Smoking your own hubris is neither cool nor healthy

Oscar Widle's novel, The Picture of Dorian Grey, tells of a beautiful and idealistic young man who sells his soul to ensure that his portrait will age rather than himself. He subsequently leads a life of debauchery, but the portrait serves as a disturbing reminder of the effect each act has upon his soul, with the sins displayed as a disfigurement of his form.

This seems to be an allegory for Apple Inc and Steve Jobs, who has just stepped down as CEO of the company he co-founded 35 years ago with the admirable vision of democratizing IT through “low cost computers for everyone”.

In this modern parallel to Wilde's story there is a twist in that the company is Dorian and Jobs is the picture. Despite his healthy lifestyle Jobs is not a well man and I hasten to wish him all the best in his battle with cancer.

Nonetheless, it struck me as ironic back in January when – a few of days after Apple announced another monster set of quarterly results and Jobs started his latest medical leave of absence – the lid came off the story about serious health & safety, environmental and labor rights violations in the company's Chinese supply chain.

Seven months later and a week after the announcement that Jobs has stepped down, the same coalition of environmental NGOs in China has released a second report, alleging large-scale hazardous waste discharge by the Apple supply chain. One of the local communities effected has seen an alarming rise in cancer cases.

No doubt mindful of the opprobrium heaped on it last time round, Apple has reacted swiftly to the new report. It invited the Beijing-based Institute of Public and Environmental Affairs – which spearheads the Green Choice Alliance – to have a “private conference call” while saying it takes such concerns seriously, but found discrepancies in the document.

This response is straight out of the public relations crisis management play-book, which attempts to contain the problem by totting out the usual blandishments without taking responsibility. It does, however, rate as an improvement by Apple which has thus far stonewalled multiple efforts by Green Choice to enter a dialogue with the company, as it has with 28 other major Chinese and international electronics manufacturers.

Lack of transparency

The technology giant says that it is committed to the highest standard of social responsibility, but clearly does not understand that transparency is an essential element in achieving this.

Apple's secretiveness, which comes in for strong criticism in both Green Choice Alliance reports, can be laid squarely at the door of Steve Jobs. During his first stint at Apple Jobs was responsible for copying the idea of a graphical user interface for computers from Xerox and thereafter saw Microsoft take the concept, which Apple pioneered commercially, and use Windows in its various guises as a platform to dominate the IT market and generate monopoly profits for well over a decade.

After returning and taking up the reins of Apple in 1997, Jobs instituted a corporate code of secrecy comparable to Omertà. While information leaks from Apple are not punishable by death, the consequences for perpetrators are severe. It is not unreasonable to assume that Jobs' imperious management style has also stifled the free flow of information internally, especially when it comes to bad news.

Take, for example, the harrowing case of workers at the Wintek plant in Suzou where workers were given N-Hexane, a neurotoxin, to clean touch screens used in Apple's iPods and iPhones because it was faster than using alcohol.

Shortly after the release of the first Green Choice Alliance report on Apple, which documented this case, AFP reported that a Hong Kong-based company spokesman rejected the claims, saying Apple "has a vigorous auditing program that investigates suppliers and other parts of the business chain. We audit throughout... We actually have had an extensive auditing program since 2006".

Clearly the unfortunate flak had no idea what was going on because a few weeks later the company acknowledged the N-Hexane poisoning, devoting a whole chapter of the Apple Supplier Responsibility 2011 Progress Report to the Wintek Shouzou case. Equally clearly, however, for far too long powers that be within Apple's supply chain operations were clueless about what had been going on in Suzhou.

In a side-bar at the start the “Addressing the Use of N-Hexane” chapter of the latest supplier responsibility report its says: “Apple investigates reports of alleged violations in our supply base, ranging from public reports by NGOs to information submitted directly by factory workers.” The report also says that the company became aware of the problem sometime in 2010.

Nokia gets it

In February 2010, a year before the release of Apple's report, Nokia issued an official statement saying it became aware of allegation about the use of N-Hexane at the Wintek Suzhou plant in July 2009 and investigated immediately. Although it confirmed the chemical had not been used on the Nokia production line it nonetheless engaged with Wintek to improve health and safety plan at the Suzhou plant.

So what was Apple doing at the time? Absolutely nothing it would seem.

In its latest supplier responsibility report Apple claims to have audited 127 contractors in 2010 and found 36 in violation of its core code of conduct but not a single case of environmental pollution. Only two suppliers, Foxconn and Wintek, are named.

Given the many serious problems in Apple's supply chain unearthed and reported by the Green Choice Alliance there appears to be considerable gap between what the company thinks is happing and what is actually going on.

Last year, in reply to concerns raised by Apple customer Jay Yerex about the spate of suicides at Foxconn, Jobs wrote that: “We are all over this”. In a subsequent clarification and in regard to its supply chain in general he also said: “You should educate yourself. Apple does more than any other company on the planet.”

It would seem that, as far as running a responsible supply chain is concerned, those most affected by the famous Jobsian “reality distortion field” are himself and those who work at Apple.

Of course enforcement of environmental regulations in China is often weak and sometimes corrupt. There are, however, plenty of examples of other companies, within the IT industry and in other industries, who do quite a lot better than Apple in China. In response to evidence uncovered by Greenpeace NIKE recently announced its intention to completely “detox” its supply chain by 2020 and the Green Choice Alliance points to many other examples of improvement and best practice.

Avoiding responsibility

When it comes to responsibility, however, Apple's preferred language is a bit of a give-away: Supplier Responsibility. In other words, it is not Apple's responsibility but it is doing its best (or not) to get them to behave. This is disingenuous to say the least since it is obviously a joint responsibility.

If Apple ran its own manufacturing – as it used to in the US, Ireland and Singapore – and was found to have perpetrated the same kinds of labor, health & safety violations and environmental abuse as has been occurring in its Chinese supply chain, the company would be sued, its facilities would be shutdown and its management would face charges of criminal negligence.

The Green Choice Alliance makes the point that Apple uses its massive negotiating power to squeeze contractors till the pips squeak. And as Apple has been growing rapidly, so has the environmental impact of its supply chain.

In the last couple of months Apple has made headline for overtaking Excon Mobil to become the world's most valuable company and, for a time, having more cash that the US Government. During the quarter ended 30 June 2011 Apple shipped more than 41 million devices, posted record revenue of USD28.57 billion and a quarterly net profit of USD7.31 billion with a gross margin of 41.7 percent.

I bet the margins for Apple's Chinese manufacturing contractors are not anywhere near as rosy so it is little wonder they all too often give in to the temptation to cut corners.

To be fair to Apple and Jobs, they have done quite a lot to create more environmentally-friendly products and packaging, but its supply chain operations are far from being best-in-class. It can obviously afford to do far better.

Let's hope that Apple's new CEO, Tim Cook, can put focus on creating a more responsible supply chain and burnish its somewhat tarnished reputation. He's certainly the person to do since he is the executive credited with pulling Apple out of manufacturing by closing factories and warehouses around the world and establishing its fully-outsourced supply chain in the first place.