Richard Karmel: Why human rights auditing needs to change?

Richard Karmel is responsible for Mazars’ award winning social performance and human rights reporting line. In his latest blog he details why human rights auditing needs to change.

A case study – Tazreen Fashions Ltd

In November 2012 more than 112 workers were killed in a fire at a garment manufacturing factory owned by Tazreen Fashions Limited based in Dhaka.

Whilst shocking in itself, what was more shocking was that three weeks earlier, the factory had received a certificate of approval that workers’ human rights were being respected.

As it turns out, fire extinguishers that were in view on the day the auditors undertook their review were removed once they had left and the fire exits were padlocked shut.

The excuses given by the company were that if fire extinguishers are left out then they are stolen and that if the fire exits aren’t locked, this would let in potential thieves.  Rather than address the cause, the company took the route of addressing the symptom.  This in itself says much about the culture of the company.

What is the value of auditing?

Of course, this incident raised questions over the value of ‘social’ auditing.  If a factory that was so obviously flouting its respect for human rights, could receive a seal of approval, despite Walmart having already blacklisted it for major safety failings in 2011, then what is the value of being audited in the first place.  The answers can be grouped into the following areas:

  • The Audit concept
  • Audit methodology applied
  • Competence of the audit provider
  • Publicity of findings
  • Government oversight

The Audit concept

The term audit that is applied to these social/human rights reviews is potentially misleading given that it is synonymous with the term audit in the financial arena.

Where financial audits are undertaken on an annual basis for statutory purposes, they are heavily regulated with government oversight and have to follow a defined set of international or national guidance.

In the human rights world, there is minimal, if any, oversight of the work undertaken by the ‘auditor’ and there is no international or national guidance; each individual ‘auditor’ has developed their own.

Audit methodology applied

As indicated above, methodologies differ from one human rights ‘auditor’ to the next.  Furthermore, human rights methodologies need to be fundamentally different from those applied in the financial arena given that the reviews are looking at more qualitative and subject data rather than quantitative and absolute data.

However, some of the questions that these ‘auditors’ apply look sensibly at face value e.g. are there fire extinguishers freely available? However, there are no follow up questions about whether the extinguishers work or how often they are tested (or even the question – are they in evidence when the ‘auditor’ is not in attendance)?

Competence of the ‘auditor’

Given there is no specific ongoing training programme for human rights auditors (SA8000 requires attendance on a week long course), the competence of human rights ‘auditors’ varies significantly.

Some may be human rights experts, some may be audit experts but it is more the exception than the rule to find ‘auditors’ expert in both.

Publicity of findings

Is it just possible that if the ‘auditor’ knew that his findings of his review together with his name were publicised, that more care may be taken in the performance of the review.

In the case of the Tazreen ‘auditor’, it turns out that they had outsourced the work to a local ‘auditor’ who was already under investigation for approving so many fire safety certificates in a short period of time.

Government oversight

This is probably the most difficult area to overcome given that corruption is rife amongst many of the states in the developing world where human rights abuses are reported as regularly taking place.

However, in the more developed world there is no government or regulator oversight unless the work is undertaken by a professional services firm.  So, it is difficult for the West to preach to the developing world that they need to get their house in order when it is not readily apparent that our own national positions have been addressed.

Auditing needs to change

The conclusion is that the whole basis for human rights ‘auditing’ needs to change.

There is ‘audit’ fatigue at suppliers, with too many companies (as evidenced in BBC’s Panorama programme in September 2013) still deceiving companies and the ‘auditors’.

There needs to be harmonisation of guidance and methodologies such that the ‘audit’ becomes less of a tick box approach but rather a review of the effectiveness of measures and controls put into practice to reduce the risk of abuses.

The approach to a human rights ‘audit’ needs to be more holistic in nature and endeavour to understand the culture at the business rather than just look at end results.

All in all, the aim for the ‘audit’ process should be to deliver a position of continual improvement at the suppliers.  Where failures are identified, the ultimate sanction needs to be on the table; companies must take their business elsewhere.  Companies may not see it as their legal duty to protect human rights in their supply chains; but it is very much their moral duty.

Richard Karmel

Mazars LLP