Work: Corporate Social Responsibility and International Operations
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Discuss ethical or corporate social responsibility issues that arise because of an organisation’s international operations.
The report is focused on Apple Inc.
Introduction
The globalisation of business activity has “focussed attention on a number of ethical and corporate responsibility issues” (Griseri and Seppala 2010:152). This discussion will examine the loss of manufacturing and engineering jobs in America and the employment of similar workers in countries such as China. In particular, there is a concern over labour standards in South East Asia. Another issue which will be considered is the international nature of environmental fears; in the context of global manufacturing firms.
“The dilemma for corporations is that they are faced with trying to meet two often contradictory requirements” (Deresky 2011:66). They have to sell at sufficiently low prices to encourage custom yet they are also expected to be environmentally and socially conscious. Corporate Social Responsibility means that business “activity should be motivated, in part, by a concern for the welfare of some non-owners” (Deresky 2011:49). Stakeholders, other than shareholders, should be considered fully in strategic decision-making. Nevertheless competitive pressures could limit Apple’s ability “to raise prices in order to cover the cost of socially responsible policies” (Deresky 2011:66). This competitive pressure and Apple’s position as a world leading technology company leads to the possibility that Apple could exploit labour standards in developing countries.
The Manufacturing Shift to South East Asia
Apple has been described as one of the most innovative companies in the world (Walton 2012:5). This innovation has not just been in the technology sold to the final consumer. Apple has a well developed supply chain based on South East Asian manufacturing excellence (Gamble and Marino 2011:350). It has used large-scale manufacturers, such as Foxconn, which have the scale to construct significant quantities of mobile devices (Duhigg and Barboza 2012). Chinese operations are also more cost-effective than American assembly. This is in terms of the “expense of buying parts and managing supply chains that bring together components and services from hundreds of companies” (Duhigg and Bradshaw 2012a). These circumstances are a long way from the situation of the early 1990’s. In 1992, Apple’s manufacturing facilities were largely American with just three manufacturing operations abroad (Freedman 1992:10).
In recent years, China has been able to provide Apple with the engineers on “a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States”. In China, the recruitment took only 15 days (Duhigg and Bradshaw 2012a). The inability to hire American workers, arguably, presents a challenge to Apple. It could be criticised for failing to support the American employment and the wider economy. However, Apple rejects such criticism. It was argued that America has stopped producing people with the skills that Apple needs (Duhigg and Bradshaw 2012a). Manufacturing overseas has presented another set of problems.
Labour Standards at Apple’s Contractors
There have been concerns over labour standards at Apple’s contractors. For example, it was challenged over health and safety failings, unpaid overtime and excessive working hours (Garside 2012). A former worker employed through an Apple sub-contractor, Foxconn, worked for 16 hours a day (Hejuan et. al. 2010). Consequently, the National Advisory Committee on Occupational Safety and Health criticised Apple’s contracts with their suppliers (Duhigg and Barboza 2012). Another criticism is that Apple has made suppliers sign contracts which promise secrecy. The purpose was for Apple to keep its manufacturing strengths secret. However, with limited transparency then arguably, there is “a barrier to improving working conditions” (Duhigg and Barboza 2012).
Courses of Action that Apple could undertake
To address the concerns outlined Apple’s main course of action should be to fulfill its mission statement on ‘responsible manufacturing’ This states that “Apple is committed to ensuring that working conditions in our supply chain are safe, workers are treated with respect and dignity and manufacturing processes are environmentally responsible” (Apple.com 2013). This statement needs to be implemented properly otherwise it could be dismissed as an example of corporate public relations. In general, Apple needs to consider longer term collaborative relationships with its suppliers based on trust. This implies that it distances itself from “short-term arm’s length” supplier contracts (Lysons and Farrington 2006:657). This should reduce the criticism from non-governmental organisations that Apple is creating harmful impacts on workers (Cousins et.al. 2008:199). Apple needs to reduce the disapproval that it is exploiting people in developing countries (Wetherly et. al. 2011:221).
