Apple's supplier code of conduct and corporate responsibility practices

Apple Corporation and Ethics

Apple Corporation and Its Corporate Responsibility and Marketing Strategies

Apple Inc.(2014) is an American corporation, which designs and produces computer hardware, software and other consumer. Its best-known products include the Macintosh personal computer line, Mac OS X, iTunes media applications and the iPod personal music player. Its headquarters are in Cupertino, California and has 284 retail locations in 10 different countries. It was opened on April 16, 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne to sell the Apple I personal computer kit. Since then, it has enjoyed a unique reputation in the consumer electronic industry. Forbes (2014) placed Apple Inc.'s market capital at $416.62 billion (Apple).

Current Position on Ethical and Social Responsibilities

Apple formulated and enforced a Supplier Code of Conduct in 2005 a year ahead of accusations of sweatshops' violations (Myers, 202; Shapiro & Nova, 2014; USSEC, 2011; Apple, 2014; Satariano & Culpa, 2014). This Code binds Apple suppliers to the highest standards of conduct in their dealings with employees, suppliers and customers. It strictly prohibits corruption, extortion and embezzlement; compels them to disclose information on business activities and related information; forbids them to offer or accept bribes; compels them to observe business standards in advertising, sales and competition; encourages and protects whistleblowers; encourages contribution to social and economic well-being; and protect and respect intellectual property (Myers, Shapiro & Nova, USSEC, Apple, Satariano & Culpa).

In 2007, Apple began conducting official supplier audits and then posting annual responsibility reports on its website (Myers, 2012). But it was not certain or clear if it did so out of the honest intention of improving suppliers' working conditions in factories or only to avoid bad publicity image and incur minimal cost by highlighting only the most obvious issues. Despite critics' suspicions on its true intentions, some of Apples decisions actually improved the conditions of suppliers' subordinates. Worth mentioning among these decisions were the pressure applied by Apple on the use of child labor for excessive overtime, the reduction of unsafe practices by suppliers, and increased benefits and pay for workers (Myers).

One major evidence of Apple's pursuit of its corporate and social responsibilities is the conduct of worker and manager training (Myers, 2012; Apple, 2014). These training programs taught managers and supervisors management practices, such as worker-management communication, anti-harassment policies and protection of workers. Workers were informed about local laws, their rights and occupational health and safety. During these training programs, they were thoroughly informed about the Supplier Code of Conduct. In addition, Apple offered them specialized training on related concerns like preventing underage labor and chemical safety. More than 2.3 million of its workers participated in these training programs since 2007 alone. Participation continues to increase since then (Myers).

Another major evidence of compliance to its corporate and ethical ode was the elimination of child labor from its suppliers' factories (Myers, 2012; Apple, 2014). Apple even clarified that the effort to eliminate child labor was not only within its supplier ranks or company-wide but also within the industry. This position was demonstrated in the case of Guangdong Real Faith Pingzhou Electronics Co. Ltd. And Shenzhen Quanshun Human Resources Co. Ltd. In Yantai. The company established a zero tolerance policy for child labor and made serious steps to return working children to school and compensated them for damages and time lost to illegal employment. The company also trained 84 high-risk suppliers in the region about the illegal practice through its Prevention of Underage Labor training program's age verification and fraud prevention (Myers).

Apple also reported having trained 350 employees on process safety topics and then sent to suppliers' factories since 2011 (Myers, 2012). This was aimed at improving workplace safety conditions. It has also trained 261 supplier personnel in the use of personal protection equipment, 95 on chemical safety, and 77 on the control of hazardous energy in factory equipment. The company likewise instructed suppliers who committed violations of occupational safety guidelines as set by the Code of Conduct to immediately correct their violations. The company also took steps in reducing the imposition of excessive overtime at its factories. It began recording and tracking down the work hours of factory employee. Those found violating were contacting. It expanded the program to track down one million employees in 2011 and published their monthly compliance rate in its annual supplier responsibility reports. It said that 92% of its suppliers complied with the requirement for factory workers to work for no more than 60 hours a week with the average work hours a week at only less than 50 (Myers).

In consultation with an International NGO, Verite, Apple came up with the Sustainable Workforce Program (Myers, 2012). It promotes open communication among workers, suppliers and the management in order to insure that workers' concerns are verbalized and handled in the most effective way possible. This initiative, Apple claims, has attracted and involved 47,000 workers and continue to facilitate dialogues and communications in all levels (Myers).

