Why Social and Labor Assessments Matter in Your Global Supply Chain

Article key points: 

• Global brands and retailers are under constant scrutiny for working conditions in their supply chains.
• Social and labor assessments are systematic evaluations of factory conditions to ensure compliance with labor laws, social standards, and company policies, covering areas such as hiring practices, child labor, work hours, wages, and worker safety.
• These assessments are crucial for protecting workers’ rights, ensuring legal and regulatory compliance, reducing financial and reputational risks, and aligning with brand values and ethical responsibilities.
• Common challenges in global supply chains include child labor, forced labor, excessive working hours, inadequate wages, health and safety hazards, and exploitation of vulnerable workers, often interconnected with issues like poverty and weak labor law enforcement.
• Frameworks like the ILO’s Fundamental Principles, the FLA’s Fair Labor Code, the UN Guiding Principles, and SLCP’s Converged Assessment Framework (CAF) provide standardized tools and methodologies to assess and improve labor conditions, benefiting both workers and businesses through higher productivity, lower turnover, and market access.
• Worldly is an Active Accredited Host for the CAF, which companies can access by using the Higg FSLM on the Worldly platform.

Global brands and retailers face intense scrutiny from consumers and government regulators alike over the working conditions in their supply chains. Unsafe factories and labor abuses have been responsible for tragedies and scandals throughout history—from the 1911 Triangle Shirtwaist Factory fire to numerous reports of child and slave labor in chocolate production. No industry or geographic region is free from the risk of unsafe working conditions and unethical labor practices. 

This is why responsible brands, retailers, and manufacturers are increasingly conducting social and labor assessments: systematic evaluations of factories’ working conditions that identify risks and drive improvements. Keep reading to gain a better understanding of what social and labor assessments are and the benefits of conducting them, both for workers and the business.

What are social and labor assessments?

Social and labor assessments, also known as social compliance audits or ethical audits, are comprehensive workplace evaluations that check working conditions in specific locations for compliance with social standards, labor laws, and companies’ own policies. 

Social and labor assessments include looking at a variety of factors at working locations, including:

• Hiring practices
• Child labor and forced labor prevention 
• Work hours and overtime
• Worker safety and health concerns
• Wage fairness
• Discrimination and harassment prevention

Most major brands worldwide require their supplier partners to complete social and labor assessments, which may involve both collecting data from factory locations and interviewing workers.

Regardless of the methods or the exact type of assessment a company conducts, the goal is to gain visibility into labor conditions at supplier factories and ensure workers are treated fairly and safely. By proactively auditing and engaging suppliers, brands can spot and address potential issues before they escalate into legal violations or public crises, while improving the overall conditions in their factories to benefit workers and their communities.

Why are social and labor assessments important?

Social and labor assessments are critical for several reasons:

Protecting workers’ rights and wellbeing: Fundamentally, social and labor assessments help uphold basic human rights in the workplace. They are a tool to ensure workers across each product’s supply chain have jobs with fair pay and benefits, in safe environments, and free from discrimination and harassment. Social and labor assessments shine a light on conditions to prevent abuses like forced labor or child labor that violate human dignity and international laws and standards.

Legal and regulatory compliance: Governments around the world are increasingly mandating that companies perform supply chain due diligence. The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), for example, went into effect in 2024 and requires companies doing business in the EU to identify and address both environmental and human rights issues. While legal and regulatory requirements will certainly change and evolve, both in the direction of more stringent requirements and less, it’s smart business to have insights into your supply chain—even when not required by law. 

Financial and reputational risk reduction: Poor labor practices pose serious risks to businesses, and being unaware of those practices is not an excuse. Companies caught with child labor, forced labor, worker health and safety hazards, or systemic mistreatment can face lawsuits, consumer boycotts, and damage to brand value. Even just allegations of these types of social and labor practices can take a large toll on a company’s reputation and its financial performance. And such allegations are extremely common, particularly in the apparel and footwear industries. 

Ethical responsibility and brand values: Consumers and investors are paying more attention to corporate ESG (Environmental, Social, Governance) performance, and brands known to ensure fair labor practices throughout their supply chain enjoy stronger reputations and customer loyalty. Social and labor assessments are a tangible way for companies to live up to their stated values on human rights, health and safety, and working conditions. They help identify misalignment between a brand’s promises and the reality on the factory floor. More importantly, they allow companies to spot potential issues early and take a proactive approach to solving problems.  

