3.1 Supply chain sustainability audit

A supply chain sustainability audit is a systematic, independent and documented examination of an organisation's supply chain, or of a supplier, to determine whether environmental, social, economic and governance requirements are being met and how well sustainability is being managed. The audit compares what is actually happening, shown by records, observations and interviews, with audit criteria such as the organisation's sustainability policy, the supplier code of conduct, contract requirements, laws and recognised standards.

Audits may be carried out by the organisation's own staff on itself or on its suppliers, or by an independent third party. Example: a food manufacturer audits the packaging supplier that prints and forms its cartons, checking its handling of inks and solvents, waste disposal, working hours, safety equipment and records of recycled content claimed in its offer. ISO 19011, the international guidance on auditing management systems, sets out audit principles such as integrity, fair presentation, due professional care, confidentiality, independence and an evidence-based approach, which apply equally to sustainability audits.

3.1.1 Purpose of sustainability audit

The purpose of a sustainability audit is to give management reliable, evidence-based information on how the supply chain is performing against sustainability requirements, so that risks are controlled and improvements are made. An audit replaces assumptions and supplier promises with verified facts.

• Verify compliance: confirm that the organisation and its suppliers comply with laws, the sustainability policy, the supplier code of conduct and contract terms.
• Identify risks: reveal environmental, labour, health and safety, ethical and supply continuity risks before they cause harm or disruption.
• Assess performance: measure progress against sustainability objectives, targets and indicators.
• Validate supplier claims: check that certificates, declarations and data supplied during tendering are true and current.
• Identify improvement opportunities: find ways to reduce waste, energy use, costs and social risks.
• Support decisions: provide evidence for supplier selection, development, continuation or termination.
• Provide assurance to stakeholders: give management, customers, financiers and regulators confidence in the organisation's sustainability claims and reports.

3.1.2 Scope of sustainability audit

The scope of the audit defines its extent and boundaries: what will be audited, where, over what period and against which criteria. A clear scope keeps the audit manageable, prevents disputes with the auditee about what the auditors may examine and makes clear what the conclusions cover.

Elements of the audit scope

• Organisational and physical boundaries: the sites, departments, warehouses, suppliers or sub-suppliers included, for example "the supplier's main production site and its finished goods store".
• Supply chain stages: sourcing of raw materials, production, packaging, storage, transport, distribution and disposal, or a selection of these.
• Sustainability issues: the topics to be examined, such as energy and emissions, water, waste, chemicals, labour conditions, health and safety, business ethics and community impacts.
• Audit criteria: the requirements against which evidence will be compared, for example the supplier code of conduct, contract clauses, applicable laws, ISO 14001 or SA8000.
• Time period: the period whose records and performance will be examined, for example the last 12 months.
• Products or contracts: the goods, services or contracts covered.
• Exclusions: areas deliberately left out, with reasons, so that readers of the report do not assume they were examined.

3.1.3 Types of supply chain sustainability audits

Sustainability audits are classified by who carries them out and by what they examine. The type chosen depends on the purpose, the level of risk and the resources available. Example: a retailer may use a desk-based self-assessment for low-risk suppliers and an on-site third-party audit for high-risk apparel factories.

By who carries out the audit

• First-party (internal) audit: carried out by the organisation on its own operations, for example its warehouses and transport fleet, by trained staff who are independent of the area audited.
• Second-party (supplier) audit: carried out by the buying organisation, or someone on its behalf, on its suppliers, to check that they meet its requirements.
• Third-party (independent) audit: carried out by an independent audit or certification body, for example for ISO 14001 certification or an SA8000 audit, giving the most impartial assurance.

By the subject of the audit

• Environmental audit: examines energy, emissions, water, waste, chemicals, pollution control and environmental permits.
• Social or ethical audit: examines labour standards, wages and hours, child and forced labour, health and safety, and worker welfare. SMETA (Sedex Members Ethical Trade Audit) is one widely used ethical audit methodology.
• Compliance audit: checks compliance with specific laws, permits, contract terms or the supplier code of conduct.
• Management system audit: checks whether a supplier's environmental, health and safety or energy management system works as designed.
• Performance audit: examines results against sustainability indicators and targets.
• Follow-up audit: checks that corrective actions from an earlier audit have been completed.

