Sunday, February 28, 2010

Apple's audit of their supply chain - laudable step

Organizations that collect and publish data publicly have the best chance to make fundamental changes. Today, with widespread outsourcing and global procurement, there is a huge risk to the reputation of brand owners from the actions of their suppliers. Thorough on-going audits and corrective actions are proactive steps to address that risk. When companies make these studies public, there are going to be some dirty linen in the data.  On the other hand, making the results of the study public is a necessary step to reduce the reputation risk from the supplier actions. I applaud what Apple is doing with their supplier audits and Supplier Responsibility Progress Report.

 To quote Apple, from their supplier responsibility progress report from 2010
Apple is committed to ensuring the highest standards of social responsibility throughout our supply base. The companies we do business with must provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made.
There certainly is some dirty laundry:
In 2009, our audits identified 17 core violations: eight violations involving excessive recruitment fees; three cases where underage workers had been hired; three cases where our supplier contracted with non-certified vendors for hazardous waste disposal; and three cases of falsified records provided during the audit. In one instance, Apple’s 2008 audit had revealed falsified records for working hours and days of rest. When Apple returned in 2009 for a core violation re-audit, the facility again falsified records. At 60 facilities, we found records that indicated workers had exceeded weekly maximum of 60 work-hour limits more than 50 percent of the time.
On the other hand, the 2010 Apple report also shows progress and shows how Apple is addressing these issues.  Given this process at Apple, it would be interesting how the other hi-tech companies compare with Apple in how their suppliers treat their workers and how they are measuring and improving that.  Many Hi-Tech companies, including Sony and Dell have a code of conduct for their suppliers, but I have not been able to find a comparable process of verification and public reporting.

(Having said all these, Apple is not being consistent. I have no idea why they would oppose two petitions calling on the company to introduce new environmental governance measures and create a sustainability report by July 2010. Though there will be dirty laundry, taking the leadership role would be a good thing. )




  1. Karthik,

    Transparency does amazing things. Looking at it another way, not having that transparency lets a lot of bad things slide.

    Look at the AIG mess ( and see how the role of the New York Fed and Goldman Sachs has been helped by that lack of transparency. The New York Fed, which secretly engineered the AIG bailout, prevented the full publication of a document for more than a year. The document itemizes the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps which pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense.

    What Apple is doing is a great step.

  2. Myron, I agree.

    Lot of the media coverage of this was sensationalism: "Would you buy your iPhone from a child abuser" was the theme.

    I would have liked more of the coverage to ask why competitors of apple are not doing this. Also what Apple is trying to hide by not agreeing to do the same for sustainability.