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| 08 March, 2018

Apple finds supplier problems as its audits expand

Apple audited 756 suppliers in 30 countries

An Apple logo hangs above the entrance to the Apple store on 5th Avenue in the Manhattan borough of New York City, July 21, 2015.

An Apple logo hangs above the entrance to the Apple store on 5th Avenue in the Manhattan borough of New York City, July 21, 2015.

REUTERS/Mike Segar

Apple Inc AAPL.O said on Wednesday that it had found violations of its labor and environmental policies for suppliers, such as falsifying work hours data, as it expanded the scope of its annual audit of conditions of workers making its iPhones and other products.

Apple runs one of the largest manufacturing chains in the world, but most of the work is done at factories owned by contractors.

Apple audited 756 suppliers in 30 countries, 197 of which it was auditing for the first time.

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Apple said in its annual supplier responsibility report that the proportion of "low performers," or suppliers scoring less than 59 points on its 100-point scale, fell to 1 percent in 2017 from 3 percent in 2016 and 14 percent in 2014. "High performers" with scores of more than 90 rose to a record high of 59 percent from 47 percent the year before.

Apple found 44 so-called "core violations" of its labor rules in 2017, double the previous year. Those included three instances of employees forced to pay excessive fees for a job, a practice Apple banned in 2015.

In one case, over 700 foreign contract workers recruited from the Philippines were charged a total of $1 million to work for a supplier. Apple said it forced the supplier to repay the money.

Compliance with Apple's 60-hour work week fell to 94 percent of suppliers from 98 percent the year before. Moreover, Apple said it uncovered 38 cases of falsification of working hours data in 2017, up from 9 cases the year before.

Apple said the increase was driven by the fact that it brought on a number of new suppliers in 2017 and started tracking the working hours data of 1.3 million supplier employees, 30 percent more than in previous years.

In the report, Apple also said it was launching a new women's' health initiative at its supplier plants, with a goal of reaching 1 million women by 2020. And it said that it had launched a program in China to train workers to become factory line leaders, who often make 20 percent to 30 percent more than line workers.

On Wednesday, Apple also issued its so-called conflict minerals report, which is required by United States securities regulators. The report lists suppliers of sensitive metals such as tin and gold.

Apple company said that 16 smelters and refiners left its supply chain in 2017, 10 of which were dropped because they would not participate in a third-party audit of their practices. Six left of their own accord.

Apple also outlined new rules on student labor after a discovery last year that some Chinese students were working more than 11 hours a day assembling its iPhone X. urn:newsml:reuters.com:*:nL3N1NS3RU

(Reporting by Stephen Nellis; Editing by Peter Henderson) ((Stephen.Nellis@thomsonreuters.com; (415) 344-4934;))