Appalling Ethics of Apple Inc. and the Progress Achieved

Thesis

By

Thien Vu Hoangova

Submitted in Partial fulfillment

Of the Requirements for the degree of

Bachelor of Science

In

Business Administration

State University of New York

Empire State College

2018

Reader: Tanweer Ali

2

Statutory Declaration / Čestné prohlášení

I, Thien Vu Hoangová, declare that the paper entitled:

Appalling Ethics of Apple Inc. and the Progress Achieved

was written by myself independently, using the sources and information listed in the list of

references. I am aware that my work will be published in accordance with § 47b of Act No.

111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid

publication guidelines for university graduate theses.

Prohlašuji, že jsem tuto práci vypracovala samostatně s použitím uvedené literatury a zdrojů

informací. Jsem vědoma, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998

Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o

zveřejňování vysokoškolských závěrečných prací.

In Prague, 27.4.2018 Thien Vu Hoangová

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Table of Contents

Chapter 1: INTRODUCTION ................................................................................................ 5 1.1. Purpose and Explanation of the Research ........................................................................................ 5 1.2. Apple Corporation ............................................................................................................................ 6 1.3. Apple and Consumerism .................................................................................................................. 9

Chapter 2: ETHICAL CONCEPTS ..................................................................................... 11 2.1. Ethics .............................................................................................................................................. 11 2.2. Ethical Systems .............................................................................................................................. 12

2.2.1. Deontology .............................................................................................................................. 12 2.2.2. Teleology ................................................................................................................................. 14 2.2.3. Egalitarianism ......................................................................................................................... 15

2.3. Role of Business in Society ............................................................................................................ 16

Chapter 3: RESEARCH METHODS AND DATA ............................................................. 18 3.1. Research Objective ......................................................................................................................... 18 3.2. Research Design and Methods ....................................................................................................... 18 3.3. Analysis of Information .................................................................................................................. 19

Chapter 4: OUTSOURCING ................................................................................................ 20 4.1. Problems in the Supply Chain ........................................................................................................ 20 4.2. Overtime and Low Wages .............................................................................................................. 21 4.3. Dormitories ..................................................................................................................................... 21 4.4. Unsafe Working Conditions ........................................................................................................... 22 4.5. Suicides .......................................................................................................................................... 25 4.6. Explosions ...................................................................................................................................... 26 4.7. Environment ................................................................................................................................... 27

Chapter 5: OTHER ETHICAL CONTROVERSIES ......................................................... 30 5.1. Apple tax avoidance ....................................................................................................................... 30

Chapter 6: PROGRESS ACHIEVED BY APPLE .............................................................. 32 6.1. Supplier Code of Conduct .............................................................................................................. 33 6.2. Greenpeace’s Green Guide to Electronics ...................................................................................... 35 ............................................................................................................................................................... 38 6.3. Changes of Foxconn ....................................................................................................................... 38 6.4. Apple’s New Headquarter .............................................................................................................. 39 6.5. Apple’s Renewable Energy Efforts ................................................................................................ 41 6.6. Apple Bans All Benzene ................................................................................................................ 43 6.7. Steve Jobs and Tim Cook ............................................................................................................... 44

Chapter 7: DISCUSSION ...................................................................................................... 48

Chapter 8: CONCLUSION ................................................................................................... 50

Works Cited ............................................................................................................................ 51

Bibliography ........................................................................................................................... 58

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Abstract

In order to cut production costs as low as possible, many companies decided to outsource their

productions to other countries that offer appealing benefits. The trend of moving supply chain

for production of goods and services into developing or underdeveloped countries has been

popular among many corporations starting from fashion to technology industry. Today, the

production for majority of products such as clothes or electronic devices are being outsourced

and only a small fraction is manufactured within the border of United States (Morgan, 2015).

However, there can be seen negative impact of outsourcing on developing countries in terms of

environment, societies or their economies. Corporations, well aware of these impacts, have

been dealing with many dilemmas between acting ethically or increasing company’s profit

margin. One of the many multinational corporations being found facing ethical dilemmas is

also Apple Inc., a world’s largest information technology corporation. Apple has been criticized

for ethical and moral problems in their supply chain and they have taken measures in order to

eliminate these issues. This paper focuses on Apple’s ethical problems and whether or not their

reforms targeted at these problems work.

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Chapter 1: INTRODUCTION

1.1. Purpose and Explanation of the Research

For many companies, the main priority is maintaining and securing company’s survival and

that is through earning revenue. In today’s highly competitive business environment, it could

be challenging to sustain the competition and therefore companies find new ways how to

withstand on the market and usually they will decide to outsource production to developing or

underdeveloped countries. Placing their manufacturing production to these countries does offer

them the benefit of lower employment costs, cheaper costs for materials and also less strict laws

in terms of environmental pollution. When Nike begun to manufacture their products in Japan,

a number of companies saw this approach as a new innovative method of competition and

technique to cut costs. However, it did not take long until people realized that this ‘innovative

approach’ violates many ethical rules, mainly because of labor practices but also other negative

impacts resulting from outsourcing. While global companies are applauding the profitable

technique of diminishing production costs and securing greater income, on the other hand upset

employees are demanded to work in buildings which are unsafe to stay in and hustle for

inadequate wages. Due to the fact that developing countries have very lax laws or even non-

existent laws in many areas, manufacturers abuse this fact and it results in human costs. First

of all, corporations squeeze the prices as low as they can and the owner of the manufacturing

factory is paid very little, so as a result the owners pay the employees low salaries. Due to the

fact that factory owners are paid so little, they also do not secure safe working environment for

employees but rather leave it in poor condition, such as the buildings are unstable, walls that

have holes in, emergency exits are not incorporated into the building, fire extinguishers are

absent, unavailable protection for workers (such as glasses or ear plugs) and improper storage

of materials which could potentially lead to fire. As a result of these dangerous conditions of

factories, accident occurring at workplaces that result in human cost are inevitable. Factories