By method

• Desk or document-based audit: review of documents and data without a site visit.
• On-site audit: a visit to the premises to observe conditions, inspect records and interview workers.
• Announced, semi-announced and unannounced audits: differing in how much notice the auditee receives; unannounced audits give a more realistic picture of normal conditions.
• Remote audit: carried out through video calls, shared documents and live camera tours where travel is not practical.

3.1.4 Contents of sustainability audit plan

The sustainability audit plan is the document that describes the arrangements for a specific audit. It is prepared by the lead auditor, agreed with the auditee before the audit and used to guide the audit team. A good plan tells everyone what will happen, when and who is responsible.

• Audit objectives: what the audit aims to establish.
• Audit scope: the sites, activities, issues and period covered.
• Audit criteria: the policy, code of conduct, contract terms, laws and standards against which evidence will be judged.
• Audit team: the lead auditor, team members, technical experts and their roles.
• Auditee and contact persons: the supplier or department audited, and the people who will receive the auditors and provide information.
• Dates, times and locations: the schedule of the audit, including the opening meeting, site tour, interviews, document review and closing meeting.
• Audit methods: document review, observation, interviews, sampling and measurements to be used.
• Sampling plan: how many records, workers or deliveries will be checked, and how they will be selected.
• Documents and information required: records the auditee must make available.
• Resources and logistics: transport, protective equipment, interpreters, translation and safety arrangements.
• Confidentiality arrangements: how information obtained will be protected.
• Reporting arrangements: the format of the report, who will receive it and when.
• Risks to the audit: factors that could affect the audit, such as restricted access, and how they will be handled.

3.1.5 Steps in developing a supply chain sustainability audit plan

Developing the audit plan follows a sequence that starts with the reason for the audit and ends with an agreed, communicated plan.

1. Establish the need and objectives of the audit, for example routine monitoring of a high-risk supplier, a new supplier approval or a complaint about working conditions.
2. Prioritise suppliers or areas by risk, using spend, the sustainability risks of the category, location and previous audit results.
3. Define the scope, including sites, supply chain stages, sustainability issues and the time period.
4. Identify the audit criteria: the policy, code of conduct, contract clauses, laws and standards that apply.
5. Select the audit type and method, such as on-site, desk-based or remote, announced or unannounced.
6. Appoint a competent and independent audit team with the right technical and language skills.
7. Collect and review background information, such as earlier audit reports, supplier questionnaires, certificates and performance data.
8. Prepare the audit schedule, checklists, sampling plan and interview guides.
9. Plan resources, budget and logistics, including travel, protective equipment and interpreters.
10. Communicate and agree the plan with the auditee, unless the audit is unannounced, and confirm access to sites, records and workers.
11. Obtain approval of the plan from the audit sponsor or procurement manager and file it with the audit records.

3.1.6 Objectives of supply chain sustainability audit

The objectives of the audit are the specific results it is designed to achieve. They are stated in the audit plan and guide the choice of scope, criteria and methods. Clear objectives allow the audit report to give a direct answer to management's questions.

• Determine the extent of compliance: establish how far the organisation or supplier conforms to the sustainability policy, code of conduct, contract terms, laws and standards.
• Evaluate the effectiveness of sustainability management: assess whether the systems, procedures and controls in place are capable of achieving the sustainability objectives.
• Identify significant sustainability risks and impacts: locate the environmental, social and governance hot spots in the supply chain.
• Verify the accuracy of sustainability data and claims: confirm that reported figures and certificates are complete and correct.
• Identify non-conformities and areas for improvement: record gaps and opportunities so that corrective actions can be agreed.
• Assess supplier capability: judge whether a new or existing supplier can meet the organisation's sustainability requirements in future.
• Provide a basis for decisions and reporting: give evidence for supplier approval, development, contract renewal or exit, and for sustainability reports.

3.1.7 Procedure for supply chain sustainability audit

The audit procedure is the complete sequence of stages that every audit follows, from initiation to follow-up. It is usually written into the organisation's audit procedure manual, so that all audits are carried out in the same way. The main stages are:

1. Initiating the audit: the audit programme manager selects the auditee, confirms the objectives and scope, appoints the lead auditor and makes first contact with the auditee.
2. Preparing the audit: the team reviews documents, prepares the audit plan, checklists and sampling plan, and assigns work to team members.
3. Conducting the audit: the team holds an opening meeting, collects and verifies evidence through document review, observation and interviews, records findings and holds a closing meeting.
4. Reporting the audit: the lead auditor prepares and issues the audit report, which states the findings, their grading and the conclusions.
5. Corrective action planning: the auditee prepares a corrective action plan addressing each finding, with root causes, actions, responsible persons and deadlines, and the auditor or buyer approves it.
6. Follow-up and closure: the buyer verifies that corrective actions have been completed and effective, through evidence or a follow-up audit, and closes the audit.
7. Recording and programme review: audit records are filed, supplier risk ratings updated and the audit programme adjusted based on the results.

