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Questions and answers on our Supply Chain Audits

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Why does a Supply Chain Audit according to social standards pay?

A supply chain audit enables you to take responsibility for work safety within your supply chain. It also opens up new marketing possibilities. By adhering to the Code of Conduct you strengthen your stakeholders’ trust in your company. You also gain a key competitive advantage in tender procedures by using social standards to prove that issues like social and ethical sustainability are important for you. You create a way of proving your social commitment by taking responsibility for fair production and working conditions. And: With a high social standard like amfori BSCI (Business Social Compliance Initiative) you save time and money. The amfori BSCI audit supersedes costly multiple audits for different clients.

What are the most important standards?

The most common social standards are established by initiatives, for example the amfori BSCI (Business Social Compliance Initiative). Other important and globally recognized standards are ICS (Initiative for Compliance and Sustainability or Initiative Clause Social), RBA (Responsible Business Alliance), SA8000 (Social Accountability), WRAP (Worldwide Responsible Accredited Production), PSCI (Pharmaceutical Supply Chain Initiative) and SMETA (Sedex Members Ethical Trade Audit). There are also customer-specific programs for a code of conduct. These include independent and impartial code of conduct audit services which can be aligned with local legislation, international norms or clients’ own codes. In addition to these, ISO standards like QMS (Quality Management System), EMS (Environmental Management System) and ISO 45001 for occupational health and safety can be added.

Which is the right standard for my company?

This depends on the company’s branch, size and individual priorities. For example, the traditional fields of CSR (Corporate Social Responsibility) and HSE (Health Safety Environment) can be supplemented with other focus areas. These might include specific risk areas, such as fire protection in textile factories. Other companies might concentrate on the areas of employment law, the handling of structural materials or data protection. On request, we also offer an individualized list of priorities based on our many years of experience and an individual analysis. We also support companies in formulating their own code of conduct.

How do the auditors of TÜV Rheinland acquire their expertise?

Our auditors continuously update their skills, operate worldwide, and share their experiences every year. They are authorized to audit according to all of the current international social standards, and they can also conduct audits focussing on other areas during an appointment with the customer — for example, environmental protection or the handling of chemicals. We can demonstrate that our auditors in the social audit sector, which has existed for 20 years, have ten years of experience on average. That makes them the most experienced auditors in the sector.

How much effort does it take to audit an entire supply chain?

The complexity of the schemes – in other words, the checklists – depends on the company and the standard we use, such as amfori BSCI (Business Social Compliance Initiative) or SMETA (Sedex

Members’ Ethical Trade Audit). In general, most of the social standards are much more detailed than ISO standards.

Our auditors have to precisely fill out questionnaires, investigate many specific points, conduct interviews, carry out research and do cross-checking. The effort required for this process also depends on the company’s branch, size and individual priorities. When our experts audit large companies they work as a team. An audit usually lasts several days.

What is amfori BSCI?

The abbreviation BSCI stands for Business Social Compliance Initiative. It was established in 2003 by the Foreign Trade Association (FTA, renamed amfori in 2018). The amfori BSCI members have developed the amfori BSCI Code of Conduct, whose provisions are based, among other things, on the standards of the International Labour Organisation (ILO), the UN Charter of Human Rights and national laws and regulations.

Through membership in the amfori BSCI, companies commit themselves to acknowledging the provisions of the Code of Conduct in their corporate environment and to implementing them in their corporate policy with suitable measures. Suppliers must also ensure that sub-contractors adhere to the amfori BSCI Code of Conduct. Compliance with the Code of Conduct is supervised through audits by independent auditing firms.

What is SEDEX?

The acronym SEDEX stands for Supplier Ethical Data Exchange. With a not-forprofit membership in this organisation companies commit to the continuous improvement of ethical performance within their supply chains. Founded in 2011 by a group of UK retailers, the organisation drives convergence in social audit standards and monitoring practices. This engagement aims to ease the auditing burden on suppliers through the sharing of reports and to develop improvements in supply chain standards.

The Sedex Members Ethical Trade Audit (SMETA) was created for this purpose. The audit was developed in response to member demand for an ethical audit report that could be shared more easily. SMETA is designed to reduce or avoid duplication of effort in ethical trade auditing, benefitting retailers, consumer brands, and their suppliers.

