? 

Audits can place a heavy burden on suppliers. A supplier might receive a number of assessments from each buyer, which demands considerable cost from suppliers—and brands—in time and human resources. These assessments must typically be performed on a yearly basis, at significant annual cost, and responses may not reflect business reality. A 2017 study found a number of shortcomings in sustainability auditing regimes, including dishonesty and ineffective problem solving. What is the use of an audit if quality information cannot be obtained and there is no guarantee that action will be taken to fix the problem? For this reason, auditing may not always be seen as a driver of business value or a useful evaluation of performance. Rather, it is perceived as part of the cost of doing business—particularly when the results are punitive rather than supportive or development-oriented.

From a brand perspective, the time-consuming nature of audits means that the data used is often out-of-date. The information gleaned from assessments makes it difficult to effectively enact necessary changes. The volume of data can also prove to be challenging. Deeper supply chains produce mountains of disassociated information in inconsistent formats, from both independent and co-dependent suppliers, making it difficult to reassemble and draw meaningful conclusions from such a wealth of data.

How can we do better? 

What changes can we make to the current process of auditing to create a system that is efficient, is effective, and produces value?

First, ensure that suppliers’ practices are placed within a strong framework to provide structure to performance metrics. Suppliers should ensure that they have a comprehensive understanding of the environmental, health, and safety (EHS) metrics that are most relevant to their work, and that the priorities of EHS managers are structured around these metrics. EHS managers should be armed with complete knowledge of all relevant local and international regulations in their field. Brands can assist in establishing these frameworks by providing resources and tools, such as templates and standard operating procedures that help EHS facility managers comply with regulations and demonstrate compliance to external standards like the Sustainable Apparel Coalition’s (SAC) Higg Facility Environmental Module or the ZDHC Manufacturing Restricted Substances List (MRSL). This enables suppliers to provide a standardized set of certified data to multiple buyers, significantly reducing the need to respond to individual assessments.

Having the ability to provide a standardized set of data to multiple auditors comes with multiple benefits. Not only does it save time and money, it produces better results. With a standardized data set, suppliers are also given guidance and tools to help them meet both regulatory and auditor imposed requirements, increasing the quality of the compliance significantly. In addition, if the results of one audit or assessment can be repurposed for another brand’s audit, the supplier’s cost of the compliance drops significantly. This approach—which requires suppliers to simply report once and then resubmit that standardized data—is an important part of combating audit fatigue and a major step forward in the ongoing challenge to drive more efficiency from the supply chain.

While audit fatigue is a significant challenge for organizations aiming to improve their ESG performance and supplier relations, there are solutions available. Organizations should work together with suppliers to develop best practices and help them improve their performance over time—rather than apply punitive action to those who fall short. This type of nurturing supply chain management strategy is one that focuses on collaboration to improve supplier relationships, overall efficiency, and the reliability and quality of assessment data.

ADEC Innovations is a leading provider of ESG solutions, including fully-integrated industry expertise, software solutions, and data management. We create programs that help reduce audit fatigue while working with you to create custom solutions for a sustainable supply chain.  

Keep an eye on your inbox for the next installment in our “Rethinking Sustainability Audits and Assessments” series.

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