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manufacturing clothes being in flames has become a common occurrence in the garment

industry (Burke, 2013). In addition to that, salaries that employees receive are usually low and

in many countries the wages do not even provide employees with sufficient money for basic

needs. Moreover, many of the factories employ high number of child labor, forces employees

to work overtime and mistreats them. The United States have regulations that protect workers

and the employees are entitled to filing a lawsuit against their employer even for unimportant

or absurd reasons, such because employee feels bored at workplace or because employee

believes that they should not be fired. Unfortunately, in the majority of developing countries,

workers do not possess this kind of luxury even though the problem is more severe. In these

countries, workers have no voice and the most powerful people are those that are the wealthiest.

Lastly, factories cause a lot of pollution which causes harm to people living in the

neighborhood. In many cases, chemicals were found to be released into rivers and polluting the

water system leading to many health problems for civilians. Both sides – the multinational

corporations or owners of the factories, most of the time just care about the profit maximization

without thinking about their ethical duties that businesses should have towards society, citizens

and they also do not consider their corporate social responsibility. The list of the issues with

these ‘sweatshops’ goes on and the problems need to be addressed in order to improve the

working conditions for employees. This research paper will be specifically looking at Apple

Inc. supply chain and their ethical problems. Apple tried to fix the problems in their supply

chain by introducing new conducts and whether or not were these conducts effective will be

examined further in the paper. The key issues that the paper focuses on is what are the unethical

breaches are, how apple is trying to resolve them and how effective they are at it.

1.2. Apple Corporation

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Apple Inc. is world’s largest information technology corporation, which also received titles the

richest and also one of the most iconic company in the world. The corporation was founded in

1976 by Steve Jobs, Steve Wozniak, Ronald Wayne and is most popular for their iconic iPhone,

which transformed the whole phone industry and made a shift into use of smartphones

(Rawlinson, 2017). They are known for their innovation of new devices as well as product

categories. The Apple brand offers advanced electronic gadgets as well as unique elegant design

which plays the main factor in many customer decision processes. The half-eaten apple fruit

logo is well recognized by people all around the globe and as of 2017 Apple has managed to

open 499 retail stores worldwide (Steeber, 2017). Apple reached its peak in 2015, where

company’s net income reached $53.39 billion and in 2017 the net income has decreased but the

profit that Apple earned was still $48.35 billion, which is still more than any United States’

corporation including Google or Microsoft. Looking at their profits earned since the launch of

the company, just within 5 years of the company’s existence, Apple was able to accumulate

profit of $39.42 billion, however, the net income significantly decreased in 1982 to $61 million

and then since 2002 Apple showed constant positive revenue each year (Statista, Apple's net

income in the company's fiscal years from 2005 to 2017 (in billion U.S. dollars)).

Their products are so popular, that Apple became well-known for the excitement every time

the company is about to announce their new product and their long-standing queues in front of

their stores days before the launch of a new iPhone model just so that they could be first ones

to get their hands on the iPhone. For most of the corporation’s success people assign credits to

Steve Jobs, who people think of in relation to Apple, because Steve Jobs was the visionary

leader, the innovator and inventor that believed in Apple, believed in the making the ‘insanely

great products’ and pushed everyone into doing the same even if it meant that they will be

spending their Christmas Eve working on a new iPhone for him. After he lost his own battle

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against pancreatic cancer, Tim Cook took over his position as CEO. Tim Cook on the contrary

is less of the innovator and cares more about employees, suppliers and the way company works.

However, despite Apple’s popularity and its wide usage among consumers, not many fans of

Apple are aware of the ethical controversies that their phone manufacture is involved in or

under which circumstances their high-tech gadgets were manufactured in. According to a

national survey that was conducted by New York Times in November 2011, more than half of

all respondents (56% of respondents to be specific) did not know anything negative about Apple

and 14% of them said that the only unfavorable factor about their company is the price tag and

over the top expensive products. However, only striking 2% of all respondents noted labor

practices that are happening overseas (Barboza & Duhigg, New York Times, 2012). For many

people, the perception of Apple is just a company that creates beautifully designed products

and nothing beyond that. For the majority of consumers, the main criteria when purchasing a

new product is usually its cost, function and its magnificent design. Not many consider

company’s sustainability or corporate social responsibility as top consideration when buying

themselves a merchandise, because they do not feel like it in any way is their concern and

affects their life. The percentage of customers that would feel guilty for buying a product,

because of the way it was developed, manufactured or eventually after being used disposed of,

is very small. Which plays in favor of Apple, because if more consumers cared about origins

of their products, insisted on product that is not ecologically damaging and did not cause anyone

any pain or hardship during the manufacturing process, they would most probably not purchase

Apple products. Such customers would possibly rather choose another firm that offers more

sustainable technological devices, for example companies that produce their gadgets from

recyclable materials which are more environmentally friendly than materials used in the

production of Apple products. Apart from consumers, even Apple’s investors are not concerned

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about its issues in the labor practices, because they mainly pay attention to whether or not Apple

is capable of delivering margins or their bottom line.

