Supply chain audits are often used as box-ticking exercises to achieve a compliance need or satisfy customer due diligence. This black and white approach to risk management compromises the audits’ potential to truly help a business control risks, as they typically overlook the root causes of poor social and environmental practices. At Levin Sources, we help clients generate value from their audits, transforming audits from a burdensome cost to an opportunity for learning and continuous improvement.
One such example is with Thai tin smelter Thaisarco. Since October 2018, Levin Sources has been working with Thaisarco, an internationally recognised industry leader in the manufacturing of tin and tin alloys, to carry out a series of internal audits with its suppliers worldwide. These audits take into account the RMAP Tin and Tantalum standard requirements for the assessment of supply chain risks. In addition, they aim to improve the effectiveness of mining companies’ policies and procedures by identifying areas of improvement in the management and mitigation of risks, such as those related to human rights, corruption, and working conditions.
Through our first- and second-party audit work, we have been assisting several mining companies to set up and improve their operations by bringing a systematic and disciplined approach to evaluating and then improving the organisation’s governance, risk management, and control processes. Over the years, we have come to appreciate the importance of guiding companies through a journey of discovery as they learn how they can improve their due diligence procedures and risk controls. For example, many of the mines we visit are located in very remote areas, and workers are required to stay and work on-site for long periods. In these cases, we have had to adapt our analysis to existing working conditions to ensure that risks are still managed properly to protect workers, regardless of these extended working periods.
When the auditor leaves the site, it’s a new beginning.
While the education process leading to the audit and the assessment itself are central, what happens after the audit and how the company acts on the audit findings represents the real opportunity for positive improvements and change. How this happens will be entirely determined by the narrative that the auditor leaves with the audit outcomes. At Levin Sources we look at audit reports not as scorecards but management tools . They can be the starting point for a company to improve on any type of finding. Our internal audit offering can provide continuous improvement, driving change and also building long-term value for businesses and society at large, by producing sustainable outcomes.
Finally, our experience has taught us that while smelters and refiners can successfully pass third-party audits, the extent to which companies effectively implement due diligence processes in their supply chains still requires improvement to achieve greater positive change.
Thaisarco demonstrates how smelters and mining companies can still act to make a difference and support improved business practices upstream. Mining companies can benefit from internal audit services to help them set themselves apart on a journey towards full compliance and improved social responsibility. Though there is intensifying scrutiny of media and NGOs on large-scale mining companies and practices, the greatest challenge is engaging medium-sized mining companies. Smelters can play a critical role by using their leverage over medium-scale miners, which are often privately funded and less scrutinised, to improve these miners’ risk controls.