SMETA 4-Pillar Audit Guidance for Suppliers for Extended

Environment and Business Ethics Assessments

(Version 1, September 2012)

This Guide for Suppliers has been produced by the current members of the Associate Auditor Group (AAG) to assist suppliers in
preparing for Environment and Business Ethics assessment in a SMETA audit.
It is one of a series of documents which support a 4-Pillar audit process which include:
l SMETA Best Practice Guidance version 4.0 2 / 4-Pillar audit
l SMETA 2 / 4-Pillar Audit Report and CAPR
The above are available on the public section of the Sedex website
l Guidance for suppliers (this document)
l Guidance for auditors to assist auditors in the types of checks they should be doing for Environment and Business Ethics assessments.
The above two documents are available for Sedex member only.
 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

Guidance for Suppliers for Extended Environment and Business Ethics

Assessments

INTRODUCTION
Suppliers may be familiar with the Sedex Members Ethical Trade Audit (SMETA) process, which has been used by Sedex members for measuring a supplier’s
performance in the area of Labour Standards and Health & Safety.
Reflecting the widening nature of Corporate Social Responsibility, and following requests from Sedex members the scope of the SMETA protocol has been
increased to include Environment and Business Ethics. This can be found as the new SMETA Best Practice Guidance (BPG), audit report and CAPR version 4
(May 2012) on the public section of the Sedex website, these now cover the established pillars of labour standards and Health & Safety (2-pillar) as well as the
additional modules of Environment and Business Ethics. (4-pillar).
The additional modules of Environment and Business Ethics may not be required by all Sedex members and it is important that suppliers and customers are
clear when these supplementary modules are required additions. They have been designed so that customers/suppliers may choose whether to add one or
both and together they are designed to take a total of 0.5 auditor days when added to a SMETA procedure.

Note: These assessments may not meet the level of a complete environment and/or Business Ethics audit and this will depend on individual members and how
they define those terms. This will incur an additional audit cost and so it is important that members are clear when the additions are necessary. They cannot be
considered as a substitute for full environmental and Business Ethics audits but this assessment process may assist members in deciding if a full audit for
Environment and Business Ethics is required. Suppliers should check with their customers whether they require this addition.
Although the 2 modules together should take no more than 0.5 auditor days when added to a SMETA process which covers Labour Standards and Health and
Safety, in the case where one or both is requested separately it is likely to take a full auditor day.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

The AAG has produced supplements to assist the process as follows:

l Guidance for Auditors: which will inform the auditors of what checks they should be making.
l Guidance for Suppliers: (this document), which gives details to suppliers of what the auditor will be checking and how the supplier canprepare themselves
for the assessment process.
Note from the AAG: We have found from experience that many sites demonstrate non compliances because they are not aware of the types of issues the
audit is covering. We hope to minimise this effect by making these guidance documents available to suppliers prior to the assessments. All the above can
be obtained from your ultimate customer, who may be requesting these additional modules or your chosen auditor. They will also be available on the
‘Members Resources Section’ of the Sedex website.

METHODOLOGY
The intention of the 2 new modules is to be an Assessment not an Audit process and the information will help the supply chain decide whether any further
action is required following this assessment.
l They will not be mandatory but will be included with SMETA at the request of the customer and/or supplier.
l They are designed to take no more than 0.25 auditor days each, and so are an assessment rather than a full audit.
Note: where Environment and/or Business Ethics are requested separately from a standard SMETA it is likely to require 1 full auditor day .alternatively it
may be possible to limit to the agreed half a day if included in a follow up audit.
l For environment they will concentrate on capturing whether or not the site is aware of and meeting all relevant local and national laws, as well as what
certifications, and/or management systems sites already have.
l For Business Ethics the guidance details the assessment criteria, but in all cases any information gathered will be recorded as ‘observations’ not ‘non
compliances’ and this will form the basis of on-going membership consultations to define appropriate standards over time. Supply chains are encouraged
to be open about local challenges and context in the area of Business Ethics.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

AUDIT EXECUTION
Auditors will:
l Check the site performance against the previously completed Sedex SAQ.
l Be aware of the environmental laws in the site’s areas of operation.
l Assess whether the site is meeting legal and regulatory requirements.
l Check whether the site is aware of its major environmental impacts and/or Business Ethics risks.
l Where possible establish any client requirements/codes for environment and/or Business Ethics.
l Check whether the site is aware of any client requirements/codes for environment and/or Business Ethics.
l Check whether the site has a system in place to monitor their performance against any legal/customer requirements.
l The auditor will use an assessment process as detailed.

