Beyond Auditing – Illegal wood, Syrian refugees, trust and ferrets

Lessons learned excluding illegal wood could help solve the Syrian refugee supply chain challenge.

BBC’s Panorama program recently highlighted the plight of Syrian refugee and refugee children working, apparently on desperately low wages and in exploitative conditions, in Turkish garment factories. The exposé, just the latest in a series, once again rocked British retail brands with apparent links to the factories in question. The situation appears to have unfolded despite the brands’ extensive and genuine efforts, backed by serious investment in Codes of Conduct, contractual obligations and vast numbers of audits and training programs, to improve the situation.

In response, we’ve seen calls for “more robust procedures”. Such calls always follow when audit processes are found wanting in efforts to exclude issues from supply chains. They remind me of Einstein’s refection that, “We cannot solve our problems with the same thinking we used when we created them.” Audits haven’t solved the problem so let’s have more, tougher audits, “Let’s crank things up!” Sigh…

What might we do instead?

Lessons learned excluding illegal wood from garden furniture might hold some insights. Similarly, lessons learned grappling with human rights abuses in supply chains in India and China could help frame a thoughtful response.

Back in 1998, British NGO Global Witness produced a report “Made in Vietnam, Cut in Cambodia” that linked exploding European garden furniture demand with human rights and environmental abuses in Cambodia. There were campaigns across Europe against the major brands selling the furniture and these led, amongst other initiatives, to the founding of TFT, The Forest Trust. TFT’s Founding members – six retailers and their supplier – committed to excluding all illegal wood from their supply chains within two short years. This was a hugely ambitious target given they had absolutely no idea where the wood used in their products came from.

“Key to our efforts was a program of regular, short notice and unannounced factory visits”

But they did it! Well, their supplier, ScanCom International, did it. ScanCom was a TFT Founding member and after three months of advising the company as TFT Executive Director, I joined them in Vietnam as Managing Director of their operations. With a team of committed Vietnamese and European staff, we set about sorting out the company wood supply. Key to our efforts was a program of regular, short notice and unannounced factory visits aimed to support suppliers to implement systems to verifiably exclude illegal wood. These ‘support’ visits were nonetheless armed with teeth because continued breaches were met with lost business. It was an ‘engage to transform’ approach, not dissimilar to the programs described by Marks and Spencer in their response to the Panorama program. We had third party auditors visiting the factories too but quickly learned that beyond their high cost, they had little impact. Factories knew well in advance that auditors were coming and the need to pass audits frequently led to short term, last minute clean-up actions that undermined the push for long term transformation.

What worked instead was our own program of on-going training and internal audit visits. Taking these lessons further, TFT rolled out this ‘Wood Control System (WCS)’ process in more than 100 factories in Indonesia. Our members didn’t want illegal wood in their products and the garden furniture sector in Indonesia was awash with the stuff. Repeated audits gave green lights to factories we knew were misbehaving. So we established a program with the factories based on an initial training period involving 2-3 visits. We set up a TFT WCS database in their office and trained them how to use it. And then we went out in the factory and helped them establish proper material handling processes so that everything could be tracked. Central to the whole endeavour was the understanding that our WCS team could and would turn up frequently and unannounced to check production and that no containers could be shipped without their signoff.

“We pressed further until the truth was revealed – a network of sub-suppliers and in many cases sub-sub and even sub-sub-sub suppliers underpinned the supply chain.”

The results were enlightening. Just being present in the factory for long periods enabled us to watch the flow of wood. We could see that good factories kept everything organised and controlled and it was not an issue to track all the way back to source forests when it came to signing off shipments. But there were many – many - factories where truck loads of wood and furniture components would arrive mysteriously at all times of the day. A factory would be busy producing 200 chairs and suddenly we’d be called to sign off a shipment of 1,200 pieces. “How did you do that so quickly?” our team would ask. “We worked extra shifts” was the inevitable response. Utter nonsense. We pressed further until the truth was revealed – a network of sub-suppliers and in many cases sub-sub and even sub-sub-sub suppliers underpinned the supply chain. These subbies would buy wood anywhere they could get it, manufacture under contract to the main supplier and bring along their chair arms, table legs, slats and even whole pieces of furniture at designated times.