3.1.8 Execution of supply chain sustainability audit

Execution is the stage at which the audit team carries out the audit at the auditee's premises or remotely, collecting evidence and forming findings. It is the most visible part of the audit and the stage at which the quality of the plan is tested. During execution, auditors must remain objective, follow the plan, record evidence carefully and treat the auditee with courtesy and respect.

Sources of audit evidence

• Documents and records: permits, licences, policies, procedures, payroll and time records, training records, waste transfer notes, utility bills, maintenance records and accident registers.
• Observation: conditions on the shop floor, in stores, in loading areas and in workers' facilities, such as housekeeping, chemical storage, fire exits, guarding of machines and use of protective equipment.
• Interviews: discussions with managers, supervisors and workers, including confidential worker interviews held away from management.
• Measurements and tests: readings of energy meters, water meters, noise levels or emissions where the scope requires them.

Good conduct during execution

• Keep to the agreed schedule and scope, and inform the auditee of any necessary changes.
• Gather enough evidence to support every finding, and cross-check information from different sources (triangulation).
• Respect confidentiality and protect workers who provide information.
• Observe the auditee's safety rules and wear the required protective equipment.
• Discuss findings with the auditee as they arise, so that there are no surprises at the closing meeting.

3.1.9 Objectives of supply chain sustainability audit

In the execution stage, the objectives are the results that the fieldwork itself must achieve, so that the conclusions of the audit are reliable. They are the working objectives of the audit team on site, which serve the overall audit objectives set in the plan (3.1.6).

• Collect sufficient and appropriate evidence: obtain enough reliable evidence for every area in the scope to support a conclusion.
• Confirm that documented procedures are applied in practice: compare what procedures say with what workers and managers actually do.
• Test the reliability of records and data: check samples of records against original sources, for example hours recorded against gate records.
• Hear the views of workers and other affected people: obtain information that documents cannot show, such as how overtime is decided.
• Grade findings correctly: classify each non-conformity by seriousness, so that urgent issues receive urgent action.
• Agree the facts with the auditee: make sure the auditee understands and accepts the factual basis of each finding before leaving the site.
• Identify root causes where possible: gather enough information for meaningful corrective action, not only the symptoms.

3.1.10 Key areas of supply chain sustainability execution

These are the main areas the audit team examines during the audit, chosen according to the scope. Together they cover the pillars of sustainability.

• Environmental management: environmental permits and licences, energy and fuel use, greenhouse gas emissions, water use and wastewater, air emissions, noise, and environmental management systems.
• Waste and chemical management: segregation, storage, labelling and disposal of solid, liquid and hazardous waste, use of licensed waste handlers, and safe storage and handling of chemicals.
• Labour standards: employment contracts, wages and deductions, working hours and overtime, age verification, voluntary employment, freedom of association and non-discrimination.
• Occupational health and safety: risk assessments, protective equipment, machine guarding, fire safety and emergency exits, first aid, accident records and safety training.
• Business ethics and governance: anti-bribery measures, conflict of interest declarations, accurate records, whistleblowing channels and legal compliance.
• Supply chain traceability: records showing where raw materials and components come from, and how the supplier controls its own suppliers.
• Product sustainability: evidence for recycled content, certification, energy efficiency and packaging claims made in the offer.
• Community impacts: relations with neighbours, handling of complaints, and nuisances such as dust, noise and traffic.
• Logistics and transport: vehicle condition, fuel efficiency, load planning, driver hours and safety.

3.1.11 Steps in executing supply chain sustainability audit

The steps below describe what the audit team does on the audit day or days.

