Apple starts to open its supply chain kimono

Apple has published its 2012 Supplier Responsibility Progress Report which, for the first time, contains a list of 156 suppliers that represent 97 percent of its procurement expenditures for materials, manufacturing, and assembly in 2011. The company has also announced that it will allow an independent third party – a non-profit called the Fair Labor Association (FLA) – to check on working conditions at those factories, and to make its findings public.

The FLA already checks on suppliers for other American companies, including Nike, New Balance, and Adidas but Apple is the first technology company on its roster. Apple says it will "open its supply chain" to the FLA, which will do unannounced factory visits without coordinating with Apple, and will then post the results on its website.

“It’s a level of transparency and independent oversight that is unmatched in our industry,” Apple wrote in its progress report.

Apple has previously taken the stance that the identity of companies in its supply chain is a trade secret and has been in the habit of stonewalling enquiries from journalists and NGOs about them. Although it does not reveal their locations, the supplier listing does provide some support for independent investigations into the Apple supply chain.

Responding to the move, Judy Gearhart, executive director of the International Labor Rights Forum, told The New York Times that: “It’s a bit of a half-step really to say, ‘Here are the names of the factories, go look through a haystack. But it’s a start.”

While publication of the supplier list and the appointment of a third-party supply chain auditor are moves in the right direction, Apple's transparency claims are rather overblown. The latest report describes Apple's policies and auditing methodology, provides copious statistics and summaries of code-of-conduct violations and responses, but it still does not identify which facilities it found to have made the violations.

Nor does appear that Apple’s partnership with the FLA will increase transparency in this regard. The FLA will audit 5 percent of the factories that make Apple products but, unlike other companies FLA works with, Apple will not permit it to name which suppliers it checks or where it finds violations.

Nonetheless, the FLA's reports will, for the first time, provide independent verification of Apple's claims about at least some of its supply chain. The FLA is certainly a credible player in this role and the audits of other companies' suppliers posted on its website are impressive and revealing, citing dangerous working conditions, attempts by suppliers to quash unions, unfairness in wages and hiring and so on.

Apple says that last year it carried out 229 audits throughout its supply chain, which was an 80 percent increase over 2010, and included more than 100 first-time audits. In addition to its standard audits, the company also launched a specialized auditing program to address environmental concerns about certain suppliers in China, with third-party environmental engineering experts working alongside Apple's teams to conduct detailed investigations at 14 facilities. It says it plans to expand its environmental auditing this year.

In 2010 Apple found that only 32 percent of the suppliers it audited followed its rules about excessive working hours and, according to its latest report in 2011, things did not get much better with just 38 percent of audited facilities found to be following the rules. Thirty-seven facilities lacked basic systems to ensure workers took off at least one day out of seven.