AUDIT CHECKS AND EVIDENCE GATHERING

The auditor will assess documentary evidence by reviewing appropriate records or documents, in conjunction with the management: The auditor will check
documentary evidence by interviewing relevant personnel. Choice of the relevant personnel is at the discretion of the auditor/supplier, but as a minimum the
auditor will cross check information by interview with the individual(s) identified by the site as responsible for environmental and/or Business Ethics
performance.
Worker interview: The auditor will seek to establish that policies and procedures are carried out in practice. Critical points will include areas of legal compliance
such as, in the environment module, contents of waste water discharge. Interviews with workers responsible for checking these contents will be carried out as
evidence of procedures correctly implemented.
N.B. Selection of interviewees will depend on the topic. For environment, where a check is procedure related e.g. testing of waste water discharge, the auditor
willinterview as a minimum, the operator responsible for making checks.
For Business Ethics, discussions will focus on personnel where Business Ethics is most relevant, e.g. sales, service management, logistics departments.
Note: it is important that these 'appropriate personnel' are present on the day of audit.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

RECORDING FINDINGS
Definitions of non-compliances/observations/good examples are as follows:
For Environment non-compliances will be recorded:
l Where a site fails to meet local and national regulatory requirements*.
For environment observations will be raised:
l Where there are customer requirements/codes covering environment and a site is unaware of them.
l Where there are customer requirements/codes covering environment and the site does not have a system in place to monitor their performance against
these.
l Where there are practices which fail to meet a good practice standard but which do not contravene laws or client's requirements.
l Where a site is unaware of its major environmental impacts.
For environment good examples will be raised:
l Where a supplier is exhibiting exceptionally good performance, in excess of requirements in these areas.
Note: where a supplier is monitoring environmental and Business Ethics standards of its own suppliers/subcontractors, this can be viewed as a "good
example”.
* This is in line with Global Social Compliance Programme (GSCP) Environmental Module Level 1, which proposes that “a minimum requirement is to be
compliant with applicable legal standards.” see: http://www.gscpnet.com
GSCP is a business driven programme for companies who wish to harmonise their efforts to improve working conditions and environmental performance in
their supply chains. For more information on GSCP see: http://www.ciesnet.com/2-wwedo/2.2-programmes/2.2.gscp.background.asp

For Business Ethics only observations and good examples should be recorded
l All findings will be recorded as Observations or Good examples.
l The group recommends that since laws on Business Ethics are less clear than those on environment all issues should be "observations" rather than non
compliances. The data collected as observations will form the basis of an on-going consultation with the Sedex membership to agree standards over time.
For more information on Business Ethics see http://www.transparency.org

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

REPORTING
Auditors will record findings on Environment and Business Ethics on an extended audit report using the 4 pillar audit report and CAPR version 4 (May 2012).
Sedex issue titles exist on the Sedex system for environmental and business practice issues to allow the upload of audit information.

CHECKLIST FOR SUPPLIERS

We have laid out this section as follows:
In column 1: the topic and explanation.
In column 2: the typical questions the auditors will be asking.
In column 3: the measures you should have in place to be able to respond to those questions.
In column 4: any extra guidance, websites where you can find further information.
10B4: Covers Guidance for Suppliers for Environmental Assessments
10C: Covers Guidance for Suppliers for Business Ethics Assessments
Please note: in many cases the measures listed in column 3 may be "best practice" level. The auditor will be registering non-compliance only where a site is
not meeting the law. Any other questions are used for measurement purposes only so Sedex members can understand where a supplier is on his continuous
improvement and these findings will be recorded as observations.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

