When you are the most valuable company in the world, it is inevitable that third-party groups will start to take an interest in how your business is conducted. This is a truth that Apple has learned painfully over the last decade as abusive labor practices within their supply have come to light with startling regularity. Beyond the well publicized cases of suicide among Foxconn workers, reports of the use of hazardous chemicals and underage workers have been prominent (Myers, 2013). There is no more obvious proof than this for the first and second laws of doing business in relationship to society: size means scrutiny and cutting costs raises compliance risks (De Kluyver & Pearce, 2012, p. 45). As Apple has come under scrutiny, it has taken great strides to improve the conduct of its suppliers. There is still more work to be done.
In 2014, Apple conducted 633 audits of supplier facilities located in 19 countries. In addition to these 633 regularly scheduled audits, Apple conducted 40 surprise audits. Apple found conduct violations in every single audit. Furthermore, evidence indicates that auditing a facilities a second and third resulted in 25% and 31% improvement respectively (Apple, 2015). Clearly, Apple’s auditing procedure for its suppliers is effective. It is worth noting that if every single audit includes a violation, there are still problems at facilities that are being audited more than once.
Based on the effectiveness of Apple’s current auditing procedure, it is clear the program needs to be expanded. Apple has increased the number of audits conducted per year, conducting 40% more audits in 2014, but the number of surprise audits is just over 6% (Apple, 2015). Although it is not clear how expensive these audits are, Auret van Heerden of the Fair Labor Association claimed that Apple was paying “well into the six figures” for the audit of Foxconn in 2012 (Pepitone, 2012). Therefore, it is likely that Apple is already spending hundreds of millions of US dollars maintaining their current audit program. For a company with over $100B in cash reserves, continuing to grow that budget and expand the auditing program is certain to improve and expand their brand image over the coming years.
Apple, Inc. (2015). Supplier Responsibility 2015 Progress Report. Retrieved September 4, 2015.
De Kluyver, C. & Pearce, J. (2012). Strategy: A View From the Top (4th ed.). Boston: Prentice Hall.
Myers, C. (2013). Corporate Social Responsibility in the Consumer Electronics Industry: A Case Study of Apple Inc. Retrieved September 4, 2015.
Pepitone, J. (March 29, 2012). Apple supplier audit finds major wage and overtime violations. CNN Money. Retrieved September 4, 2015.