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Before he began the interviews, Ahmed swept the room for cameras and recording devices. He then invited the workers in, one by one, spending about 10 minutes talking with each.
They were employed at a factory in the Middle East that supplied goods for a major American company – and it was Ahmed’s job, as an outside auditor, to uncover any labor abuses. Often, before he could even ask a question, the staff members hastened to assure him that they were happy with their jobs.
Their eagerness made him suspicious.
As Ahmed coaxed answers out of one worker, a security guard at the factory, a different picture emerged. He said he had worked 26 days straight, with long hours, no days off and no overtime pay. He was scared – if anyone found out he was talking honestly, he might lose his job. When Ahmed scrutinized the attendance and pay records the company provided him, he found they had been falsified, in part because security footage showed the man was truly enduring a grueling schedule. The names of all the workers were missing from attendance records, making it impossible to decipher whether hours and wages were fair.
Ahmed was upset but not surprised. He’s audited this same company more than 50 times across the region, and estimates that in at least 10 cases he found some form of labor abuse. They included signs of forced labor, such as confiscated passports so workers weren’t able to leave the country. He was rarely able to take action.
In this instance, he informed a manager at the factory that it had failed to comply with basic labor standards. In response, the manager told him to change the finding. The audit needed to find that the company was free of labor abuses, he said to Ahmed, otherwise it might lose business.
“I was very disappointed,” Ahmed says, adding that the factory did not invite him back for a follow-up assessment and that he suspects it hired a different, more compliant auditor.
US companies “use audits to pretend that they are protecting people but actually they’re just doing business and trying to minimize cost as much as they can”, according to Ahmed.
American and European firms with overseas operations have turned to auditing firms, like the one Ahmed works for, to investigate conditions at their factories and produce an assessment sometimes known as a social audit.
But insiders and observers say auditing companies are failing at their job, and are part of a broader system focused less on safeguarding workers than protecting companies – and their bottom lines – from costly public relations scandals.
Labor abuses persist in the global operations of many big companies, as an investigation published today by the Guardian US, the International Consortium of Investigative Journalists, NBC News and Arab Reporters for Investigative Journalism has revealed. In interviews with the reporting partnership, nearly 100 workers describe an array of unfair and repressive labor practices within the Persian Gulf footprints of Amazon, McDonald’s, Chuck E Cheese and the InterContinental Hotels Group.
Ahmed and another auditor interviewed for this story did not observe the abuses alleged by these 100 workers. In their work as auditors, however, they have witnessed what they say are similar human rights violations by other US companies and their suppliers. And they say they have little power to stop them.
“Since 2016 I’ve been scrutinizing the audit industry, and I’ve read about 80 social audit reports and I’ve not seen one that inspires confidence,” says Aruna Kashyap, associate director on corporate accountability at Human Rights Watch. “If I was working for a company and designing its due diligence I would be extremely worried if my company was relying on these types of audits as a monitoring tool.”
The Guardian is using pseudonyms for the auditors interviewed in this story, and is not naming their employers or clients, to protect them from professional consequences. We confirmed their identities in a professional auditing registry and validated details they shared about the auditing industry with experts.
While Ahmed says not all companies are as careless as the goods company – a handful take audits more seriously – he’s uncovered poor conditions at a variety of American companies’ footprints in the region. But there’s not much he can do about it.
“If I raise a forced labor case in a factory in the Middle East that’s working for American clients, I will find a lot of [pushback] from the client about this case, trying to minimize the severity of the finding,” says Ahmed, adding that while there are a small number of American companies that seem to respect audits, most “try to put the auditor under pressure to not raise such cases”.
Corporate efforts to combat forced labor, like auditing, “are failing because they are designed to fail”, says Genevieve LeBaron, a professor at Simon Fraser University in Canada and the author of Combatting Modern Slavery: Why Labour Governance Is Failing and What We Can Do About It.
Labor abuses aren’t just predictable, they’re lucrative, she says. “Corporations amass huge profit from depending on those business models in their supply chains.”
In response to the labor practices documented by the reporting partnership, a representative from McDonald’s said the workers’ accounts are “extremely troubling” and Amazon said in a statement that it was “deeply concerned” workers weren’t treated better. The InterContinental Hotels Group and the Chuck E Cheese brand’s parent, CEC Entertainment, both say they take fair treatment of workers seriously.
An opaque industry provides cover for corporations
The auditing industry emerged in the 1990s after a series of damaging revelations about American firms using sweatshop labor abroad. By 2020, it had reached an $80bn valuation. Dozens of firms perform hundreds of thousands of audits each year of labor, environmental and safety practices for many Fortune 500 companies and a host of smaller corporations.
But the industry has come under fire in recent years.
“A vast majority of the social audit industry is so opaque that it doesn’t build trust with workers and their representatives and the lack of transparency is also fertile ground for the worst malpractices to thrive unchecked,” says Kashyap.
After interviewing 20 former and current auditors and dozens of industry experts, Kashyap concluded that auditing companies often don’t operate independently or transparently, acting more frequently as a way for brands to burnish their image than to keep workers safe.
Kashyap found that pressures to save money – many international brands require suppliers to hire and pay for audits themselves – contributed to rushed assessments. Interviews with workers usually occur at their workplace, sometimes within earshot of management, she found. Even if audits were more diligent, Kashyap says, there is little legal requirement for companies to act on their findings.
