Last updated: Sept 2008
The people who work for SGS are social auditors, inspecting factories and forests for sweatshop labour and illegal logging. So, they’re the good guys, right? Yes and no, says Scott Clouder
Societé Générale de Surveillance (SGS) group is a Geneva-based quality assurance and testing firm that employs 50,000 people and has a network of over 1,000 offices and laboratories round the world. It specialises in inspection, outsourcing, risk management, testing, technical consultancy, training and certification. Like many companies that provide services as opposed to tangible products, its global reach goes largely unnoticed.
SGS and its subsidiaries provide many services to controversial industries such as nuclear power and animal testing. The company’s various operations also extend to Burma – the Burma Campaign UK includes it on its ‘dirty list’ of companies that operate there, stating that “SGS (Myanmar) Ltd... plays a key role in the facilitation of Burma’s international trading.”
SGS also works on ‘Pre-Shipment Inspections’ (PSI) - which are a sort of outsourced customs service. Its PSI work takes it to some corrupt countries where SGS has been tainted with the whiff of scandal. The company went through professional “embarrassment” in the 1990’s after it was caught paying kickbacks to Benazir Bhutto and family whilst she was president of Pakistan, in exchange for PSI contracts with that country. Bhutto and her husband were given suspended jail sentences, as was the Swiss lawyer who had arranged the complex laundering of SGS’s money into bank accounts in Panama and the British Virgin Islands.
Despite this, it is actually the company’s quality assurance and auditing sectors that deserve the most attention from ethical consumers. Unbeknownst to most of us, SGS seems to be failing to enforce the social and environmental standards behind some of the key certification labels that consumers trust.
FSC certification issues
The Forest Stewardship Council (FSC) certification scheme allows consumers to select wood and paper products that originate from sustainably managed forests. The FSC tree logo is recognisable on many mainstream branded products but, as Ethical Consumer discussed in issue 110, the FSC’s standards have come in for some strong criticism recently.
One aspect of this complex issue is that the FSC has to ensure that the auditing companies that certify forests and forestry operations as being FSC-friendly, are themselves audited. If companies like SGS can rubber stamp production sites and processes whilst knowing they do not comply with the standards, then the integrity of the whole certification scheme would be in doubt.
In 2007, SGS Qualifor had the contract to certify Uganda’s Mount Elgon National Park for FSC status. SGS’s team of four people assessed the entire 112,100 hectare National Park in just three days, and pronounced that it was “well managed”. Auditors Accreditation Services International (ASI), checked out SGS’s claims and found that the certification was based on ‘hoped for future improvements’, rather than anything that was actually occurring at the time.
Indigenous people evicted
Then, in February 2008, the managers of the National Park (the Uganda Wildlife Authority) evicted over 4,000 indigenous people of the Benet and Ndorobo communities from the park, contravening a Ugandan High Court ruling. Naturally, the FSC’s ‘Principles and Criteria’ for certification highlight “Respect of Human Rights with particular attention to indigenous peoples”.
SGS is due to inspect Mount Elgon again, and it remains to be seen as to whether it will pass after such obvious breaches of the standards. That was the fifth time that SGS has been caught out by ASI for substandard evaluations.
Problems with SGS forest certification
A 2006 ASI report on SGS Qualifor’s certification of a Polish forest made very serious criticisms. Problems included: downgrading of major non-compliance incidents to ‘minor’ ones, lack of qualifications of SGS staff, “inadequately developed and implemented SGS procedure”, and allowing “... continuing non-compliance of RDLP Bialystok [the Polish forest] with requirements.”
This July, a press release on the FSC website stated that; “following the results of recent accreditation audits by Accreditation Services International (ASI), SGS South Africa, an FSC-accredited certification body, has made a business decision to adopt an open-ended moratorium on the issuance of new FSC forest management certificates.” A business decision? It doesn’t take a detective (or a compliance auditor) to speculate that maybe the results of the Accreditation Services International audit had something to do with this.
The FSC did actually suspend SGS’s forestry certification activities for six months back in 1997 due to its certification of a logging operation in Gabon. Although this time the FSC could have gained more kudos for actually being seen to enforce the standards, the press office maintained that the SGS’s worldwide moratorium was entirely voluntary.
