An ESG audit evaluates a company’s environmental, social, and governance performance. It is a comprehensive way to ensure a business operates responsibly and sustainably. Having a structured audit checklist is crucial to companies looking to improve their ESG performance. A well-designed ESG audit checklist helps businesses systematically review their practices and policies. It covers everything from compliance with laws and regulations to the ethical treatment of employees and environmental stewardship. By following a detailed checklist, companies can identify areas of improvement, address potential risks, and demonstrate their commitment to responsible business practices. Drawing from our 40 years of auditing experience, Pro QC has developed an ESG audit checklist that is thorough, practical, and tailored to meet the needs of various industries. In this article, we will introduce the checklist and explain how our social auditors conduct ESG audits. What Does an ESG Audit Checklist Cover? Pro QC’s ESG audit services integrate components from renowned standards such as SA8000, SMETA and RBA, ensuring a comprehensive evaluation that aligns with global best practices. This audit requires 1.5 days on-site with one social auditor. Pro QC’s ESG audit checklist covers the following elements: Management Responsibility: Evaluating if there is accountability within the organization and systematically ensures adherence to local and international laws, and maintaining legal and ethical operations across the organization Child Labor: Verifying the absence of child labor is crucial for upholding human rights and protecting vulnerable populations. Working Hours: Monitoring working hours ensures fair labor practices and prevents worker exploitation. Wages and Benefits: Assessing wages and benefits guarantees that employees receive fair compensation and necessary benefits. Health and Safety: Evaluating health and safety measures is vital for providing a safe working environment for employees. Non-Discrimination: Ensuring non-discrimination promotes equality and a diverse, inclusive workplace. Coercion and Harassment: Preventing coercion and harassment is critical for maintaining a respectful and supportive work environment. Environment: Assessing environmental practices helps ensure sustainable operations and minimal environmental impact. Business Ethics: Evaluating business ethics ensures that the company operates with integrity and transparency. How to Conduct an ESG Audit? In this section, we will outline the specific items we examine in each part of the checklist and explain how we gather the necessary evidence. We begin with the collection of general information, the identification of key personnel, verification of certificates, and worker analysis. Then, we delve into each of the nine sections of the ESG audit checklist (from A to I) for a comprehensive evaluation. 1. Collecting General Information The first step in conducting an ESG audit is gathering general information about the supplier or factory being audited. Screenshot from Pro QC’s ESG audit checklist: Supplier and Factory Details The auditor starts by collecting basic information about the supplier or factory. This includes: Supplier Name: the official name of the supplier, in English and the local language if applicable. Full address of the factory Contact Information: the contact details of our key contact at the supplier for the audit. Company Website Operational Details The following information is important to understand the operational context of the supplier. Year Established: this helps gauge the experience and stability of the supplier. Business License Number: to ensure the company operates legally. Size of Production Area and Size of Warehouse Area Opening hours/working days This initial step ensures that we understand the supplier’s identity, operational scope, and legal standing. These are all essential for an accurate and thorough ESG assessment. 2. Personnel and Participants Identifying and understanding the key personnel and participants involved in the ESG audit is a crucial part of the process. This step ensures we have a clear picture of who is responsible for various aspects of the operations and who will be providing the necessary information during the audit. Key Supplier Personnel We document the primary contacts and management team at the supplier’s site, including their contact details. Participating Supplier Personnel We identify the supplier personnel who will be actively participating in the audit. This includes: Interviewees: Employees selected for interviews, both from management and the general workforce. Support Staff: Personnel assisting with providing documents, access to facilities, and other logistical support during the audit. Screenshot from Pro QC’s ESG audit checklist: Collecting Certificate Information For each certificate, collect the following detailed information: Certificate Title Issuing Body Certificate Number Issue Date Expiry Date Scope of Certification Screenshot from Pro QC’s ESG audit