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.