Over the past two decades, multinational corporations (MNCs) have increasingly adopted social auditing and certification programs, with the purported aim to ensure that their sourcing practices meet ‘ethical’ labor and environmental standards. Indeed, MNCs are spending considerable resources on such programs, with some estimating the social auditing industry to be worth $US 50 billion. Yet twenty years of research show that social audits have perpetually failed to detect, report, and provide adequate remedy for grave labor abuses, further fueling the critique that social auditing schemes – and the broader constellation of corporate social responsibility initiatives – are first and foremost concerned with protecting the reputation of global brands, effectively obscuring the corporate practices that render low-wage workers vulnerable to abuse. The analysis below examines one of these initiatives, dubbed by its proponents as the “gold standard” of the social auditing industry.

Overview

Established by Social Accountability International (SAI) in 1997, SA8000 is a multi-stakeholder initiative (MSI) that, in its own words, “helps certified organizations demonstrate their dedication to the fair treatment of workers across industries and in any country.” This auditable standard is currently used to certify 3,728 facilities globally, covering roughly 2 million workers. It measures social performance in eight areas: child labor; forced/compulsory labor; health and safety; freedom of association and right to collective bargaining; discrimination; disciplinary practices; working hours; remuneration; and management system.  Audits to certify organizations under SA8000 are performed by certification bodies that have been accredited by Social Accountability Accreditation Services (SAAS). Initially, SAAS was a department of SAI, but it separated from the organization in 2007 and now functions as its own legal entity. Despite this legal separation, they remain deeply interdependent: SAI relies on SAAS’ accreditation services in order to function, while SAAS relies on SAI’s maintenance of the SA000 standard and training guidelines.

SA8000 is used to certify self-selecting suppliers – factories, farms and other workplaces – as opposed to brands and retailers. Suppliers that seek SA8000 certification must cover the full cost of the certification process. After successfully completing a 90-minute self-assessment created by SAI called the Social Fingerprint, applicants are required to contact an accredited certification body via SAAS. The certification body then conducts a preliminary social audit, usually lasting 1-2 days, to “assess the organization’s readiness for SA8000.” If the supplier makes it past this stage, it goes through a full certification audit, which can take anywhere from 2-10 days, depending on the size and scope of the facility. Once a facility is certified, it undergoes subsequent on-site monitoring (a combination of announced and unannounced visits), typically twice a year. SA8000 certificates last three years, after which suppliers may choose to recertify.

While SA8000 has expanded significantly since its inception – in 2000, only 74 organizations were certified by this standard – there is no empirical evidence that its growth has brought about parallel improvements in labor conditions. To the contrary, numerous case studies from the past two decades reveal its perpetual and sometimes fatal failure to protect workers in global supply chains.

The Ali Enterprises Fire

Perhaps the most tragic example of the failure of SA8000 was the Ali Enterprises fire in Karachi, Pakistan on 12 September 2012, that killed nearly 300 workers just weeks after the factory received SA8000 certification. The certificate was issued in August 2012 by RINA – a certification body accredited by SAAS –  after a social audit was completed by RI&CA, RINA’s subcontractor in Karachi. Despite the numerous safety hazards inside the Ali Enterprises factory, including a lack of proper fire exits, the factory was certified as safe. Despite its role in this fatal monitoring failure, RINA did not have its SA8000 accreditation revoked by SAAS.

Safety hazards were not the only problems that were overlooked during the certification process: according to the New York Times, many workers at the factory worked 12-hour shifts and were paid as little as $58 per month, a third less than the statutory minimum wage. Workers also testified having “been forced to lie about their working conditions to auditors representing foreign buyers.”

Standards without enforcement

A key flaw of SAI’s SA8000 specifically and MSIs generally lies in their voluntary nature. While SA8000 has evolved to articulate higher standards for workers than traditional corporate social responsibility programs, it nonetheless fails to secure the commitments necessary to implement meaningful and sustainable change. For suppliers that self-select and pay for certification, the main driver for complying with SA8000 is the prospect of achieving (or the fear of losing) certification status – which presumably allows them to gain competitive advantage as suppliers for brands and retailers atop global supply chains (brands and retailers increasingly require such certificates from suppliers as a precondition for a commercial relationship). Yet conflicts of interest abound.  On the one hand, factories, farms and other workplaces have an incentive to conceal labor violations from auditors, as this allows them to maintain artificially low production costs.  On the other hand, because auditors rely on issuing certifications to generate revenue, they face a financial incentive to underreport labor violations. And with the growth of the private auditing industry, competition among auditors “creates incentives that push towards keeping auditing standards, costs and efforts low.” In either scenario, workers lose.

