Apple Inc. (AAPL)’s rivals aren’t rushing to emulate the iPhone maker’s decision to subject supplier factories to audits by a labor group. Instead, they’re sticking to internal checks that may leave room for violations -- and negative public relations fallout.
Apple said on Feb. 14 the Fair Labor Association had started independent audits amid criticism of conditions at its plants in China. Companies including Microsoft Corp. (MSFT), Dell Inc. (DELL), Hewlett-Packard Co. and Samsung Electronics Co. rely on their own evaluations, based in part on guidelines from the Electronic Industry Citizenship Coalition, which they say are sufficient to prevent abuses.
Though Apple’s decision to join FLA may not root out all instances of labor abuse, the EICC’s member companies may open themselves to even harsher criticism. While the EICC sets standards for ethics, worker safety and labor practices, it doesn’t require members to disclose findings and it lacks enforcement powers. The result is a disjointed system of self- imposed regulations that fail to hold companies accountable when abuses arise, according to labor advocates and technology executives.
“They are absolutely toothless,” said Tom Fallon, chief executive officer of Infinera Corp. (INFN), a Sunnyvale, California- based maker of telecommunications equipment that hasn’t joined the EICC because Fallon says the group isn’t effective. “I don’t think they do meaningful work.”
Wendy Dittmer, a spokeswoman for EICC, said she doesn’t know of any instance of a factory losing business, permanently or temporarily, for failing to live up to the group’s code of conduct. The EICC doesn’t require companies to share those details about their relations with business partners, she said.
Technology companies are under scrutiny for working conditions at Foxconn Technology Group (2354) and other manufacturers’ Chinese plants, where the world’s best-selling gadgets are assembled. Workers making Apple products log 11 hours of work a day, six days a week, while production speeds are so high that workers aren’t able to rest while making iPads, according to New York-based China Labor Watch. Employees have been exposed to dangerous aluminum dust, the group said. Foxconn installed safety nets and hired counselors and psychologists in response to multiple suicides in 2010.
Apple’s FLA Membership
Amid the criticism, including a New York Times investigation highlighting Foxconn’s labor conditions, Apple opened factories to the FLA, a Washington-based nonprofit organization, and said that the group would inspect plants owned by three of its largest manufacturing partners. Apple in January also listed its suppliers for the first time. The company has disclosed instances of rights violations in an annual progress report since 2006, though it has never specified where or at which suppliers the violations occurred.
Foxconn also said on Feb. 18 that it was raising wages to $290 a month, double the level of three years ago.
No other technology company has sought membership in the FLA, said CEO Auret van Heerden. Founded in 1999 to address working conditions in the apparel industry, most of the group’s 34 member companies come from that business, including Nike Inc. and Adidas AG.
Unlike the EICC, FLA member companies must agree to disclose their suppliers and to submit to unannounced visits from the FLA or third-party auditors. The FLA also posts results of all audits on its website.
The 67-member EICC, a Washington-based trade group founded in 2004, doesn’t require companies to stop using suppliers or manufacturers regardless of their record on treatment of workers. It dictates only that “members commit to continuous improvement,” said Dittmer, the group’s spokeswoman. Cupertino, California-based Apple also is a member of the EICC.
When it comes to ensuring factories’ ability to reliably make a quality product, most companies in the EICC insist that all factories earn certifications to ensure a plant can reliably deliver high-quality products.
The EICC doesn’t require any such certification regarding the treatment of workers. Member companies may choose an EICC- sanctioned outside auditor, usually paid by the company. Yet, companies aren’t required to make the results of their audits public or share them with the EICC. Each company owns the results of its audits, Dittmer said.
A drawback to both the FLA’s and EICC’s approach is inspections often don’t include suppliers further down the supply chain, said Mike Fawkes, a former supply-chain executive at Hewlett-Packard. (HPQ) A handheld product like the iPhone has hundreds of parts, many of them made by small companies in China.
Even the FLA only requires companies to audit about 5 percent of companies in their supply chains, down from 30 percent when the organization was created, said Heather White, who founded workplace-auditing firm Verite in 1995 and is now a fellow at Harvard’s Edmond J. Safra Center for Ethics.
Until recently, the EICC hadn’t required member companies to audit a specific percentage of its suppliers, the EICC’s Dittmer said. In 2010, the EICC members voted to create a compliance program to include a requirement that members audit some percentage of “high risk” factories owned by the company or important suppliers. The board voted on Feb. 17 on what number of high-risk suppliers would need to be inspected, though it hasn’t released the result. She says the definition of high- risk is up to each company.