Burgess COMMENTARY

Peter Burgess

Is Apple cleaning up its act on labour rights? Tough production schedules and slim margins lead to poor labour conditions in the electronics industry. Duncan Jefferies asks if progress is being made

Foxconn factory ... The assembly line at a Foxconn factory in China, which produces vast numbers of the west's 'fast gadgets'. Photograph: Agence France-Press/Getty

For electronics companies, the decision to outsource manufacturing operations to the developing world isn't just about cost-cutting. The speed and flexibility of the vast Asian workforce, assembled to build slick, shiny gadgets for western consumers, allows for unprecedented turnaround times on new products. And by outsourcing production to China, the world's electronics giants – Dell, Sony, Microsoft, Apple, Samsung and others – are closer to the hundreds of component manufacturers, engineers and material eco-systems that their products depend upon.

It's a business model that's highly profitable – particularly for Apple, which recently announced a $13.4bn profit for the first quarter of 2014.

But there's a human cost to outsourcing to countries with lax or non-existent labour laws. Suppliers often hire and fire thousands of people at a moment's notice to meet production quotas, press them to work excessive overtime that leaves workers exhausted and clinically depressed, and skirt around health, safety and environmental concerns. All of which leaves an ugly stain on the corporate social responsibility credentials of the companies that use their services.

In the clothing sector, these issues have been part of public and corporate consciousness since the mid-1990s, when brands such as Nike were condemned for their use of sweatshops in the developing world. Then in 2010 the electronics industry suffered its own sweatshop scandal when 18 workers at Foxconn facilities in China, where most of the world's gadgets are produced, attempted suicide. Fourteen died.

Almost four years on, have electronics suppliers in the developing world cleaned up their act? Peter McAllister, director of the Ethical Trading Initiative, says: 'We are seeing some positive signs in China, such as increases in the minimum wage as a result of worker protests and chronic labour shortages. But the labour rights challenges should not be underestimated. [We see] high levels of bribery and corruption, audit fraud and a poor health and safety culture. Freedom of association is also severely restricted. These issues are rife in many sectors and pose real challenges for companies committed to trading ethically.'

Another concern is the widespread use of student labour: young people aged 16-18 are often drafted into factory positions under the guise of work experience placements, so that suppliers can meet production schedules. Apple's latest Supplier Responsibility Progress Report details many of the steps it has taken to fix some of these problems, including worker education programmes and tighter monitoring of working hours.

But many of these issues are systemic, and will require a concerted cross-industry effort through the likes of the Electronic Industry Citizenship Coalition (EICC), as well as work with NGOs and government, to properly address. 'Respect and protection for fundamental human rights is absolutely important,' says Julie Schindall, director of communications at the EICC, 'but in practice, when for example you do not have a state that either enforces its own laws or does not recognise what would generally be seen as the most basic and fundamental human rights laws, it puts a company in quite a difficult position.'

Some electronics companies exacerbate the situation with their own demands. Chasing the lowest price from suppliers can directly affect labour conditions: if a supplier has to slash its own overheads to make a profit on manufacturing items for big-name electronics companies, then worker pay, equipment, working hours and living conditions are likely to be sacrificed first.

Underestimating supplier capacity, and their ability to deal with rapid ramp-ups in production, can have a similar knock-on effect on working conditions. 'A supplier is never going to say no,' says Sean Ansett, chief sustainability officer at Fairphone, a social enterprise which aims to manufacture an ethically produced smartphone and alter existing supply chains. 'So unless you truly understand their capacity, frankly, you're turning a blind eye to some of these issues.' In worst-case scenarios, part of the production process ends up 'going out the backdoor to a place you've never visited, where there's no oversight whatsoever, and potentially some very egregious violations [of human rights]'.

Apple's sustainability progress report also details a dramatic increase in the number of audits it carried out last year (up from 298 in 2012 to 451 in 2013), and other companies seem to be following suit. But Ansett contends: 'It's just a snapshot of what's going on a particular day or series of days at the factory, rather than the whole movie.'

Western commentators often confine their focus to issues around audit fraud, but there are bigger problems at play. 'It's important to understand some of the deeper issues driving this. Chinese factories are often too scared to share labour rights challenges with British, European or US buyers, fearing that they'll lose important business,' says McAllister.

To address this, Ansett advocates greater transparency and 'models which are mutually beneficial'. Part of this trust lies in recognising that problems may occur, but agreeing that these will be addressed with help from both parties, and that the client company will continue to place business with the supplier in the aftermath.

As trust develops, suppliers will realise that western companies can be important allies in improving conditions for workers, according to McAllister. For example, peaks in production can be managed effectively through collaborative working. 'Good planning of orders not only leads to increases in productivity, it directly benefits workers through improved management of working hours and overtime,' he says. Schindall says several EICC members are now working with their suppliers to predict and manage surges in capacity and bring about such changes. Financial incentives for suppliers to meet ethical and environmental targets can also lead to improved standards. And it's also important that workers understand their rights, so both companies and their suppliers should 'open up dialogues and communications internally in factories, and allow [workers] to hold [trade union] elections that are democratic and fair, so that they too have a voice', Ansett concludes.