Apple Achieves 100% Cobalt Supply Chain Mapping (Plus: Lessons for Supply Chain)

conflict minerals Carol Meneses/Adobe Stock

Apple’s responsible sourcing efforts now include tracking cobalt as well as conflict minerals, according to the company’s 11th annual Supplier Responsibility Progress Report released Monday.

Last year, Apple announced it had achieved 100% third-party auditing of conflict mineral suppliers. This year, Apple was able to publish a complete list of its cobalt smelters, all of which have participated in third-party auditing. In another milestone, Apple’s suppliers have also achieved 100% UL 2799 Zero Waste to Fill validation for all final assembly sites in China.

The 2017 report provided an updated look at supplier compliance and violations in the categories of labor and human rights; health and safety; and environmental issues. Each category received an average assessment score based on audits of 705 work sites, the highest number to date for Apple.

In the category of health and safety, Apple found no core violations, which the company defines as the most serious breaches of compliance, such as underage or involuntary labor. The average assessment score for health and safety was 87 out of 100, the same as for the environment category. The category of labor and human rights performed the worst, with 22 core violations found in 2016.

Labor Violations Persist

Out of the 22 core violations uncovered in this category, 10 were bonded labor violations, nine were working hours falsification violations, two had to do with harassment, and one with underage labor.

Bond labor involves recruiters charging would-be workers fees in exchange for finding them employment, a common practice that violates Apple’s Supplier Code of Conduct. Apple requires non-compliant suppliers to pay recruitment fees back to the employee, which has resulted in $2.6 million repaid to more than 1,000 workers in 2016.

The one instance of underage labor that Apple unearthed last year concerned a “15½-year-old” working at a manufacturing facility in China, where the minimum working age is 16. However, the 705 facilities that Apple audited employ nearly 1.2 million workers, which makes one wonder how likely it is that other instances of underage labor slipped under the radar. The report does not detail how Apple checked for working age compliance.

Safety and Environmental Violations are Rarer

Overall, the findings in Apple’s report that pertain to health and safety measures were positive, with the majority of discovered violations having to do with emergency preparedness (e.g., exit signage) and hazard prevention (e.g., wearing eye protection).

Under the umbrella of environmental issues, Apple found two core violations last year. One was a wastewater violation, and the other was air emissions. The majority of the rest of the violations had to do with hazardous substance management (e.g., improper waste storage) and environmental permits (e.g., expired permits or insufficient operating licenses).

But a very impressive accomplishment Apple has made in 2016 — which also ties to human rights — is its full mapping of its 3TG (otherwise known as conflict minerals) and cobalt supply chains. Apple removed 22 smelters and refiners from its supply chain last year for refusing to comply with auditing standards.

Last year, the Washington Post had reported on the rampant child labor and human rights abuses enmeshed in the cobalt trade in the Democratic Republic of Congo, where 60% of the world’s cobalt originates. As Amnesty International researcher Mark Dummett had told the newspaper, “We’d now like to see the downstream companies like Apple and Samsung disclose the names of their cobalt smelters” — precisely what Apple has now managed to do.

Supply Chain Takeaways

Apple’s pledges to environmental sustainability would certainly be boosted by not producing a new iPhone every year (60 Minutes referred to the dumping sites where mobile phone parts inevitably go as the “Chernobyl of electronic waste”), but this is not the place for a discussion of the merits and downsides of capitalism. Apple’s efforts in minimizing its environmental impact and promoting supplier responsibility set a higher bar for other companies.

Not to mention, there are also supplier management lessons to be gleaned from Apple’s example. Here are a few of the takeaways.

Invest in supplier development. While this is often toted as a general good practice, Apple’s experience shows that working on compliance issues with your suppliers has tangible benefits beyond a easier conscience. Apple has a Subject Matter Expert (SME) program for low- to medium-performing suppliers, who are coached in areas such as labor law, safety risk assessment and environmental standards by technical experts. On average, suppliers enrolled in the SME program has seen their assessment scores rise by 10 to 20 points.

Be aware of local cultures. As supply chains extend nowadays to all figurative corners of the globe, it is important to keep in mind that what works in one locale or work environment won’t work in another. Apple provides survey access at supplier sites so that workers can report grievances anonymously. By making the surveys free and relatively easy to access, Apple was able to collect more than 22,000 responses in 2016.

Create a standardized process for assessment. And then hold suppliers accountable. While holding suppliers to a code of conduct may seem obvious, plenty of companies turn a blind eye or lack a code of conduct altogether. As of 2017, Apple requires new conflict minerals and cobalt suppliers to complete a risk readiness assessment that was created from more than 50 leading social and environmental risk standards taken from different industries.

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