Who knew? Certainly not the brands buying the furniture and certainly not the auditors. How could they? They were never present during production and never stayed more than a few hours…there were always more audits to do at the next factory.

So just by being present and having the approach of a ferret - digging, smelling, looking, uncovering, asking tough questions, diving down supply chain ‘holes’ to see where they led - our TFT WCS team uncovered all sorts of sourcing behaviour that didn’t comply with our members’ Codes of Conduct and certainly didn’t match what was shared in training programs. At the same time, being present in the factories meant that we got a good look at labour practices and could work beyond illegal wood issues to get improvements there. Crucially, and this is key, over time we were able to build a strong relationship based on the spirit of partnership and trust with those factories willing to work with us to improve their practices.

We’ve done this same ferreting in India and China around human rights issues in factories and production sites. Our teams dig, snoop, ask tough questions, are often present and turn up with little notice. But once the trust is there, we also then work with the factories and sites to tackle issues. We offer training, share learnings from elsewhere and build capacity so that change can come and be sustainable in the long term. Initially factories get grumpy about it, and that’s an understatement, but when they realise they win more business and can be more productive because they’re improving and listening, everything changes.

“That’s not to say that all issues are resolved in all sites where we work.”

That’s not to say that all issues are resolved in all sites where we work. In some contexts, child labour remains an issue. It’s very grey. Kick them out, where do they go? Your suppliers’ factories might be clean but if the kids are now working elsewhere where there is less visibility and less care for their welfare, what have you achieved? Worse, if the kids are on the street, there is a risk of drugs and prostitution. That’s not to say we should have child labour but it is to argue that nuance and approach is critical and the welfare of the children, like all workers, has to be paramount.

Coming back to the Panorama findings and what to do about the exploitation of Syrian refugees and refugee children, I would argue that more ferret work, more trust building and less auditing is what we need. This is not an issue where we should be trying to 'exclude' the refugees in the same way we excluded illegal wood but the lessons from the 'ferreting' approach to finding solutions are suggestive. The aim here is to make sure the refugees aren't being exploited, that they and their children are properly treated and given work that is safe, fulfilling and creates opportunities. The ferret work involves a lot of presence in factories. Training is good and the fact that the British clothing brands had so strongly engaged on this issue before the Panorama program is great. But relying on thousands of audits…well, no. In the end that hasn’t closed everything out and in my view it cannot ever make them issue free. Nothing can really, but ferreting goes further than auditing. And worse, auditing sends suppliers the message that they’re just not trusted and only encourages them to look for actions to work around the audits. If they’re not trusted, why would they act in a trustworthy way? So build trust and let it work both ways.

Spending time in a factory helps build those close, trust-based relationships. It helps build understanding of the issues suppliers face, of the workers, and gives space to innovate solutions together as opposed to being checked against a list of requirements created by someone else. It starts and ends at a different place.

Those who love audits and believe they’re the answer will point to overall improvements in the situation and what might have been without audits. I agree, audits do help and have an important place in gathering data to establish a baseline but that’s all, they don’t get us far enough. And sadly, in some cases, passed audits are used to greenwash foul supply chains that remain festering until an NGO or a journalist bravely delves deep into the context to expose reality.

“Work with them, support them, listen to them, trust them for heaven’s sake and reward good behaviour with more orders.”

So…I encourage all brands looking for ways to solve any complex supply chain issue, those presented in the Panorama program or elsewhere, to engage with their suppliers beyond an auditing approach. Work with them, support them, listen to them, trust them for heaven’s sake and reward good behaviour with more orders. Ferret around to understand where and why suppliers use subbies and visit those subbies and get them engaged too. Getting to grips with complex, deeply interwoven, interconnected supply chains is a challenge but with good quality people checking deeply on the ground and inputting info into new databases and apps that are becoming available, supply chain issues can be transformed in a much deeper, long lasting way.

As our supply chains get ever more complex and as the issues presenting in the chains become more and more wicked, we might profit from looking to past experiences to expand responses beyond auditing, not to ditch it altogether I stress, but to include other, more complete approaches to supporting suppliers to get it right. Bonne chance.