Apple releases 2011 Supplier Responsibility report

Apple has released its 2011 report on Supplier Responsibility, a relatively new annual report that compiles results from audits it performs of its component suppliers and manufacturing facilities. Social responsibility at Apple’s overseas partners has become an increasingly hot topic lately—fairly or not, Apple has often been singled out over other companies—and the report offers a summary of the progress that Apple’s suppliers are making.

As Apple’s packaging often so modestly touts, the company’s products are usually designed at its U.S. headquarters in California. But like many companies, Apple’s products are primarily built by a variety of manufacturers, most of which are located in Taiwan, China, and Singapore. Over the years, stories from these factories of worker abuse, inhumane working conditions, and a Chinese employee committing suicide after losing an iPhone prototype have prompted investigations from both Apple and Chinese authorities. A 26-page complaint lobbied against Apple from 36 environmental groups in China just last month revived the topic again.

The discussion of social responsibility in these factories—and Apple’s role in facilitating it—has increased in recent years, roughly in proportion to Apple’s escalating popularity. To tackle the subject more directly, Apple began auditing its supplier’s facilities in 2007 to verify that they meet, or are aspiring to meet, various criteria of its Supplier Code of Conduct, a series of guidelines that is modeled after (but, according to Apple, are more stringent than) the Electronics Industry Code of Conduct. Apple also created its aforelinked Supplier Responsibility site and has been publishing its reports.

For its progress report this year, Apple says it audited 97 new facilities in 2010 and repeated audits at 30—that’s 14 more new audits than in 2009 and nearly double the number of repeat audits. The company investigated 127 facilities in all last year, bringing the total number of audits since 2007 to 288. The report organizes key findings, decisions, and facility improvements by a handful of topics, including employee and management training, protecting worker rights, and acquiring conflict-free materials.

Training and education

Apple introduced the Train-the-Trainer program in 2008, which educates workers, supervisors, and managers in facilities that make Apple products on things like the code of conduct, occupational health and safety, and workers’ rights. In 2010, Apple expanded the program to 29 more facilities (which were chosen based on their lower audit scores) and doubled the number of participants in 2009, reaching a total of 300,000 workers since the program’s introduction. More than 6000 supervisors and managers have also been trained on their responsibilities to their workers’s rights.

The training is working, Apple claims. A survey showed an increase in confidence among assembly line workers—59 percent in 2009, but 93 percent in 2010—that they can provide feedback without any concern of negative repercussions.

Apple says it also found a few aspects of its program in need of improvement, including class sizes, engagement through interactivity, and expanding coverage of topics around anti-harassment, anti-discrimination, and grievance mechanisms. The company says new tactics have been implemented for this year’s programs.

Another program, launched as a pilot in 2009 called Supplier Employee Education and Development (SEED), saw greater success in 2010. SEED allows workers to take computer-based classes to learn English, computer, and technical skills, and some workers are able to join associate degree programs that are linked to Chinese universities. In 2009, 14,800 workers participated. In 2010, that number rose to more than 16,000.

Protection

After one of its first audits in 2008 revealed a number of unethical hiring practices, Apple launched initiatives to combat involuntary labor through the use of excessively high recruitment fees. In short, some workers in these factories pay fees to recruitment services in order to get their jobs. While such fees are often legal in many of these facility workers’s countries—namely the Philippines, Thailand, indonesia, and Vietnam—Apple found that many were being forced to pay many months worth of wages, and therefore become steeped in debt, just to get a job.

Apple now regulates against what it calls “debt-bonded labor” by mandating that recruitment fees for the facilities it uses cannot exceed more than one month’s wages. Going one step further, Apple also requires suppliers to reimburse overpaid fees for all contract workers, even for employees who are not building Apple products. Since 2008, more than $3.4 million in overcharges have been returned, and as far as Apple knows, it is the only company in the electronics industry that mandates reimbursement of excessive recruitment fees.