The failure of social audits has been documented extensively in the past two decades by practitioners, researchers, and scholars. In 2008, a Harvard Business School study found:

“Almost no systematic evidence exists to indicate whether independent organizations such as SAI have been able to establish effective monitoring programs that ensure compliance with their codes, or whether they are simply being used as political cover for businesses hoping to avoid further scrutiny from activists and negative publicity.”

The AFL-CIO’s 2013 “Responsibility Outsourced” report was especially thorough in documenting the flawed approach of several MSIs, including SAI’s SA8000. Drawing from case studies, including the Ali Enterprises fire, it found that the social auditing system not only lacks accountability and transparency, but also that it has helped keep wages low and working conditions substandard. Both SAI and SAAS issued responses following the publication of this report. With regards to SA8000’s failure in the Ali Enterprise case, SAAS wrote: “Of course we are all aware that audits do not create changes; changes are made by workplace participants. These changes can be guided by the information acquired throughout the audit process.” SAI, on the other hand, distanced itself from the tragedy by saying: “SAI does not conduct, or pay others to conduct, SA8000 certification audits.” Both responses are noteworthy in that they reflect the foundational flaw of virtually all MSI schemes: they promote voluntary standards without enforcement, and therefore inevitably fail to protect workers. They also shed light on SAI and SAAS’ labyrinthine system of outsourcing social responsibility functions, which allows each of them to effectively dodge direct accountability for monitoring failures.

Furthermore, SAI’s SA8000 does nothing to address the single biggest factor leading to labor exploitation in global supply chains: the sourcing squeeze. Corporations pressure their suppliers in an effort to secure the lowest possible price, forcing suppliers to cut labor costs, often at the expense of workers’ wages and conditions, in order to remain competitive. Yet the SA8000 standard places no economic responsibility on the brands at the top of supply chains. Tim Bartley’s analysis of a 2010 survey of Chinese workers found no evidence of a wage premium in certified factories, despite the fact that SAI’s website boats of having created “the first social responsibility standard to integrate the concept of living wage in 1998.”

Instead, SAI offers global corporations an appealing vision of cheap and commitment-free social responsibility: “[SA8000] is appreciated by brands and industry leaders for its rigorous approach to ensuring the highest quality of social compliance in their supply chains, all the while without sacrificing business interests” (emphasis added).  Accordingly, brands and retailers may become “corporate partners” of SAI. This simply entails demonstrating their commitment to SA8000 “by placing the following public statement on the CSR page of its website, in its CSR report or in some equivalent public manner:

‘As a Corporate Member of SAI, we share the mission to improve working conditions in our supply chain, in accordance with performance criteria based on relevant ILO conventions and national law, utilizing management systems and multi-stakeholder dialogue.’”

What’s missing, of course, are the binding commitments and pricing interventions necessary to achieve sustainable change.

Lastly, SAI has been routinely criticized for its lack of worker participation. A 2018 report by the Centre for Research on Multinational Corporations (SOMO) on the SAI grievance mechanism in the South Indian textile industry found that workers have not benefited from this process and that this mechanism “failed to engage workers in a meaningful manner.”  And while SAI bills itself as an MSI that “[works] together with a diverse group of stakeholders, including brands, suppliers, governments, trade unions, non-profits, and academia,” it remains “heavily financed by industry,” with workers and their organizations excluded from the decision-making process. SAI’s current Advisory Board contains 13 members, seven of which have a corporate background (five of these are from companies that are dues-paying corporate partners of SAI). Only one member from the Advisory Board is from a trade union. Both SAI’s and SAAS’ Board of Directors contain no workers or representative organizations.

Can SA800 find its bite?

In the final analysis, SAI and SA8000 are woefully inadequate programs that, rather than improving labor conditions in supply chains, seem to primarily serve as smokescreens for global corporations that are unwilling to take seriously their responsibilities as end-buyers.  The programs’ myriad problems –voluntary compliance, dependence on flawed social audits, failure to address price pressure, and lack of worker participation – do not lend themselves to quick fixes. As LeBaron et al. have argued, “for nearly two decades, workers’ rights and trade union organizations, scholars, and auditors themselves have documented the flaws of the audit regime; yet, corporations have done little to transform it. The problem is not one of finessing the institutional design or audit methodology, but rather relates to corporate power, politics, and profits”. The Worker-driven Social Responsibility model, including the Fair Food Program in agriculture and the Accord on Fire and Building Safety in Bangladesh in the apparel industry, offers a compelling alternative rooted in binding and enforceable agreements between worker organizations and global corporations.  This model, in contrast with SAI and SA8000, has an empirical basis of support to validate its ability to deliver meaningful changes for workers in global supply chains.

Comparison of SA8000 vs WSR