10B4 Guidance for Suppliers for Environmental Assessments (see BPG pg 75)
0. ENVIRONMENTAL MANAGEMENT SYSTEM (EMS)
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
l It enables a site to l Is the Sedex SAQ completed and available for pre – review? l Complete the SAQ for your site and make it Information sources on
identify, monitor and l Are you aware of any local and national regulations and any available to the auditor for pre review. EMS
control its impact on client requirements covering environmental performance? l Have copies of all local and national regulations
the environment . l Do you have procedures in place to ensure you meet these and client requirements covering environment. China State
l It should include regulations/standards? l Ensure all procedures are documented and Environmental Protection
responsibilities, l Do you have an environmental policy? Is any policy sufficient to ensure you meet the legal Administration
procedures and communicated to relevant parties e.g. employees, suppliers, requirements, including permits. (FAILURE TO
practices for agents? ACHIEVE LEGAL OBLIGATIONS IS LIKELY TO
http://www.sepa.gov.cn

implementing the l Is certificate available e.g. ISO14001/BS8555? RESULT IN THE AUDITOR RECORDING A NON Environment Canada
environmental policy. l Are you aware of your major environmental impacts (e.g. In COMPLIANCE) . http://www.mb.ec.gc.ca/index
l An EMS may be an area of water shortage your water usage would be a major l Where there are client requirements ensure that .en.html
compliant with an impact)? you have a system to measure your performance
international l Do you have relevant legal permits for each of your against those requirements.
recognised standard environmental impacts? l If you do not have an environmental policy
such as ISO14001 or l Is there a periodic review of environmental performance and consider creating one.
BS8555. targets set for improvement? l Communicate your policy to all relevant parties.
l Has responsibility for environmental performance been l Make any certificates available for assessment
assigned to an individual(s)? e.g. ISO 14001.
l Do you review the environmental performance of your l Prior to the assessment, list all environmental
suppliers? impacts for your site and prioritise them for action.
l Are you aware of any customer requirement with reference to l Consider ways of reducing your impacts and
chemicals used in the manufacture of their products and are together with the individual(s) responsible for
you meeting these? performance produce action plans with targets.
l Do you have inspections for environmental issues from local l Keep any local inspection documents and ensure
government/others? Have you had any complaints, you react to any prosecutions, complaints or
prosecutions or recommendations and have you acted on recommendations.
them?

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

SPECIFIC TOPICS FOR ENVIRONMENTAL ASSESSMENT INCLUDE (BUT MAY NOT BE LIMITED TO):
Energy usage • Water usage • Water discharge • Waste • Emissions to air

GUIDANCE ON EACH OF THESE IS LISTED BELOW:

Please note not all may be important for your site, It is up to the auditor and the supplier to decide the significant topics for this assessment.

1. ENERGY USAGE
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
Reducing energy usage l Are you aware of any local and national regulations and any l Have copies of all local and national regulations Information on how to
can have a number of client requirements covering energy usage performance? and client requirements covering energy usage. improve energy efficiency
benefits: l Do you have procedures in place to ensure you meet these l Ensure all procedures are documented and can be found:
l Reduction in costs. regulations/standards? sufficient to ensure you meet the legal
l Improvement in l Do you require permits for specific energies used and do you requirements. (FAILURE TO ACHIEVE LEGAL UK Carbon Trust
environmental have them? OBLIGATIONS IS LIKELY TO RESULT IN THE
performance. AUDITOR RECORDING A NON COMPLIANCE.
http://www.carbontrust.co.uk
l Do you measure your energy usage including the use of
l Improved local air electricity and/or gas meters, and the quantity of fuel used for l Where there are client requirements ensure that United Nations Energy
quality. e.g. on site transport and machinery? you have a system in place to measure your Site http://esa.un.org/un-
l Reduction in green l Is your energy usage recorded against the quantity of goods performance against those requirements.
house gas emissions and services you produce e.g. KwH per measure of finished
energy
l Where permits for energy use are required ensure
and a reduction in the goods produced? these are available and up to date. International Energy
contribution to climate l Are you taking steps to reduce your energy usage as a l Keep records of your energy usage/week/month Agency
change. proportion of the goods produced by e.g. Turning off machines and document against your output. http://www.iea.org
when not in use; Training workers in the need to switch off l Map your energy use over time as a proportion of
machines when not in use; heat recovery systems? output and have targets for reduction.
l Are you using any renewable energy e.g. Solar, wind turbines l Investigate opportunities for renewable energy
etc.? such as, solar, wind turbines, geothermals, and
l Are you keeping any local inspection documents and ensuring energy from biomass e.g. Wood, animal manure,
you react to any prosecutions, complaints or crop residues, and waste.
recommendations? l Keep any local inspection documents and ensure
you react to any prosecutions, complaints or
recommendations.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