1.3. Apple and Consumerism

Consumerism has increased incredibly over the century and what contributes to this increase is

better economical situation many countries in comparison to many years ago. The Industrial

Revolution drastically expanded availability of goods and services and consumers are also

purchasing more goods, which is even encouraged by presidents in order to help the country’s

economy to prosper. And as a result of that, today, when entering an electronics store, there are

not just three models of mobile phones or two types of computers to choose from, but a whole

range of different types. On daily basis, we are exposed to commercials which encourages us

to purchase tangible products for us to feel better, happier, more beautiful. Marketers of Apple

are also aware that humans have a need of belonging and they wanted to address customers’

subconscious desires of possessing social statuses and power. In the United States, owning and

iPhone is probably not as significant or special as it is in other countries, especially Asian

countries, where people like to show off their status by an ownership of expensive smartphones.

According to the Statistical Portal, in the United States, 43.5% of all smartphone users are

iPhone users in year 2015 (Statista, n.d.). On the other hand, in China, the percentage of people

that can afford to purchase an iPhone is smaller and that is why people feel exclusive owning

an iPhone there. According to 2015 data, only 16.8% of all smartphone users own an Apple

product, which is still the highest figure out of all, nevertheless, other smartphone manufactures

are not too far behind, because Samsung user’s share is 15.8%, Xiaomi is 15.6% and Huawei

is 14.2% (Horwitz, 2016). Due to the population of China, even 16.8% of all smartphone users

represents about 131 million iPhone users in China, which is even more than in the United

states, making it the largest iPhone market in the world. Apple devices are so popular in Asian

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countries, to the point many customers go a very long way in order to obtain their devices.

There are number of unbelievable cases of Chinese or Indian people selling their organs, such

as kidneys, in order to afford a purchase of Apple products or many Chinese men tried to

impress their loved ones and win their girlfriends’ hearts by proposing to them using a stack of

iPhones arranged in a shape of a heart (Griffin, 2015) (Weingus, 2014). Advertisers are mindful

of their power and try to convince customers that they can solve all their life problems with

consumption and that they can even buy nontangible assets such as love or happiness with

money.

Unfortunately, with increasing consumerism and people purchasing more gadgets than they

need (people have multiple mobile phones, tablets, notebooks), there is also increased need for

production to meet the demand. Apple just like any corporation aims for profit maximization

and wants to sell as many products as possible. For this reason, Apple releases newly designed

mobile phones every year and they want to make consumers believe that, it is necessary to

purchase the newest model of an iPhone every year and advertisers made it acceptable to

purchase a new mobile phone every so often even though the model that you just acquired last

year is still functioning without any complications. Consumers were manipulated into thinking

that last year’s model needs to be thrown away because it is not up-to-date anymore and that

they need to purchase the most advanced model in order to keep up with the trend and stay

“cool”. Electronics were turned into disposable products, which consumers do not hesitate to

throw away after few months of usage instead of products that are supposed to stay with you

for a long period of time. Unfortunately, this leads to increased waste, which we burden the

environment with

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Chapter 2: ETHICAL CONCEPTS

2.1. Ethics

In order to have basis to judge whether Apple is acting in an ethical way or not, it is appropriate

to define what ethics is what makes a person or corporation ethical or unethical. Defining ethics

is difficult, because it varies and it is individual. In simple words, ethics is a system of moral

principles which can be used as a tool to behave and judge moral issues. Ethics provide us with

critical analysis of morality and serve as a guide for people to decide what is right and wrong.

Ethics provide us with standards that prescribes us what people ought to do, in terms of rights

(even rights to life, rights to freedom from injury or privacy), obligations, fairness, benefits to

society or virtues such as honesty, loyalty or compassion.

For purpose of this paper, it would also be suitable to define what business ethics is. According

to Ferrell and Fraedrich, business ethics “compromises moral principles and standards that

guide behavior in the world of business” and they also pointed out that two aspects need to be

considered when applying ethics to businesses and that is that businesses need to make profit

in order to ensure survival and that businesses have to balance their eagerness for profit against

the desires of society (Ferrell & Fraedrich, 1997). However, in many cases it is very difficult to

achieve both, because society has established set of rules to protect everyone in the society

which usually results in compromises or tradeoffs of profit for corporation. This is why it is

important to find the balance between these two aspects. Business ethics make sure that

business policies, which address controversial problems such as corporate governance, bribery

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insider trading or corporate social responsibility, are established and in place ready for

enforcing when needed (Investopedia, n.d.).

2.2. Ethical Systems

Principles of ethics are derived from different religions, philosophies, human

conscience/intuition and cultures of individual country, therefore what is ethical in one country,

could be found unethical in another country. There are three main categories in the ethical

system and that is deontological, teleological and egalitarianism.

2.2.1. Deontology

Deontological approach was pint down by German philosopher Immanuel Kant during the 18th

century, nevertheless, the term was derived from Greek words “deon” meaning “duty” or

obligation and “logos” study (The Editors of Encyclopaedia Britannica, n.d.). This approach is

duty-based moral reasoning, which means that a person must adhere to his/her independent set

of moral duties or rules and follow them. As long as they follow their duties and rules then they

are behaving morally, but if they do not do so, they will be behaving immorally. Moral

philosophies of this approach are also referred to as non-consequentialism, because it does take

under consideration whether or not many people will benefit the decision or other advantageous

consequences; it just cares for the person being affected at that specific moment.