checklist: 4. Worker Analysis and Interviews Analyzing the workforce helps to understand the composition, treatment, and conditions of the workers at the supplier’s site. It ensures that labor practices comply with legal standards and ethical guidelines. This step is done through the verification of documents and employee interviews. Workforce Composition We document the overall composition of the workforce. This includes: Total Number of Workers Gender Breakdown Employment Types (permanent, temporary, agency, or home workers) Nationalities Screenshots from Pro QC’s ESG audit checklist: Worker Interviews It is essential to conduct confidential interviews with a representative sample of workers to gain insights into their working conditions and treatment. We always ensure these questions are asked confidentially to protect workers’ identities and responses. We compile the data from the interviews and observations to identify any patterns or areas of concern. The key areas to cover during the interviews include: Remuneration: we ask workers about their wages, including whether they receive the legal minimum wage, overtime pay, and other benefits. Working Hours: we inquire about their working hours, including regular hours and overtime. Ensure that the hours comply with legal limits. Contractual Status: we confirm workers have valid labor contracts and understand their terms. Health and Safety: we gather information on their perceptions of workplace safety and health conditions. Ask if they have access to necessary safety equipment and training. Treatment and Harassment: we ask if they have experienced or witnessed any harassment or unfair treatment. Screenshot from Pro QC’s ESG audit checklist: The interviews also provide an overview of the overall employee morale: General Sentiment: the general sentiment among employees, noting whether they feel valued, respected, and satisfied with their jobs. Specific Concerns: the concerns or recurring themes that emerged during the interviews. We also gather the perspectives of the management by interviewing key managers: Commitment to ESG: we note the management’s commitment to ESG principles and their efforts to implement related policies. Challenges: we identify any challenges management faces in implementing ESG practices, such as resource limitations or regulatory hurdles. Interviews provide valuable insights into the real-world application of the supplier’s ESG policies and practices, helping to identify areas for further improvement. 5. Detailed Compliance Sections of the ESG Audit (from A to I) In this section, we explore the specific areas of compliance covered in our ESG audit checklist. Below, we outline the key compliance sections to be assessed and explain our audit methods for each. A. Management Responsibility This section evaluates whether the supplier has established accountability within the organization to systematically ensure adherence to local and international laws and maintain legal and ethical operations across the organization. When evaluating whether an organization has a systematic approach to ensuring compliance with ESG regulations, an auditor would first identify the accountable personnel (or lack thereof) and examine each of the following types of evidence: Labor compliance: Documented policies and procedures for hiring, wages, hours, overtime, and worker rights Health and Safety: Documented health & safety policies, procedures, and risk assessments Environmental compliance: Environmental policies, procedures, management systems, and the necessary permits and licenses. Business Ethics: Code of conduct, anti-corruption policies, and procedures for reporting violations By reviewing these high-level documents, it usually becomes immediately clear whether the supplier’s management team is systematically approaching these compliance areas. This evidence provides insight into the organizational maturity in each compliance domain, which will help the auditor determine the appropriate focus and depth of the audit for the rest of the chapters. B. Child Labor Preventing child labor is a key aspect of ethical business practices and is one of the main focuses of ESG audits. To verify this element, we check whether the supplier complies with laws and regulations prohibiting child labor and ensure all employees meet the legal working age. The key components include: Minimum Age Policy: A clear statement of the minimum legal working age in accordance with local laws and international standards. Age Verification Process: Procedures for verifying the age of all new hires to ensure compliance with the minimum age policy. Remediation Plan: A documented plan for addressing situations where child labor is discovered, including steps for the safe and supportive removal of underage workers from the workplace. How to obtain the information? Information is obtained through interviews, on-site observations, and documentation review. The documents to check are: Information is obtained through interviews, on-site observations, and documentation