II. Impact of the Publication of Supplier Violations on Company Reputation

In response to the publication by Chinese and British journalists of evidence of labor rights violations in China in 2006, Apple published its annual reports on the working and environmental conditions of its entire supply chain (Satariano & Culpa, 2014; Shapiro & Nova, 2014). Media expressed great caution in interpreting the findings of these annual reports as they relied on corporate self-assessment. Apple also refused to make public its individual factory audits, and released only aggregate data and general claims it chose. Furthermore, the auditors were not independent of the company. Assessing and looking through Apple's own findings on the 15 categories of labor practices in its last three annual reports suggest three conclusions. One, the likelihood of labor practice violations retention remains quite high. The practices of Apple's suppliers did not comply with is own wage and benefit standards. These are illustrated by 4 out of 10 or 38% compliance violations in juvenile protection standards and 4 out of 10 or 41% suppliers' failure to comply with company ergonomic standards. Second is the mixed progress in the practices of broader labor under the human rights category as in the sharp reduction in the number of workers working more than 60 hours a week. China sets a maximum of 49 hours a week work. More importantly, Apple's code of conduct obliges supplier to obey laws. And third, no overall progress in health and safety-related practices was reported. These strongly imply and confirm that many workers in the company's supply chain continue to work under unfit conditions. Neither has Apple undertaken the necessary reforms needed to protect workers basic rights. The media also discerned many flaws in the report which are not examined. Neither does the report tackle serious labor violations in the supply chain found by independent journalists and labor rights researchers. It does not discuss the issue of freedom of association or on prices of products, delivery deadlines and production planning. The data presented in this and earlier reports show the continued and routine violation of workers' rights and efforts at deeper reform were not too clear (Satariano & Culpa).

III. Two Methods for Suppliers' Adherence to Wage and Benefit Standards

One is the introduction of auditors who are neither dependent on the continuation of labor rights violations for funding or influenced by the decision-making of corporations (Myers, 2012) The Fair Labor Association, which receive funding from corporations they audit and also led by executives of corporations found committing workers' violations themselves, cannot provide fair oversight to Apple's suppliers. Another method is the cessation of its secretive practices, which is known to all and which prevent the public from fairly and clearly observing its business practices and working conditions. It should allow greater public access to its and its suppliers' facilities. Confidentiality agreements should be relaxed or loosened. The details in the Supplier Responsibility Progress Reports should be increased. Increased transparency and greater public scrutiny will force the company and its suppliers to really improve the working conditions of its factory workers. If these are not done, they will have to incur greater negative media impressions and even lawsuits (Myers).

V. Two Actions to Improve Global Competitive Advantage

One is to exert real efforts at ridding its supply chain free of workplace abuses not only to improve working conditions in its factories (Myers, 2012). This would also set an example to many of Apple's giant consumer electronic competitors to observe the practice. Apple can do so by increasing funding for improving work environment, offer financial incentives to suppliers by shifting supply chain with preference to those with better records in observing labor laws, and reducing demand from each supplier so as to correspondingly reduce the pressure currently imposed on them to cut corners on production. An anonymous Apple executive commented that this task should not be difficult at all for Apple considering its excellent performance and huge available resources (Myers).

Another is to maintain its outsourcing operations while improving workers' conditions in supplier factories. A lot of its manufacturing tasks are performed overseas, specifically in 600 manufacturing locations in Asia, 331 of which are in mainland China (Myers, 2012). Outsourcing of manufacturing, at least for Apple, has reduced labor costs. Suppliers have established access to the huge Chinese supply chain in assembling the company's products. This has been particularly important to reducing production cost. Assembling iPhone alone has reduced the cost for each unit to 47% less than what it would cost them if assembled in the United States (Myers).

Reduced costs were not the only advantage that outsourcing has brought to Apple (Myers, 2012). It also rewarded them great flexibility in the production process. Its major partners like Asustek and Foxconn assemble iPhones in dormitories located on factory grounds. This proximity or set up allows an almost immediate use of thousands of workers and their speedy adjustments of assembly line products. Their established relationship with these contracted workers allows last-minute changes on product designs, needed changes and the production of several thousands of products each day in less than a week's notice only (Myers).

While labor rights violations are high up in the list of considerations for improving its competitiveness in the global market, Apple should keep open to the pressure placed by media and its suppliers to continue making those improvements and maintaining them. On the whole, the issue that turns up about corporate social responsibility has to do with deciding whether corporations should be solely or more strongly motivated by economic considerations than fulfilling their social and moral obligations to people under them and around them. How they should be measured and accounted for is a sub-issue. How far down the supply chain should these responsibilities go is one more consideration. There are those who believe that corporations like Apple should establish and faithfully follow a strict set of standards, which will protect the rights of those who work for them. Others, on the other hand, argue that non-corporate bodies, such as government entities, international institutions and unions should initiate and lead the implementation of labor reforms and oversight of these. Corporations more and more in recent years feel the pressure of taking responsibility for the behavior of their partners overseas. Many hope that this trend should continue until workplace abuses around the world are eliminated (Myers).

Apple Corporation and other multinational corporations must determine the extent of their responsibility in insuring the respect of workers' rights (Myers, 2012). Under the current system where the stakeholders are spread out globally, there are no clearly set standards. Corporations, subcontractors, governments, NGOs and individual workers follow different rules or systems. Yet actions must be taken when basic human rights are violated. Multinationals like Apple Corporation are becoming more and more aware of the painful and troublesome consequences of exploiting cheap labor and fostering sweatshop conditions through outsourcing, there remains a great lack of some widely accepted or acceptable and clearly defined set of global standards for appropriate corporate citizenship for everyone to follow and to control everyone. Without these standards, these corporations will tend to take risks they see fit in the primary pursuit of making and maximizing profit (Myers).