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Global Sourcing Spotlight: Supplier Audits—Ensuring Compliance in Global Sourcing

Global sourcing offers companies significant advantages—lower costs, access to specialized skills, and extended market reach. But those benefits come with critical responsibilities. Ensuring that suppliers meet legal, ethical, and environmental standards is no longer optional. It is a core business necessity. This is where supplier audits play a pivotal role.

Supplier audits are systematic evaluations of suppliers’ operations, processes, and compliance practices. Done well, they protect brand reputation, reduce supply chain risks, and ensure alignment with developing consumer and regulatory expectations. 

Key Areas of Focus in Supplier Audits
A thorough supplier audit examines several key domains to assess risk, compliance, and alignment with business values. These typically include:

• Operational capabilities: Can the supplier’s processes meet quality, quantity, and delivery expectations consistently?
• Quality management systems: Does the supplier follow ISO 9001 or equivalent standards for quality control and documentation?
• Financial health: Is the supplier solvent and capable of sustaining operations long term?
• Workplace safety: Are facilities safe, with proper emergency protocols, training, and equipment in place?
• Environmental practices: How does the supplier manage waste, emissions, and energy use?
• Labor conditions: Are workers treated fairly, legally employed, and adequately compensated?

These categories help organizations build a full picture of the supplier's reliability and integrity, not just its output.

Understanding Social Compliance Standards
Social compliance is how a supplier aligns with labor laws, human rights standards, and ethical working conditions. Increasingly, global buyers require suppliers to meet or exceed international standards such as:

• SA8000 (Social Accountability International): Addresses child labor, forced labor, health and safety, and collective bargaining.
• ETI Base Code (Ethical Trading Initiative): Based on International Labour Organization (ILO) conventions.
• Local labor regulations: These vary by country, but all parties involved must understand and respect them. 

Social compliance is not just about avoiding scandals; it’s about building long-term partnerships rooted in mutual respect, dignity, and shared values.

Environmental Regulations and Sustainability Goals

Environmental compliance is driven by government regulations and consumer expectations for sustainable sourcing. Companies are increasingly asking suppliers to:

• Demonstrate proper waste disposal practices
• Track carbon emissions and energy use
• Use environmentally friendly raw materials and manufacturing processes
• Avoid banned substances (e.g., under REACH or RoHS directives)
• Support circular economy initiatives, like recycling and product take-back programs

A supplier’s commitment to environmental responsibility reflects on the buying company and directly affects its ESG (Environmental, Social, and Governance) profile.

Evaluating Supplier Labor Practices
Auditors look for compliance with national labor laws and international standards in areas such as:

• Working hours and overtime pay
• Minimum wage compliance
• Occupational safety and health
• Freedom of association
• Prevention of discrimination and harassment

Forced labor, child labor, or unsafe working conditions can damage a brand and carry legal consequences in many jurisdictions, particularly under legislation such as the U.S. Uyghur Forced Labor Prevention Act or the UK Modern Slavery Act.

Conducting Surprise vs. Scheduled Audits
Each approach serves different purposes:

• Scheduled audits give suppliers time to prepare documentation, organize personnel, and present their best face. This can foster transparency and collaboration but may obscure ongoing issues.
• Surprise audits reveal the day-to-day reality. They’re particularly valuable when teams have already flagged concerns or when the risk of non-compliance is high.
• A blended strategy often works best by establishing routine, scheduled audits to build relationships and trust, while reserving the option of unannounced visits to verify consistency and uncover hidden issues.

Leveraging Third-Party Audit Services
Not every company has the in-house capacity or expertise to conduct global audits, especially across diverse legal, linguistic, and cultural landscapes. Reputable organizations such as SGS, Bureau Veritas, Intertek, and TÜV offer:

• Global networks of trained auditors familiar with local regulations
• Standardized reporting aligned with international frameworks
• Impartial assessments that reduce internal bias or conflicts of interest
• Access to audit databases that track supplier history and risk profiles

Third-party audits can offer credibility and consistency, and are particularly valuable when reporting to regulators, customers, or investors.

Corrective Action Plans for Non-Compliance
Finding a problem is only half the job. Effective audits include follow-up and accountability through Corrective Action Plans (CAPs), which outline:

• Specific issues identified
• Actions required to resolve them
• Timelines for implementation
• Verification procedures to confirm closure

CAPs should be collaborative rather than punitive. The goal is continuous improvement, not immediate perfection. That said, repeated or willful non-compliance may warrant escalation, including the suspension or termination of supplier contracts. Companies that provide support, such as training, tools, or process recommendations during CAP implementation, often build stronger, more loyal supplier relationships in the long run.

Audits as a Strategic Advantage
When taking advantage of global sourcing, transparency is currency, and there is an expectation of accountability. Supplier audits are no longer just a checkbox exercise; they’re a strategic tool. When done proactively and thoroughly, audits protect the supply chain from risk, build brand trust, and drive long-term value for all parties involved. More importantly, they affirm a company’s commitment to ethical global business practices. In a competitive landscape, that commitment is a powerful differentiator.

The message is simple: don’t just know your suppliers. Know how they operate, treat people, and affect the world around them. Your audit process is your lens into that reality. Make it sharp, meaningful, and consistent.

Bob Duke is president of the Global Sourcing Division at American Standard Circuits.