“It’s a report that’s dropped into a corporate blackhole and no one knows what’s in it or how these reports improve workers’ lives,” she says.
A 2021 analysis of more than 40,000 social audit reports across multiple countries by Sarosh Kuruvilla, a professor at Cornell University, found that almost a third of audits were falsified, with data about working hours and pay either partly or entirely falsified.
Kuruvilla’s research even showed the rise of a parallel cottage industry that advises factories on gaming the audit system. Coaching companies in China guaranteed a “100% pass” if suppliers used their services, he found. They offered workers training on how to reply to auditors, and advised keeping two sets of record books, one with actual information about things like overtime and wages, and another with false data purged of records of underage workers or low wages.
The real books, the consultants advised, should be sealed in boxes in workplace locations where auditors wouldn’t go. The consultancies also boast about software that falsifies data – with one advertising that “one month’s audit data of a factory that has more than one thousand people can be generated in just thirty minutes”.
“It is surprising that the audit consulting industry is so open about offering these services,” Kuruvilla writes. “It seems impossible that global buyers that use local auditors would not also be aware of these services and the sophistication these [consultants] have when it comes to falsifying audit information and managing the audit process.”
Some auditors themselves feel trapped in an ineffective system.
“Ultimately everybody wants money in the industry; nobody is working for the sake of betterment of workers – that is all bullshit. Everybody is here to make money,” says Arjun, an auditor who has worked in India for 15 years assessing companies exporting goods to the United States and Europe.
Auditors like himself are often overworked and underpaid, he says, and unable to do much when they suspect working conditions aren’t what they seem.
Arjun says US firms are profiting from an unreliable audit system and the mistreatment of workers within their supply chains.
“US buyers focus more on pricing and money,” he says. “They are never really bothered about what is going on in the industry; they just want a showcase report to be published on their website. They are not really interested in resolving the problems.”
Recent research by Human Rights Watch has criticized two of the most well-known audit companies, Amfori and Sedex, for their lack of transparency, including a failure to make public the results, company names, locations or dates of audits.
A Sedex spokesperson did not provide data on the overall number of problems discovered by its auditors at overseas factories, though they pointed to case studies on the company’s website. And they said that more than 1,500 worksites in the US resolved more than 8,500 issues identified in its audits.
The Sedex spokesperson said that while the company makes recommendations to the firms it audits, it does not “set requirements or have regulatory powers”.
“While we encourage buyer members to follow best practice and take effective action, we do not assess members on whether they do this or have visibility of their due diligence activities outside of our solutions,” the spokesperson said.
Amfori did not respond to requests for comment.
Toothless US regulations
The weaknesses of the auditing industry are important because legal protections for many overseas workers are scant, experts say.
While there is limited regulation of what US companies make abroad if those products are also sold within the US, there is even less recourse for products that are manufactured abroad and sold abroad. An American company could potentially be criminally liable for trafficking overseas under the Trafficking Victims Protection Act of 2000 and its ensuing reauthorizations, but human rights advocates have struggled to use it to protect workers or punish companies.
One of the key laws aimed at addressing abuses in American companies’ overseas operations is California’s 2010 Transparency in Supply Chains Act. Any retailer or manufacturer that does business in California, and has worldwide gross receipts of over $100m, is subject to it. Similar laws have been passed in the United Kingdom, Australia, France and other countries around the world.
The act mandates that companies must publicly outline their efforts to stop trafficking, including whether they are performing audits of their suppliers.
Yet detractors have noted that the law was watered down, after it faced stiff opposition from industry groups when it was being crafted. It focuses less on stopping companies from using forced labor than on publicly declaring their efforts to do so. The law does not criminalize or create civil liability for companies that use forced labor.
“The law only requires that covered businesses make the required disclosures – even if they do little or nothing at all to safeguard their supply chains,” a guidance from California’s attorney general’s office, helmed by Kamala Harris at the time, stated.
Other attempts to regulate the overseas operations of US companies have too many loopholes and weaknesses, many labor trafficking experts say.
“It is scandalous how much power has been afforded to multinational corporations, American brands, to dictate the terms of their own complicity because they have lawyers to say they checked all the boxes and are human trafficking compliant,” says Elena Shih, an assistant professor at Brown University and the author of Manufacturing Freedom: Sex Work, Anti-Trafficking Rehab, and the Racial Wages of Rescue.
A new European Union proposal appears to have more teeth. The Corporate Sustainability Due Diligence Directive requires companies to identify risks of human rights abuses in their supply chains – including large American companies that do business in Europe. Unlike most of its predecessors, however, the directive subjects companies found in violation to sanctions such as fines. And crucially, victims of labor abuses can seek compensation.
Labor experts say the success of this directive will hinge on its being paired with robust enforcement mechanisms, as well as stronger protections for unions, as opposed to practices like auditing.
For Arjun and Ahmed, continuing to do this work takes a mental and physical toll they’re not sure they can endure permanently. Arjun struggles, however, to know what he’d do otherwise. Most of his job experience is in auditing.
Ahmed says he feels a responsibility to document the reality of conditions in the factories he audits, even in the face of companies that are indifferent to the results.
“It’s very stressful – I try to push as much as I can to figure out the welfare of the people during the audit time,” says Ahmed. “I’m trying to use the limited tools I have to improve people’s lives.”
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