Question

Apple’s profile

Apple Inc. (hereafter Apple) was established in 1977 and is registered on the NASDAQ Global Select Market exchange. According to its Form 10-K ‘Apple designs, manufactures and markets mobile communications, media devices, personal computers and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications’. Its products are sold through Apple’s retail stores, online stores and third parties

Apple is a world leader in producing innovative electronic goods and technology. In 2011 Apple’s net sales were estimated at $108.2 million. Its net sales in 2011 increased by 60% compared to 2010. Apple worldwide employs 60,400 full-time people and 2,900 temporary employees and contractors. The company utilizes outsourcing through the manufacturing of its products overseas; most of the factories are located in Asia          

Apple’s CSR policies and reporting

As required by the Security Exchange Commission (SEC), Apple has made the Form 10-K annual report available on its website. The Form 10-K contains – amongst other things – information on Apple’s business strategy and organization, the company’s risk factors, legal proceedings and financial data. It also includes the business conduct policy of Apple: ‘Apple conducts business ethically, honestly and in full compliance with all laws and regulations. This applies to every business decision in every area of the company worldwide’. Furthermore, the business conducts deals with corporate governance, information disclosure, non-corruption and bribery, environmental health and safety

Apple has considered the GRI G3.1 indices relating to the economy, the environment, human rights, society and labour for its publication on Governance, Product Environmental Reports, Recycling and Facilities Environmental Report and Supplier Responsibility. For Supplier Responsibility, Apple, for example, has taken into account the indicator which reports on measures it has taken to contribute to the elimination of child labour. About Product Environmental Reports, Apple has used the EN26 performance indicator and sets out initiatives to lessen the environmental impact of its products. Apple designs its products with the aim of being as energy efficient as possible, and it is the only company that can claim all electronic goods are Energy Star qualified. Apple’s products have become more powerful while, at the same time, fewer materials are used and fewer carbon emissions are generated.

Almost all of Apple’s products are outsourced for manufacturing overseas. On its Supplier Responsibility website, Apple states: ‘Apple is committed to the highest standards of social responsibility across our worldwide supply chain. We insist that all of our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes. Our actions – from thorough site audits to industry-leading training programs – demonstrate this commitment

The Supplier Code of Conduct (Supplier Code) outlines Apple’s expectations for the suppliers it does business with. As a condition for doing business with Apple, suppliers have to commit to the Supplier Code. For the Supplier Code, Apple has adopted the Electronics Industry Code of Conduct (EICC), the guidelines and standards for the electronics sector. Through onsite audits, Apple ensures that suppliers comply with the Supplier Code. The final assembly manufactures are audited every year and the components suppliers are audited arbitrarily. Apple obliges its suppliers to respect the human rights of its workers, to inform the workers of their rights, and to treat them with dignity and respect. Apple requires from its suppliers that they prevent discrimination, involuntary and underage labour, excessive working hours and that they pay workers with wages and benefits in accordance with the applicable laws and regulations.

Apple’s conflicts

The limited transparency of Apple’s supplier sustainability policy has often been criticized in the media. In February 2010 Apple also turned down two shareholders’ sustainability proposals to establish a sustainability report on Apple’s environmental policies and the impact that climate change has on the company. The other proposal was to establish a board of directors’ sustainability committee

Labor and human rights

A well-known conflict involving Apple’s suppliers is the suicides at Foxconn. It is the largest contracted electronics manufacturer in the world, with dealings involving Dell and Sony. Foxconn is the manufacturer of iPhones and iPads and employs over 900,000 workers, of whom 420,000 employees work at the Foxconn Shenzhen plant. This plant covers 15 factories, including dormitories, a hospital, a bank, a grocery stores and restaurants. The workers live and work inside the complex

In 2006 the Chinese local press reported on the excessively long working hours and the discrimination of mainland Chinese workers by Taiwanese superiors. In May 2010 several media sources reported several cases of suicide at Foxconn. From 2009 to 2010 a total of 13 workers had committed suicide. The first worker, Sun Danyang, committed suicide after he had been interrogated on the loss of an iPhone 4 prototype that he had in his possession. When the former CEO Steve Jobs was asked about the suicides at Foxconn, he responded: ‘Foxconn is not a sweatshop

During an undercover investigation, it was discovered that the reason for the multiple suicides was related to internal management. ‘The facilities of Foxconn are fine, but the management is poor,’ revealed Zhu Guangbing, who organised the investigation. According to Audrey Tsui, a professor at the National University of Singapore Business School, Foxconn maintains a military-style management approach. The workers were not allowed to interact with each other. Workers who violated the rule were penalized with a fine or were held to be in contempt by the manager

The weekly working hours of workers were up to 70 hours, ten hours above the maximum hours set by Apple’s Supplier Code. The Foxconn factory has good facilities. The workers have access to swimming pools and tennis courts. Foxconn organises activities such as chess clubs, mountain climbing or fishing expeditions. But with a 70-hour workweek, employees did not have any time to enjoy these facilities

However, interviews with several Foxconn workers by Dreamworks China revealed that not all the employees were dissatisfied. Some believed that the working conditions at smaller factories are worse. One of Foxconn’s workers stated that employees at Foxconn thought the media had exaggerated the suicides regarding their connection to Foxconn and that possibly some suicides had a sentimental or romantic cause.

