Social compliance

Social compliance refers to the steps and measures a business takes to protect the health, safety and fair treatment of its workers in the supply chain. It also involves environmental issues and social responsibility.

What is social compliance?

Social compliance has become a key element of corporate social responsibility. It is an ongoing process in which companies commit to implementing policies and procedures that protect the rights of their workers, and of the community in which they operate.

Social compliance extends beyond a company’s own domain, encompassing also the safety and fair treatment of workers in their supply and distribution chain.

The principles of social compliance exist to ensure ethical working practices are adhered to across industries. They amount to a dozen compliance guidelines on social compliance and responsibility that define fair labor rights, freedom of employment, safety from discrimination, and more. It may also address issues about the use of certain minerals, human rights and environmental sustainability.

Examples of social compliance

The term “social compliance” encompasses an umbrella of social and ethical standards that exist to ensure that companies pay fair wages and meet the benchmark standard of labor rights, and that their products are made under ethical conditions.

This may include:

Providing fair and secure working conditions for employees
Providing a safe working environment
Using materials and production processes that do not pollute the environment
Adhering to existing labor laws
Conducting mandatory due diligence to identify minerals sourced from conflict regions (conflict minerals compliance)
Paying fair wages
Avoiding child labor

Social compliance audits

The number of corporations and brands operating in different parts of the globe is greater than ever before. With hundreds of factories and commercial product suppliers spread out across multiple continents, it can be difficult for companies to monitor their supply chains and make sure that each and every supplier complies with social and ethical standards.

This is where social compliance auditing plays an important role.

Companies have a code of conduct that suppliers and distributors must adhere to. Auditors verify that the standards are being upheld through social compliance audits. These audits provide a third-party assessment of whether a factory adheres to certain rules and regulations, as well as local laws.

A social audit (or ethical audit) reinforces the oversight that a brand has of their supply chain, making sure company-established requirements are followed with regards to local work, health, and safety laws.

The SA8000 audit is one of the most common social compliance audits. It follows the criteria established by the Social Accountability International organization (SAI) and includes specific standards regarding health and safety, discrimination, the prevention of child labor and fair wages. Another social compliance audit model is the Ethical Trading Initiative (ETI), which includes similar principles to protect workers’ rights.

The ETI Base Code audit assesses a company’s adherence to these principles and its efforts to improve labor practices and social conditions in global supply chains.

Even though it's not an audit, we believe it's important to mention the CSRD here which has been a go-to place for companies seeking social or any other kinds of compliance.

Social compliance and social responsibility

The terms social compliance and social responsibility are often used interchangeably, though they are not the same. Social compliance refers to a set of policies and procedures that a company has established to ensure compliance with existing labor laws and regulations.

Social responsibility, on the other hand, is a more overarching term that relates to the moral obligation that companies have to protect the environment.

Social compliance and the ILO

Many companies have adopted the labor standards determined by the United Nations International Labor Organization (ILO). The ILO has a mandate rooted in defending the rights of workers. It focuses on social justice, promotes decent working conditions for men and women, and aids companies in establishing sustainable business models.

Some of the principles set forth by the ILO include:

Promoting freedom of association
Eliminating forced labor and child labor
Ensuring non-discrimination in the workplace
Upholding fair and equal remuneration for work of equal value.
Advocating for safe and healthy working environments
Recognizing workers’ rights to voice their concerns and participate in decision-making processes.

Why social compliance is important

Protecting the rights, health, and safety of workers has become a dominant concern worldwide, and a growing number of companies are taking steps to align with global efforts.

Consumers are becoming more aware of unethical conducts of businesses, retailers and manufacturers. They no longer focus solely on the price and quality of a product, but on the compliance of the company behind the product.

At its core, social compliance is about good business practice. Adopting a socially responsible approach creates trust among consumers who typically choose socially responsible brands over companies where evidence of abuse or mistreatment have been reported. This has a direct positive impact on a company’s bottom line.

The benefits of social compliance

Social compliance brings significant benefits to businesses and the communities in which they operate. Some of these benefits are:

It can help businesses build positive relationships with suppliers and stakeholders.
It helps to protect the company and its employees from legal risks and negative publicity.
It helps businesses create a more sustainable business model and be more successful in the long term.
When companies commit to social and ethical standards, they generate a higher level of trust with customers.

How to implement social compliance

There are a number of steps to take in order to ensure that a business is socially compliant:

One of the first steps is to create a social compliance code of conduct that includes clear guidelines on labor standards, fair wages, non-discrimination, health and safety measures, environmental protection, and responsible sourcing.
Key to any social compliance policy is to train employees on the procedures held within the company’s code of conduct to ensure effective implementation.
Regular monitoring of company compliance with the established policies is key. An important part of this is to incorporate mechanisms for regular internal audits with independent third-party auditors.