Apple has released its latest Supplier Responsibility report, which shows an 80% drop in underage labour and signs of a new and long-awaited transparency. The company also published a nearly comprehensive list of suppliers for the first time, and announced its membership of the Fair Labor Association to provide some measure of third-party oversight. But this relative openness still leaves much about Apple’s supply chain obscured.

The Wall Street Journal spoke about the report with new CEO Tim Cook, who as SVP for Worldwide Operations and then as COO oversaw the closure of Apple’s own factories and the assembly of its current supply chain over the past 14 years.

In one of his first interviews as Apple Chief Executive, Tim Cook said the Cupertino, Calif., company has long aimed to be more transparent and believes the steps it is taking—including nearly doubling the number of supplier audits it does—are “raising the bar” for the industry.

“I have spent a lot of time in factories over my lifetime and we are clearly leading in this area,” said Mr. Cook, previously Apple’s chief operating officer who oversaw its supply chain. “It is like innovating in products. You can focus on things that are barriers or you can focus on scaling the wall or redefining the problem.”

Apple’s audits covered all of its final assembly manufacturers and included 14 specialised environmental audits in China. From Apple’s own list of highlights:

• 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 ….

• Our audits have always checked for compliance with environmental standards. In 2011, in addition to our standard audits, we launched a specialized auditing program to address environmental concerns about certain suppliers in China. Third-party environmental engineering experts worked with our team to conduct detailed audits at 14 facilities. We uncovered some violations and worked with our suppliers to correct the issues. We will expand our environmental auditing program in the coming year.

• We have a zero-tolerance policy for underage labor, and we believe our system is the toughest in the electronics industry. In 2011, we broadened our age verification program and saw dramatic improvements in hiring practices by our suppliers. Cases of underage labor were down significantly, and our audits found no underage workers at our final assembly suppliers.

Alongside the report, Apple announced its membership of the Fair Labour Association, a factory monitoring organisation established in 1999 by the Clinton White House and a group of apparel manufacturers bearing fresh bruises from a string of highly-publicised sweatshop scandals. From Bloomberg:

“Most big corporations have their ‘Nike moment’ at some stage — when they realize the difficulties of maintaining their standards, particularly in an increasingly global environment,” said FLA President Auret van Heerden. “The problem with the supply chain is that it’s a moving target ….”

“If you’re a 16-year-old girl in a developing country, your best chance of enjoying proper rights is if you get to work at a multinational,” he said. “The power of their contract is more powerful than the power of law ….”

Independent monitoring isn’t the panacea to problems in China’s factories, said Geoffrey Crothall, communications director of workers-rights group China Labour Bulletin .

“The problem isn’t whether or not they do audits, but whether workers are treated in a reasonable manner,” he said. “What the workers need is an effective voice in the workplace.”

The use of child labour among Apple’s suppliers has attracted particular attention in the past, particularly after the number of reported cases increased from 11 in 2009 to 91 in 2010. Last year, the total subsided to 19, in spite of the greatly expanded inspections.

We discovered a total of 6 active and 13 historical cases of underage labor at 5 facilities. In each case, the facility had insufficient controls to verify age or detect false documentation. We found no instances of intentional hiring of underage labor.

We required the suppliers to support the young workers’ return to school and to improve their management systems— such as labor recruitment practices and age verification procedures—to prevent recurrences. (p 9)

In an email to company employees published at MacRumors, Cook said that “we will not rest until the number is zero everywhere”.

Apple’s report emerged amid a burst of well-deserved attention to Mike Daisey’s show, ‘The Agony and the Ecstasy of Steve Jobs’, which was featured this month on This American Life. [UPDATE, 03/16/2012: This American Life has now retracted the episode because of “numerous … substantial fabrications” by Daisey.] When Daisey visited the Foxconn’s Shenzhen plant in 2010, he spoke to several workers in their early teens:

And I say to her, you seem kind of young. How old are you? And she says, I’m 13. And I say, 13? That’s young. Is it hard to get work at Foxconn when you’re– and she says oh no. And her friends all agree, they don’t really check ages. The outside companies do have inspections, but workers told me Foxconn always knows when there’s going to be an inspection. So what they do then, they don’t even check ages then. They just pull everyone from the affected line, and then they put the oldest workers they have on that line ….

Do you really think Apple doesn’t know? In a company obsessed with the details, with the aluminum being milled just so, with the glass being fitted perfectly into the case, do you really think it’s credible that they don’t know? Or are they just doing what we are all doing? Do they just see what they want to see?

Apple has repeatedly disclosed cases of child labour in its supply chain, though not at which suppliers these cases were discovered. The 2012 report states that no such cases were found at final assembly manufacturers such as Foxconn in 2011, suggesting either an ineffective audit or a miraculous reversal of the situation Daisey found the previous year. But others interviewed by This American Life lent some credence to Apple’s claim:

This is Ian Spaulding, who estimates that he has been in or worked with about 1,000 factories throughout China. The company that he founded and runs, INFACT Global Partners, goes into Chinese factories and helps them meet social responsibility standards that are set by Western companies so those companies are ready when outside auditors come and check on working conditions ….

… [H]is only real objection to anything that Mike Daisey found had to do with child labor. Ian Spaulding said yes, there definitely is child labor in China, but not at the top tier electronics manufacturers. Other people who we talked to agreed with this. Even people who are critical of Foxconn for all kinds of things agreed with this. He said maybe a stray worker here and there might get in on a borrowed ID, but it is not a widespread problem.

The report also describes measures taken in response to explosions last year at factories in Chengdu and Shanghai, in which a total of 77 were injured and four killed. Both accidents were found to have been caused by the ignition of airborne aluminium particles.