In February 2011, the media reported the child labour issues had worsened at the suppliers for computers, iPods and iPhones. Apple’s Supplier Responsibility Report 2011 revealed 91 underage workers at the suppliers

Workers’ health and safety

Concerning workers’ health and safety conditions at the suppliers, in May 2010 two workers were killed and sixteen employees were injured during an explosion at Foxconn. An Apple spokesperson stated: ‘We are deeply saddened by the tragedy at Foxconn’s plant in Chengdu, and our hearts go out to the victims and their families. We are working closely with Foxconn to understand what caused this terrible event’. In the same month, The Guardian reported that workers from Wintek had been poisoned by n-hexane, a toxic chemical used to clean the touch screens of iPhones. The employees complained that the compensation Wintek offered for the health damage was not sufficient. The workers who did receive compensation were asked to resign from their jobs.

Apple’s CSR policy post-conflict

Apple makes sure that suppliers comply with the Supplier Code by conducting audits. The audits cover working and living conditions, health and safety but also environmental practices at the facilities. According to Apple’s Supplier Responsibility Report 2010, Apple conducted 102 audits in 2009. In 2011 Apple conducted 229 audits, an increase of 80% compared to 2010. An audit is conducted by an Apple auditor and supported by local third-party auditors

In the Supplier Responsibility Report 2010, published in February 2011, Apple included a paragraph responding to the suicides at Foxconn

In the Supplier Responsibility Report 2011, Apple reports that during inspections Apple discovered ten facilities with underage labour violations. One of the facilities had a large number of underage workers. Because the management did not want to address the problem, Apple terminated businesses with this facility. Where underage labour has been discovered, suppliers are required to pay educational expenses, living stipends and lost wages for six months or until the worker reaches the age of sixteen

In November 2010, Apple set up a training programme to prevent the future hiring of underage workers. The human resources managers are trained in Chinese labour law. Training human resources managers, however, will not solve child labour issues. When the costs of labour, energy and raw materials rise and there is a shortage of labour, factory owners are forced to cut costs or to find cheaper labour. Child labour can easily be hidden by providing fake wages and work schedule data. Also, it is difficult to prevent child labour when underage workers want to work to provide for their families. The Supplier Responsibility Report of 2012 states that suppliers are obliged to return underage workers to school and finance their education through Apple’s Child Labour Remediation Program. Regarding abolishing underage labour, Tim Cook, the CEO of Apple, stated: ‘We would like to totally eliminate every case of underage employment. We have done that in all of our final assemblies. As we go deeper into the supply chain, we found that the age verification system isn’t sophisticated enough. This is something we feel very strongly about and we want to eliminate’

In the Supplier Responsibility Progress Report of 2011 Apple addressed the issue of the use of n-hexane. Apple obliged Wintek to stop using n-hexane and required Wintek to repair its ventilation system and to work with a consultant to improve its environmental health and safety systems

To take action, companies need to be transparent about their supply chain. In February 2012 Apple announced it would be the first technology company to join the Fair Labor Association (FLA) as a participating company.

------------------------quation-------------

1. At Shenzhen plant, many employees have committed suicide due to the following reason. (1 Mark)
   1. Discrimination among the employees
   2. Bad management
   3. Poor facilities
   4. Due to the explosion at the plant

Justify your choice: (50 words minimum/ 1Mark)

Answer 1

answer is (b) bad management

Foxconn keeps their employees in overcrowded dormitories run by military-like security forces. People work excessive hours, often with no compensation for overtime, which the company claims is done voluntarily. Management controls every aspect of workers’ lives, interfering with their privacy. The concept of privacy is even an illusion, as up to 24 people share a room in huge blockhouses.

Time off is usually only used for rest as people regularly work shifts of 11 to 13 hours. Working hours are so long that people sleep in the factories when a new product is being released. Additionally, if targets are not met, lunch breaks are also cancelled. Days off are rare and trips home to visit family are only allowed once a year. This is particularly concerning as most of the workers are immigrants from distant provinces.

Another problem consistent among Foxconn factories worldwide is high levels of water and air pollution in surrounding region. Disturbing odours which cause immediate respiratory problems and gas leaks have frequently occurred in many locations.

The persistent competitive advantage of Apple isn't just due to creativity, excellent architecture, and marketing. This is also a result of its dominance of the sophisticated supply chain in consumer electronics. Effectively Apple has built a decentralized network that governs every aspect of the supply chain from architecture to sale.

Disaggregating the regional value chain allows for the continuation of the most lucrative operations in US, including production, accounting, marketing and distribution. In developing nations, contractors are assigned the least lucrative labour-intensive operations, where pay and services are also much lower.