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March 28, 2017

Green Supply Chain News: Apple Continues to Up the Ante with 2017 Supplier Progress Report


Number of Full Audits Jumps to 705, as Number of Top Performers Rises 59%

By The Green Supply Chain Editorial Staff

Apple has once again released its Supplier Responsibility Progress Report, which as usual details the performance of the tech giant's supply chain against the tough standards it has set.

This is the 11th such report, Apple says, but it was really six years ago, after Apple received a lot of criticism for how workers were being treated at some of its suppliers such as contract manufacturing giant Foxconn, that Apple really upped its compliance game and the depth of the report, which set a standard of sorts for how this reporting should be done.


The Green Supply Chain Says:
Apple says that with these and other efforts, low-performing sites in our supply chain decreased by 31%, while the number of high-performing supplier sites increased by 59%.

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As opposed to an overall Sustainability report, this document is focused specifically on performance by Apple suppliers against its Supplier Code of Conduct, an evolving standard that Apple says now involves more than 500 elements or expected behaviors.

"Every year, the requirements that our suppliers must meet increase and our efforts to raise the bar continue," Apple says in the report.

What made Apple's effort really change six years ago was a much greater focus on audits of its suppliers, at multi-tiers of its supply chain, generally performed by what Apple calls "independent, third party auditors."

The audit process focuses on what Apple calls core violations, which "include underage workers or involuntary labor, document falsification, intimidation of or retaliation against workers, and egregious environmental and safety risks."

Apple says that it conducted 705 "total score" audits, up from 574 in 2015.

The process is increasingly strict.

"If year-over-year improvement is not demonstrated by a low-performing supplier, they risk losing our business," Apple wrote, adding that "In 2016, we enforced a stricter performance policy, placing any supplier with a core violation or sustained poor supplier responsibility performance on an immediate probation plan."

Apple says that as a result of its policy on inadequate performance, the company significantly reduced business allocation to 13 suppliers and cut business ties altogether with three suppliers in 2016.

Apple says that in 2016, nearly 30% of its assessments involved new suppliers. For new suppliers, Apple begins with an onboarding process, including facility site visits to review the Code of Conduct, share best practices across its supplier base, and provide suppliers a head start on developing successful management systems.

Apple adds that when it uncovers Code of Conduct violations, it can draw upon a bank of over 100 technical toolkits assembled from its extensive experience in building supplier capability across numerous areas of performane and compliance.

In 2016, Apple expanded its supplier partnership efforts by extending customized, in-person consultation to low and medium performers through a Subject Matter Expert program. An SME team consists of technical experts with deep experience in topical areas such as labor law, safety risk assessment and control, chemical engineering and industrial hygiene, machine and electrical safety engineering, and wastewater, stormwater, and air emission system design.

All of this, of course, comes at some not insignificant cost to Apple.

Apple has been perhaps the most aggressive in combatting practices of workers being forced to pay fees to get jobs at Asian factories, often in a different country from their homelands. The fees frequently are more than the workers can ever pay off, making them in some cases virtual slaves.

"Bonded labor is a core violation of Apple's Code of Conduct and we have zero tolerance for it," Apple says. If a case is found, we require the supplier to repay all recruitment fees back to the worker," a very punitive action in that the supplier itself did not likely receive the worker fees, but rather some recruiting firm.

Apple says that in 2016, uncovered violations of this policy resulted in $2.6 million being repaid to over 1000 supplier employees. To date, a total of $28.4 million has been repaid to over 34,000 workers in Apple's extended supply chain from this program.

"Repeat cases are very rare," Apple says.

Eliminating excessive overtime has recently been a major focus of Apple. In this year's report, Apple says that it tracked working hours on a weekly basis at supplier sites that employed nearly 1.2 million workers in its extended supply chain in 2016. That analysis showed supplier compliance with these overtime rules last year exceeded the 2015 results by achieving 98% working hours compliance across all work weeks.

With some firms being known to try to fake this and other payroll data, Apple says "Our cross-functionally integrated program includes careful verification of all data reported by suppliers as part of our standard assessment process."

Apple's Code also focuses on health-related issues, and it says in the 2017 it completed an annual chemical mapping at all final assembly sites, reviewing things like chemical locations, storage, and quantities, as well as ventilation and protective equipment. The company also verified that 100% of all process chemicals at all final assembly facilities were free of Apple-restricted substances such as benzene, n-hexane, and chlorinated organic solvents in cleaners and degreasers.

Apple also performed chemical-related audits at 81 additional first second tier suppliers.

Apple's report says it continued to make progress in many other areas, such as "zero waste" (total volume of waste diverted from landfills more than doubled year-over-year); water usage (suppliers conserved over 3.8 billion gallons of freshwater); reducing supplier CO2 emissions (tripled the number of supplier sites participating in its energy efficiency program); and educational programs for supplier employees, from basic skills to bachelor's degrees (700,000 participants in 2016).

It's All Showing Results

Apple says that with these and other efforts, low-performing sites in its supply chain decreased by 31%, while the number of high-performing supplier sites increased by 59%.

Scores by area were strong, with average assessment scores by area versus a perfect score of 100% as shown below:

• Labor and Human Rights: 85%
• Health and Safety: 87%
• Environment: 87%

"By holding our suppliers accountable to the highest standards and partnering with them to make lasting change, we remain steadfast in our commitment to improve lives and protect the environment," Apple concludes. notes this year's report was back to a more straightforward tone, versus the overhype that crept into the 2016 version. It is an impressive program that must involve many millions of dollars in expense, as Apple continues to lead the way in supplier oversite and compliance.

The full report is available here: Apple Supplier Responsibility 2017 Progress Report

Any reaction this year's Apple supplier report? Let us know your thoughts at the Feedback button below.

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