2. WATER USAGE
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
Water used by l Is the site in an area of water shortage? l Have copies of all local and national regulations Information on
companies can come l Are you aware of any local or national regulations and client and client requirements covering water usage. mechanisms and
from several sources: requirements governing water usage? l Ensure all procedures are documented and processes to improve
l Purified drinking l Do you have procedures in place for meeting these sufficient to ensure you meet the legal water efficiency:
water. regulations/standards? requirements. (FAILURE TO ACHIEVE LEGAL
l Municipal mains. l Do you know your water sources? OBLIGATIONS IS LIKELY TO RESULT IN THE Australian Department of
l Abstracted ground l Do you have any necessary permits covering water AUDITOR RECORDING A NON COMPLIANCE. the Environment, Water
water (wells). usage/extraction? l Where there are client requirements ensure that Heritage and the Arts
l Surface water l Do you measure your water usage by e.g. Meter? you have a system in place to measure your http://www.environment.gov
(rivers). l Is your water usage recorded against the quantity of goods performance against those requirements. .au
l Collected rainwater. you produce? l Where permits for water usage are required
l Recycled grey water. l Do you have the appropriate facilities for treating incoming ensure these are available and up to date. Sign up to a Save Water
water where necessary l Keep records of your water usage/week/month Mandate
There are a number of l Are you reducing water usage by (e.g.): and document against your output. http://www.unglobal.comp
costs associated with l Mending leaks? l Map your water use over time as a proportion of act.org
water use: l Turning off water using machines and equipment when output and have targets for reduction.
l Costs to abstract. not needed? l Investigate opportunities for re- cycling water such
l Treatment costs e.g. l Training workers in the need to conserve water? as, grey water being used for other operations.
Storing, purifying and l Use of non-return valves? l Keep any local inspection documents and ensure
disposal costs. you react to any prosecutions,complaints, or
l Costs from disruption recommendations.
to supply.
l Reducing water
usage can
significantly reduce
costs.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)
Topic and explanation
Waste water can be a
significant cause of pollution
and in most countries there
are laws governing the
discharge of waste water,
including permits.
At any site waste water can
be in several forms:
l Process effluent as a
result of commercial
processes.
l Cooling waste water or
non contact waste water
e.g. Chillers.
l Blow down (from boilers).
l Storm water runoff (roof
etc.).
l Fire water.
l Domestic/sanitary waste
water (toilets/sinks).
Laws usually state:
Volume and flow rate,
suspended solids, biological
oxygen demand (BOD),
chemical oxygen
demand(COD), toxicity (e.g.
Chemicals), heavy metal
content, pH, colour,
temperature, foam, oil.
3. WATER DISCHARGE
Typical questions from auditors
l Are you aware of all local and national regulations and
client requirements covering water discharge?
l Do you have procedures in place to ensure you meet
these standards e.g. Testing procedures to check the
quality of the waste water?
l Do you have any necessary permits for water discharge?
l Do you keep records of your water discharged both in
quantity and quality?
l Are the operators testing for quality of water discharge
aware of what action to take if the results are over any
required limits?
l Have you identified all sources of waste output and are
you managing associated risks e.g. waste water
discharge to drains, soak aways and possible spillages?
l Where your water discharge (effluent) is handled by
others, have you checked their license and credentials for
correct handling of waste water?
l Are there any local inspections by government or similar
and have you kept records of these and are taking action
on their findings?
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Further information,
What you should do
websites etc.
l Have copies of all local and national regulations Information for improving
and client requirements covering water discharge. the quality of waste water
l Ensure all procedures are documented and
sufficient to ensure you meet the legal Uk Envirowise
requirements. (FAILURE TO ACHIEVE LEGAL Programme
OBLIGATIONS IS LIKELY TO RESULT IN THE
AUDITOR RECORDING A NON COMPLIANCE.
http://www.wrap.org.uk
l Where there are client requirements ensure that Water Environment
you have a system in place to measure your Federation
performance against those requirements.
http://www.wef.org/home
l Where permits for water discharge are required
ensure these are available and up to date.
l Keep records of your water discharged both in
quantity and quality.
l Ensure that water discharged meets the legal
requirements with reference to its contents and
quality, by sufficient testing.
l Track your water disposal routes and ensure that
where necessary different types of water
discharges are separated.
l Ensure that the operators carrying out the water
testing know what action to take if the tests go
outside of the legal and regulatory limits.
l Keep any local inspection documents and ensure
you react to any prosecutions, complaints or
recommendations.

