Bhupendra

Bora, Ethics and Sustainability - Apple

Apple an electronics company- designs, develops, and sells consumer electronics,
computer software, online services, and personal computers. The blast in the Chengdu
plant of Foxconn Technology, one of Apples most important manufacturing partners,
has once again highlighted the dismal work environment and serious safety problems
in various manufacturing plants that churn out thousands of devices.
Organization and Business Environment
Apple, like many other electronics giants, outsources manufacturing operations to the
developing world. The reason isn't just about cost cutting, its also the speed and
flexibility of the huge and cheaper workforce that allows for unprecedented
turnaround times on new products. And by outsourcing production to China, the
world's electronics giant is closer to the hundreds of component manufacturers,
engineers and raw-material eco-systems that its products depend upon.
But there is a human cost to outsourcing to countries with non-existent labor laws. In
case of Apple, suppliers often hire thousands of people, depending on the
requirement, to meet production quotas, press them to work excessive overtime that
leaves workers exhausted, and skirt around health, safety and environmental concerns.
All of which leaves a blot on the social responsibility of Apple that use their services.
The Ethical Dilemma & the Contextual Factors

Apple, so as to fulfill the market demand and its policy of having no large and
profit-sapping inventories, has exacerbated the situation with its own demand
of chasing a supplier offering the lowest price. This directly affects labor
conditions because a supplier has to cut its own overheads to make a margin
on worker pay, factory maintenance, working conditions and working hours.

Lack of state that either enforces its own laws or does not recognize basic and
fundamental human rights laws also aggravates the condition in China, and
this predicament has put Apple in a difficult position with regards to applying
rectifying measures.
Underestimating the supplier capacity, and their ability to deal with rapid
ramp-ups in production, can have a similar effect on working conditions. A
supplier would want more business and therefore would not be concerned
about the safety features and working conditions. Suppliers, to meet the
production schedules, use young student labor - aged 16 to 18 in the
factories.

Apples executives mention that there is an unresolved tension within the

company: executives want to improve conditions within factories, but that
dedication falters when it conflicts with crucial supplier relationships or the
fast delivery of new products, leading to the dilemma between profit, cost and
human life.

Executives at Apple report internal pressures. They agree that the system is
not pretty but a radical overhaul would slow innovation and directly impact
the huge margins that Apple get on its products. Also, customers want
amazing new electronics delivered every year.

Bhupendra Bora, Ethics and Sustainability - Apple

Recommendations

Setting up of a supplier code of conduct audit by an independent

international agency that on any violation finding can levy huge fines and
ensure immediate termination of the contract.

Apple need to identify the suppliers with optimum capacity so that awarding a
contract above the optimum capacity for a supplier doesnt lead to supplier
cutting on spending on working conditions, factory maintenance and
minimum wages.

When awarding new business, Apple needs to take previous audit results into
consideration; conduct detailed risk assessments with suppliers who have not
been audited in the past.

Apple needs to make impactful changes across its supply chain so as to

understand first-hand whats happening at the supplier factories. Every
supplier must submit a corrective action plan within two weeks of the audit,
outlining a corrective course of action. Severe violations should result in
termination.

Worker education programs and tighter monitoring of working hours for

effective management during peaks in production. This can lead to higher
productivity and better management of working hours and overtime.

Financial incentives should be provided to the suppliers for adhering to the

best practices. For example, starting an annual Best supplier award to
factories that meet ethical and environmental targets.

Apple cannot take the entire margin on a product, as all the apple products
have huge margins that should trickle down to the suppliers. As a socially
responsible company Apple needs to revisit its pricing policy towards
suppliers

An independent international monitoring agency should be set up; any

violations while awarding contracts to suppliers should lead to heavy penalties
on Apple.
International Human rights organization should hold Apple accountable for
child labor in supplier factories.

The suppliers chosen by Apple should be submitted to the Independent audit

agency on annual basis; this way Apple can maintain secrecy from its
competitors and audit agency will have the list of suppliers that they could
monitor.

Apple need to work on the business model with its suppliers; Mutually
beneficial models will allow suppliers to develop trust that they will get
manufacturing contracts in future; this assurance would help suppliers realize
that Apple can be an important ally in improving conditions for workers.