review. The documents to check are: ul> Employee Records: Review records to confirm that all employees meet the minimum age requirement. This includes checking identification documents and birth certificates. Hiring Practices: Ensure that the hiring process includes age verification steps are consistently followed. Training Records: Check that managers and HR staff are trained on child labor policies and the importance of compliance. Examples of elements included in our ESG audit checklist for evaluating child labor components: Age Verification: Are all employees above the legal minimum working age? Does the company have a reliable process for verifying the age of new hires? Remediation and Support: Does the supplier have a clear plan for handling cases where child labor is discovered? Are there procedures in place to support underage workers in transitioning to appropriate educational or vocational programs? Training and Awareness: Are all relevant staff trained on child labor laws and company policies? Is there ongoing training to keep staff updated on any changes in legislation or best practices? Screenshot from Pro QC’s ESG audit checklist: C. Working Hours Ensuring that working hours comply with legal standards and ethical guidelines is an essential part of the ESG audit. This section assesses whether the supplier manages working hours fairly and in accordance with applicable laws. We assess the supplier’s policies on working hours. Key elements should include: Standard Working Hours: Policies outlining the standard working hours per day and per week. Overtime Policies: Guidelines on how overtime is managed, including limits on overtime hours and compensation. Rest Days and Breaks: Policies ensuring that employees receive adequate rest days and breaks during their work shifts. How to obtain the information? Information is obtained through interviews, on-site observations and documentation review. The documents to check are: Timekeeping Records: Review records of working hours, including clock-in and clock-out times, to ensure accuracy and compliance. Overtime Logs: Check logs of overtime hours, including the reasons for overtime and how it is compensated. Payroll Records: Verify that overtime payments are correctly calculated and paid in accordance with legal requirements. Examples of elements we cover to verify the working hours comply with legal standards: Standard Working Hours: Do the working hours comply with local laws and regulations? Are employees aware of their scheduled working hours? Overtime Management: Are overtime hours voluntary and within legal limits? Are employees fairly compensated for overtime work? Rest Days and Breaks: Do employees receive at least one full day off per week? Are there adequate breaks during work shifts, including meal breaks? Screenshot from Pro QC’s ESG audit checklist: D. Wages and Benefits During the ESG audit, the auditor will evaluate whether the supplier compensates employees in compliance with legal standards and provides appropriate benefits. The key elements to assess the supplier’s wage policies should include: Minimum Wage: Policies ensuring that all employees receive at least the minimum wage as mandated by law. Overtime Pay: Guidelines for compensating employees fairly for overtime work. Payment Frequency: Policies outlining how often employees are paid (e.g., weekly, bi-weekly, monthly). How to obtain the information? Information is obtained through interviews, on-site observations, and documentation review. Key documents to check include: Payroll Records: Review payroll records to ensure accurate and timely payment of wages, including regular and overtime pay. Payslips: Check that employees receive detailed payslips that clearly state their earnings, deductions, and net pay. Benefits Records: Verify records of benefits provided to employees, such as health insurance, retirement plans, and paid leave. Examples of elements we cover for auditing the wage policies of the supplier: Minimum Wage Compliance: Are all employees paid at least the legal minimum wage? Are wage rates clearly communicated to employees? Overtime Pay: Is overtime compensated according to legal requirements? Are employees aware of their overtime pay rates? Payment Frequency and Method: Are employees paid regularly and on the scheduled pay dates? Are wages paid through secure and reliable methods? Screenshot from Pro QC’s ESG audit checklist: E. Health and Safety Health and safety are critical to protecting employees and preventing hazards, injuries, or fatal incidents. To ensure the supplier maintains a safe working environment and complies with all relevant health and safety regulations, we examine the following elements: Employees Awareness and Training: Ensuring all employees are trained and aware of health and safety protocols. Fire Safety Installation and Equipment, Electrical Safety: Checking the presence and maintenance of fire safety installations and electrical safety measures. Chemical Safety, MSDS, PPEs: Ensuring proper handling, storage, and use of