Topic and explanation
Everyone produces
waste. Industry and
commerce produces
billions of tonnes of
waste each year and the
value is growing by
approx. 3 % per year.
Waste costs money
discarded materials were
originally bought at a
cost.
The cost and reducing
availability of landfill will
require companies to
significantly reduce their
waste.
SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)
4. WASTE
Typical questions from auditors
l Are you aware of all local and national regulations and client
requirements covering waste?
l Do you have procedures in place to ensure you meet these
standards?
l Are you aware of any hazardous waste you produce?
l Do your disposal methods for hazardous waste meet legal
and client requirements?
l Do you have any necessary permits for disposal of all the
types of waste you produce?
l Do you keep records of the volumes and types of waste you
produce and is there an action plan to reduce it?
l Do you re-use, and recycle waste and only dispose of it as a
last resort?
l Where contractors handle waste have you checked their
licences and credentials for appropriate legal disposal?
l Are there any local inspections by government or similar and
have you kept records of these and are taking action on their
findings?
11
Further information,
What you should do
websites etc.
l Have copies of all local and national regulations China Environmental
and client requirements covering waste disposal . Protection Foundation
l Ensure all procedures are documented and http://www.cepf.org.cn/en/i
sufficient to ensure you meet the legal ndex.htm
requirements. (FAILURE TO ACHIEVE LEGAL
OBLIGATIONS IS LIKELY TO RESULT IN THE UK Envirowise
AUDITOR RECORDING A NON COMPLIANCE. programme
l Where there are client requirements ensure that http://www.envirowise.gov.
you have a system in place to measure your uk
performance against those requirements.
l Where permits for waste disposal are required
ensure these are available and up to date.
l Keep records of your waste disposed of both in
quantity and type and have an action plan to
reduce waste by re-use, re- cycle and only
dispose of as a last resort.
l Track your waste disposal routes and ensure that
each one meets legal requirements.
l Ensure that you have checked any contractors
processing your waste for legality and licenses.
l Keep any local inspection documents and ensure
you react to any prosecutions, complaints or
recommendations.
 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

Topic and explanation
The issue of global
warming has become an
important issue for
businesses.
5. EMISSIONS TO AIR
Further information,
Typical questions from auditors What you should do
websites etc.
l Are you aware of all local and national regulations and client l Have copies of all local and national regulations US Environmental
requirements covering air emissions? and client requirements covering air emissions. Protection Agency
l Do you have procedures in place to ensure you meet these l Ensure all procedures are documented and
standards? sufficient to ensure you meet the legal
http://www.epa.gov

There is a worldwide
pressure to reduce the
emissions of greenhouse
gases to limit as far as is
possible the issue of
global warming.
Some emissions,
resulting from a sites
processes have limits
imposed by law in order
to protect the air quality
and the health of the
local environment.
l Do you have any necessary permits for emissions to air?
l Do you keep records of the volumes and types air emissions
you produce and is there an action plan to reduce it?
l Do you carry out regular testing of emissions where it is a
legal or client requirement?
l Do you have a cleaning/maintenance programme for critical
control equipment?
l Are there any local inspections by government or similar and
have you kept records of these and are taking action on their
findings?
requirements. (FAILURE TO ACHIEVE LEGAL
OBLIGATIONS IS LIKELY TO RESULT IN THE
AUDITOR RECORDING A NON COMPLIANCE.
l Where there are client requirements ensure that
you have a system in place to measure your
performance against those requirements.
l Where permits for air emissions are required
ensure these are available and up to date.
l Keep records of your air emissions both in
quantity and type and have an action plan to
reduce.
l Keep any local inspection documents and ensure
you react to any prosecutions, complaints or
recommendations.

