Inside an Ethical Audit: What to Expect

Companies supplying the major retailers are often required to undergo an ethical audit approximately every two years in order to meet supplier requirements. Ethical audits are a method of measuring their compliance against the ETI Base Code and local law.

Ethical trading means that retailers, brands and their suppliers take responsibility for improving the working conditions of the workers making their products. It is an integral part of the business for the major retailers, who are keen to ensure fair treatment of workers throughout their supply chain.

What are 2-pillar and 4-pillar ethical audits?

SMETA ethical audits can be either two-pillar or four-pillar audits. The first two pillars are included in all audits, and they are:

• Health & Safety
• Labour Standards.

Four-pillar audits cover the first two pillars plus two additional areas:

• Environmental Performance
• Business Ethics.

How long is the audit and what is covered?

The length of the audit depends on the number of workers on site including agency workers.

• Up to 100 workers – 1-day audit
• 101 – 500 workers– 2-day audit
• 501 - 1000 workers– 3-day audit
• 1001+ workers-4.day audit

Supplier sites are audited against all elements of the ETI (Ethical Trading Initiative) Base Code. These are:

• Employment is freely chosen
• Freedom of association and the right to collective bargaining are respected
• Working conditions are safe and hygienic
• Child labour should not be used
• Living wages are paid
• Working hours are not excessive
• No discrimination is practised
• Regular employment is provided
• No harsh or inhumane treatment is allowed

They are also audited against local law and Additional Elements including Universal Rights covering UNGP, Management System and Code Implementation and Entitlement to Work and Immigration.

Opening Meeting

Like most audits, ethical audits begin with an Opening Meeting. Typically, this will be attended by representatives from HR, Health & Safety and Production departments as well as senior management. It’s also good practice to have a union or staff representative in attendance.

Generally the opening meeting will last around 30 minutes. Here introductions will be made, and the auditor will discuss what will happen during the audit. The auditor will also request that certain documentation be made available during the audit.

Arranging Interviews

An essential element of an ethical audit is interviewing the workers, so the next step is the selection of interviewees and timetabling of interviews. Workers are selected randomly by the auditor, but there needs to be a broad cross-section of directly employed workers and agency workers. It is helpful to have input from HR and production managers regarding which are longstanding employees, union or works committee members, first aiders, forklift truck drivers, members of the safety committee etc. The auditor will always endeavour to timetable interviews where there is minimum disruption to production.

Worker interviews are confidential and need to be conducted in a private room where the workers will feel comfortable. On farms, the interviews may take place in the field. The auditor will interview some workers in groups and others individually following SMETA guidance.

Site Tour

Ideally this will be led by the Health & Safety Manager or a safety committee representative. The auditor will discuss any health and safety issues and workplace hazards and how they are managed. The auditor may request permission to take photographs for use in their audit report.

Whilst the tour is taking place, it gives HR staff the opportunity to access the documentation requested by the auditor at the opening meeting. These will include personnel files, contracts, employee handbook, agency documents, Health & Safety information, HR files etc.

Review of Documentation

The auditor will review any relevant Health & Safety documentation with the Health & Safety Manager. They will speak with the HR Manager about their recruitment practices, contracts and policies. Supporting evidence will be reviewed in the form of any contractual documentation, HR policies and procedures.

In order to ensure that workers are paid a living wage, overtime is paid at the correct rate, regular breaks are given, and workers are not working excessive hours, the auditor will review a randomly selected sample of payroll and time and attendance records.

After lunch the auditor will typically investigate how the company manages any agency workers, if any are on site. Again, this will require a discussion with the HR Manager and the review of supporting documentation.

Worker Interviews

Group and individual worker interviews are conducted by the auditor. The number of interviews undertaken is determined by the size of the workforce. Wherever possible they will try to include a range of male and female and direct employees and agency workers, and a range of nationalities. An interpreter may be required (can be another worker) if English is not a worker’s first language. However, some auditors can speak other languages and some telephone translation services and apps are now also available.

Corrective Action Plan

Throughout the audit, the auditor will have been making notes in order to write the final Audit Report. However, before they produce this, they will write the Corrective Action Plan (CAP). The CAP details any non-compliances found during the audit as well as observations and good examples. Any non-compliances listed have preventative and corrective actions against them, together with a timescale for implementation. Copies of the CAP are printed for distribution during the Closing Meeting.

Closing Meeting

The final part of the audit before the report is written is the Closing Meeting. All personnel who attended the Opening Meeting should ideally be present. The auditor will give a summary of their audit findings. This will include the non-compliances (if any), observations and good practice contained in the Corrective Action Plan.

There is an opportunity for managers to dispute any findings during the Closing Meeting before signing off the Corrective Action Plan.

Following this, the auditor will outline the next steps including when the company can expect the full audit report, upload to Sedex and any follow-up procedures to ensure the corrective actions specified can be verified and signed off.

How do I book a SMETA Ethical Audit?

To discuss your SMETA ethical audit and request a quote, get in touch with Samantha Day our Ethical Audit Team Leader on 01756 700802 or samantha.day@vwa.co.uk

Verner Wheelock has an experienced team of APSCA qualified CSCA ethical auditors, based around the UK, together with dedicated account managers to ensure that you have all the information you need to allow your ethical audit to run smoothly. Find out more