Posts Tagged ‘sustainability’

Iphone Manufacturers Getting Heat. Should you care about the working conditions of the factories you source?

By admin on February 28, 2011 | Category: Product Sourcing and Strategy,Sustainability & Transparency | Tags: , , , , | Comments Off

I think so. Wired Magazine’s March 2011 cover/issue (available in print, not yet online) “1 Million Workers. 90 Million Iphones. 17 Suicides”, raises the question from a consumer perspective.  Article author Joel Johnson hopped on a plane and toured through the main Foxconn factory, Apple’s largest contract manufacturer, in hopes of learning and telling the world more about the kinds of places the vast majority of our electronics products come from. The article did a good job of portraying the conditions of a chinese factory, and even Johnson admits that his tour guides were not far off the mark when they described the city-state factory (1 million workers) as looking like a typical community college campus in the U.S. (Are the keg lines long?).

The working conditions of overseas manufacturers are always a hot issue and scrutiny of the way large companies like Apple treat their masses of contract manufacturer workers is a good thing. Surprisingly, the Wired article may seem like a disappointment to many hoping to find the chink in Apple’s armor, because it did a good job of exonerating Apple by showing that their business with Foxconn hasn’t led to anything outside the norm for society from a statistical standpoint. The article points out that the worker suicides at Foxconn, 17 people out of 1 million, are well below the national averages for both rural and urban China, and that the suicide rate of U.S. College students is four times the incidence of suicide at Foxconn.   Geez, it almost seems as though, if you’re kid was considering suicide, statistically–you would want to send them to work in this Chinese factory.   Either way, some people will buy the magazine because more people care these days about sustainability in general and would like to know the truth, at least, according to Wired. What may be more troubling, is many people will read the magazine cover and assume there are problems because, “why else would a magazine write about it?”  The point is, these are sensitive issues for ANY company.  So even if you’re not Apple, or HP, or Sony, but you’re a start-up, how do you approach this in your supply chain?

Sustainability and labor conditions in international supply chains is a concept that is still relatively new. For all the public and media lashings that companies like Nike and Walmart have taken over the last 20 years regarding the treatment of factory workers and environmental impacts of supply chains, we still have a long way to go in moving industries in a more sustainable and transparent direction. But it’s happening. See my posts on Walmart and IBM, for a taste of the progress.

At the start-up and growth stages, you’ve got to start early and you’ve got to approach sustainability in a way that makes sense given the challenges before you. My advice: focus on the social and environmental standards of the factories you’re sourcing. Look for the manufacturer who is already doing it right, rather than thinking you’ll change the one that isn’t.

How do you know if they’re doing it right?

There are many issues with the way large companies institute and monitor social and environmental policies with their suppliers. Typically, companies send teams of auditors to inspect factory conditions every so often.   The auditors then report either a pass for the supplier, a change in the supplier’s status to the ‘watchlist’, or elimination from the purchasing base altogether. The truth is, the monitoring system widely used in the industry is not very effective as a cause for improvement in industry conditions beyond a baseline point. Andrea Harney’s book, The China Price, does a fantastic job of laying out the problems of this system in the industry. Despite this system, there are so many factories out there that don’t even meet baseline standards.   As a start-up or small company, how do you assure the standards of the factory you’re working with?   I have 3 options for you, any of which will give you some information to make a judgment on.  Coupling a few of these tactics together will give you a more well-rounded perspective: 1) source a factory that is working with larger companies that must enforce standards, 2) go there and see the factory for yourself, 3) have an audit team go in and report on the status of the factory conditions.

Simple as that. You should start with #1, do #2 at some point anyways, and pay for #3 if you’re very serious about the issue.

Why is it unlikely that I’ll be able to push change with my manufacturer?

First, let me say that this is something that the largest of the large companies in the world are continuing to struggle with. Some companies and industries have made greater advances than others, but the fact remains that even organizations with far greater resources and budgets must work hard to make improvements. Oftentimes, industry leaders like Levi and Nike don’t have enough clout themselves to push suppliers to change their operations, and companies like these must band together with their competitors in the industry to lean on suppliers and advance their standards and operational practices. Thus, thinking you will begin to do business with a new contract manufacturer (and as a start-up, the importance of your business will likely be small compared to their larger, steady customers) and demand they adhere to guidelines they don’t already subscribe to is not realistic. For these reasons, it’s much more important to think about the factory you’re sourcing to begin with, rather than trying to change a supplier you’re already working with.

Thinking about these issues going forward, I encourage my clients who are interested in the sustainability of their products and supply chains to consider the entire lifecycle—from the materials and design of the product and packaging, to the location of the factory, the practices of the factory, and the impacts of shipping. A start-up should be strategic in their approach and go after the low hanging fruit, while making sure they are focusing on successfully growing their business. As business grows, there will be increasing opportunities and resources to continue building your business in a responsible fashion. Just like Apple, at some point, consumers and watchdogs may demand to look under the hood of your factories to see if you’re business is on the up and up.  Start early. Start smart.

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