Safety, Health, and Environmental (SHE) professionals face a more complex business environment as they are asked to either directly audit or consult on auditing their employer's overseas operations. Evolving legal requirements throughout the world have added complexity to what was once a matter of the simple application of US and Corporate Standards. This paper details some of the challenges faced by SHE professionals as they approach the compliance, auditing, and sustainability needs of their overseas operations and suppliers. Drawing from practical experience gained over the course of 20 years of international auditing, examples of compliance and auditing systems, as well as approaches to ensuring a compliant and sustainable supply chain will be discussed.
In January, 2008, manufacturing employment in the US hit 13.75 million (BLS, 2008). This represents a continuing decline and the lowest manufacturing employment rate since July, 1950 (CBO, 2004). Continued softness in the economy could lead to manufacturing employment reaching a level not seen since the Great Depression. In addition to softness in manufacturing jobs, the US has been suffering a manufacturing trade deficit since 1971 (Census, 2008), which has grown from a 2.6 Billion (USD) surplus in 1970 to a deficit of more than 815 Billion in 2007. Most of these manufacturing losses have resulted from off-shore production.
Further, some of the US' largest "manufacturers" actually own manufacturing facilities. As an example, Nike – a $15 Billion revenue company – operates only two manufacturing facilities in the US, operations manufacturing the proprietary air insoles for Nike shoes. Cisco Systems - a $28.5 Billion revenue company - directly owns no manufacturing operations for its main products, and owns only a small amount of manufacturing for smaller subsidiaries. Increasing globalization of business has driven the factors of production out of the US. US manufacturing largely consists of those products too local to ship, too bulky to ship, or too light to ship.
As a result of this globalization, Safety, Health, and Environmental (SHE) employees are increasingly called upon to assist with issues of compliance in overseas locations and/or are asked to support initiatives to improve supply chain "corporate social responsibility" or "sustainability." Further, US manufacturers have faced increasing pressure in off-shoring manufacturing jobs to ensure that foreign operations meet standards similar to those achieved by domestic operations in practice.
International compliance auditing is not a new practice. Major international manufacturers such as Kodak and Johnson & Johnson have had long-standing practices of conducting EH&S audits for all of their manufacturing facilities, without exception. For example, the J&J audit program was initiated almost 20 years ago, with audits against a broad corporate standard that was nearly all-inclusive.
What has changed in today's business climate is the shift to increased regulation in international markets and increased pressure on the supply chain to comply and not shift compliance costs to low-cost providers and low labor rate countries. The following addresses some of the issues associated with regulatory compliance auditing in this business environment.