Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Wednesday, June 21, 2006

Discrepancies in Apple Supplier Code of Conduct

Responding to accusations of horrible working conditions at the Chinese factories that churn out I-pods, Apple (NASDAQ: AAPL) promised quick investigations and pointed to their Supplier Code of Conduct as proof of their commitment to decent working conditions in their s
upply chain. Yet, Sustainable Log has discovered that the CoC contains language virtually identical to that of the Electronics Industry Code of Conduct (EICC). The problem is Apple is not, nor has ever been, a member of the EICC (click for a list of members). This raises the question: If their effort at coming up with a Supplier Code of Conduct amounted to a cut and paste job, how actively are they enforcing and auditing the companies making the hundreds of components for I-pods (and, for that matter, Macs as well)?

The EICC is a consortium of large electronics companies, including Hewlett Packard (NYSE: HPQ), IBM, Sony (NYSE:SNE), and Intel (NASDAQ: INTC). Interestingly, Foxconn is also a member. Responding to my email inquiry, Dunstan Hurst of Business for Social Responsiblity (the advisory group that helped formulate the EICC principles), acknowledged the discrepancy. "
Foxconn is currently a member of the EICC but Apple is not, though you are right to conclude that the Apple Code is very similar to the EICC code." (In fact, it is virtually identical, right down to the lists of resources... this would have gotten a University student expelled)

Though nobody will argue that the EICC is a step in the right direction, one should recognize it's limitations. Since the guidelines are new, the organizations acknowledges that there are no enforcement mechanisms in place yet. They only require adopting members to formulate auditing procedures. In effect, they're on the honor system. Further, the principles provide some hedging room by indicating that they are subject to local laws. Of course, not even this applies to Apple since they have not adopted the principles.

Foxconn, for its part, denies the accusations. They, at least, have signed on to the EICC. A recent story in Business Week chronicles a surprise visit to Foxconn by the driving force of EICC adoption, HP's Bonnie Nixon-Gardiner. However, it is feasible to believe that Foxconn would gladly sign on to a bunch of principles with no mechanism of enforcement because it was a precondition to doing business with HP, Dell, Sony, IBM, and others. After all, other outsourcers such as Flextronics and San-Mina have signed on as well.

To summarize the controversy, the British Daily Mail published pictures of the so-called "I-Pod City" facility in Foxconn's Tzinghua factory. According to Foxconn's own releases, the Taiwanese company employs 1 million people, 200k of which are at this facility. This fact is itself amazing, considering that the company also provides room and board for the employees. As the Mail put it, as many people live and work in this facility as live and work in Newcastle, England. The article showed pictures of packed dormitories and morning exercise drills. Laborers indicated that they were forced to work overtime for a cumulative of about $50 USD per month. Foxconn denies that workers are forced to work overtime and says that the minimum wage for the province is $72.50.

With regards to the Apple-Foxconn imbroglio specifically, there may be nothing there. The blogosphere has latched onto the pictures and the emotional accounts of workers (mostly poor, rurual women). There is no telling at this point whether this life offers a better chance than subsistence agriculture in the Chinese countryside. However, I see Apple's defense as half-hearted at best. If there are doubts about Foxconn, what do we know about the dozens of contractors and subcontractors not on the EICC list?

Full disclosure: I had a brief period of employment with Apple's Education Sales Organization during grad school, but had no involvement whatsoever with manufacturing operations.

9 Comments:

Anonymous DNA said...

Dont be dumb

Everything electronic that is mass-produced is manufactured with cheap foreign labor

FoxConn is a highly respected company, with extremely high quality production

If you look at the bottom of the EICC document you will see Foxconn as an endorsing party

Of course the documents are similar by nature

Even if Apple did cut and paste this EICC Document, it carries no copyright and it even says on it "Other companies are invited and encouraged to adopt this code."

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