Common social and labor challenges in global supply chains

Despite progress in some areas, social and labor issues remain widespread in global supply chains, particularly in industries like apparel, footwear, home textiles, and outdoor gear that often rely on manufacturing in countries with lower-cost labor. Some of the most common challenges and issues that social and labor assessments can uncover include:

• Child labor: The International Labour Organization (ILO) estimates there are 160 million children involved in labor worldwide, with nearly half of them engaged in hazardous work.
• Forced labor and human trafficking: The ILO reports that 27.6 million people (including men, women, and children) are in situations involving forced or coerced labor, debt bondage, and human trafficking. 
• Excessive working hours: Workers in some factories face long hours and a lack of rest days, which isn’t just bad for individual worker health but also leads to more accidents and lower productivity in the long run. 
• Inadequate wages and benefits: Without proper monitoring and assessment, workers in the supply chain can be subject to less-than-living wages. They may also work unpaid overtime hours or be denied insurance or benefits they’re entitled to. 
• Health and safety hazards: Social and labor assessments often uncover issues like blocked fire exits, unsafe machine operation, and exposure to harmful chemicals without proper protective equipment. In the worst cases, buildings have structural cracks or overloaded electrical systems that pose imminent danger. 
• Vulnerable worker exploitation: The most vulnerable workers, including migrant workers, women, and temporary workers often face additional abuses that social and labor assessments can uncover. 

These challenges are often interrelated and rooted in deeper issues like poverty, gender inequality, and weak labor law enforcement. Social and labor assessments help surface these problems, however, real progress requires continuous improvement programs, collaboration with suppliers, and even industry-wide commitment to action. 

Frameworks and standards for fair labor practices

Over the years, a variety of frameworks, standards, and initiatives have emerged to guide social and labor assessments globally. Some of the most commonly used and well known standards and frameworks include the ILO’s Fundamental Principles and Rights at Work, the Fair Labor Association (FLA)’s Fair Labor Code and Fair Labor Principles, The United Nations (UN) Guiding Principles, and the Social & Labor Convergence Program (SLCP) along with its Converged Assessment Framework (CAF), which brands and manufacturers can access using the Worldly Facility Social and Labor Module (FSLM).  

What is SLCP? 

The Social and Labor Convergence Program (SLCP) is a multi-stakeholder initiative committed to improving working conditions in global supply chains. 

SLCP supports its vision of decent working conditions in global supply chains by uniting stakeholders—including more than 100 major brands or organizations and more than 15,000 facilities from over 50 countries —with its Converged Assessment Framework (CAF). The CAF, SLCP’s data collection tool, enables one assessment to be shared multiple times with stakeholders, saving time and money otherwise spent on duplicate audits. Last year, the Better Buying Purchasing Practices Index found 57% of suppliers using SLCP gained monetary savings by reducing duplicative audits, and 67% reduced staff time devoted to auditing.*

* 2024 SLCP Impact Report, page 30 

What is the CAF? 

The Converged Assessment Framework (CAF) is SLCP’s social and labor data tool used to assess working conditions in manufacturing facilities.The CAF collects a comprehensive set of social and labor data, reducing the need for multiple proprietary audits. It provides credible and actionable data that supports human rights due diligence. 

The CAF assessment process consists of three stages: collecting, verifying, and sharing data. Thanks to its widespread adoption, facilities that use the CAF can complete one assessment and share it to multiple brands using the SLCP Gateway or Worldly platform. Currently, Worldly is the only software platform acting as an Active Accredited Host for the CAF.  Currently, Worldly is the only software platform enabling completion of the CAF with the Higg FSLM.

What is the Higg FSLM? 

The Higg Facility Social & Labor Module (FSLM) is part of the Higg Index suite of sustainability solutions that Worldly hosts, including the Higg Facility Environment Module (FEM) and Product Impact Calculator (PIC). It is a standardized self-assessment using the SLCP assessment tool and process for facilities to complete and measure their social performance across areas like wages, working hours, worker voice, and worker health and safety. 