After expanded audit efforts in 2010 at 20 facilities in Taiwan and eight between Malaysia and Singapore, Apple found 18 facilities where workers were forced to pay excessive recruitment fees. Apple required the suppliers to reimburse those workers and management to take classes that cover labor standards. It also invited officials from Taiwan, Thailand, and the Philippines to share information about their laws governing everything from the recruitment and management of foreign workers to direct-hire processes that reduce recruitment fees.

Fighting underage labor was another focus of Apple’s efforts in 2010. Chinese factories are increasingly turning to labor agencies and vocational schools to meet rising production demands. Worse, some sources—including schools and hiring agencies—provide false IDs to misrepresent a child’s age. In the case of one particular school, students who revealed their true ages during Apple’s investigations were threatened with retaliation.

Audits of 127 facilities found 10 that had hired workers under China’s minimum employment age of 16. A total of 49 workers from nine facilities were hired before reaching the legal age, and Apple has required those suppliers to add policies and procedures to prevent hiring underage workers. Apple found, however, that the tenth facility was responsible for hiring 42 underage workers on its own, and it intentionally ignored Apple’s requirements for changing its policies. Apple has since terminated its relationship with that facility (but does not name which one), required other facilities to reimburse educational expenses, living stipends, and lost wages for the underage workers, and reported the offending school to Chinese authorities.

Conflict-free minerals

The supply chain for various materials that Apple and many tech companies use in their products can be convoluted, ranging from family-run mines, to brokers, and commodity exchangers. Apple has been mapping its supply chain and working with the the Extractives Workgroup, a joint effort of the Electronics Industry Citizenship Coalition and the Global e-Sustainability Initiative, to validate conflict-free sources and comply with new provisions of the Dodd-Frank Consumer Protection and Wall Street Reform Act, which became U.S. law in July 2010.

In 2010 the Extractives Workgroup began audits to identify smelters which can demonstrate that they do not get their materials from conflict areas associated with the Democratic Republic of Congo or neighboring countries. Apple expects audits for smelters of two of its key materials, tantalum and tin, to be completed by the end of 2011.

Foxconn suicides

In this year’s report, Apple detailed its response to the tragic suicides of 12 workers in Foxconn’s Shenzhen factory in 2010. COO Tim Cook and other Apple executives accompanied suicide prevention experts with experience in China on a visit to the Shenzhen factory in June 2010. They wanted a better idea of the conditions at the factory and to assess how Foxconn would prevent future suicides.

Two of Foxconn’s post-suicide efforts gained attention in the media: the installation of safety nets outside the factory and an average of a 30 percent pay raise for each worker. However, company representatives denied that the latter measure had anything to do with the suicides, insisting that business had simply been good over the past year.

Apple commissioned an independent team of suicide prevention experts to interview more than 1000 workers about working at Foxconn. Per the team’s recommendations, Foxconn began implementing a number of long-term plans for improving employee well-being, including better training of care center staff and expanding operations to other parts of China so that workers can be closer to their home provinces.

Core violations

In addition to the involuntary and underage labor violations mentioned earlier, Apple outlined a number of other “core violations”—serious abuses of its Supplier Code of Conduct—that it found in 2010, as well as how it reacted to them.

Core violations included worker endangerment, health impairment from exposure to the hazardous n-hexane chemical, and employee coaching. In all but one case, facilities followed Apple’s requirements and discontinued the violating practices. Apple caught one facility repeatedly offering cash to third-party auditors in order to reduce the number of audit findings, so it subsequently terminated business with the facility.

Moving forward

Apple finishes its report by outlining priorities for 2011. The company plans to expand the reach of its social responsibility training for workers and its SEED education program. Apple says it wants to work with both industry groups and NGOs in China to tackle fundamental issues such as underage labor and employee well-being. In addition to training expansion, Apple wants to implement more aggressive audits and stronger rules to help correct bad practices and bolster preventative actions.

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