Just before the holidays in 2023, the Associated Press published an article titled, “Volkswagen-commissioned audit finds no signs of forced labor at plant in China’s Xinjiang region.” At first glance, this seems like a non-news story; all workplaces should be free of forced labor. Yet this article was only the latest in a series of events–events that make these findings highly concerning and spell a looming crisis of confidence in the social audit industry.

State-sponsored Forced Labor is Widespread in Xinjiang Uyghur Autonomous Region

Like many companies, Volkswagen has come under increasing scrutiny for its business dealings in the Xinjiang Uyghur Autonomous Region (Uyghur Region). Mounting evidence points to a systematic regime of state-sponsored forced labor of Uyghur and other Turkic and Muslim-majority peoples since at least 2017. In 2021, the United Nations human rights experts issued a statement saying:

According to sources, Uyghur workers have reportedly been subjected to exploitative working and abusive living conditions that may constitute arbitrary detention, human trafficking, forced labour and enslavement by the use of forced labour.

The sources allege hundreds of thousands of members of the Uyghur minority have been held in “re-education” facilities. Many have also reportedly been forcibly transferred to work in factories in the Xinjiang Uyghur Autonomous Region and in other Chinese provinces.

“Uyghur workers have allegedly been forcibly employed in low-skilled, labor-intensive industries, such as agribusiness, textile and garment, automotive and technological sectors,” stated Dante Pesce, Chairperson of the Working Group.

Also in 2021, the U.S. Congress passed the Uyghur Forced Labor Prevention Act, a ban on importing goods made with materials from or manufactured in the Uyghur Region. Enforcement of the ban is based on the presumption that forced labor is ubiquitous enough in the Uyghur Region that the onus is on companies to prove that their products from that Region do not have ties to forced labor. This is unusual as more often, the burden of proof is on the party who wishes to claim that something was made with forced labor–an acknowledgment of the gravity of the situation.

Volkswagen’s Chinese Ventures Linked to Uyghur Forced Labor

“Driving Force: Automotive Supply Chains and Forced Labour in the Uyghur Region,” a report from the Helena Kennedy Centre at Sheffield Hallam University drilled into the connection of the automotive industry to state-sponsored forced labor. The report, published in 2022, includes a spotlight on the operations of Volkswagen’s joint venture with Chinese-state-owned SAIC, the Ürümchi plant, as well as an in-depth tracing of the supply chains for raw materials and auto parts with links to Uyghur forced labor. Volkswagen had the most supply chain exposures to the Uyghur Region of any of the automakers identified in the report. Volkswagen AG has been publicly connected to the risks of Uyghur forced labor at all levels of its supply chain: within its business area, direct suppliers, and indirect suppliers.

Volkswagen has been scrutinized for its involvement in the Region before. In 2019, then-CEO Herbert Deiss defended their operations claiming that he “was not aware of that,” and claiming that the plant created good jobs. Incoming CEO Steve Blume doubled down on that assertion in 2022, stating that the company offers “secure, well-paid jobs” in Xinjiang. However, the “Driving Force” report notes, “Those benefits might be unlikely to accrue to Uyghur people, however, due to discriminatory hiring practices. In at least one of Volkswagen’s [Uyghur Region]-located job advertisements from 2018, a CNY 100,000 a year test engineer job was explicitly only open to a ‘male of Han nationality.’” 

The same report notes that low and declining production at the plant suggests that Volkswagen’s commitment may be more symbolic and political, intended to pave the way for approval from the Chinese government to open other production facilities in China. 

Social Audit in Uyghur Region Sparks Scandal

It is in this context that we can now further examine the audit’s finding of “no forced labor” in Volkswagen’s plant in the Uyghur Region. According to Volkswagen, “The audit targeted ESG topics and encompassed the enquiry whether ILO [C29, Forced Labour Convention], [C111 Discrimination (Employment and Occupation) Convention], and [C155, Occupational Safety and Health Convention] are being adhered to with regard to the employees at the Urumqi plant.” To assess these topics, Volkswagen hired Löning – Human Rights & Responsible Business GmbH, a German firm that bills itself as a consultant providing businesses with “the practical and strategic advice they need to incorporate respect for human rights into their operations and along their value chains.” Löning itself is not an audit firm. Instead, as the company later explained in a LinkedIn post, “we cooperated with a mandated Chinese law firm from Shenzhen. Working with a local certified partner is mandatory for conducting audits in China by Chinese national laws.” Thus, the audit was performed by a Chinese law firm with two principals from Löning present. 

The audit, unsurprisingly, found no signs of forced labor. That finding rightfully sparked outrage. Staff within Löning posted to LinkedIn, stating that “The human rights situation in China and Xinjiang and the challenges in collecting meaningful data for audits are well known and are also present in this project.” Even Markus Löning, founder and principal of the firm, was quoted in the Financial Times noting that “the main basis for the audit had been a review of documentation relating to the 197 employees at the plant rather than interviews adding that this could be ‘dangerous.’ ‘Even if they would be aware of something, they cannot say that in an interview.’” However, despite these rather damning statements, he affirmed in a LinkedIn post that, “I am not distancing myself from the conduct or results of the audit.”

U.S. Government & Human Rights Advocates Warn Audits May Not Be “Credible”

The controversy over conducting social audits in Xinjiang is not new. In 2020, social audit firms Bureau Veritas, TÜV SÜD, Sumerra, RINA, and  Worldwide Responsible Accredited Production (WRAP) stated that they would not conduct audits in the Region. This came in the aftermath of an advisory issued by the U.S. government concerning the risks of doing business in Xinjiang which stated:

Third-party audits alone may not be a credible source of information for indicators of labor abuses for the following reasons:  

• Auditors have reportedly been detained, harassed, threatened, or stopped at the airport. 

