Supply Chain Due Diligence Audits

Prevent incidents, monitor compliance and drive improvement

Leveraging our global pool of expert auditors, we help customers prevent, identify and remediate human rights issues and environmental impacts throughout the supply chain, thereby contributing to robust supply chain due diligence and reducing risk.

Ensure compliance with human rights and environmental due diligence regulations around the globe

Reduce risk by leveraging robust and credible third-party support

Develop supplier capability and improve ESG performance along the supply chain

Align your supplier audit methodology with national and international due diligence regulation

Regulatory Requirements: Supplier Audits in Context

Around the globe, legislative changes and increasing regulatory scrutiny are forcing companies to assume responsibility for human rights and environmental impacts along their supply chains. It started small and slow, with the California Transparency Act in 2010, picked up speed with the Modern Slavery Act (UK, 2015; Australia, 2018) and the Duty of Vigilance Law (France, 2017), and really kicked in in the early 2020s, with (additional) regulation in Germany, Norway, New Zealand, Switzerland, Mexico, Canada, the US, and the upcoming European Union Corporate Sustainability Due Diligence Directive.

While there are significant differences between the various initiatives, there is growing pressure on companies to install a proactive system to ensure compliance with human rights standards and environmental standards throughout the supply chain, in order to avoid penalties, reputational damage, and having products taken off the market.

Many legal initiatives and authorities explicitly or implicitly acknowledge the value of standards and audits in fulfilling due diligence obligations, creating a need for audit programs that are aligned with the human rights and environmental conventions protected by law.

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Integrating Supplier Audits into a robust Supply Chain Due Diligence Process

As per the OECD Due Diligence Guidelines, companies should carry out periodic assessments of business relationships, to verify that risk mitigation measures are being pursued or to validate that adverse impacts have actually been prevented or mitigated. Audits of suppliers and business partners are an instrument to monitor and measure compliance with the applicable codes of conduct and/or standards.

With the right accompanying measures, supplier audits can also contribute to the prevention of human rights violations and adverse environmental impacts. This is particularly the case when the audit standard prescribes preventive measures suppliers should take.

Lastly, supplier audits also contribute to the correction of adverse impacts. If an auditor finds that a site does not meet certain requirements of the audit standard, this is called a non-compliance (sometimes also called issue, deviation or non-conformity). This triggers a Corrective Action & Preventive Action (CAPA) workflow. For each non-compliance, sites will be required to analyze the root cause of the issue, and to define actions to fix the immediate issue (corrective action) as well to avoid reoccurrence of the issue (preventive action).

Once the site has defined the corrective and preventive actions within an established timeframe, the auditor will review evidence to confirm that the actions are appropriate, and close the CAPA process.

Thus, a robust audit looks beyond a snapshot of compliance and establishes whether a site has taken appropriate measures to reduce the likelihood of adverse impacts on human rights and the environment. In case the site does not comply with the relevant requirements, the process for implementing and verifying corrective and preventive actions commences.

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DQS approach

No need to reinvent the wheel: DQS has a tried and tested supplier due diligence audit checklist ready to go.

At the start of each project, we review these audit criteria together with the client to ensure full alignment with the ESG strategy, industry sector profile, supplier code of conduct, risk assessment approach and regulatory requirements. The result is a checklist that is 100 % aligned with the due diligence objectives of the client.

Aligned with international standards, including but not limited to SA 8000 and the ETI Base Code
Covers all supply chain due diligence topics referenced in national and international regulation on supply chain due diligence / human rights due diligence, including but not limited to the German Supply Chain Act (LkSG), the EU Corporate Sustainability Due Diligence Directive (CS3D), the Transparency in Supply Chains Act, …
Three-pillar approach: Prevention – Compliance – Development
Covers business ethics & governance, occupational health & safety, environment, human rights & labor relations
Scoring system for benchmarking purposes
Focus on improvement rather than pass-or-fail

Regular Audits and Investigative Audits

DQS provides two main types of supplier due diligence audits:

Regular audits: These audits cover all relevant areas, such as business ethics and governance, human rights and labor conditions, environmental aspects, and supply chain management. Typically, they are scheduled more than one month in advance and are a regular instrument to measure compliance with the applicable code of conduct and/or standard.
Investigative audits: This is a supplier audit triggered by a particular incident, report or complaint. The audit may cover all topics or consist of a deep dive into the specific issue and the underlying causes. Investigative audits can be planned on short notice, as an urgent response to the issue at hand.

Supplier Due Diligence Audit Process

In the first step, we want to learn about your company, your ESG strategy, procurement policies, supplier code of conduct and the applicable due diligence requirements. Once the objectives, responsibilities and deliverables of the supplier audit program have been defined, you will receive a comprehensive proposal, tailored to your individual needs.

Supplier audits should be prioritized based on risk. If supplier self assessment questionnaires or risk ratings are available, we encourage our clients to share them with the auditor, to maximize efficiency and use the time on-site as effectively as possible. The auditor contacts the auditee to establish the audit agenda.

Depending on the project and client preference, audits can be conducted announced, semi-announced or unannounced. The audit will consist of a site visit, document review and interviews with management and workers. As the confidentiality of the worker interviews must be guaranteed, audits typically take place on-site. In specific situations, remote audits may be an alternative.

All findings are documented in a comprehensive report, which is made available to the auditee and the client. The report includes a scoring system for benchmarking purposes.

If auditors detect significant issues, auditees will be required to analyze the root cause of the issue, and to define actions to fix the immediate issue (corrective action) as well to avoid reoccurrence of the issue (preventive action). The auditor verifies through a document review or a follow-up audit that the proposed actions are appropriate.

What is the cost of a supplier due diligence audit?

The cost of an audit is determined by various factors, the most important of which is the audit duration. The audit duration is typically determined by the size and complexity of the facility. We invite you to request a tailor-made quotation, so that you know exactly what to expect.

DQS – Your Audit Partner for effective Supply Chain Due Diligence

As an experienced monitoring body, DQS is uniquely positioned with its comprehensive technical, regulatory and industry expertise. This is what you can expect from us:

Local auditors familiar with the language, culture and industry of the audited site
One central point of contact
Partnerlike mindset to drive improvements and add value for buyers and suppliers
Technical expertise on human rights, OHS, environmental matters and compliance to provide actionable data

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Your contact Carolin Nguyen

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