Through the Higg FSLM, Cascale has developed a standardized social and labor score that can be applied to SLCP assessments, establishing a common industry benchmark for assessing and measuring labor performance across facilities. 

Brands and manufacturers use the Higg FSLM to address systemic labor challenges and advance safe, fair, and dignified working conditions across global supply chains, while also minimizing audit fatigue for manufacturers and suppliers. The Higg FSLM ensures a transparent, consistent, and impactful approach to evaluating workplace conditions while aligning with the needs of diverse stakeholders. 

Specifically, the Higg FSLM evaluates a supplier on: 

• Recruitment & hiring
• Working hours
• Wages & benefits
• Employee treatment
• Employee involvement
• Health & safety
• Termination practices
• Management systems
• Empowering people & communities

Some key differentiators that set the Higg FSLM apart from other social and labor assessments are that facilities own and control their data and can share it with their brand and retail partners without duplicating effort; and that the Higg FSLM is accepted by over 100 brands, with more accepting it each year. 

How businesses benefit from measuring and improving labor conditions 

Despite common barriers to measuring a supplier’s labor and social performance, including audit fatigue, limited access or visibility into Tier 2 and 3 suppliers, and complex local contexts, making the effort to conduct social and labor assessments has tangible value for manufacturers and their brand and retail partners. 

Research and real-world case studies increasingly show ways that investing in workers’ well-being can pay off in ROI terms that businesses care about beyond the fundamental moral imperative of providing safe and decent working conditions. 

These benefits include: 

• Higher productivity and quality: When workers are treated well, they are healthier, more motivated, and less prone to errors. The result? Factories with good working conditions often see efficiency gains that can translate into cost savings. 
• Lower turnover and absenteeism: Poor labor practices drive high employee turnover, which is costly due to constant retraining. Improvements such as respectful management, fair wages, and safe facilities generally increase worker retention. 
• Reduced reputational and operational risks: Proactively managing labor conditions helps avoid crises that can disrupt operations and tarnish a brand. By mitigating risks of strikes, accidents, or scandals, companies ensure more stable production and supply. 
• Reduced financial risks: Investors and lenders might deny capital to companies with poor human rights records, and import authorities (like U.S. Customs) now detain shipments suspected of forced labor.
• Greater flexibility: Rich social and labor data and insights ensure companies are ready to pivot, scale, flex, and adapt their supply chain strategies as regulations and supply chain conditions change—often rapidly.
• Access to new markets: Many big buyers and governments require proof of good labor practices. Improving labor conditions ensures companies can meet these client requirements and retain market access, or even expand into new markets that competitors without social and labor data can’t, turning compliance into a competitive advantage rather than a hurdle.
• Staying ahead of compliance: Businesses can prepare for future regulations and avoid last-minute scrambles when new laws come into effect. 
• Brand value and consumer preference: In an era of conscious consumerism, a company known for ethical sourcing can differentiate itself. Positive stories about how a brand treats workers can boost customer loyalty and brand equity. 
• Innovation and continuous improvement: Engaging closely with factories on labor issues can have spillover benefits. It encourages better communication and trust between the brand and supplier. This collaboration can lead to improvements not just in compliance, but in production processes, quality, and delivery as well. 

Partner with Worldly, complete your Higg FSLM, and benefit from SLCP’s wide adoption 

Investing in fair labor conditions within your supply chain is not only a legal and moral obligation: It’s a strategic imperative for brands, retailers, and their supplier partners in today’s world. Engaging in social and labor assessments yields benefits across areas like risk reduction, resilience, reputation, productivity, worker satisfaction, and even profitability. 

As the world moves toward greater supply chain accountability, companies that champion decent work will be best positioned to thrive in the global marketplace. Measurement is the first step in the journey, yet it’s one that stakeholders find daunting and can even stand in the way of meaningful action. 

With Worldly and the Higg FSLM—built on SLCP’s framework—measurement doesn’t have to mean spending excessive time and money, or conducting multiple audits to satisfy multiple customers and partners. Factories can conduct one assessment, own their data, and share it at scale. 

Learn more about the Higg FSLM and contact Worldly to take the first step toward achieving the benefits of focusing on the social and labor data within your supply chain.