From compliance to impact: a call to measure what matters

Our world is changing. We’ve seen the rise in ethical demands soar within the last decade. Governments are now regulating corporate activity at home and abroad. The more conscious consumer is demanding more from brands to evidence social impact. And brands are beginning to use a language of partnership rather than policing to describe the journey they are taking towards ethical supply chains. 

But the havoc wreaked by the novel coronavirus around the world is adding more pertinence to this issue.

The disruption it has left in its wake is causing many to challenge the way we consume, live in community and do business in our global economy. From mocking our personal liberties, to dismantling our fragile social structures, COVID-19 seems to have exposed the insular institutions we’ve built, thus compelling us to envision alternative systems that will centre people and their welfare at the core. 

When it comes to business, we have already seen this shift take root over the years. Many brands and their sustainability teams want to make inclusion and blended value a core part of their business models. Responsible sourcing teams want to make the business model work for workers. Many are capturing data in their supply chains and are eager to talk about impact. Everyone seems to agree that the biggest opportunity for inclusion and impact lies in the supply chain.

But what does that impact look like? And how can we build and measure it over time?

From social compliance to social impact

A brand’s social impact is seen in the measurable progress it's having on a particular social issue. Such issues could be forced labour related, gender inequality, or poverty.

A social impact strategy introduces multi-dimensional improvements within the supply chain, showing steady progress in issues such as creating a transparent responsible recruitment process that reduces the likelihood of human trafficking, or tackling gender imbalances in pay and treatment in the workplace.

As such, social impact is radically different from social compliance. The goal of social compliance is to assure compliance with regulations and legal frameworks.

Compliance typically relates to a pass-fail status - a snapshot assessment of whether a site and business are meeting all the necessary criterion to achieve a “pass”. As such, looking through a social compliance lens alone often limits the capacity to appreciate improvement as a process with multiple steps and iterations.

Further, risk and avoiding risk by checking compliance, as we discussed in our previous blog, lacks a clear relation to impact. Worse, because risk is focused on avoidance, it can compel brands to exit a business partnership with a supplier when social issues are uncovered.

Reducing reputational risk is normally the easier option, compared with engaging with the supplier to make the improvements necessary to actually positively impact the social issue. Hence social compliance with the risk language that accompanies it, is not where impact lies.

The tools often relied upon to measure and build impact were never really about impact.

We applaud the enthusiasm of brands desiring to transition from a risk-focused approach towards a more social impact orientation. The problem remains though, that the tools often relied upon to measure and build impact were never really about impact. They were designed for social compliance. And these tools only show half of the picture. 

Let’s take the case of child labour to illustrate. Imagine a brand with a zero tolerance policy on child labour. If an auditor or brand representative discovers a child working at the factory, they might respond by implementing their zero tolerance child labour policy- cutting ties with the supplier and pulling their product off the production line.

This response protects the brand reputation and may avoid scandal. In that way, the brand is able to claim a strong stance against child labour and demonstrate measures taken to prevent child labour in its supply sites. But what of the impact on the child?

The reality is: the child is often worse off after being discovered than she or he was before. With no child labour remediation policy in place, there is no accountability for improving the situation of the child. The child could be fired and forced to find an alternative means of income, which is usually worse than the factory that was at least being audited.

So it's clear that merely reporting on an issue is not what offers insight into social impact. A brand needs to demonstrate the current state of a social issue together with the action taken to prevent it, and have a means of monitoring improvement over time, in order to achieve the intended impact.

There must be accountability throughout the process in order for measured improvement to occur, along with a realistic dialogue about the costs, cultural barriers and lack of technical understanding that might block a steady path of improvement to achieve meaningful social impact. 

Measuring social impact

If we can assume that we all want to pursue social impact along supply chains, then what tools are needed to measure such?

First, setting clear priorities for what gets measured and why it should get measured, is essential. Having a baseline understanding of the current status of certain issues can be a great place to start. This is where audit data and status monitoring fits in, a practice some brands are already engaging in.

Say you want to know whether workers can freely move around and leave the workplace, or you want to inquire about general health and safety, along with the codes of conduct and policies in place to ensure safety within the site. Such investigation will give you metrics that reflect static data - data that is time-stamped and simply describes the status of health and safety, for example, as of today. This is typical of social compliance tools.

Reporting on the action a brand and supplier have taken … and being able to demonstrate the effectiveness of these actions - now that is social impact

Such data is useful because it provides a baseline to track the second set of metrics which is more related to growing impact: the result of efforts and actions of the brands and their suppliers as they work to address issues and make improvements. The first type of metric is static and measures status, the second is dynamic and measures actions. We need both when it comes to measuring impact. 

Let’s return to the child labour example. If brands want to report on their social impact on child labour, reporting on a zero tolerance policy and monitoring factories for child labor is not enough. Brands also have to report on their remediation policy: how effective was the remedial action taken once child labour was found? Was the safety of the child prioritised? How was the supplier held accountable?

Merely reporting on the presence of child labour in the supply chain is a social compliance measurement. Reporting on the action a brand and supplier have taken to reduce child labour, and being able to demonstrate the effectiveness of these actions - now that is social impact.

Outcome over output

This is where Direct Worker Reporting or worker voice fits in.

We can’t measure the efforts taken to improve working conditions and worker wellbeing without hearing from the workers themselves.

Workers provide valuable insights every step of the way. Their input constitutes the starting point: where lies the largest opportunity for improvement, according to workers themselves? Or, how do workers experience the particular social issue a brand wants to improve? 

Next, workers’ feedback helps to measure the effectiveness of any actions undertaken. Is the situation for the worker improving or deteriorating? If so, why? 

Finally and ideally, an open channel between workers and management is established. Listening to workers in measuring and making improvements is routinely made a core part of the operational management system for tracking social impact, with workers contributing to workplace solutions, ideas and suggestions.

The key to social impact is to see whether your actions, your outputs, are delivering results: your outcomes on workers

At &Wider, we are actively monitoring changing working conditions, and are in the process of gathering data from suppliers. We want suppliers to tell us what actions they have put in place in their sites, which have contributed to better progress.

Our intention is to capture more multi-dimensional data around what suppliers are actually doing, so that we can track these changes over time. We believe status data direct from workers and action-related data direct from suppliers offers a more comprehensive picture of changing working conditions, and the interventions that help to explain the change. 

In the past, brands have often reported what they do (outputs), and not necessarily what they achieve (outcomes). The key to social impact is to see whether your actions, your outputs, are delivering results: your outcomes on workers’ working lives. This provides a truly exciting and complimentary set of metrics to not only measure impact, but also build more impact over time. Now these are the stories worth telling.

Social impact: the new normal

This is an extraordinary time of immense global change. It’s critical that we use this as an opportunity to build resilience in our global value chains and think through various types of business models which will allow us to centre the wellbeing of workers, transitioning from mere compliance to a more authentic commitment to impact.

Once COVID-19 has passed and routine operations can resume, one thing is clear: it cannot return to business as usual.

The impact of seeing countries and corporations brought to their knees by the virus must challenge us to forge new ways of doing business. From procurement and sourcing practises, to building reciprocal relationships with suppliers, and engaging with workers directly and in a meaningful way, we need to retool the way we do business if we are to truly transform supply chains in the years to come.

Ensuring we generate the best possible data direct from workers, and direct from their employers - data that reflects both change and the efforts invested - will help us rebuild supply chains to be stronger than they were pre-Covid.

Now that impact is impact worth chasing.