Apple and Its Suppliers: Corporate Social Responsibility

Submitted By
Aakriti Gupta UH19066
Aayushi Kabra UH19067
Abha Lal UH19068
Abhipsha Kar UH19069
Abhishek Kalyan UH19070
CONTENTS

TOPIC PAGE NO.

Synopsis 2
Dilemma 3
External Factor 4
Our Decision 5
Potential Solution 6

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SYNOPSIS
In 2014, the smartphone industry was booming with a net revenue of $380 billion. More than
1.4 billion smartphones were sold worldwide and the industry’s major players were Samsung,
Huawei, HTC, Nokia and Apple. Like any industry, the smartphone industry reached saturation
point in the western countries. In emerging and low-income countries, however, the
smartphone industry was still growing.

Apple was, by far, the largest player of the smartphone industry and enjoyed differentiated
positioning with its cutting-edge features, superior aesthetics and proprietary operating system.
The company was founded in 1976, encroached into personal computer market in late 1980s
and finally entered the smartphone market in 2007. Apple experienced exponential growth
from 2008 as iPhone was their greatest contributor to success. According to surveys, many
customers declared blind loyalty to their Apple products especially their iPhones.

Apple had two major suppliers, Foxconn and Pegatron. Foxconn was headquartered in Taiwan
and did not produce its own branded goods. The scandal started when in 2009 a worker
committed suicide allegedly for losing a prototype of iPhone 4. It was rumoured that his
questioning came close to torture. A year later, another eighteen workers attempted suicide and
fourteen died in the manufacturing facilities. Poor labour practices and working conditions
were cited as reasons for the mishaps. The company came under scrutiny and pressure to
improve its working conditions. The company then decided to shift some of its business to
Pegatron, a Taiwanese electronics manufacturing company. In 2013, China Labour Watch, a
U.S.-based NGO whose mission was to increase the transparency of factory labour conditions
in China, released a report named “Apple’s Unkept Promises” based on an undercover
investigation into the working conditions at Pegatron factories. According to the report, 86
Chinese regulations were violated. In 2014, BBC Panorama broadcasted a documentary based
on an undercover investigation of the actual practices and working conditions of a Shanghai
factory owned by Pegatron where a variety of poor practices were exposed like overcrowded
dormitories, no proper health and safety training and workers falling asleep in the middle of
work due to exhaustion.

Apple faced multiple Corporate Social Responsibility(CSR) challenges. Firstly, Apple and its
suppliers operated in very different cultural, legal, political, social and economic environment
and hence faced different expectations like high expectations from its stakeholders while most
of its suppliers had to deal with much lower expectations. Secondly, Apple needed to maintain
close buyer-supplier relationship. Apple was notorious for its pricing policy and it was noticed
that Foxconn started losing orders around the same time it improved its labour practices due to
increase per unit cost. Thirdly, there were differences in company’s objectives regarding CSR.
Owing to its size and visibility, Apple faced more scrutiny than other companies. Lastly,
individuals also differed in their assessment of how much attention should be paid to labour
rights issues.

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DILEMMA
There are ethical dilemmas within Apple due to the variance perspectives on employment
conditions and or safety policies as well as human rights. Apple has violated the ethics
principle when associated with suppliers and sub-contractors in regards to exchanging
cheaper and cost effective production.

Also, there seems to be an ethical dilemma regarding worker’s health and safety. Apple has a
history of underage workers being hired. Apple faced social responsibility dilemmas by
ensuring workers followed their military management style. Workers being injured or even
killed due to being poisoned or involved within an explosion.

 It all started in 2009 when a worker reportedly committed suicide as he lost a prototype
of the IPhone. It was found that employer’s behavior was torturous towards that
employee. After a year Foxconn workers attempted to kill themselves and 14 died
during manufacturing. Poor labour practices were followed and many justifications
were given to subdue this matter.

 In 2011, Apple shifts some of its business from Foxconn to Pegatron

 In 2013, China Labour Watch published Apple’s Unkept Promises. This stated that:
o China violated 86 Chinese Regulation
o Used Juvenile workforce
o Violated women’s rights
o Excessive working hours
o Increased environmental pollution

 In 2014, a documentary was released by BBC Panaroma stating:

o No basic health and safety training was given

o Workers were to hand over their Id card before entering factory
o They had to work 16 hours per day
o Workers were working 18 days continuously without any leave
o No health and safety training given before doing hazardous work
o Workers used to fall asleep in middle of busy working hours
o Outside factory premises are also in worse conditions
o Dormitories overcrowded with 12 beds in a small room end to end

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EXTERNAL FACTORS

The social risk of doing enterprise is probable to increase as reputation and responsibility
converge in a global of demanding clients.
The changing communication landscape means that businesses are more and more making
use of the internet for communicating their message. Social media has started playing a
critical function in corporate conversation. Companies often communicate their brand,
marketing promotion, corporate promotion etc through social media. Most companies use
CSR initiatives to build reputation and have huge media budgets yet social media forms a
limited part of their communication and engagement process around CSR. Companies tend to
rely more on old-world media. While reports work perfectly well in communicating a
historical perspective they are little use when stakeholders demand instant answers to an issue
they may take umbrage to. Companies need to think of new ways of engaging stakeholders.