chemicals, availability of Material Safety Data Sheets (MSDS), and provision of Personal Protective Equipment (PPE). Sanitation Installation, Restrooms, Canteen: Verifying the availability and cleanliness of sanitation facilities, restrooms, and canteen areas. Accident Log and Handling, Medical Care / First Aid / Medical Kits: Reviewing records of accidents and incidents, and ensuring the availability of medical care and first aid kits. Risk Assessment for Young, Pre/Post-Natal Female Workers: Assessing the risk management procedures for vulnerable worker groups. Machinery Maintenance Plans and Records: Ensuring that machinery maintenance plans are in place and records are maintained. Legal Certificates/Licenses/Registration for Special Equipment: Verifying the validity of certificates, licenses, and registrations for special equipment. Personal Protective Equipment (PPE): Ensuring the provision and use of appropriate PPE. How to obtain the information? While it is important that our auditor investigates if there is a systematic health and safety policy and procedures in place, the auditor primarily relies on direct observation to identify violations, rather than solely on procedures and records. Pro QC has developed a practical onsite inspection checklist for this purpose. Information is obtained through interviews, on-site observations, and documentation review. The list of documents we verify includes: Safety Manuals: Ensuring comprehensive safety manuals are accessible to all employees. Training Records: Checking records of safety training sessions, including attendance and topics covered. Incident Reports: Reviewing records of workplace accidents and incidents, including investigations and corrective actions taken. Maintenance Records: Reviewing maintenance logs for machinery and safety equipment. Risk Assessment Reports: Verifying risk assessments conducted for different worker groups and job functions. Compliance Certificates: Checking for the validity of legal certificates and licenses related to health and safety. Examples of elements we check when assessing the supplier’s health and safety practices: Emergency Preparedness: Are emergency exits clearly marked and accessible? Are fire alarms and fire extinguishers available and regularly inspected? Is there a clear evacuation plan in place? Workplace Safety: Are machines equipped with necessary safety guards and emergency stop buttons? Are hazardous materials properly labeled and stored? Are safety signs and warnings clearly displayed? Health Programs: Are regular health check-ups provided for employees? Is there access to clean drinking water and sanitary facilities? Are there programs for the health and safety of young, pre/post-natal female workers? Screenshot from Pro QC’s ESG audit checklist: F. Non-Discrimination Ensuring non-discrimination in the workplace is essential for promoting fairness and equality. This section evaluates whether the supplier has effective policies and practices to prevent discrimination and foster an inclusive environment. The auditor controls the supplier’s non-discrimination policies, including: Equal Opportunity Policy: A policy that ensures equal employment opportunities for all employees, regardless of race, gender, age, religion, sexual orientation, disability, or any other protected characteristic. Anti-Discrimination Policy: Guidelines that prohibit discrimination in hiring, promotions, job assignments, wages, benefits, training, and any other aspect of employment. Harassment Policy: Policies that prohibit harassment and outline procedures for reporting and addressing complaints. How to obtain the information? Information is obtained through interviews, on-site observations, and documentation review. Key documents to check include: Employee Handbooks: Ensure that the non-discrimination policies are clearly documented and accessible to all employees. Training Records: Review records of training sessions conducted to educate employees and management about non-discrimination and harassment policies. Complaint Records: Check records of discrimination complaints and how they were resolved, ensuring that the processes are fair and transparent. Examples of elements we cover for auditing this section: Equal Opportunity: Are hiring and promotion practices free from discrimination? Are job advertisements and descriptions non-discriminatory? Anti-Discrimination: Are there clear policies prohibiting discrimination based on protected characteristics? Are these policies communicated to all employees? Harassment Prevention: Are there clear policies against workplace harassment? Is there a process for reporting and investigating harassment complaints? Screenshot from Pro QC’s ESG audit checklist: G. Coercion & Harassment This section of our ESG audit checklists aims to evaluate whether the supplier has effective policies and practices to prevent any form of coercion and harassment. We review the supplier’s policies on coercion and harassment, including: Anti-Harassment Policy: A clear policy that defines and