NGO criticisms of SGS
Greenpeace also feels that SGS could do better. In its January 2008 report on “Wood Products Legality Verification Systems – An Assessment”, the NGO rated SGS TLTV as ‘mediocre’ and SGS Russia as ‘inadequate’ in comparison with other companies’ verification systems.
Another NGO with reservations about SGS is Global Witness. It noted that SGS previously worked as the Cambodian government’s independent monitor of forest law enforcement from 2003 to 2005. Global Witness itself investigated allegations of violence, corruption and illegal logging at the Prey Long Forest for its ‘Cambodia’s Family Trees’ report, but was disappointed by SGS’s “steadfast refusal to acknowledge the corruption underpinning the illegal logging industry” there.
Global Witness was even more outraged by the company’s failure to report any of “the overwhelming evidence of massive illegal logging by relatives of [Cambodian Prime Minister] Hun Sen”, or even, the attempted shooting of a forest activist in the presence of an SGS inspector.
To some extent these stories show that the FSC’s system of checking its own auditors seems to be working. And although finding alternative auditors might be difficult in some parts of the world, there must be a point at which continued problems with a supplier begin to look systemic.
Clothing retailers rely increasingly on outsourcing the social auditing of the garment factories that create their products. Typically, companies spend something like 80% of their ethical trade budget on audits.
According to the Clean Clothes Campaign: “Tens of thousands of social audits are commissioned annually by hundreds of brand-name companies (“brands”) or retailers. A whole industry of commercial social auditors, self-assigned experts, and quasi-independent ethical enterprises has jumped on the social audit bandwagon.” Naturally, SGS is active in this area.
When a company outsources part of its operation, it gives away a little control. The associated economic risks and responsibilities are also dispensed with so, for most, it’s a small price to pay. However, that lack of control can have serious consequences.
One of the most extreme cases of abuses of factory workers culminated in April 2005 when the Spectrum Sweater factory in Bangladesh collapsed, burying hundreds of workers alive and killing 64. According to Clean Clothes Campaign, workers had attempted to raise the alarm about cruel and dangerous conditions before the incident, but to no avail. The factory had previously undergone at least one social audit (by Carrefour) and had undergone a “quality audit” reportedly carried out by SGS.
Social auditing - good and bad
When done properly, social auditing can be a force for good. According to the Ethical Trading Initiative (ETI) “findings showed that auditing has contributed to widespread improvements in health and safety, extending payment of the minimum wage and legally correct overtime premiums to more workers, and a reduction in working hours.” However, the ETI has also profiled “a number of common ways in which ethical trade auditing currently goes wrong.” First on this list was: Unreliability of third party commercial auditing companies”.
It is important to state that there are retailers that contract production audits in good faith that they are paying ‘the experts’ to use specialist skills to ensure compliance with various social and environmental standards. This approach has been praised in the past since using an independent auditing company shows a readiness to put assessment of its operations in the hands of a third party. It also demonstrates a confidence on the part of the retailer or brand that its house is in order.
Delve into this a little more philosophically though, and you may have a problem. Corporate social responsibility is not simply a process, (like sewing, or riveting, or growing) that can be easily quantified and compartmentalised. Yes, companies still need quantifiable targets to drive change - but those targets must embody the whole philosophy and spirit of responsibility, rather than exist as discrete tasks.
So the assessors looking for compliance to a code of conduct must have as much belief and understanding of it as the people who devised the code. If SGS is anything to go by, it looks like the ethical auditors who also do lots of other types of process verification, are least best placed to understand this.
2 Republic and canton of Geneva, Judicial Authority Investigation 30/07/03
3 World Rainforest Movement Bulletin, Issue 131, June 2008
4 ASI Forest Management Audit to Regional Directorate of State Forest in Białystok, Poland, 09 – 12 May 2006
5 FSC Press release 04/07/08, and email from FSC press office 08/07/08
6 WRM bulletin Issue 6, November 1997
7 Global Witness press releases 08/06/2007 and /07/2007
8 ETI Forum Report from ETI members’ meeting, 16/11/ 2006
9 Clean Clothes Campaign “Looking for a Quick Fix: How weak social auditing is keeping workers in sweatshops” 2005
11 ETI Forum Report from ETI members’ meeting, 16/11/ 2006
From Ethical Consumer issue 114, September/October 2008