Apple Makes Public The Results Of Its 2010 Supplier Audits . . . The Good, The Bad, And The Ugly

Has your company published a supplier code of conduct? Most likely it has. Is it conducting supplier audits to ensure that the code of conduct is being followed? Maybe. Does it have a plan in place if you turn up something truly ugly? Doubtful. Would you publish those results if they were bad? Yeah . . . probably not.

Enter Apple, which recently released its latest Supplier Responsibility 2011 Progress Report, which outlines the specific findings of its own supplier audits. The results?

“In 2010, our audits of 127 facilities revealed 37 core violations: 18 facilities where workers had paid excessive recruitment fees, which we consider to be involuntary labor; ten facilities where underage workers had been hired; two instances of worker endangerment; four facilities where records were falsified; one case of bribery; and one case of coaching workers on how to answer auditors’ questions.” (Source: Apple Supplier Responsibility, 2011 Progress Report)

 I give Apple high praise for making this information public. Hopefully, it has a ripple effect in the industry and we’ll see more transparency. Public sentiment does not separate the company that assembles an iPad from the Apple brand. Even if you’ve outsourced the supply chain, there’s still a corporate responsibility to ensure that socially and environmentally sound business practices are taking place. And this goes for subcontractor relationships too — yes, in the eyes of the consumer, you are responsible for your supplier’s supplier’s actions. Apple gets this.

 What else can other companies learn here? I encourage all vendor management organization (VMO) and governance, risk, and compliance (GRC) practitioners to read Apple’s report. It’s relatively high level but can still serve as a good foundation to cross-check again your own supplier auditing practices (see Figure 1). Here are a couple of key recommendations:

  1. Create a back-up plan when it comes to mission-critical suppliers.The types of issues that Apple has turned up are more common than most people think. Once you really ramp up an auditing program, your company is bound to unearth labor and human rights, health and safety, and environmental issues with suppliers. What’s the plan when that happens? Companies have to be ready to pull the plug on a supplier as soon as a major violation surfaces. Key takeaway: Do some deep thinking as to what constitutes a “core violation” and come up with a redundancy plan.
  2. For noncore issues, set remediation in place.Once you start terminating contracts, your other suppliers will perk up and pay more attention to their own practices and will be a lot more receptive to any remediation plans put in place. Terminating a relationship with a critical supplier is tough and can disrupt the business. Companies can get ahead of these issues by putting processes and tools in place.

What do you think? Should Apple be congratulated for its openness, or are they just trying to get ahead of the ever-pervasive media by releasing this information themselves?

Comments

Congratulated for its openness

Great perspective Patrick. While many companies have released uncomfortably honest assessments of negative situations related to their business (large oil/gas firms come to mind) Apple's transparency here is impressive.

I've written a few reports on this subject in the past (links below) and in my view, this is often the first step in what should be a very serious commitment to improving the responsibility of their supply chain. That is, they have just announced to the world that they know things are bad, so there is no excuse for not diligently working to fix the problems. And considering Apple's visibility among young, tech-savvy consumers worldwide, I'm betting there will be plenty of people tracking the compay's progress very closely.

So Patrick, to answer your question specifically, I'm not sure it matters what Apple's motivation was for releasing this information. Even if it was to stay ahead of prying media, they have put themselves out there in a big way. And as much as Apple understands the value of brand value and customer loyalty, I think we'll see them make a lot of substantial improvements for the supply partners and individual employees who contribute to the development of such successful little gadgets.

Best Practices: Managing The Responsibility And Associated Risks Of Global Business Partners
http://www.forrester.com/rb/Research/best_practices_managing_responsibil...

How The World's Leading Businesses Address Corporate Social Responsibility
http://www.forrester.com/rb/Research/how_worlds_leading_businesses_addre...

Transparency is good. A Step

Transparency is good. A Step in the right direction.
Greetings from Vienna, Austria Robert

At what cost?

Scanning over today's the headlines and blogosphere I have to wonder whether Apple would have been better off keeping this to themselves. They found the issues, took the appropriate actions and are tracking it on an on going basis - in fact, they plan to expand the number of audits being performed. I think publishing the results is in part a marketing tactic - to show how committed they are to CSR. The risk is that it will backfire big time -- the media will not see the big picture and will simply latch on to the most sensational headlines. Case in point:

Apple Admits Using Child Labor: 15-Year-Olds Worked In Factories - The Huffington Post
http://www.huffingtonpost.com/2010/02/28/apple-child-labor-confess_n_479...

The author uses of the word 'admits' in the title, synonymous with 'confess'. 'Apple's own audits expose...' would have been a more accurate way to put it. The big issue is that once one outlet publishes a title like this, others happily proliferate the noise. The Telegraph, The NY Daily News, and others have all run with diluted versions of the original report cross referencing each other's stories.

Here's another one...

Apple Admits Child Labor & Sweatshops Used to Build iPhones
http://news.change.org/stories/apple-admits-child-labor-sweatshops-used-...

And its tagged with 'Child Trafficking' as the topic.

Seriously?

This type of reporting will discourage transparency, not promote it.