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[9 comments]

Apple Reveals List of Suppliers

By Tom Ryan

January 17, 2012

Under pressure from labor groups, Apple for the first time unveiled a list of its suppliers and also agreed to let outside monitors audit working conditions inside the suppliers' factories.

The list came along with the company's most comprehensive report yet detailing the results of its recent factory inspections. Apple conducted 229 audits at its Asian factories, an 80 percent increase from 2010. The list of 156 companies accounted for 97 percent of what Apple pays to its suppliers.

Among the findings:

Six active and 13 historical cases of underage labor at some component suppliers were reported, but none at final-assembly partners.
Only 38 percent of suppliers adhered to its code of a maximum workweek of 60 hours.
Thirty-two percent weren't properly storing, moving or handling hazardous chemicals.
Foreign contract workers in 15 facilities paid what were deemed "excessive" recruitment fees to labor agencies.

Other violations unearthed included using machines without safeguards, testing workers for pregnancy and falsifying pay records.

Western and Asian activists have long asked Apple to follow companies such as Hewlett-Packard, Intel and Nike in revealing the names of its suppliers. Calls for greater visibility grew louder after a spate of high-profile worker suicides last year at one of the plants that supply Apple.

Some wondered if the deeper disclosures signaled a new era of transparency under new CEO Tim Cook following the "culture of secrecy" often noted under predecessor Steve Jobs.

Labor activists complained that Apple still did not identify the location of the facilities in violations and also excluded secondary suppliers, or companies providing parts to firms that directly contract with Apple. But they seemed hopeful that Apple would lead other corporations to address labor conditions and likewise offer more visibility into and accountability for foreign production.

The Wall Street Journal wrote that Apple's supplier report "could pique Chinese authorities, who have long sought to stem criticism about business practices there."

While Apple has the clout to influence suppliers, Jeff Ballinger, a global labor activist, said it would likely take paying more money by Apple to alter factory behavior. He told The New York Times, "That they don't want to do."

FINANCIALS: [NASDAQ:AAPL]

Discussion Questions

Discussion Questions: Will a greater level of supply chain transparency be required by brands in the years ahead? Are factory issues becoming more important for consumers? What are the competitive risks to Apple and other companies in providing greater visibility into production?

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Comments:

Highly visible brands will have to become more transparent. This is something that consumers are coming to expect. That said, how many consumers really make purchasing decisions based on supply chain transparency?

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Max Goldberg, Founding Partner, The Radical Clarity Group

While it feels noble to project American values onto other cultures and then arrogantly demand that they adhere to them, the end result is inevitably higher prices. At that point, the discussion usually fades.

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Bill Emerson, President, Emerson Advisors

Apple is seen as a "good guy" company by many and providing supply chain transparency is something it needed to do to maintain that image. However, as its own information shows, there are plenty of issues that need to be addressed to truly warrant that perception.

Will it spend the money to address the issues? Unknown. Do consumers care? Some do, but as Max pointed out, most people don't make purchase decisions based on events that occur or don't occur in the supply chain.

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Steve Montgomery, President, b2b Solutions, LLC

This is old news to companies that import products. Social compliance audits of supplier factories overseas have been required by major retailers for several years. Apple is late to the party due to their unique position in the marketplace.

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Dan Raftery, President, Raftery Resource Network Inc.

This is a very interesting topic. First we must remember the psychographic characteristics of the apple consumer. It is a consumer group which has more "world consciousness" than the average consumer, and after promoting itself for those who "think different" Apple is being called to task on thinking different than other companies.

I don't believe the average consumer cares, especially if commitment to caring means boycotting the product. Remember Nike and labor issues? While some consumers will never buy Nike products, there are millions who are very loyal to the brand.

I believe that supply chain transparency and factory issues will be required of companies that appeal to a consumer base that is concerned with ecology and fair labor practices. The competitive risk will be in loosing the "halo" associated with being a "responsible" company, but it is also an opportunity for the company to publicly demonstrate corporate responsibility and come out ahead.

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Carlos Arámbula, Managing Partner, Arámbula-Phillips Communications, Inc.

I don't agree that asking a company not to dump methyl-ethyl-whateveride in the local river is an "American value [that we] arrogantly demand they adhere to" (naive, perhaps, but not arrogant). That having been said, few are probably making that request, and I don't see Biff and Buffy taking out time from their busy i-Thinging activity to demand change. If transparency does become the norm, it will be in the form of meaningless PR blurbs that show smiling foreign faces, and all the transgressions either rounded out or in the footnotes.

'notcom'

As the world gets smaller, supply chain transparency becomes more visible, and is of interest to consumers -- and share holders.

On January 13, Apple announced "first technology company to join Fair labor Assoc." The investment community is interested in these efforts -- In September, the Dow Jones Sustainability Index (DJSI) announcement that Microsoft, HP and and Coca-Cola were among the 23 companies omitted from the 2011 DJSI World list.

Shareholders are interested in the Corporate Social Responsibility initiatives, including labor, of leading companies, and will continue to consider it as a metric for corporate governance.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

I suppose it's simply and completely out of the question that Apple could assemble their computers in the USA?

James Avilez, Graphic Designer, James Avilez Graphic Design

I think transparency, within reason, is key for any company. In Apple's case, they have a really strong relationship with consumers. And news like this could potentially damage that relationship, and their image.

Moreover, with the advent of social media and digital in general, this news could spread like wildfire, and result in a widespread level of dissatisfaction within a matter of weeks.

Apple could use social media to combat this from a PR standpoint. It will be interesting to hear about a follow-up to this piece on damage control, and the media they chose to run it.

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Ronnie Perchik, Founder/CEO, PromoAid

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