prohibits all forms of harassment, including sexual harassment, bullying, and any form of physical or verbal abuse. Coercion Policy: Guidelines prohibiting coercion, including threats or pressure to force employees to act against their will. Reporting Procedures: Procedures for employees to report incidents of coercion or harassment safely and confidentially. How to obtain the information? Information is obtained through interviews, on-site observations and documentation review. Key documents to check include: Employee Handbooks: Ensure that the policies on coercion and harassment are clearly documented and accessible to all employees. Training Records: Review training session records conducted to educate employees and management about the policies and procedures for preventing and addressing harassment and coercion. Complaint Records: Check records of harassment and coercion complaints and how they were resolved, ensuring that the processes are fair and transparent. Examples of elements we cover for auditing coercion and harassment prevention practices: Anti-Harassment: Are there clear policies prohibiting all forms of harassment? Are these policies communicated to all employees? Preventing Coercion: Are there policies in place to prevent any form of coercion? Are employees aware that they should not be coerced to perform tasks against their will? Support and Protection: Are employees protected from retaliation when they report harassment or coercion? Is there support available for victims of harassment or coercion, such as counseling or legal advice? Screenshot from Pro QC’s ESG audit checklist: H. Environment The ESG audit checklist of Pro QC assesses the supplier’s environmental practices and compliance with relevant environmental regulations. During the audit, the auditor reviews the supplier’s environmental policies, including: Pollution Control: Measures to reduce air, water, and soil pollution. Resource Management: Efficient use of natural resources, including energy, water, and raw materials. Waste Management: Safe and responsible waste disposal, including recycling and hazardous waste handling. How to obtain the information? Information is obtained through interviews, on-site observations, and documentation review. Some of the key documents to check are: Environmental Impact Assessments: Reports that identify the environmental impacts of the supplier’s operations and measures to mitigate them. Permits and Licenses: Valid permits for emissions, waste disposal, and other environmental aspects. Monitoring Records: Records of environmental monitoring, such as air and water quality tests, noise levels, and waste management logs. Examples of elements we assess when auditing the supplier’s environmental practices: Pollution Control: Permit for onsite waste disposal. Contract with a legal entity for the collection and treatment of waste. Control of airborne emissions and programs to report emissions. Resource Management: Policies for the efficient use of water and energy. Utilization of renewable resources and energy sources where possible. Waste Management: Proper segregation and storage of waste. Handling of hazardous wastes according to legal requirements. Environmental Compliance: Valid permits and licenses for environmental aspects. Regular assessment and reporting of environmental impacts Screenshot from Pro QC’s ESG audit checklist: I. Business Ethics We review the supplier’s ethical policies to ensure they conduct business fairly and responsibly. The main policies are: Anti-Bribery and Anti-Corruption: Policies that prohibit any forms of bribery, corruption, and extortion. Respect for Intellectual Property: Policies that respect intellectual property and safeguard information. Sub-Supplier Ethical Compliance: Programs to ensure sub-suppliers meet ethical requirements. Conflict Materials: Policies addressing the use of conflict materials (Application to 3T1G and UFLPA). Supplier Chain Due Diligence and Traceability: Policies ensuring due diligence and traceability in the supplier chain. How to obtain the information? Information is obtained through interviews, on-site observations, and documentation review. Key documents we check include: Anti-Bribery and Anti-Corruption Policies: Documents outlining the company’s stance and guidelines against bribery and corruption. Training Records: Records of training sessions conducted to educate employees about ethical standards and practices. Code of Conduct: A documented code of conduct that outlines the expected ethical behavior of all employees. Incident Reports: Documentation of any reported ethical breaches and the actions taken to address them. Supplier Contracts and Agreements: Documentation ensuring sub-supplier compliance with ethical standards. Conflict Materials Reports: Reports on sourcing and handling conflict materials. Due Diligence and Traceability Reports: Documentation of due diligence processes and traceability practices in the supply chain. Ethics Training Records: Records of training sessions on ethics and compliance for