Working closely with external experts, Apple audited all suppliers handling aluminum dust and put stronger precautionary measures in place before restarting production. We have established new requirements for handling combustible dust throughout our supply chain, including:

• Specific ventilation requirements with regular testing of air flow velocity

• Comprehensive inspections of ductwork to identify aluminum dust deposits

• Banning the use of high-pressure compressed air for cleaning to lower the possibility of dust clouds forming

• Requiring that all vacuums be rated explosive proof to prevent ignition

• Ensuring that type-D fire extinguishers are available to handle metal fires

At the time of this report, all suppliers except one have implemented the counter- measures identified by the team of external experts. The one supplier that has not will remain shut down until modifications are in place. (p 15)

The publication of Apple’s supplier list follows sharp criticism of the company’s practices over the past year from Chinese environmental groups, including Friends of Nature and the Institute of Public and Environmental Affairs. Among the coalition’s complaints was Apple’s uncooperative and frequently obstructive attitude. In January last year, they ranked Apple last out of 29 tech companies in terms of supply chain transparency, and the firm’s exceptional secrecy was a major reason for the special attention it received in a follow-up report in August. Apple’s cloak-and-dagger approach was described in a chinadialogue interview with the IPE’s Ma Jun last year:

Liu Jianqiang: … In February Apple released a document admitting that workers in its supply chain had suffered industrial injuries. Has Apple improved its behaviour since then?

Ma Jun: Apple’s behaviour hasn’t improved at all. It has admitted there are issues in its supply chain, but it hasn’t made any adjustments to its policy, maintaining that “it is our long-term policy not to disclose supplier information” and ignoring questions from environmental groups …. We’ve read that Apple progress report carefully. It says that 36 suppliers had “major violations”, but some of those are taking high agency fees or telling workers what to do during audits. The pollution issues we found are a serious threat to local communities – yet not one of those was included.

Personally I feel that the “black box” audits aren’t doing any good ….

LJ: Have you been in touch with Apple during your investigation?

MJ: We wrote to Apple last week, asking it to confirm: whether or not the companies we mention in the report are suppliers; whether or not Apple is aware of their breaches; and whether or not Apple knows about the repeated complaints. But there was no response. After the poisoning incident last year, we sent a list of questions to Apple in August. Apple didn’t reply until November – and then not to Chinese NGOs, but to an American NGO – saying it could not confirm if the company was a supplier, and that Apple needed the environmental groups to provide more evidence. The NGO responded that a lot of publicly available information showed it was an Apple supplier, and Apple replied that “it is our long-term policy not to disclose supplier information”. And so the door was closed.

Apple later engaged in talks with the organisations involved, but the newly released supplier list marks a still more radical departure from its past policy. Although not completely exhaustive, it includes suppliers accounting for 97% of Apple’s procurement spending.

But many have criticised the absence of information beyond a bare list of names which fails to reveal which suppliers have committed violations, where their plants are located, or with which subsidiaries of the larger companies Apple is involved. (Kaedar Electronics, for example, is not listed separately from its parent company, Pegatron.) From The New York Times:

Judy Gearhart, executive director of the International Labor Rights Forum, an advocacy group for workers’ rights, was disappointed Apple did not reveal the location of the suppliers on its list, complicating outside efforts to monitor the progress at the factories. Some plants on the list are relatively unknown, with Web sites that do not list where facilities are situated.

“It’s a bit of a half-step really to say, ‘Here are the names of the factories, go look through a haystack,’ ” Ms. Gearhart said. “But it’s a start ….”

… [T]he list excludes many of the secondary suppliers — companies that provide parts to firms that directly contract with Apple. For instance, though the American glassmaker Corning has manufactured the strengthened glass in iPhones, it does not appear on the list because it technically does not contract with Apple, but with an intermediary that finishes the glass before it is delivered to an assembly factory.

Further frustration came from the Hong Kong-based China Labour Bulletin, which pointed out that 62% of Apple’s global suppliers failed to meet the company’s 60-hour-per-week limit, let alone the 49-hour average workweek which is the Chinese legal maximum:

Apple’s Code of Conduct stresses of course that: “Under no circumstances shall work weeks exceed the maximum permitted under applicable laws and regulations.” But very few factory workers in China work less than 50 hours a week, and so we should not be surprised if employees at Apple supplier factories are working in excess of the Chinese legal limit, especially given the results of Apple’s progress report. We can’t say this is for sure however because even in the new post-Steve Jobs era of openness, Apple still does not reveal which factories commit what violations.

Apple’s Supplier Responsibility Progress Report would be a lot more helpful and meaningful if it went one or two steps further and broke the report down into individual countries and showed to what extent the individual suppliers in those countries complied with the law as well as Apple’s own standards.

This would not be such an issue if Apple’s standards and China’s labour laws were more in sync but an eleven hour gap between the maximum working hours permitted each week is something Apple needs to think about.

The list also failed to win over Mike Daisey, who responded via This American Life’s blog:

Apple has released a list of its suppliers, but it still hides the companies it audited with anonymity. This makes it impossible to learn anything new about what is going on in Apple’s supply chain, to verify anything, or hold anyone responsible. The FLA will audit a tiny percentage of Apple’s factories, and also won’t make public which factories they audit.

If Apple would spend less energy finessing its public image, and instead apply its efforts to real transparency and accountability, it could be a true leader for the electronics industry. Apple today is still saying what it said yesterday: trust us, we know best, there’s nothing to worry about. They have not earned the trust they are asking for.