This approach also includes theory about absolutism, which is an ethical belief that moral

absolute standards which are universal and against which can be used in the process of judging

moral questions. An example of such an absolute standard is that people should not lie and

cheat, wherever they come from or what their religion is. Absolutists judge actions based on

absolute standards and does not take under consideration context of the act. Therefore, acts such

as whistleblowing or lying about hiding Jewish refugees would under this theory would all be

13

considered as unethical practices. Ancient philosophers Aristotle and Plato were believers in

moral absolutism.

Deontological approach also consists of the categorical imperative, which was introduced by

Immanuel Kant and it claims that a person cannot imply a rule to him/her if it cannot be implied

to everybody else. (Ferrell & Fraedrich, 1997). In the precise words, it says “Act as if the maxim

of thy action were to become by thy will a universal law of nature”. Another part of deontology

approach is also “the golden rule” which says “do onto others that you would do to you”. The

rule says that a person cannot imply people should not do to other what they would not like if

it was done to them. The golden rule has a positive and a negative form. The negative form

states that we should not treat others the way that we would not like to be treated and the positive

form is that we should treat others the way we would like to be treated (New World

Encyclopedia, 2017).

Followers of this deontology approach also believe that there is a set of absolute rights that

individuals possess and that include freedom of conscience, freedom of consent, freedom of

privacy, freedom of speech and due process (Ferrell & Fraedrich, 1997). An example that could

be used in case of Apple is if an employee gets injured or even dies because of conditions at

the workplace, a deontologist’s view on it could be that the corporation has to make adjustments

to prevent incidents like this to happen, even if it means corporation will have to announce its

bankruptcy. Under this approach, people do not tolerate intentionally hiding defects or

continuing operations even when they are aware of its positive effects on other people’s lives.

Deontologists would cease any activity that would hurt a single living thing even if more people

would benefit from it (consumers have their beloved gadgets, corporation earns high profit

margins, offers working opportunities to many) and even if it could lead to potential loss of

sales. Therefore, a deontologist would most probably classify Apple’s practices as unethical

and immoral.

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2.2.2. Teleology

Translating from Greek words the term means “end science” (telos means end or purpose and

logos means science), which indicates that this moral philosophy is rather concerned with the

end result of decision (The Editors of Encyclopaedia Britannica, n.d.). In this approach, it is

morally acceptable if the act results in greater, more beneficial outcomes or increased utility.

Because the approach is consequences based moral reasoning, meaning that people derive their

moral behavior/reasoning out of results from their acts, many philosophers refer to this theory

as consequentialism. There are two concepts that are part of teleological approach –

utilitarianism and egoism.

Among egoists it is acceptable to make decisions which would maximize their own self-interest,

without taking under consideration others (Ferrell & Fraedrich, 1997). The term egoism is

derived from word “ego” which in Latin means “I” (Moseley, n.d.). Believers of egoism

approve of behavior in which consequences benefit only the person making the decisions and

they find it ethical as long as it benefits at least the doer. An example in relation to Apple is

their tax avoidance methods, by which they are trying to maximize profit margin through

minimizing the amount of income tax paid. They decided to indulge into tax avoidance because

they were motivated by their own interests and desires.

Utilitarianism defines a theory that people should behave in a way that produces the greatest

pleasure to the greatest number of people – greatest total utility. Philosophers that are often

coined with and who had great influence on utilitarianism are J. S. Mills and J. Bentham

(Nathanson, n.d.). This approach has to rely on the cost and benefit analysis of every person

involved in the act, to find out whether the act would result in the greatest good to the greatest

number of people – the most beneficial consequences. Many corporations also use utilitarianism

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in their defense, when they are being criticized for ethical misconducts, arguing that they create

greater utility for people than harming people.

However, teleology approach is predictive and nobody can predict the precise future since one

act could result in many different outcomes. This approach assumes there is a measurement to

everything and compared to deontological approach, teleological approach would justify a lot

of conducts, which are not justified in deontological approach. Teleological approach would

justify killing a person for the good of greater number of people or outsourcing production to

other countries if 100 people suffer, while other 100 000 people will be benefiting from it. As

a result, teleology followers would most probably find Apple’s business strategies acceptable

and within ethical norms, because their manufacturing offers hundreds of working positions for

people all around the world and thousands of people like their gadgets and enjoy using them.

Compared to “a few” people that could get hurt by their manufacturing practices, their

manufacturing business strategies still create more utility.

2.2.3. Egalitarianism

Last moral philosophy that this paper will discuss is the Egalitarianism approach, which

concentrates on equality or fairness based reasoning. The term is derived from French word

“egal” which means equal and in English it was first used in 1880s (The Basics of Philosophy,

n.d.). Egalitarianism states that all people are equal and they deserve the same rights and

chances, it does not concern with someone’s wellbeing, but just purely about equality – the

wealthy ones have to become poor, strong must become weak so that all can become equal.

This approach aims for removal of inequalities as well as discrimination in the society. There

are many different types of egalitarianism that focuses on different fields such as gender,

political, opportunity or economic egalitarianism (The Basics of Philosophy, n.d.). If we put

the exploitation of developing countries by developed countries into context here,

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egalitarianism would classify this as immoral and unethical, because egalitarianism strikes for

economic equality among all people. Therefore, egalitarianism followers would classify Apple

as unethical corporation.

