Flawed audits

Like most multinationals that contract out manufacturing to factories in the developing world, Disney relies heavily on audits to ensure product quality and its image as a practitioner of "corporate social responsibility." In recent years, thousands of audit companies have sprung up to meet surging demand from multinationals. While many are reputable, there are also a large number of small firms built around a handful of qualified staff.

Li Qiang told China.org.cn he was concerned that Disney has not released the name of the companies that carried out previous, flawed audits of Yiu Wah that failed to uncover the use of child labor. "These audit companies will continue to allow other factories to get away with extreme violations," he said.

Zhang acknowledged that audits carried out by commercial companies are often not ideal. "The approach we take is different from the other commercialized companies," he said. "Verite is a non-profit organization unlike some companies who are just in it to make money." He added that some audit companies have close links with factories, with some even offering discount schemes akin to supermarket loyalty cards.

With only ten auditors in Shenzhen, Verite's resources are extremely limited. Its high quality audits are, at best, the second or third line of defense against poor conditions and they are often called in to deal with emergencies. Most standard audits of working conditions are carried out by commercial auditors. "Actually, we don't do a whole lot of audits," said Zhang, "We don't have enough people."

China Labor Watch, which aims to leverage multinational companies' corporate responsibility programs to improve working conditions on the ground, sees faulty audits as a major problem.

Li Qiang is outspoken on the issue. "The audit system is full of corruption in the forms of bribery and fraudulent 'consulting services' which allow factories to achieve satisfactory audits in spite of failing to meet standards. Workers in these factories are forced to work in sub-standard factories that are nevertheless certified as meeting standards."

(China.org.cn by John Sexton August 14, 2009)