The above is a guide only and it can be used for all environmental topics judged to be significant by the site and the auditor.
The above are the most common environmental impacts; they may not all be significant for your site.
The likely environmental impacts include but are not limited to: energy usage, water usage, water discharge, waste and emissions to air.
The auditor will record each of the above measureables for this year and last year in the environmental analysis section of the SMETA report.

Notes: To encourage convergence the above information uses available best practice from a number of sources, these include:
l Global Social Compliance Programme (GSCP), Environmental Reference Tools.
Please see: http://www.gscpnet.com/working-plan/environmental-module.html and UK Envirowise Programe. http://:www.envirowise.gov.uk

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

10c Guidance for Suppliers for Business Ethics Assessments (see BPG)
Note: It is expected that the company employing the auditor(s) will have its own code of conduct and integrity policy, which will include the prohibition of
accepting or soliciting bribes. The policy will be discussed with each site prior to and at assessment to inform the site of the ethical business standards of the
audit company.
At this time the AAG recommends that any issues found in Business Ethics are recorded as “Observations”. Standards are difficult to define at this moment
and may only become clear over time.

0. MANAGEMENT SYSTEM
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
A management system l Is the Sedex SAQ completed and available for pre – review? l Complete the SAQ for your site and make it For a complete discussion
enables a site to: l Are you aware of any local and national regulations and any available to the auditor for pre review. of why it is important to
l Monitor and control client requirements covering Business Ethics performance? l Have copies of all local and national regulations conduct business
its business ethics l Do you have procedures in place to ensure you meet these and client requirements covering Business Ethics ethically, see Clean
issues. regulations/standards? issues. Business is Good
l It should include l Do you have all necessary licenses and permits in place to for l Ensure all procedures are documented and Business
responsibilities, correct legal practice of your business? sufficient to ensure you meet the legal
procedures and l Do you (or your clients) have a Business Ethics policy, if so requirements.
practices for what topics are covered? l Where there are client requirements ensure that
implementing any l Has any policy been communicated to the relevant parties you have a system in place to measure your
business ethics such as employees, suppliers, agents? performance against those requirements.
policy. l Have you signed up to any global standards for business l If you do not have a Business Ethics policy
ethics? consider creating one.
A management system l Has responsibility for Business Ethics performance been l Ensure that policies are communicated to relevant
needs: assigned to an individual(s)? parties.
l A policy (statement of l Are you aware of your major Business Ethics risks? l Have available any documentary evidence of sign
intent). l Is there a mechanism for reporting Business Ethics concerns up to any initiatives on business ethics standards.
l Documented and does it include no reprisals for reporters? l Prior to the assessment, list all Business Ethics
procedures. risks for your site and prioritise them for action.
l Practices.
l A review process to
test the system.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

Business Ethics l Is there a clearly communicated procedure in place for dealing l Ensure that any of your (and/or your clients)
policies can cover for with Business Ethics issues including disciplinary action Business Ethics policies are clearly
example (but not limited against perpetrators? communicated to the appropriate parties such as
to): l Are there any local inspections by government or similar and employees, customers, agents, suppliers.
l Bribery. are the findings actioned? l Ensure that appropriate employees know how to
l Facilitation payments. report concerns through e.g. poster or website
l Conflict of interests. information.
l Charitable and l Keep any local inspection documents and ensure
political donations. you react to any prosecutions, complaints or
l Intellectual property recommendations.
rights.

THE AUDIITOR WILL ASSESS SPECIFIC TOPICS FOR BUSINESS ETHICS, THESE CAN INCLUDE
(BUT MAY NOT BE LIMITED TO):
Bribery is defined as: The giving of money, gifts, or other advantage as a deliberate inducement to do something that is dishonest, illegal or a breach of trust
in the course of business
Conflict of interests is defined as: when a personal interest or relationship is put before the interests of the business.
Charitable contributions is defined as: giving which might influence a business deal.
Facilitation payments defined as: e.g. payment made to speed up a service which is a legal entitlement such as customs clearance.
Political contributions (must be made with the agreement of the business).
Reporting procedures (for Business Ethics issues).
Disciplinary procedures (for dealing with Business Ethics issues).
Non-retaliation for raising compliance issues in good faith.