2.3. Role of Business in Society

For a business to survive on the competitive market alone is already challenging, but in addition

to that they have to create profits for their shareholders. Therefore, serving the needs of society

is usually less of an importance for them. There are four different types of businesses in society,

which differ in degree of ethicalness – profit maximization, moral minimum, stakeholder’s

perspectives and last one is corporate citizenship.

Business that only strikes for profit maximization only aims to create profit for its owners and

shareholders. In this type of business models, they do not look after the good of the society or

the world, but just their own profit. An example of this business model would be with the Ford

Pinto case, when Ford designed a new car, but it had a defect because the gas tank was at the

back, making it prone to explosions. Ford could make some adjustment to the design, which

would decrease number of deaths, nevertheless, they assigned to each dead person a price tag

and calculated that making adjustments would cost them more than paying for diseased people

and therefore they did not fix the problem. It is clear that Ford’s only aim was to maximize their

profit and they did not care about lives of others.

In the moral minimum model, businesses show minimum of ethical behavior. These types of

business recognize that if their company made a mistake, they have to take responsibility for

their misconducts and fix the problem. An example is when Exxon Valdez supertanker ruptured

and oil spilled into water in Alaska. As a result, many birds, marine animals were killed and the

fishing industry was damaged. Exxon payed billions, sent ships and helicopters to clean up their

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mess, which took years. Exxon definitely does not classify as ethical corporation, but at least

they show minimum of morality and ethical behavior in situations when they make a mistake.

The stakeholder’s perspective model is when the company does not only care about

shareholders but also its stakeholders and therefore has a responsibility to their employees, local

community, creditors, business partners, public as well as suppliers. In this model, the business

is more ethical and cares more about people around them. Example of this business would be

Ben & Jerry’s, because they cared about happiness of their employees and customers and

decided to leave off one day to give free ice cream to everyone. Their primary goal was not to

become wealthy, they just wanted to earn money and the rest give back to their community.

The most ethical business model is corporate citizenship. These businesses understand that they

are responsible to help treat societal problems just like any other regular citizens. Corporate

citizenships try to give back to the community and society and help the people as they can. Bill

Gates foundation is an example of this business, because he is considered as the modern Robin-

Hood, since he is acquiring money in a bad way but using it to help others in a good way. His

foundation managed to save more lives in Africa than anyone, including UNICEF, and his

investments in Africa such as mosquito nests or sterilizing water saved many lives.

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Chapter 3: RESEARCH METHODS AND DATA

This part will focus on the objectives and design of the research as well as methods for process

of gathering the data and its analysis. It is also critical to determine which type of moral

philosophy will be used as a basis to judge Apple’s activities against.

3.1. Research Objective

The objective of this thesis is to analyze multinational electronic company Apple and their

corporate social responsibility as well as their ethical and moral behavior. The aim of this

research is to investigate whether Apple has over the years developed adjustments or made any

progress after being criticized for their unethical practices regarding the supply chain

management or tax avoidance.

3.2. Research Design and Methods

In order to fit the specific research purpose, the most suitable research method would be

secondary research method. Secondary research is a method, which involves interpretation and

analysis of information that has already been compiled and gathered by primary sources (Do,

n.d.). Due to availability of many documents published by Apple, large number of researches

that have already been conducted on Apple-related facilities and a lot of different articles

written by credible sources, it is more convenient and less time consuming to collect and

19

analyze these documents. In addition, the majority of Apple supplying partners are located in

Asian countries and Apple headquarters is situated in the United States therefore it would be

very complicated to interview factory employees or distribute surveys among them. Moreover,

the thesis investigates Apple practices before activists together with critics decided to focus on

Apple and draw to public’s attention all their imperfect sides, which has already happened many

years ago and the only available source of these specific pieces of information is through

gathering articles which were published in those particular years.

3.3. Analysis of Information

There are two approaches to analysis of information – deductive approach and inductive

approach (Halliday, 2016). Deductive approach is used when researchers build hypothesis

based on already existing theories. Inductive approach describes method where researcher

begins process by collecting data related to the topic and then constructs the theory based on

patterns of data assembled. In light of the fact that this research paper compares and contrasts

information and theories about Apple practices before backlashes against reports about recent

conducts, this thesis will follow the deductive approach.

As presented in Chapter 2, there are three main ethical systems - Deontology, Teleology and

Egalitarianism. For the purpose of this thesis, it has been concluded that it would be most

suitable to adopt and use of deontology approach to correspond research’s objective. Teleology

theory puts emphasis on greatest utility and as a result it shows a preference for public utility

over justice and fairness, because the approach results in a zero-sum situation, where someone’s

win indicates other’s loss. On the grounds that teleology approach has prompted some

consideration about fairness since teleologists determine by themselves who are the more

advantaged ones and which unfortunate individuals will have to sacrifice themselves to the

more advantaged class. Teleology is also the approach which businesses usually use in order to

20

justify their behavior, which would be classified us unethical in other ethical systems. For this

reason, deontology would be best suited to be selected for the purpose of this thesis.

Chapter 4: OUTSOURCING

4.1. Problems in the Supply Chain

Apple has more than 700 manufacturing partners and they are spread out over 31 countries –

Austria, the United States, Germany, United Kingdom, France or Brazil. However, the majority

of the partners come from Asian countries, mainly China, Japan or Vietnam. It is not surprising

that Apple bases their manufacturing production to Asian countries, because of their

competitive advantage and the majority of them have the less strict laws when it comes to

employment or pollution and countries also offers very attractive prices in term of employee

low minimum wage or cost of materials.