Brand Dashboards need to move from conventional thinking towards more active
engagement that tracks active trends, brand conversations to real time interfaces of service
and information delivery. Social media tends to be useful medium. One communicates
frequently rather than at the end of the year. It also acts as a useful feedback mechanism. The
intended audience responds in real time to work. It lets you know whether you are on or off
target. It also let you know the mood of the audience and you can undertake a course
correction. It also lets you communicate in very many ways. You could use text, images,
multimedia etc. Depending on the context the content can be crafted in the appropriate
manner. You could also choose the medium depending on:
– Speed of diffusion: how quickly is a message likely to spread
– Credibility of the message: How credible is a message likely to be perceived
– Detail delivered: How much detail can be provided in communication
Utilising social media for CSR communication requires several mindset changes:

Master the medium: There are several outlets that can be utilized for communicating a CSR
and Sustainability performance. Be it e-mail, blog, published reports, social media, etc. This
needs companies to master each medium to communicate effectively with their stakeholders.

Shift the focus: Sustainability reports are seen as one time efforts. We can change this one
time communication to that takes place all year round. This will provide continuous reporting
and constant engagement through real time information.

Engage the stakeholders: Companies can start thinking about stakeholders reporting their
CSR performance. This does two things. One, it engages the stakeholders. Two, the
stakeholder’s story gets told in their own way.

Leverage technology: to provide more engaging and easy to access reporting. This will bring
greater interactivity, promote partnership and enhance effective linkage with stakeholders.

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Our Decision
How Apple has improved its suppliers’code of conduct in 2019:
Apple with its strict policies had made sure that suppliers have 96 % compliance with Apple
working hour standards. In 2018 Apple has also won the stop slavery award – issued by
Thomson Reuters Foundation.

It has started giving training on vocational education, soft skills, health, and safety, so that
young employees in manufacturing can have access to skill building and through Apple’s
Factory Line leader program they can be future leaders. They have also started training
programs for employees to make them aware about labour laws and working standards.

What more can be done by Apple?

After going through the supplier code of conducts of various companies like Google, Microsoft
and Tesco we reached to a conclusion that Apple can add these points mentioned below to its
supplier code of conduct so that all the suppliers would be able to embrace the social
,environmental, and ethical responsibilities needed to treat the workers with respect.

Multistep Process: Evaluation of suppliers can be done through a multistep process to address
the potential issues. (For example, self-assessment and risk assessment by Google).

Strong Supplier Code of Conduct, which can be designed to protect the health, safety, and
treatment of workers, which includes the prohibition of any form of modern slavery, including
forced, bonded or indentured labour.

Supplier engagement, through mechanisms such as supplier self-assessments, risk

assessments, and third-party on-site audits, suppliers’ performance can be evaluated relative
to the standards.

Community investment: while working with suppliers, Apple can aspire to positively impact
not just the areas in which they work together but also suppliers’ overall operations and their
broader communities.

Partnerships: Apple can partner with NGOs, industry groups, suppliers, and peers to tackle
issues bigger than a single company can address alone.

Onsite Audits: Third party audits can be performed to determine whether suppliers meet the
standards or not. Audits can also provide valuable opportunities to raise suppliers’ awareness
of their social and environmental responsibilities.

Close Buyer-Supplier relationship: Apple can have its Apple Supplier Program through
which it can make suppliers aware of its strategies and expectations. For example, it can arrange
events to address importance of ethical conduct and the prevention of modern slavery.

Creating safe and healthy workplaces: It’s important to ensure that everyone who makes
Apple’s products or provides services, works in a healthy and safe environment. In accordance
with the Supplier Code of Conduct. Suppliers are expected to maintain safe and healthy
workplaces that comply with all applicable laws.

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POTENTIAL SOLUTIONS

 Chip away at the problems associated with contract manufacturing with a

program of iterative improvement, higher standards, constant audits and growing
transparency. This could be a better option, and in fact it’s the one that Apple is
actively pursuing, to its credit.

 Have a human rights committee established which would deal with the issues the
company is facing.

 An initiative of aggressive program of paying component suppliers and contract

manufacturers more in exchange for transparency, worker welfare and
environmental safeguards. And this option, which Apple is not pursuing adequately.
Many leading Silicon Valley companies, including HP, actively pay component
suppliers more to improve conditions. Apple’s current approach of demanding from
suppliers nearly impossible schedules, nearly impossible quality at nearly impossibly
low prices is driving many of the problems. And Apple clearly can afford to pay a little
more here. The idea that Apple squeezes every penny out of its suppliers, forcing them
to survive on thin margins while the company reports profits that exceed Google’s
revenues is the kind of reality that could make people stop buying Apple products
purely on ethical grounds.

 Focus on sustainable profits rather than just profits and ensure the suppliers
provide for a provision of safety training and equipment for the workers.

 Ink deals with suppliers who lay emphasis on fair labour practices.

 Suppliers not to be kept out of cycle and maintain close buyer-supplier

relationship Maintaining a healthy price policy and not squeezing the suppliers to
produce products at a curtailed cost

 Better auditing of conditions reported in media Proper and thorough investigation

should be done related to economic, social, environmental, physical and psychological
aspects. In addition to the above the practices should be improvised to deal with the
circumstances in an efficient manner

 Apple to be less defensive and more responsive to allegations

During the course of accused allegations, apple should be more concerned about
considering to rectify the charges cited against it through measures like improving
practices, increasing the transparency of labour conditions, etc.

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