At 10am on November 15, five Chinese environmental groups visited Apple’s Beijing office to discuss supply-chain pollution with company representatives dispatched from the United States.
A series of reports published earlier this year by a coalition of campaigners, including Green Beagle, Friends of Nature, Envirofriends and the Institute of Public and Environmental Affairs, accused Apple of ignoring serious pollution in its China-based supply chain, causing a stir both inside and outside of China.
A number of NGO participants in the meeting later told 21st Century Business Herald that, while Apple had shown good faith on certain areas, the two sides continued to disagree over the extent to which the company should be open about corporate information, and that the coalition would continue to monitor Apple’s supply chain. For its part, Apple announced that it had launched investigations into 15 suppliers suspected of pollution.
The talks lasted three hours, during which the two sides crossed swords several times, according to participant accounts. Li Li from Envirofriends said that, at one point, discussions almost broke down.
The meeting was conducted with two supply-chain executives from Apple’s US headquarters, but attendees were asked not to reveal the employee’s names or job titles. The Apple ambassadors explained some of the company’s supply-chain regulations and gave an update on progress on its corporate social responsibility, before the two sides moved in on the core issue: pollution by Apple suppliers.
The green groups said that they used the meeting to flag up pollution cases at more than a dozen suppliers as evidence of major failings in supply-chain management, while Apple admitted that oversights such as out of date water-quality standards may have created problems. The NGOs remained unimpressed by Apple’s reluctance to publicise supplier information and allow public supervision, they said, while Apple continued to stress that it can deal with the problems internally.
Apple told the NGOs that, contrary to some reports, it is closely involved with all aspects of its supply chain: Apple makes no distinction between first and second tier suppliers, purchases almost all materials itself and applies identical labour and environmental standards to all suppliers, the representatives said. If any supplier breaches Apple’s rules, they added, it will be ordered to make changes to its operations and, if those changes are not made, suppliers will be subject to further measures and orders may be cancelled.
But Apple’s supply chain is complex and accidents at associated factories cannot be completely eradicated, the representatives reportedly said. The poisoning of workers at touch-screen supplier Wintek is one such example. Apple’s representatives said the company has always instructed suppliers not to use toxic cleaning agent n-hexane, and that this now infamous incident was caused by poor ventilation at the factory. The NGOs said they were not satisfied with this explanation.
Before this meeting, Apple had shown itself consistently unwilling to engage in talks with environmental groups. “Apple is a company that does things in a very low-key way,” one representative reportedly stressed at the meeting.
But the publication of the Chinese campaigners’ report in August this year put huge pressure on the Californian firm. The report documented “shocking” pollution in Apple’s supply chain, attracting attention from around the world.
The NGO coalition named 27 polluting companies they suspected to be affiliated with Apple in its report. To date, Apple has admitted that 15 of these are suppliers.
Feng Yongfeng, co-founder of Chinese NGO Green Beagle, was present at the meeting. He said that, after publication of the August report, Apple hired third-party auditors to investigate those 15 companies – but the investigation’s findings have not been released, nor has Apple promised that they will be.
On October 15, environmental problems were uncovered at Catcher Technology, which supplies Apple with laptop casings, and the government ordered a halt to production. Improvement works were carried out and manufacturing has since restarted. But production wasn’t halted due to a request from Apple, said Feng – it was public pressure that forced the local government to act.
The close relationship between Apple and its suppliers is an open secret in the industry – insiders allege that Apple often funds new factories for suppliers, and in return gets priority access to high-demand components.
But certain suppliers previously contacted by this newspaper argued that the main driver of pollution was Apple’s constant efforts to lower prices. They said Apple usually asks suppliers to cut prices every quarter and falling profits are forcing suppliers to reduce costs, which in turn leads to a reduction in spending on environmental protection.
Evidence of this profit decline can be seen in financial reports from Laibao High-Tech, which produces sensors for iPhone touch-screens. Its third quarter report shows operating income of 288 million yuan, down 10.88% year-on-year, and net profits of 84.3963 million yuan – a fall of 26.77%.
That weaker performance is mostly due to a fall in the price of touch-screen components. It’s estimated that the price of small and medium sized touch-screens has fallen by more than 25% since the start of the year, and this figure will go above 30% by the end of the year. Competition is fierce.
Yang Shengfan, deputy director of Taiwan’s Topology Research Institute, explained that Apple often asks suppliers to expand capacity before giving them orders. After they have done this, upstream suppliers face the threat of excess capacity – and so it is hard for them to refuse Apple’s demands for lower prices. In the end, the suppliers become closely controlled by Apple.
But you can’t blame Apple for everything, said Li Bo of Friends of Nature, China’s oldest environmental NGO, who was also present at the meeting last week: after all, the factories are in China. China needs to think about how to deal with these pollution issues under its own legal and supervisory regime, he said.
Zeng Hang is a reporter at 21st Century Business Herald, where this article was first published.
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