Please note: not all may be important for your site, It is up to the auditor and the supplier to decide which are the significant topics for this Business Ethics
assessment.
To assist suppliers to prepare for this assessment we have detailed 3 topics:
4.6.1. BRIBERY AND CORRUPT BUSINESS PRACTICE
4.6.2. CONFLICT OF INTERESTS
4.6.3. REPORTING AND INTERNAL CONTROLS/MONITORING

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

1. BRIBERY/CORRUPT BUSINESS PRACTICE

Definition: (from http://www.transpency.org International Business Principles for Countering Bribery SME edition)
Bribery is the giving or receiving money, a gift or other advantage or inducement to do something that is dishonest, illegal of a breach of trust in the course of business
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
There are a number of l Are you aware of any local and national regulations and any l Have copies of all local and national regulations For a list of countries that
global initiatives working client requirements covering bribery? and client requirements covering bribery issues. have signed or ratified the
to eliminate bribery. l Do you have procedures in place to measure your l Ensure any procedures are documented and United Nations
l The United Nations performance against any regulations/standards? sufficient to measure your performance. Convention Against
Convention against l Do you (or your clients) have a bribery policy, if so what topics l Where there are client requirements ensure that Corruption see:
Corruption UNAC. are covered? you have a system in place to measure your http://unodc.org/unodc/en/
l The Organisation for l Has any bribery policy of you or your clients been clearly performance against those requirements. treaties/CAC/signatories.ht
Economic communicated to the appropriate parties e.g. Suppliers, l If bribery is not covered in any a Business Ethics ml
Cooperation and customers, employees, agents etc.? policy you should include it.
Development (OECD) l Is there a mechanism for reporting bribery concerns without l Have available any documentary evidence of sign For information on
has a anti-bribery fear of reprisal to the reporter? up to any anti bribery initiatives. facilitation payments
convention which is l Is there a clearly communicated procedure in place for dealing l Ensure that any of your (and/or your clients) http://www.ethicalcorp.com
now in the laws of 37 with bribery issues including disciplinary action against bribery policies are clearly communicated to the
Note: In Oct 2011
/content
countries. perpetrators? appropriate parties such as employees,
customers, agents, suppliers. UK government
l Are there any local inspections by government or similar and
For businesses in the are the findings actioned? published The UK
l Ensure that appropriate employees are informed
developed world anti- on how to deal with any bribery issues they Bribery act (link) any
bribery policies and encounter in their work. Company related to the
practices are important UK, has a legal
l Keep any local inspection documents and ensure
within their suppliers as you react to any prosecutions, complaints or obligation to minimise
they have disclosure recommendations. bribery and corruption
requirements which not only in their own
extend to their supply compnay but also in their
chains. supply chains.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

2. CONFLICT OF INTERESTS
Definition (from http://www.transparency.org International Business Principles for Countering Bribery SME edition)
A conflict of interests is when a personal interest or relationship is put before the business interest. Conflict of interest can lead to actions, which are not honest and open. They
can sometimes lead to a situation where individuals, against their better judgement can give or accept a benefit, which may damage the business.
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
Even without malpractice l Are you aware of any local and national regulations and any l Have copies of any local and national regulations http://www.uksport.gov.uk
conflict of interests may client requirements covering conflict of interests? and any client requirements covering conflict of
be seen as corrupt l Do you have procedures in place to measure your interests. http://www.nih.gov
practice. performance against any regulations/standards? l Ensure any procedures are documented and
l Do you (or your clients) policy cover conflict of interest? sufficient to measure your performance.
http://www.hw.ac.hr/htm/p
The way to deal with this l Have any rules of you or your clients concerning conflict of l Where there are client requirements ensure that
olicies/conflictofinterests

