Up to 60 per cent of Chinese suppliers try to mislead retailers about working conditions as concern grows over how to ensure that manufacturers stick to standards expected by British shoppers, ethical inspectors say.

Retailers keen to avoid accusations of child labour exploitation, unacceptably long working hours or low pay have driven a rapid rise in the business of ethical inspections.

The third-party ethical audit business is estimated to have grown by 50 per cent a year over the past few years to about $50 billion (£25.5 billion) as firms cater to retailers’ increasing concern to ensure their suppliers are behaving well.

Typically companies spend 80 per cent of their ethical trade budget on such inspection regimes, which underpin their efforts to be “good” businesses.

But research by the Ethical Trading Initiative found that such third-party inspections often fail to pick up or change unethical behaviour.

An ETI meeting on the subject attended by representatives from 20 top companies including Asda, Tesco, Sainsbury’s, Boots, The Body Shop and WH Smith found that third-party auditing was characterised by a “lack of evidence or proof, failure to identify the real issues and poor value for money”. In the words of one participant: “It’s money for old rope.”

In some countries suppliers are developing an evermore sophisticated and wide range of practices, which aim to hide the truth to inspectors hired by retailers.

In China, for example, the keeping of false documentation is so common that specially designed software packages and training courses to help to keep multiple sets of work and staff records are available to help to fool inspectors convincingly.

One ETI member found that a supplier had hired outside professionals to help to coach workers to provide “correct” answers to inspectors and another found that staff had been bribed with concert tickets for a good “performance” in front of visitors. Some Chinese workers said that a particular piece of music being played in the factory was a signal for underage workers to leave were inspectors in attendance.

Martin Hearson, spokesman for Label Behind The Label, an organisation which campaigns for workers’ rights, said: “The growing consensus in the ETI confirms what we’ve been saying for years: that social audits do not deliver. When we speak to workers it’s obvious that their impact is limited. For most companies, audits seem to be more about ticking the right boxes to keep critics at bay than actually improving working conditions.”

Effie Marinos, head of corporate social responsibility management at SGS, the inspection company, said that the quality of audit carried out can vary dramatically and that a lack of verification and accreditation of auditors is unhelpful.

The ETI advises its members to ensure that any ethical inspections are well regulated and trained and suggests that retailers work together to share information on suppliers.

Alan Roberts, chairman of the ETI, said: “We want to see more companies integrating their ethical trade policies with their business practices. This could mean, for example, incentivising buyers to purchase from the suppliers who are the best employers — not just the cheapest suppliers.

Marks & Spencer, for example, runs workshops for suppliers in key sourcing countries such as China, Bangladesh and Thailand to help them to comply with its code of conduct, which is based on the ETI’s code.

Buyers learn about how their decisions can influence labour standards and the company uses Sedex, a database that shares information on suppliers’ audits.

M&S also has 120 employees working in regional offices who work directly with suppliers and can advise on ethical standards.

Krishan Hundal, head of technology for Marks & Spencer’s general merchandise division, said: “An audit only works if you then act on it. We’re now also looking at introducing new initiatives like unannounced audits and random checking.

“You need to have a package of measures — and not just rely on one part.”

Mr Roberts said that ethical audits had brought concrete benefits to workers, including improving health and safety and extension of the payment of minimum wage.

Such inspections still have an important role to play. “It’s important we don't throw the baby out with the bathwater — companies need to have a means of diagnosing where the problems are.”

It is not realistic, for example, for a retailer suddenly to demand a massive order for delivery in a short time frame at a new low price and then be surprised when the factory pushes its staff into working long hours or brings in unsuitable labour.

Ms Marinos said that the only way to bring about “sustained change” with suppliers was to work on a programme of continuous improvement in which regular inspections are combined with training and support.

She said: “The problem with saying ‘if you don’t comply we won’t source from you’ is that you don’t allow factories to show reality. Some of these issues take a long time to fix and need a lot of care and thought to fix properly.”

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