employees. Audit Reports: Previous internal or external audit reports related to business ethics and compliance. Examples of elements we cover when auditing the business ethics of the supplier: Anti-Bribery and Anti-Corruption: Is there a clear policy prohibiting bribery and corruption? Are employees trained to recognize and report bribery and corruption? Are there mechanisms in place to report unethical behavior anonymously? Respect for Intellectual Property: Does the supplier have policies to respect and protect intellectual property? Are there safeguards in place to protect proprietary information? Sub-Supplier Ethical Compliance: Is there a program to ensure sub-suppliers comply with ethical requirements? Are sub-suppliers regularly audited for ethical compliance? Conflict Materials: Are there policies addressing the use of conflict materials? Is there a procedure to ensure compliance with regulations like 3T1G and UFLPA? Supplier Chain Due Diligence and Traceability: Are there policies ensuring due diligence in the supplier chain? Is there a system for traceability of materials and products throughout the supply chain? Screenshot from Pro QC’s ESG audit checklist: ESG Audit Scoring and Summary The risk score and audit summary provide an overall assessment of the supplier’s compliance with ESG standards. This section summarizes the level of risk associated with different areas of the supplier’s operations and key audit findings. Screenshot from Pro QC’s ESG audit checklist: Understanding Risk Scores The risk score is a numerical representation of how well the supplier meets various ESG criteria. The scoring method typically follows these guidelines: Complies (C): The supplier meets the requirements completely, scoring 3 points. Opportunity for Improvement (OFI): There are minor issues that can be corrected, scoring 2 points. Minor Non-Conformance (Minor NC): Moderate risks that indicate partial failure to meet requirements, scoring 1 point. Major Non-Conformance (Major NC): Significant risks that need immediate attention, scoring 0 points. Not Applicable (N/A): Certain criteria may not apply to the supplier, and these do not affect the final score. Each compliance chapter is scored separately to show the strengths and weaknesses in different areas. The overall risk level is determined based on the average score across all chapters. Risk Levels The overall risk level is categorized as follows: Low Risk: 90% to 100% compliance Medium Risk: 60% to 89% compliance High Risk: 59% and below compliance Scoring Guidelines The following guidelines are used to determine the risk scores: Complies (C): No risk of harm to workers, communities, or the environment. The supplier demonstrates effective implementation of required activities. Opportunity for Improvement (OFI): No observed risks, but the potential for improvement exists. Minor Non-Conformance (Minor NC): Moderate risk due to partial failure in the supplier’s management system. Major Non-Conformance (Major NC): Significant risk requiring immediate corrective action. Key Findings We highlight the key findings from the audit: Areas of Strength Areas Needing Improvement Critical Risks Recommendations Based on the audit findings, we provide recommendations to help the supplier improve their ESG performance: Immediate Corrective Actions: List actions to be taken immediately to address major non-conformances and critical risks. Long-Term Improvements: Suggest long-term strategies for improving overall compliance and reducing risks. Follow-Up Audits: Recommend scheduling follow-up audits to verify the implementation of corrective actions and ensure continuous improvement. This scoring and comprehensive overview are essential for making informed decisions about ongoing and future engagements with the supplier. Conclusion In conclusion, the ESG audit provides a comprehensive assessment of the supplier’s adherence to environmental, social, and governance standards. This audit helps identify strengths and areas needing improvement, ensuring that the supplier operates responsibly and sustainably. Sustaining high ESG standards requires ongoing effort and commitment. Regular audits, continuous monitoring, and updating policies and practices are essential for continuous improvement. Encouraging a culture of transparency, accountability, and ethical behavior will help the supplier maintain compliance and achieve long-term success. About Us Pro QC International is a global quality assurance company providing product inspections and supplier audits for over 40 years. We offer comprehensive and tailored solutions across a wide range of industries, ensuring that clients secure their supply chains and receive the highest quality products. Our range of social compliance audits includes ESG audits, SA8000 audits, and SMETA audits. We operate globally, with a presence in over 88 countries, demonstrating our extensive experience and commitment to quality. For more detailed information about Pro QC International and our social audit services, please contact us.
