Mixed Signals from Apple on Pollution Report

Apple’s response to a recent report by Chinese environmental NGOs, in which it came under heavy fire for pollution from suppliers, has been characteristically vague and evasive, but the company has also shown some signs of willingness to discuss the issue with the groups behind the study.

“Apple is committed to ensuring the highest standards of social responsibility throughout our supply chain,” Apple said in an e-mail reply Wednesday to the organizations making the allegations. Apple said the companies it does business with “use environmentally responsible manufacturing processes.” […]

Apple said there are “discrepancies” in the list of suppliers mentioned in the report and suggested a “private conference call” with the NGOs behind the report, a move that the Institute accepted.

“This is progress, and we welcome it,” said Ma. “We sent a different pollution report to Apple earlier this year, but received no response.”

Cleaning up the supply chain would undoubtedly be a Herculean task. In his Letter from China at The New Yorker, however, Evan Osnos notes the formidable resources at Apple’s disposal in China, citing Wikileaked cables about its campaign against counterfeiting:

Shruhan was … impressed with the forces Apple could muster: the company had “internal controls at subcontracted facilities” and independent audits “good enough” to guard against workers making knock-offs in their spare time. Moreover, “Apple’s system for tracking each product’s unique serial number appears very effective, and more sophisticated than Pfizer’s,” the embassy wrote. Moreover, once Apple realized it faced a real threat to its business, it was prepared to marshal “not only a team of investigators, which Shruhan has subcontracted, but also tools like a laboratory to begin accurately tracing the source of counterfeit goods. A lab that can perform forensic analysis on individual parts like batteries, for example, can help to locate high-volume manufacturers of such component parts.” As he put it, his team “does 95 percent of the investigative work,” then turns its files over to Chinese authorities, and “gives the [local authorities] 100 percent of the credit.” […]

… If Apple can marshal as much energy and creativity against pollution as did against counterfeiters, then it will live up to the fragile reputation it is building among China’s many new fans.

At chinadialogue, corporate social responsibility consultant Joshua Wickerman writes an open letter to Jobs’ successor:

That I wrote this letter is as unexpected as it is important. I abandoned most of my activist rhetoric in college, deciding to stake a career on working to cultivate enlightened corporate self-interest as the quickest way to a sustainable world. I usually work with and for corporations to help them be green, responsible and competitive. So don’t take this letter as an attack from an environmental purist ….

Nevertheless, what Ma Jun showed me is shocking. I was so saddened by the evidence of your supply chain environmental mismanagement that I wrote this letter (now updated) and posted it online. Ma Jun, head of one of China’s most prominent environmental organisations, has been in contact with you and offered to help you clean up your supply chain, but you have chosen to ignore his offer.

What is going on? Do you assume that Chinese civil society is too weak to expose you, or that your non-Chinese customers fail to care about the inhabitants of hard-to-pronounce Chinese factory towns? Or that your growing Chinese customers won’t find out? Are you expecting just to hide this information?

You are running out of time to make amends before your brand takes a beating like that experienced by Nike in the late 1990s when it ignored accusations that its products were produced using sweatshop labour. Think different. How you respond to the truth is going to sway a lot of your faithful, your bottom line and your brand.

New CEO Tim Cook, meanwhile, received an apology from Chinese web giant Tencent, who had described him as “a sufferer of homosexuality”. From Shanghaiist:

The use of the term, once widespread but abolished since homosexuality was struck off the official list of psychological disorders in 2001, sparked anger among China’s gay and lesbian community.

Leading activists have lambasted the company, saying this was not the first instance Tencent has been accused of spreading homophobia. Just recently, in the wake of the Lü Liping saga, Tencent published an article that appeared to justify the award-winning actress’s homophobic sentiments. Netizens subsequently discovered that the writer of the article was himself a Christian fundamentalist and criticised the company for giving the writer a platform to air his religiously-informed homophobia.

While government and suppliers themselves bear some responsibility for managing industrial pollution, Guo Peiyuan argues at chinadialogue that this should not excuse vendors such as Apple:

There are those who defend Apple, saying it has no factories in China and no responsibility for pollution created by its suppliers. Legally speaking, this is correct, but it runs counter to the industry tide. In many sectors, particularly electronics, a consensus is emerging around Extended Producer Responsibility (EPR). EPR means firms are not only responsible for the businesses they manage directly – that they own or control – but also the whole life-cycle of their products. Proper management includes explicitly banning the use of toxins or harmful substances in electronic goods, and the appropriate handling of discarded electronics at the end of their useful life ….

Of course, in the long term it is crucial to reflect what is right and reasonable in legislation. Only an improved legal framework and strict enforcement can bring about real change. There are two steps needed here: first, the joint liability that brands bear for regulatory breaches by their suppliers needs legal definition. Problems like those surrounding Apple today would then become legal problems, while the ethical risks the company faces would become legal or even financial risks – and be taken more seriously as a result.

This kind of joint liability is not unreasonable: it is like the middleman who knowingly sells on stolen goods for a profit – he isn’t a thief, but still bears responsibility. Of course, in actual implementation there will still be technical issues, such as the need to be clear as to whether or not the brand knew of the suppliers’ breaches, or even if it forced the breaches. These matters are for the legal draftsmen to work through.

Furthermore, Ma Jun argues that it would be difficult for suppliers to act against pollution alone. Unilateral action would raise costs, potentially leading demanding customers such as Apple to turn elsewhere. From chinadialogue:

Ma Jun indicated that Apple put much value on its outstanding ability to control its product prices. Many components require specific suppliers, which leads to low profitability for suppliers, like Foxconn and Kaedar Electronics. “I’ve read the annual reports of the suppliers. They lost money, even though they produced millions of iPhones. But Apple earned US$6 billion in only one quarter”, said Ma Jun. “The suppliers told us that they have no choice. If they dealt with heavy metal pollution while their competitors didn’t, their costs would be higher than their competitors. Then orders would disappear immediately, and the company would fail.”

“So it is important to find the rule-maker. Apple has made a bad rule. The bad rule has forced the suppliers to get orders by lowering environmental standards. This is an extremely negative force on Chinese environmental protection,” said Ma Jun.

On the other hand, there are areas in which vendors have few alternatives to their existing suppliers. Intel’s attempts to cultivate a new market of MacBook Air-like “ultrabooks”, for example, are stumbling over the limited capacity of aluminium milling facilities. From ZDnet:

Vendors are facing a shortage of the magnesium-aluminum chassis that Intel wants used for Ultrabooks, which is leading them to consider using fiberglass chassis instead. Apple has most likely gobbled up all those chassis for itself,as the two major suppliers of the metal chassis are also suppliers to Apple.

Sources:

Apple rejects China pollution allegations – CNN.com
Letter from China: Is Apple’s Tim Cook Listening? – The New Yorker
An open letter to the next Steve Jobs – the daily planet – chinadialogue
Tencent apologises to Apple CEO Tim Cook for calling him a “sufferer of homosexuality” – Shanghaiist
Hopes for a more humble Apple – chinadialogue
Why single out Apple? – the daily planet – chinadialogue
Intel working hard to keep Ultrabook pricing lower than $1,000 – ZDNet