However, Apple, just like many other companies that outsourced their manufacturing

production to developing countries, was found guilty of certain ethical breaches such as

sourcing their products from factories that have bad reputation in terms of employment working

conditions and practices. Foxconn is world’s largest electronics manufacturer and also Apple’s

biggest manufacturing partner. Foxconn has several facilities around the world, however the

main manufacturing factory is based in China. Their factory has been involved in many

controversies in terms of morals and ethics. In 2015, China Labor Watch released a report

examining labor conditions in Apple manufacturing partners Foxconn and Pegatron. According

to the report, employees still have to work excessive working hours, there is on-going

discrimination in the hiring process, women’s rights violations, employment of underage

workers, insufficient salaries, poor working and living conditions, abuse of workers by the

21

management and many more (China Labor Watch, 2015). In these factories employees are

insignificant and are not taken serious when it comes to speaking up against injustice, even

though they are the ones who have to paying the price for this product of race to the bottom and

owners of these factories are just seeking profit maximization even if it means putting their

employees in danger.

4.2. Overtime and Low Wages

In Foxconn, employees being forced to work overtime as much as 15 hours per day for wages

as low as $50 per month, has been one of the most frequent complaints coming from employees

working in Foxconn facilities (Klowden, 2006). In addition to that, an employee compared

working regime at the factory to an army, because they had to stand still without moving for

long hours and if they did not obey the would be punished and forced to stand for even more

time. Moreover, workers were not allowed to leave the job after certain hours of work, but they

have to for the majority of time work overtime and go back to their dormitories only when the

supervisor allows them to go (Clarke & Boesma, 2015). In the United States the “Fair Labor

Standards Act” does not determine the maximum hours that employer can assign to an

employee, but according to the Bureau of Labor Statistics, a standard workweek is between 35

and 40 hours (Francis, n.d.). Just for comparison, hours that an average American works for the

whole week, employees in Foxconn facilities manage to complete in not even full 3 days.

Besides forced overtime and exceptionally insufficient wages, employees also suffer from

abuse of power from the upper management, recruitment discriminations, high recruitment fees

or also humiliated when they arrived late to work by asking them to write confession letter and

copy quotations (Barboza & Duhigg, New York Times, 2012).

4.3. Dormitories

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Employees are accommodated in dormitories, which are not opened to outside visitors for a

reason. Dormitories were built to accommodate approximately 100 employees, nevertheless

Foxconn did not bother to follow these instructions and decided to take on board as many as

200 000 workers to their dormitories (Klowden, 2006). Due to the fact, that visitors are not

allowed into dormitories, it is difficult to photograph their living conditions, nevertheless, Mail

Online visited one of the Pegatron dormitories, which accommodated workers that produced

Apple components, few weeks after it was abandoned and workers were transferred to another

dormitory (Knowles, 2016). On the pictures on the website we can see how some rooms, despite

the fact that Pegatron claims to house only 8 people per room, have even 12 beds in, leaving no

space for other facilities such as tables or sinks for hygiene purposes. Moreover, the dining area

looks very unclean and not sterile just like the rest of the building including bathrooms, where

20 people shared the same room. The building accommodated more than 600 workers, yet there

were only 30 toilets, out of which half of them were out of order. In the morning employees

would have to line up to use the facilities as if they were in military. Employees raised

complaints, saying that “the bosses here treat us like robots to make money for them” and that

the dormitories are rather fit for livestock more than for human beings (Knowles, 2016). Many

workers decide to quit their career on manufacturing factories on daily basis, but the reason

behind it is usually not the low wages, but rather because they cannot cope with the ruthless

working conditions in the factory and insufferable living conditions in dormitories. Apple

received a lot of backlash and criticism when these facts came to the surface, for not taking any

actions to protect their workers.

4.4. Unsafe Working Conditions

Apple has been constantly criticized for unsafe working conditions at their manufacturing

facilities, which could result in serious health defects to their workers. Catcher technology is

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Taiwanese based manufacture as well as distributor of computer and electronic products, which

produces components for many electronic companies, including Apple. In April 2013, China

Labor Watch conducted an investigation on one of Catcher’s branches located in Suqian, China

and found many violations regarding human rights, health and safety as well as environmental

violations in the factory (Newswire, 2014). China Labor Watch (CLW) is a New York based

non-government organization, which is intended to protect workers’ rights in China through

helping China’s workers to be more knowledgeable and aware of their own legal rights and

improve working conditions by promotion of transparency in supply chains (China Labor

Watch, n.d.). 16 months after discovering and informing Apple about the misconducts, CLB

together with Green America, non-profit organization which aims to build a socially just and

environmentally sustainable society, decided to investigate Catcher facilities again,

nevertheless, Apple has not made many improvements in the factory and many of the violations

persisted. For the first time, the organization decided to just tell Apple privately about

violations, which are happening in their manufacturing facilities, but because the violations

persisted and not many modifications were made, the second time they decided to go public

with report of breaches that Catcher has been found guilty of. The list of misconducts that

Catcher has been accused of includes lack of proper ventilations, inadequate personal protective

equipment for handling toxic materials, locked safety exits, forced overtime, excessive hours

for all workers, student workers working for more than 10 hours, dumping of industrial fluids

as well as waste into rivers nearby or groundwater (Newswire, 2014). The list of violations does

not end here and is startlingly lengthy.

