Apple's stature as one of the top tech producers in the world shines a constant spotlight on every area of its business, from its marketing materials to its sourcing practices. That latter area has drawn attention recently, following Apple's annual review of its compliance with various statutes regarding supply chain practices. When reviewing its network of suppliers this year, for instance, Apple noted some companies that refused to comply with third-party audits. Rather than continuing to work with these businesses, Apple has dropped them from the network.
10 smelters won't be audited
Supply Management reported on discoveries from Apple's 2017 Conflict Materials Report, a self-auditing document designed to show how the company is removing irresponsibly sourced materials from its supply chain. Among the smelting plants used to process high-risk materials, there were 10 holdouts that wouldn't deal with auditors. Apple instructed its supply partners to stop working with those smelters. Another six plants were taken out of the network by proactive moves by suppliers.
At the moment, there are 250 smelting plants that deal with the specified materials within the Apple supply chain. Tin, gold, tungsten and titanium are the materials in question. If plants resist audits, it becomes difficult to tell whether the metals were obtained from sites that commit human rights or environmental violations, which it necessary to remove those smelters from the supply chain.
Apple released another report on conditions at its suppliers recently. According to Reuters, this audit of organizations found a few violations of acceptable practices. Some companies were caught submitting false data on work hours. When searching for major labor rule violations, Apple detected 44 incidents, two times as many as last year.
Some suppliers were making their employees pay excess fees, which was explicitly forbidden by Apple three years ago. One of the cases involved a charge of $1 million, which workers from the Philippines had to pay before they could work for a supplier. Reuters reported that Apple ordered the company to pay the workers back what was taken.
In some other cases, firms were making workers serve for more than 60 hours a week, the upper limit demanded by Apple. In the latest data, 94 percent of suppliers complied with the rules, which represents a decline from 98 percent the year before. Similarly, the amount of companies caught falsifying hours data increased from nine in 2016 to 38 in 2017.
Vetting and reports needed
If Apple, one of the best-known companies in the world, can encounter these types of violations, it's clear that any firm can find them. Organizations of all kinds need to keep a close watch on their supplier networks, vetting extensively before signing contracts and performing the same kinds of periodic audits that have detected the flaws within the Apple supply chain.
A lack of visibility may let non-compliance with laws fester within supplier networks. Therefore, companies committed to running compliant, sustainable and responsible supply chains need to increase visibility to all levels of operations. In today's environment of well-informed and conscientious consumers, a clean audit can be valuable marketing material.