Apple could encourage one its main contractors Foxconn to increase wages. Indeed, Foxconn did announce a “30 percent wage increase for workers, following a recent wave of highly-publicized suicides” (Wei et. al. 2010). The problem, as outlined in the introduction, is that there is a limit on how far wages can rise before consumer prices are adversely affected. Another option is for Apple to negotiate contracts with manufactures other than Foxconn. Apple could deal with different companies in different companies in South East Asia. The problem here is that other firms may not have the scale of production which Foxconn possesses.
Apple needs to be more transparent with its operations and more visible in its labour standard agreements. Apple’s approach should be to have better working relationships with its suppliers. There should be ethics, such as full disclosure and openness (Lysons and Farrington 2006:655). Apple's strength has been in “product design and marketing” (Lee 2012:19). Nevertheless, it needs to focus more on international human rights. They have control over this, as they have the power to specify labour standards at their contractors.
Apple could manufacture more of its products in America. The purpose of this would be to mitigate criticism that it is exploiting employees at its contracting companies. However, it was previously argued that America does not have sufficient engineering capacity to oversee the production lines.
Apple will have to monitor its subcontractors so that its computers and mobile devices are re-cycled or discarded with regard to the environment. There has been controversy over electronic waste being sent to developing countries (Business Green 2012). This could adversely affect Apple’s reputation. There is concern over waste from printed computer boards (Mohite 2005:81). There are hazardous metals which need to be carefully removed from computing equipment and stored properly. Apple needs to monitor its equipment at the end of its use. This is to avoid the problem of waste computer equipment contaminating a low income economy. However, in general, environmental improvements could help Apple to reduce manufacturing costs (Porter and van-der-Linde 1995:1). This would be the case if the supply chain was changed to reduce the usage of raw materials.
The limitations of the Courses of Action Suggested
Apple has to make profits for its owners. If it pays more money to workers then it could be criticised for contributing to a ‘social cause’ rather than the shareholder (Palmer et. al. 2006:321). Paying more money for labour standards could lead to higher consumer prices. Shareholders may not regard it as ethical to invest in being “socially responsible” (Worthington et. al. 2009:213). Shareholders will often want their needs prioritised and would argue that they have the right to have money spent on them.
There is an issue in how far a company, such as Apple, should take responsibility for the labour standards in their suppliers (Cousins et.al. 2008:197). Also, there could be commercial difficulties in paying more money to suppliers. Poor economic conditions in the United States may mean that American consumers may not be willing pay more money (Gamble and Marino 2011:351). American consumers could be unwilling to pay more money to be used for higher labour standards. Consumers may not pay extra money for improved labour standards if there are no improvements to the quality of Apple’s portable devices.
In practical terms, companies such as Apple may have problems over ‘whistle blowing’. Employees may find it difficult to raise concerns over labour standards. There could be a corporate distinction between a junior manager’s ethics and the overall organisational desire to satisfy shareholders (Lysons and Farrington 2006:660). Employees may want to keep quiet and avoid risking being seen as disloyal (Lysons and Farrington 2006:660).Additionally, purchasing managers who negotiate with suppliers are expected to reduce costs. This is based on the work of Friedman (1970:1). He argued that it was legitimate for companies to reduce costs assuming that they comply with the law (Friedman 1970:1). The minimum legal compliance could also be justified if environmental improvements are perceived as an undesirable additional cost (Cousins et.al. 2008:197).
Conclusion
Ideally, Apple needed to be proactive and reduce the risk to its corporate reputation before it became too much of a problem (Cousins et. al. 2008:212). Shareholders will not want too much money paid to suppliers. However, the reputational damage to Apple and its shareholders has become so great that the issue of labour standards, in particular, has to be addressed. It is argued that “Apple Inc.’s operating procedures will undergo significant change in order to recover from its recent public-relations disaster” (Burnson 2012). This is the only realistic course of action and despite limitations has to be made to work; given the reputational damage to Apple’s brand.
References
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