is to have rules on how interests been clearly communicated to the appropriate
to manage situations parties e.g. Suppliers, customers, employees, agents etc.?
where a conflict may l Is there a mechanism for reporting conflict of interest
happen. concerns without fear of reprisal to the reporter?
l Is there a clearly communicated procedure in place for dealing
with conflict of interest concerns including advice given and
disciplinary action against perpetrators?
l Are there any local inspections by government or similar and
are the findings actioned?
you have a system in place to measure your
performance against those requirements.
l if your (or your clients) policy does not cover
conflict of interest, consider including it.
l Ensure that any rules of you or your clients
concerning conflict of interests have been clearly
communicated to the appropriate parties e.g.
Suppliers, customers, employees, agents etc.
l Ensure there is a clearly communicated procedure
in place for dealing with conflict of interest
concerns including advice given and disciplinary
action against perpetrators.
l Keep any local inspections by government or
similar and ensure you react to any prosecutions,
complaints or recommendations.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

3. REPORTING AND INTERNAL CONTROLS/MONITORING

For any programme to be successful, it needs to have controls and records. These are the checks and balances, which will show the programme is working.
There needs to be a clearly communicated reporting procedure in which concerns about any BusinessEthics issues can be reported without fear of reprisals to the reporter.
Advice should also be available on how to handle incidents before they become a problem
Further information,
Topic and explanation Typical questions from auditors What you should do
websites etc.
A Business Ethics programme l Does the site have a Business Ethics policy l Check your procedures for dealing with any For country profiles on
begins with a policy statement l Does the site have a clearly documented procedure for Business Ethics issues which may have occurred Business Ethics risk for a
or a statement of principles, reporting on Business Ethics concerns? in your business and ensure they are clearly list of those who have
which can be as simple as: l Are records available of any reports made and actions documented and available for inspection. signed up see:
taken clearly detailed? l Check with those who have reported issues that http://www.business-anti-
Your business commits to: l Are there detailed and clearly communicated procedures procedures are being correctly followed and that corruption.com
l Conducting business fairly, for dealing with individuals who are found to be involved there have been no reprisals following reporting.
honestly and transparently. in Business Ethics issues? l Check with interested parties e.g. suppliers, The UN Global Compact
l Will not offer or accept l Is there a review process in place to check that customers, agents, employees that they are and the World Economic
bribes. procedures are working and that business ethics issues aware of your Business Ethics policy or principles Forum and Transparency
l Developing a programme are being dealt with? and that they are following these. International have
to support those Principles. l Check that any actions taken as a result of produced a tool for
substantiated Business Ethics issues, have been countering corruption in
Programmes to support this documented and have followed correct procedure. businesses see:
policy/Principles require: if you do not have a Business Ethics policy http://unglobalcompact.org
l Detailed procedures and consider creating one.
practices. l Ensure that any policies and procedures are fully
l A process for reporting communicated, and trained to the workforce
concerns. especially those where there is a high risk of
l An internal review process corrupt practice such as sales, logistics,
which checks that the purchasing
procedures are working. l Ensure that any training is recorded.

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 SMETA 4-Pillar Audit Guidance for Suppliers for Extended Environment and Business Ethics Assessments (Version 1, September 2012)

The above is a selection of Business Ethics titles, there may be others, which you may wish to discuss and report to the auditor either ahead of or during the
assessment.

Notes: To encourage convergence the above information uses available best practice from a number of sources; these include, but are not limited to:
l BUSINESS PRINCIPLES FOR COUNTERING BRIBERY (SMALL AND MEDIUM ENTERPRISE EDITION) http://www.transparency.org
l UN Global Compact 10th Principle Supply Chain Group; Extract from working documents. This is work in progress; a copy can be obtained from your client
or auditing body.
For more information see website details in above table.

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 This SMETA Guidance for Environment and Business Ethics Assessments: Guide for Suppliers, has been produced by the current members of the
Associate Auditor Group (AAG) of Sedex. It is work in progress and we are currently making it available to members only in order that we can learn from their
experience to review and improve the guidance.

Please forward your comments to auditing@sedexglobal.com

Following a further review process, based on members’ comments, we hope to follow the mission of Sedex and to drive convergence by making it available on the
public section of the Sedex website.

For more information on Sedex please go to www.sedexglobal.com

or email auditing@sedexglobal.com