audit

Following the release of Apple’s “2012 Supplier Responsibility Report,” Apple announced it would be the first technology company admitted to the Fair Labor Association. The FLA will “independently assess facilities in Apple’s supply chain,” and then publish its independent findings online. Apple announced through a press release today that the first audits have officially started with FLA President Auret van Heerden and his team beginning inspections at Foxconn City in Shenzhen. Apple CEO Tim Cook said the audits are “unprecedented in the electronics industry”:
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Apple just posted its 2012 Supplier Responsibility Report highlighting its efforts to audit and improve working conditions within its supply chain. As part of the report, Apple also posted a list of 156 companies currently supplying components for Apple products that make up over 97 percent of all “procurement expenditures for materials, manufacturing, and assembly” of its entire product line globally.

The list includes Toshiba Mobile display, which is —as far as we know—currently not supplying displays for Apple. There were rumors in May that claimed Toshiba was working on a 4-inch retina display and rumors last month that Apple and Toshiba are building a plant for display production, which were later debunked by the increasingly unreliable DigiTimes. It also includes Sharp, who was recently rumored to be ruled out of iPad 3-panel production due to quality concerns but also supplies other components to Apple. The full list is available after the break.

In 2011, we conducted 229 audits throughout our supply chain — an 80 percent increase over 2010 — including more than 100 first-time audits. We continue to expand our program to reach deeper into our supply base, and this year we added more detailed and specialized audits that focus on safety and the environment.

Every year Apple audits suppliers in eight areas including: Anti-discrimination, Fair treatment, Prevention of involuntary labor, Prevention of underage labor, Juvenile worker protections, Working hours, Wages and benefits, and Freedom of association. The overall results can be seen in the graphic below. We also learned than Apple found 42 facilities delayed wages, 68 facilities did not provide proper benefits, and 67 facilities held back payments as punishment.

There were also 108 facilities failing to pay legal requirements for overtime and holiday pay, and 5 facilities with 6 active cases of underage labor, to which Apple is requiring the suppliers “support the young workers’ return to school and to improve its management systems.”

In the audits, Apple found 93 facilities currently have more than 50 percent of its staff exceeding the maximum 60 hour workweek (with one day of rest per 7 days) set by Apple’s Code of Conduct for suppliers:

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Apple has been no stranger to environmental concerns regarding their manufacturing and supply chain abroad, most recently a report from five independent environmental organizations in China in August accused the company of taking “advantage of the loopholes in developing countries environmental management systems” and awarding contracts to known polluters. Yesterday Apple responded to the accusations in a three-hour meeting with five Chinese environmental NGOs, admitting fifteen of their current manufacturing partners are contributing to pollution in surrounding areas by agreeing to perform audits of the companies. This followed several meetings with Apple following the group’s report in August, including one with Apple execs in Cupertino.

According to a report from WSJ, Ma Jun, of the Institute of Public & Environmental Affairs in Beijing, had this to say following the meeting:

“This is a major step forward… They asked these companies to take corrective plans and give a timeline, and Apple will verify whether all these issues have been resolved.”

As a result of the meeting, Apple is apparently vowing to improve its environmental standards within its supply chain, a move that could not only alter the manufacturing process of components, but also impact contracts awarded to manufacturers and suppliers in the future. According to the report, to avoid issues like massive amounts of waste water, Apple will encourage alternative manufacturing processes for components such as printed circuit boards. Apple also confirmed that this and other environmental concerns will play a role when awarding future contracts to suppliers.

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