How do companies find out where to improve?

If a company becomes a member of an initiative such as amfori BSCI, it can compare its own supplier chain with the amfori BSCI database. That way it can find out which of its suppliers have not yet been audited. And that is how companies can know where there is still room for improvement in terms of HSE (Health Safety Environment) and CSR (Corporate Social Responsibility).

TÜV Rheinland’s auditors check the status of the suppliers by means of a questionnaire that can be based on the customer’s specific standards or international ones. That is how we create comparability. Our auditors know from experience how to organize investigations to monitor these factors. In addition, the audits can be individually expanded, for example by conducting an environmental audit in parallel with the social audit.

What is a corrective action plan?

After an audit, our auditors work together with the customer to create a corrective action plan. This plan specifies which deviations from the standard must be corrected by when, as well as the date when a follow-up audit should be conducted. A corrective action plan is usually formulated on the very same day as the audit. We check for compliance again in our follow-up audits.

Which typical problems can a Supply Chain Audit disclose?

The biggest problem is the verifiability of working times. It is followed by HSE (Health Safety Environment) deficiencies, not only regarding the buildings but also in the handling of equipment such as sewing machines and safe work clothing. Discrimination exists especially in the textile industry, in which women make up about 80 percent of the workforce. And in many companies there is no empowerment of the employees. As a result, the employees do not dare to express suggestions for improvement or express criticism that would actually be useful for the company. Our auditors investigate these aspects as well and discover where the company can improve.

What is a code of conduct?

It makes sense for a company to have its own code of conduct if it wishes to go beyond existing standards or to focus on its own special areas of interest. For example, in the pharmaceutical sector the focus might be on the trained handling of hazardous materials. In this area, the existing guidelines do not cover all the safety aspects. For companies with such special requirements, it is not enough to join an initiative. Establishing a company’s own high standards for its partnerships with suppliers minimizes the risk of incidents in the supply chain. It is also worthwhile to be a pioneer before state legislation sets new external standards in areas such as data protection, for example. In addition, by formulating their own, more stringent, code of conduct companies can distinguish themselves from their competitors — and that is an important step toward market leadership.

Which existing standards should a company incorporate into its code of conduct?

Occupational safety, for example, is an important issue for companies that have extensive warehousing operations. If a company wishes to concentrate on fair and safe work, it should orient itself according to existing ethical and social codes of conduct such as the UN Universal Declaration of Human Rights or the Conventions of the International Labour Organization (ILO). The ISO 14001 standard is one of the recommended codes for environmental issues. Companies can use building blocks like these to put together their own customized code of conduct.

What is a Hotspot Analysis?

We conduct a so-called hotspot analysis in order to find out exactly where the points of highest risk are located in the supply chain – this is one of the first steps towards a precise code of conduct. These factors can differ from sector to sector. TÜV Rheinland’s auditors check the status of the suppliers by means of a questionnaire that can be based on the customer’s specific standards or international ones. Our auditors know from experience how to organize investigations to monitor the weak points.

How does TÜV Rheinland support companies to make sure that suppliers comply with the code of conduct?

After the code of conduct has been completed, it needs to be established in the supply chain. TÜV Rheinland helps to define an individual auditing process that determines how often the supply chain has to be audited and until when deviations must be corrected. The audit programme can also set priorities for the most important criteria, for example fire protection. We can structure the reports according to the customer’s wishes. All kinds of formats are possible, ranging from the simple information as to whether the audit was passed or not to detailed reports focusing on aspects such as occupational safety or environmental sustainability. That enables companies to find out their weak points and make targeted improvements in critical areas.

How does TÜV Rheinland ensure the auditor's expertise?

Our auditors are registered members of the Association of Professional Social Compliance Auditors (APSCA), continuously update their skills, operate all over the world, and share their experiences every year. We have managers for every scheme based on the international standards who keep our experts up to date. The auditors are authorized to audit according to all of the current international social standards, and they can also conduct audits focussing on other areas during an appointment with the customer – for example, environmental protection or the handling of chemicals. We can demonstrate that our auditors in the social audit sector, which has existed for 20 years, have ten years of experience on average. That makes them the most experienced auditors in the sector.

