Supplier Auditing for ESG Management28 February 2023
If you don’t already audit your supply chain, it’s time to start.
Supplier Auditing for ESG Management
It’s quickly becoming pivotal for fashion brands to trace and measure ESG performance within their supply chains due to growing consumer expectations and upcoming regulations.
As a sustainable fashion brand, you can and need to be prepared to fully manage your ESG performance and supply chain practices to maintain and improve your sustainability strategy. Accurate supply chain data is gathered through regular supplier audits.
It may sound daunting to collect and implement supplier data on your own. But you’re not alone. We’re going to break down collecting and using metrics to develop a target-focused sustainability strategy.
What is a Supplier Audit?
A supplier audit is a regular visit to a material sourcing site, manufacturing facility, or any other part of your supply chain with a labor force.
During an audit, the auditor (whether from your business or a hired third-party organization) collects data from your suppliers–which generally covers human rights, working conditions, health and safety, and environmental impact–to ensure ethical and responsible practices in each part of the supply chain. We will explain how to structure an audit in depth later in this article.
This data provides an overview of the social integrity and environmental impact of your suppliers. This helps you optimize supplier quality by mitigating investments in bad supply chains, and allows you to effectively reduce and limit non-compliance within established ethical and legal codes.
Why are Supplier Audits important?
The data gathered from supplier audits is pivotal to creating an effective and efficient sustainability strategy.
Auditing your suppliers ensures responsible environmental and human rights practices throughout your supply chain. You need to be actively aware of this, as you will be held accountable for it–both ethically and legally.
Auditing your suppliers is key to tracking your impact and making progress toward your sustainability goals. Not only does this keep your customers and stakeholders informed, but is also crucial in accurately reporting your carbon footprint and annual social environmental performance.
How to Audit your Suppliers
Prepare to carefully assess and measure your sustainability initiatives throughout the entirety of your supply chain with accurate numeric data.
The most effective way to maintain consistent knowledge about your supply chain–and by extension, your credibility–is to gather the data firsthand. Before you leave for an in-person audit, prepare for collecting data by making a supplier audit plan.
Determine your supplier audit objective based on the areas you want to focus on most, such as social integrity or health and safety. Break these down into measurable categories, and turn these into a supplier audit questionnaire and checklist that you can fill out to gain a comprehensive view of your progress.
Who and When to Audit
You need to audit all of your suppliers, from material sourcing (Tier 4) to the final stages of shipping, to achieve true transparency throughout your supply chain. If you can’t reach all of them, audit your key suppliers and consider replacing your unreachable manufacturers. If you’re new to supply chain transparency, you may be unsure of how often should you audit suppliers and when supplier audits are used.
Tracking Progress in your Supply Chain
You should audit your suppliers at least annually, if not more frequently, to ensure consistent ethical practices and environmental improvement in your supply chain. While you are first improving your supply chain, you may consider auditing at least twice a year to gain ground and meet your goals.
Once the brand completes an audit, it typically detects several infractions against its ethical and environmental code. This begins the improvement process, starting by requesting the supplier to rectify the list of violated standards by a certain date.
This is why brands need tools that keep track of audit results. To support the audit team, you must update the information received from each supplier so you can improve their scores upon compliance.
Sustainable Brand Platform offers progress tracking tools to streamline this process. Brands upload their audit information, and the platform helps them keep track of supplier progress and improve the final score of each supplier over time.
What to Ask your Suppliers
Your supplier audit should include your sustainability standards in accordance with your business philosophy, upcoming legislation, and industry forecasting. The main criteria of a sustainable supply chain are:
- Human Rights
- Fair Wages
- No Forced or Child Labor
- Safe Labor Conditions and Hours
- Health and Social Support
- Community Care & Development
- Environmental Conditions
- Energy Systems & Emissions
- Proper Waste Management
- Environmentally-Safe Materials and Chemicals
How to Collect Supplier Data
Whether you audit your suppliers directly or outsource your data collection to an external company, you need more than qualitative data from talking to workers and walking around the facility. You will need to obtain quantitative data as well.
When collecting quantitative data to assess, establish a plan to gather it firsthand or work with a trusted external auditing company to determine the highest priorities in your metrics. This will help you ensure your data is accurate, detailed, and up to date.
In addition to speaking with the head of the facility, make sure you or your trusted auditor talk directly to the workers. If you are conducting an audit in a country with a native language you don’t speak, make sure someone on the team does or has a translator on hand. It’s important to make sure everyone is treated fairly and feels safe and valued in the supplier’s facility.
Use the information gathered to fill out your checklist and turn the collected data into sustainability metrics, so you can clearly understand the facts you need to help guide your business decisions going forward.
How to Visualize and Read Supplier Audit Data
Once you’ve collected the data, you need to visualize it so you can identify areas of improvement and share the results. This is the foundation of not only your next steps in sustainability, but how you communicate your practices to your team, customers, and shareholders.
Supplier audit templates or excel checklists can help you get started, as well as sustainability-focused supplier data software. Whatever method you choose, make sure you are prepared to use it to continuously measure your performance with the supply chain management system.
Sustainable Brand Platform’s cloud-based software for data analysis and modeling uses your raw data to quickly visualize your current supply chain metrics. It makes it simple to see key areas of improvement and set new goals to prioritize areas of focus. From there, you can visualize and transform your findings into informed actionable strategies.
To improve and maintain sustainability in your supply chain, you have to measure your impact first. Collecting and tracking supplier data from regular audits support your ethical claims, prevents legislative setbacks, and ensures that your brand does as little harm as possible.
There is much to be done in the fashion industry to right the ethical and environmental wrongs of current mainstream practices. Making sure all suppliers within your value chain are responsible and transparent, and backing your findings with factual data, is key to setting yourself apart from greenwashing.
You can book a demo of SBP's Supplier Audit Tool here.
Written by Anabelle Weissinger