Monitoring

What needs to be monitored?

What you monitor depends on the type of actions. If your actions are aimed at integrating due diligence, you will need to monitor different things compared to when you take actions to mitigate risks. International due diligence guidelines emphasize that monitoring should (1) rely on quantitative and qualitative indicators; and (2) build on feedback from internal and external stakeholders. In this chapter, we briefly discuss these two requirements.

What is the role of indicators?

Indicators can help you define targets, and track the impact of your actions. Different types of indicators exist. A first distinction is between quantitative and qualitative indicators. Quantitative indicators refer to a quantity or percentage, whereas qualitative indicators usually take the form of a narrative, textual description. A second distinction is between indicators measuring impact on the ground, and indicators aimed at tracking evolution in a process (e.g. a supplier dialogue or a risk analysis).

For large companies, the use of key performance indicators (KPIs) to monitor and demonstrate progress in sustainability efforts has become a sine qua non. While the use of indicators is less of an obligation for SMEs, there can still be good reasons to use them, either for monitoring purposes and/or because clients or investors ask for it.

While indicators certainly have their place in a monitoring approach, it is important to approach them critically. Particularly when dealing with complex phenomena like forced labour or freedom of association, indicators have obvious limitations. They reduce social reality to a set of easily measurable parameters, such as the number of accidents observed, or the number of complaints received. If you do decide to use indicators, it is important (1) to align them with the actions you take (notably the difference between impact-oriented and process-oriented indicators); and (2) to maintain a healthy balance between quantitative and qualitative indicators.

Your Excel file contains a number of examples of possible indicators (sheet 'Indicators'), as well as a number of additional resources that can help you identify relevant indicators (sheet 'Tools & Resources')

How do you collect feedback from external stakeholders?

In addition to ‘measuring’ impact, it is equally important to collect feedback on your due diligence efforts from external stakeholders, including business partners, civil society, etc. Collecting feedback can happen through an informal dialogue, but it can also happen through a more systematic approach. For instance, you can participate in public events, set up an annual meeting with key stakeholders to reflect on your due diligence processes, or gather feedback through participation in industry initiatives or MSIs.

How can you monitor progress on the ground?

Ultimately, the success of due diligence efforts depends on the extent to which risks are mitigated and adverse impacts are prevented. Yet monitoring progress on the ground is not easy because of attribution issues (the actions you take always interact with other processes) and because of practical and logistical challenges. For various reasons, these challenges are more outspoken in developing countries. While setting up systematic monitoring systems is challenging for large companies, it is even more difficult for SMEs. Nonetheless, it is important to at least familiarize yourself-, and where possible connect with, systems that can help you understand how your actions affect realities on the ground.

Audits

Audits are the standard operating procedure to verify if suppliers or production processes meet social and environmental standards. Increasingly, SMEs are asked by large clients to carry out an audit, either within their own company, or at (high-risk) suppliers. While you can conduct audits yourself, many companies will rely on the help of specialized auditors. Wherever an audit identifies an instance of non-compliance with a standard, remedial actions should be taken. Again, cooperation with suppliers should always take precedence over punishment.

There is growing criticism of audits (especially social audits), which are blamed for their failure to adequately capture realities on the ground, let alone to effectively improve the situation of workers. While auditing companies are trying to address this criticism, including by increasing the involvement of local stakeholders and by working to improve quality control, important structural deficiencies remain.

Despite these limitations, independent and high-quality auditing can still play a role in monitoring the situation at suppliers. Yet audits come with administrative and financial costs, which are difficult for SMEs to carry. Part of the solution lies in the growing number of industry and multi-stakeholder initiatives (see ‘Mitigating risk’) that provide joint audit protocols and lists of accredited auditors, but also maintain platforms for sharing audit results.

Worker-driven monitoring

In ‘mitigating risk’, we already touched upon worker-driven due diligence'. While worker-driven due diligence often involves audits, they also engage with the shortcomings of auditing systems. First, worker participation in the audit process is prioritized. Second, great care is given to confidentiality and employee safety (e.g. by organizing interviews in 'safe locations'). Third, more attention is paid to auditor training, and auditors must master the local language. Fourth, the cost for audits should be borne by the company that orders the audit, or should at least form the subject of contract negotiations.

Digital monitoring tools

A growing number of initiatives rely on digital technologies to increase supply chain transparency, to monitor the situation on the ground, and to manage, analyze, and share data about suppliers. Blockchain in particular is often presented as a ‘magic bullet’ because, at least in theory, it becomes possible to monitor products and the various actors involved in the production process in real-time.

The market for digital monitoring tools is in constant development. While the potential is obvious, the implementation of many of these mechanisms remains a work in progress. Moreover, critical questions need to be raised about the extent to which this type solution is accessible to SMEs. In addition, it will be important to pay attention to the involvement of affected stakeholders. The most interesting and most innovative mechanisms seek to combine worker-driven monitoring with digital applications.