What is the Dow Jones Sustainability Index (DJSI)?

The Dow Jones Sustainability Index (DJSI) is a stock index that includes global sustainability leaders. In order to be registered in this list, companies have to fulfil economic, ecological and social criteria.

What do Auditors check during a tour?

The on-site supplier audit begins with an opening discussion in which the goal and procedure of the audit are explained. Next, the auditors investigate whether the supplier is complying with the guidelines. They conduct confidential interviews with the employees and managers, review and copy documents such as work contracts, and compare these documents with the actual working conditions. Our auditors take photos of the work operations on a tour of the premises and document their audit results. During the confidential interviews with employees, the auditors watch for discrimination, and in their tour of the premises they are on the lookout for child labour and gaps in the safety system. The audit ends with a final discussion.

How much time do companies have to correct deviations from the standard?

The corrective action plan can schedule a time window up to twelve months. After that, the whole audit has to be repeated.

What is APSCA?

The Association of Professional Social Compliance Auditors (APSCA) is the leading social compliance audit industry association. It aims to enhance the consistency, credibility and professionalism of audit organizations and individual auditors performing independent social compliance audits. The association also promotes the use of independent social compliance audits to improve work conditions worldwide. Auditors who are registered in the APSCA have validated their competencies and fulfil the high demands of professional auditing services.

Where is TÜV Rheinland represented?

TÜV Rheinland is a globally leading independent audit service provider. The group’s employees work all around the world at about 500 sites in 69 locations. We provide our services worldwide.

What are programmes and schemes?

The term “scheme” describes the requirements and regulations of international standards like amfori BSCI that have to be fulfilled by the audited companies. A “programme” can be an individual code of conduct that is specifically created for a company.

What characterizes a sustainable, social and fair business?

Fulfilling international standards like amfori BSCI (Business Social Compliance Initiative) or SMETA (Sedex Members’ Ehtical Trade Audit) ensures a company’s social integrity and sustainability. These standards include safety regulations like fire safety and social aspects like work schedules, child labour and discrimination. Besides these ethical aspects, complying with a high standard that is internationally recognized and offers comparability can deliver a competitive advantage. Suppliers acquire new customers with corresponding requirements, and companies reinforce their integrity and can market their brands with greater self-confidence. Consumers pay greater attention to fairly manufactured products and brands’ reputations.

Why should companies audit their suppliers regularly?

Compliance is an ongoing process and standards are updated regularly. As an example, the amfori BSCI audit is valid for two years. After these two years it can no longer be ensured that the audited company still fulfils the requirements – another audit is necessary to extend the validity by a further two years. This also helps to make sure that the company’s compliance meets the latest changes of the standard.

What is the environmental standard ISO 14001?

ISO 14001 governs environmental protection rules that are designed to avoid ecological stresses in accordance with socio-economic requirements. As an established environmental norm, ISO 14001 is the world’s foremost instrument for the implementation and application of an effective environmental management system.

What it the ISO 45001 Standard?

The ISO 45001 standard is intended to fulfil the growing expectations regarding occupational health & safety management. Companies can reduce the number of accidents in the workplace using a systematic approach to aspects of occupational health & safety with ISO 45001 certification, regardless of their industry or the company’s size. Sources of errors are identified and eliminated. Companies can therefore ensure their compliance with statutory and regulatory requirements for occupational health and safety protection.

How can companies maintain an overview of their supplier network?

If a company becomes a member of an initiative such as amfori BSCI, it can compare its own supplier chain with the amfori BSCI database. That way it can find out which of its suppliers have not yet been audited. And that is how companies can know where there is still room for improvement in terms of HSE (Health Safety Environment) and CSR (Corporate Social Responsibility).

What potential improvements are enabled by Supply Chain Audits?

Supply chain audits according to an international social standard enable companies to take responsibility for their supply chain and to show their sense of responsibility for fair and safe production and working conditions. This opens up new marketing possibilities and strengthens the trust of customers and consumers as well as business partners and employees. Common international standards like amfori BSCI include many other high standards. Therefore companies save costs and time by avoiding multiple audits. Furthermore, the improvements according to an audit are often accompanied by more efficient management of the company’s value chain.

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