1. Hold the opening meeting. Introduce the team, confirm the objectives, scope, criteria, schedule, confidentiality and reporting arrangements, and agree on guides and access.
2. Carry out a site tour. Walk through production areas, stores, loading bays, waste areas and worker facilities to get an overview and note observations.
3. Review documents and records. Examine permits, policies, procedures and records against the audit criteria, using the sampling plan.
4. Interview management and workers. Hold structured interviews with managers and supervisors, and private interviews with a sample of workers.
5. Take measurements where required. Read meters, check equipment and take any measurements included in the scope.
6. Record and verify evidence. Note what was seen, read and heard, with references, and cross-check information from different sources.
7. Evaluate evidence against the criteria and record findings. Classify each finding as a conformity, an observation, a minor non-conformity or a major non-conformity.
8. Hold team review meetings. The audit team compares notes, agrees findings and checks that all scope areas have been covered.
9. Hold the closing meeting. Present the findings to the auditee's management, clarify any misunderstandings, explain the grading and agree the timeline for the corrective action plan.
10. Leave the site with complete working papers that support the audit report.

3.1.12 Tools and resources of executing sustainability audits

Auditors need tools to work consistently and resources to carry out the audit safely and efficiently.

Tools

• Audit checklists and protocols: structured lists of questions linked to each criterion, which ensure that nothing is missed and that audits are comparable.
• Supplier self-assessment questionnaires: completed before the audit, they guide the auditor to areas needing attention.
• Sampling plans: guidance on how many records and workers to check and how to select them.
• Interview guides: standard questions for management and worker interviews.
• Measuring instruments: for example sound level meters, light meters and readings from energy and water meters, where the scope includes measurements.
• Cameras: to record conditions, used with the auditee's permission and in line with confidentiality rules.
• Audit software and mobile applications: for recording findings, photographs and evidence and producing reports.
• Finding and corrective action templates: standard forms for recording non-conformities and corrective actions.

Resources

• Competent auditors: people trained in auditing and in the technical areas being audited, independent of the auditee.
• Technical experts and interpreters: to support the team in specialised areas or where workers speak a different language.
• Reference documents: the policy, supplier code of conduct, contract, applicable laws and standards.
• Budget and time: for travel, auditor days, laboratory tests and follow-up.
• Personal protective equipment: required by the auditee's safety rules.
• Transport and communication facilities: to reach sites and stay in contact with the team.

3.1.13 Benefits of executing supply chain sustainability audit

Carrying out sustainability audits brings benefits to the buying organisation, its suppliers and the people and environment affected by the supply chain.

• Early detection of risks: environmental, labour and ethical problems are found and corrected before they cause incidents, fines or supply disruption.
• Improved compliance: suppliers that know they will be audited are more likely to comply with laws and requirements.
• Reliable information for decisions: audit results support supplier selection, development and contract decisions.
• Protection of reputation: the organisation can show that it checks its supply chain, which protects its brand and customer relationships.
• Cost savings: audits often reveal waste of energy, water, materials and packaging that can be reduced.
• Supplier improvement: findings and corrective action plans help suppliers improve their systems and performance.
• Credible reporting: verified data strengthens sustainability reports and responses to customer questionnaires.
• Better relationships: audits that are fair and constructive build trust and open dialogue between buyer and supplier.

3.1.14 Challenges of executing supply chain sustainability audit

Sustainability audits face practical difficulties that can reduce their reliability. Knowing these challenges helps the procurement team design audits that still give useful results.

• High cost and time: on-site audits require auditor days, travel and follow-up, which limits how many suppliers can be audited.
• Limited auditor competence: auditors may lack knowledge of specific industries, environmental technology or labour issues.
• Falsified or incomplete records: some suppliers may present prepared or double records, especially for working hours and wages.
• Coached workers: workers may be told what to say or may fear speaking openly, hiding real conditions.
• Restricted access: suppliers may limit access to some areas, records or sub-suppliers.
• Audit fatigue: suppliers that serve many customers may face repeated audits on similar issues, causing resistance.
• Snapshot nature: an audit shows conditions on the audit day, which may not reflect normal operations.
• Weak follow-up: corrective actions may not be completed if there is no system to track them.

Ways of addressing the challenges

• Use a risk-based approach so that the most intensive audits are reserved for high-risk suppliers.
• Train auditors or use qualified third-party auditors, and include technical experts where needed.
• Cross-check records with other sources and use unannounced or semi-announced audits where appropriate.
• Hold worker interviews privately, away from managers, and protect those who give information.
• Accept recognised audits shared among buyers, where they meet the organisation's criteria, to reduce audit fatigue.
• Track corrective actions in a register and verify closure with evidence or follow-up visits.