• Auditors may be required to use a government translator who conveys misinformation or does not speak in workers’ first language.  

• Auditor interviews with workers cannot be relied upon given the pervasive surveillance, and evidence of workers’ fear of sharing accurate information. 

Underscoring that last point, Scott Nova of the Worker Rights Consortium told the Wall Street Journal, “Telling the truth to an auditor would mean accusing the Chinese government of lying…No worker can be expected to take that risk.” Third-party audits have increasingly come under scrutiny for failing to detect forced labor and uncover human rights abuses even in the best of conditions. As Human Rights Watch notes, “…commercial dynamics make the scope of the audit, along with the choice of auditing firm, integrity of auditors, and their commitment to labor rights central to the credibility of the audit.” In the case of the Löning audit of Volkswagen’s facility, the integrity of all these factors are questionable. 

Critically Flawed: Löning’s Methodology Undermines Credibility of Findings

There are a number of concerning points in what we know so far about the audit Löning contracted to perform at the Volkswagen plant. Volkswagen’s “ESG Controversies” page states that, “Löning decided to apply the international standard SA8000 due to the requirements of the audit scope.” There’s just one problem. Neither Löning nor the unnamed Chinese lawyers who performed the audit are accredited to perform audits to SA8000 standards.  Markus Löning told the Financial Times “that SA8000 had been used as a “framework” for data collection and its audit was not a certification.” Yet the language of Volkswagen’s website certainly suggests that they are invoking the name SA8000 to denote that a certain standard was met.

Third-party standards such as SA8000 generally require some sort of training and accreditation process for an audit firm to ensure that the auditors are familiar with the standards, and to have some accountability over compliance claims that might be made. By bypassing such accreditation, Löning certainly suggests that the emphasis in their “practical and strategic advice” is more focused on helping businesses tick a check box than ensuring best practices for human rights. 

Furthermore, Volkswagen’s summary of the audit states that the findings were based on “on-site document reviews in Urumchi and interviews with the employees and management of the management of the audited company. The audit process also included a series of inspections of the plant, including the external areas.” This focus on on-site document reviews and interviews goes against the ILO’s guidelines for documenting forced labor, which are quite clear about the importance of interviewing workers in safe locations that are not the workplace. Even if interviews had been conducted off-site, it is highly unlikely any auditor could find a safe location to conduct the interviews in the Region. The human rights abuses occurring in the Uyghur Region are bolstered by a pervasive, technology-enabled system of surveillance, through extensive digital and personal surveillance systems. Uyghurs are monitored around the clock, even in private. Any audit occurring in the Region could not be conducted without being surveilled by the Chinese government.

These critical flaws undermine the credibility of any findings that Löning might issue. Nonetheless, this was the audit that Volkswagen pointed to–and continues to point to nearly three months later to show that they are fulfilling their human rights obligations.

Is there a Line Social Auditors Won’t Cross for a Fee?

The issues with Löning’s audit of Volkswagen’s Xinjiang plant and their questionable findings of no forced labor point to the larger and much-documented issues with the social auditing industry. It was egregious that Löning contracted to do an audit to SA8000 standards without accreditation. Yet even accredited audits to SA8000 standards have overlooked issues that lead to massive workplace tragedies, including the single deadliest factory fire in the history of modern garment production, which killed 289 workers at Ali Enterprises and injured hundreds more. The issue of subcontracting in auditing has been flagged as a risky practice for over a decade. Time and again, social audits have failed to uncover human rights abuses–with deadly consequences. Further, social audits are not designed to identify state-imposed forced labour. In short, audits fall woefully short of a company’s due diligence responsibilities in the best of cases–and even more so in the repressive environment of the Uyghur Region.

As Human Rights Watch has documented, at every step, price and business pressures drive auditors to satisfy customers and check off the boxes instead of pursuing a thorough fact-finding process. As one auditor told researchers, “we go as far as the brands want us to go,” prioritizing uninterrupted business as usual over workers’ human rights.

Are there truly no red lines for the social auditing industry? The Löning-Volkswagen case shows that there remain firms still willing to perform cursory audits to suit their clients’ business needs – not human rights responsibilities.

Bottom line: Audits are Not Credible in State-Sponsored Forced Labor Contexts

The UN Guiding Principles on Business and Human Rights establish that governments have a duty to protect human rights and that businesses have a responsibility to respect human rights. Given the widespread repression and surveillance in the Uyghur Region and the Chinese government’s forced labor programs, there is no way for a company to meaningfully fulfill their human rights due diligence responsibilities. There is no way to conduct interviews that would generate reliable information. No worker can speak candidly about forced labor or other human rights abuses without risking retaliation for themselves or their families from the Chinese government. Given the widespread restrictions and repression of fundamental freedoms and human rights defenders, there is no way to credibly go through the steps that would assure meaningful due diligence. Any firm that claims to provide such assurances is misrepresenting the reality that exists.

While this case has caused the most public scandal, audits have failed to identify Uyghur forced labor both in the Region and outside of the Region. Auditing firms Amfori BSCI, Sedex, and Social Accountability International (SAI) have recently faced allegations of failing to detect Uyghur forced labor in seafood supply chains. There is already a crisis of confidence in the social auditing industry as exposé after exposé uncovers the consequences for working people when commercial interests trump human rights.

It’s high time that social auditing firms show that there exist at least some firm lines that they will not cross for a fee. Doing audits in a context where state-sponsored forced labor is pervasive and crimes against humanity are being committed should be that line.