Ethical audits are a way for companies to evaluate how ethical the suppliers within their supply chain are. Many businesses are blind – or intentionally turn a blind eye – to the ethical standards of their suppliers. However, to operate as a modern, ethical company that lives up to the standards of your consumers, you’ll need to fully evaluate all of your suppliers.
Ethical audits are designed to keep your suppliers, production processes, and business operations in-check. This involves an initial audit, adjustments where needed, and staying on top of the legislative changes in your industry.
How can you stay ahead of the curve?
What is an Ethical Audit?
Ethical audits are an extensive review and evaluation of your supplier (usually conducted by a third party but can be done in-house). The main points that are usually evaluate include:
- Treatment of employees
- Compliance with labor laws
- Working conditions
As you know from reading other posts on this site that explore the meaning behind what is ethical, “ethics” is a very complex term. Many different people, businesses, and cultures define what is “ethical” differently.
The Ethical Dilemma
On one hand, you have labor ethics that are clearly defined by a governing body (can be local, international, or other). These would include ethical standards for things like:
- How long a work day is
- How much pay is fair
- What type of working conditions are acceptable
These legal ethics are fairly straightforward and are most often where a company starts when seeking to make sure their suppliers are following the applicable ethical standards (depending on where they are operating).
On the other hand, there are cultural ethics which are not always reflected in governing laws. For example, while the legal minimum wage in the United States is $7.25 per hour, your consumers may believe a fair minimum wage is closer to $15.00 per hour.
How do you decide what is ethical?
This is up to you and your business. Most businesses take the legal ethics as their baseline, then evaluate and build on top of that. There are international standards set by organizations like amfori BSCI which sets recommendations for how businesses should manage their supply chains to conform with the SDGs – UN Sustainable Development Goals.
You can use a combination of local, international, and your own ethics standards to create a checklist by which you’ll hold your suppliers accountable.
What is an Ethical Audit Checklist?
Your ethical audit checklist, as the title suggests, can be used by your supplier for internal review, your own auditors external to the supplier, or a third party auditor for a more objective evaluation.
You may start with a simple and broad checklist, but to properly evaluate each of your suppliers, each will need a checklist that is specified to be appropriate each supplier.
If you hire a company for a third party ethical audit, they should have knowledge about your industry and can help you put together the most affective checklist. They should also be able to provide you with a final report and a corrective action plan if warranted.
Where To Start?
You may feel overwhelmed if you’re starting to tackle this challenge and you have various suppliers in several different countries. We recommend starting small, learning as you go, getting help where needed, and not being too critical on yourself during the process. Here are some tips to help you get started and gain some momentum, so you don’t throw your hands up at a challenge that feels to big to tackle:
- Start with Proximate Suppliers – start with the suppliers that are geographically closest to your business and most immediate to your final products. You can then branch out to deeper levels of your supply chain.
- Start with Small Suppliers – the smaller the supplier the smaller the footprint you’ll need to cover when it comes to ethical practices, which makes building your checklist easier. This will also give you a starting foundation you can build upon for larger, more complex suppliers.
- Clarify Your Objectives – make sure you’re clear on why you are embarking on this transition to an ethical supply chain. This should be the basis for your actions and should help keep your eye on the prize. You may also find it helpful to set some simple benchmarks like number of suppliers audited by a certain date and number of suppliers meeting ethical standards by a date further out.