In a documentary “Who Pays the Price?: The Human Cost of Electronics”, directed by Heather

White and Lynn Zhang, several employees working in a manufacturing facility which produces

Apple components, spoke out about the unsafe, inhumane working conditions and the exposure

to dangerous toxic chemicals such as benzene or hexyl hydride, also known as n-hexane. One

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of the employees described how she had to work from 8am until 11pm for a whole month with

just only one day off. In addition, she explained how the ventilation in the factory was poor,

without any windows resulting in unpleasant smell which employees had to inhale. The

majority of the employees starring in the documentary also became victims of occupational

leukemia, which is a type of cancer caused by being at work exposed to chemicals like benzene

in the electronic industry. In the majority of developed countries, the use of benzene in

production process is prohibited, nevertheless, in developing countries the indifferent

regulations still tolerate usage of benzene as well as n-hexane. Many of them explained, how

they wanted to pursue a better life and wanted to financially support their families on the

countryside by working in the factory. Unfortunately, because they were exposed to benzene

without proper personal protective equipment, instead of helping their families, they became

burden to their families, because they need to be taken care of and in many cases the company

rejects the diagnoses as a work related illness and therefore refuses to take responsibility for

treatments or to pay any kind of compensation. Patients of leukemia have to be hospitalized

and many of them remain in between hospital walls for months or even years, which could be

very depressing for them. For a 27-year old Ming Kunpeng, the cancer was discouraging to the

point he decided to take his own life to end his suffering and his feeling of burden to his parents,

who had to pay his medical bills for treatments since he was diagnosed with occupational

leukemia when he was 22 years old (Benzene-poisoned ASM worker commits suicide in

despair, 2013).

Apart from cases of benzene poisonings, there have been also reports on n-hexane poisoning in

manufacturing facility that supplies Apple with touchscreens – Wintek. N-hexane is a chemical

that causes “peripheral neuropathy”, which describes situation in which nerves that control

muscles in arms and legs become deteriorated and damaged (Toxic Substances Portal - n-

Hexane, 1999). Despite this fact, the chemical was not banned from their working environment

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and consequently in 2011, 137 Wintek employees were found poisoned by n-hexane.

Employees started to complain about sore limbs, headaches, dizziness, feelings of weakness as

well having difficulties when performing simple daily tasks such as dressing up or walking up

the stairs (Clarke & Boesma, 2015). It is quite disturbing that Apple did not step in and did not

took action against the use of toxic chemicals in its manufacturing facilities, even after all these

incidents happened. People started to link the accidents to Apple, resulting in campaigns and

boycotts against Apple. Estimates that were calculated by industry insiders guessed that

elimination of benzene and n-hexane would cost Apple just an additional $1 and substituting it

with another non-hazardous chemical in its supply chain (Williams, 2014).

4.5. Suicides

The workload and stress that employees at Foxconn had to put up with in some cases escalated

and took an unfortunate turn, when some of them decided to take their own lives away, because

they could not bear it anymore. In 2010, a 19-year-old boy jumped out of the factory roof to

end his life. The story behind Mr. Ma’s death is similar to other cases of young people not being

capable of handling enormous amount of work for such a low wage and decided to end their

lives as a result. Mr. Ma came to a disagreement with his supervisor, after which he was

transitioned and assigned to cleaning toilets department instead of working in the

manufacturing section. At his young age, he had to work 286 hours a month, out of which 112

hours were overtime. Despite all these hours and work, he was rewarded with only $1 an hour

(Barboza, After Suicides, Scrutiny of China’s Grim Factories, 2010). The year 2010 was critical

in terms of worker suicides, because there were 18 attempts of Foxconn employees in taking

away their lives and 14 of them died in 2010 of suicide. The ages of workers attempting suicide

varied from 17 to 28 years old. Some of the workers’ attempt to suicide was less successful,

such in the case of Tian Yu. Just a few months after Mr. Ma’s death, a 17-year-old Tian Yu

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chose to jump off her dormitory, because she felt humiliated and angry after being mistreated

by Foxconn employees when she wanted to ask about obtaining her wage after working in the

factory for a month. However, her attempt failed and as a result she became confined to hospital

beds, paraplegic from her waist down (Clarke & Boesma, 2015). The problem within the

manufacturing plant walls escalated to the point that in January 2012, 150 employees protested

against unhealthy conditions at the workplace by threatening to commit mass suicide by

jumping off the factory roof (Moore, 2012). Fortunately, after two days of employees staying

on the roof, officials managed to convince them to come down.

These distressing events drew attention of media and people started to talk about Foxconn,

saying that they have inhuman and abusive business practices. Organizations also examined

their facilities and found many labor rights violation breaches that Foxconn is guilty of. Many

young people also protested in front of Foxconn facilities and in the United States they decided

to print out pictures of deceased workers with their age and left it in front of Apple Store. For

many months, Foxconn did not want to comment or act in response to these tragic events at all.

4.6. Explosions

Apart from suicides, Foxconn was linked to another problem and that is reoccurring explosions

at their facilities. In May 2011, there was an explosion at Foxconn in Chengdu, which killed 3

people and injured 15 of them. According to investigations, local authorities declared that the

explosion resulted from not cleaning up ventilations and working place properly and therefore

combustible dust caught on fire. In many cases, the reason behind the explosions is caused by

aluminum dust particles which catches on fire. The striking thing about this explosion is that,

it was possible to avoid this event if the management listened to their employees, according to

SACOM who interviewed Foxconn employees after the incident. Prior to the explosion,

workers have already complained several times and notified the management about the

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polishing department being full of alumni dust and the room had also poor ventilation.

However, their concerns were not taken into considerations and no adjustments were made

(Barboza, Explosion at Apple Supplier Caused by Dust, China Says, 2011).

Just a few months later, in December 2011, another explosion occurred in RiTeng Computer

Accessory, which supplies Apple with metal components for their products. The explosion

injured 61 workers out of which 23 had to be hospitalized (Rundle, 2011). In order, to prevent

facilities from explosions like these to happen could be simply done by installing better

ventilation system, cleaning up the workspace property to prevent from combustible dust to

accumulate and eventually catch on fire. It would also be helpful if facilities were equipped

with proper fire extinguishers and employees would obtain trainings how to handle situations

where explosions occur.

4.7. Environment

Apart from labor violations, there are also many problems related to environment in Apple’s

manufacturing process as well as the disposing process of used electronics. Apple received a

lot of criticism for polluting the nature, using toxic chemicals and not regulating the pollution.

In 2013, one of the Apple manufacturing supplier in China polluted a river to the point the river

changed its natural color into milky white (Price, 2017). Another investigation showed that,

lake Nantaizi, which is close to Meiko Electronics PBC plant, another Apple’s manufacturing

partner, is severely contaminated and in the water stream could be found heavy metals like

copper and nickel. At the speed of the lake, these pieces of metal could cause a damage to the

public’s health. In many cases, factories produce tremendous amount of toxic waste and release

substantial amount of chemicals to the rivers and lakes to the point plants are not capable of

cleaning the water for it to be used ever again. Another factory that also received a lot of

complaints for its environmental pollution is Foxconn. Gasses that the factory release into the

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air are highly unhealthy to citizens living in the neighborhood, especially the amount that the

factory discharges at the rate of their production. As a result, nearby residents have health

problems such as irritated nasal passageways or watery eyes (The Other Side of Apple II, 2011).

Moreover, Greenpeace introduced Guide to Greener Electronic, in which they examine mobile

and PC manufactures according to emissions that they release, resource consumption and their

attempts to eliminate hazardous chemicals. In 2006, when they released the first edition of the

guide, Apple ranked 11th out of 14 electronic companies with a score of 2.7 out of 10 and the

report stated that Apple’s products are environmentally unfriendly. Out of 9 criteria, the only

category in which Apple received “partially good” ranking was reports on amount of waste,

while the rest of 8 categories were either “partially bad” or “bad”. Apple received bad rating

especially for their slow transition into PVC-free or BFR-free products as well as no timeline

plan for elimination of all BFRs (Green Peace, 2008). Apple’s most important priorities clearly

did not include being environmentally conscious back in 2008.

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Another area, in which Apple received a lot of disapproval for as well is the electronic waste

that Apple contributes to. The ethical and moral problems are not only in the manufacturing

phase but also after electronic devices are produced and consumers are finished with the use,

because e-waste is at a rapid speed becoming a serious threat to environment. Especially for a

company like Apple which is proud for its innovative design of mobile phones and they release

new model every year, which encourages employees to throw away their old smartphones to

purchase a new one. As a result, lifespan of today’s electronic devices is much shorter as

people’s desire to update to the newest model increases. Unfortunately, this contributes largely

to increasing e-waste. In some cases, electronic waste is recycled and put again to use,

nevertheless, in many cases the e-waste will end up being exported from developed countries

to the third world countries.

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Dumping any kind of waste into landfill sites in developing countries has been a common

practice done by corporations for some time already, nevertheless, dumping e-waste contributes

greatly to pollution in developing countries as well as increases chances of poison from particles

installed into electronics. E-waste is extremely toxic due to metals such as lead, cadmium or

mercury incorporated into devices, which could result in serious health problems in humans

after leaching into the surrounding soil or groundwater. People living in the neighborhood or

close to the landfill sites for a long period of time could develop diseases such as cancer, tumor

or mental health disorders (Electronic waste in landfill – a toxic time bomb , n.d.). In 2003, it

was calculated that just in the United Kingdom, a minimum of 23,000 metric tonnes of

undeclared electronic waste was exported, in the violation of international law, to countries on

such as India, Africa and China (Harding, 2010). According to the ‘Environment, Protection,

and Heritage Council’, out of 16.8 million electronic devices that were thrown away in

Australia between years 2007 and 2008, only a small percentage was recycled while 88% or

14.7 million was sent to landfills (Electronic waste in landfill – a toxic time bomb , n.d.). E-

waste that we produce not only harm and pollute the environment in which we live in, but also

has negative effects on us humans and our health is being impacted as well. This is why

electronic corporations, including Apple should help with recycling of their own products and

have programs that encourages their customers to put the used gadgets back into the cycle.

Chapter 5: OTHER ETHICAL CONTROVERSIES

5.1. Apple tax avoidance

Another ethical controversy that Apple is involved in aside from manufacturing or disposal of

products is their effort to avoid paying taxes. For the majority of corporations, their main

purpose is to maximize the profit earned, which in many cases means that they will try to find

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loopholes to cut costs where it is possible. Another reason, why US companies try to avoid

paying taxes is also because the corporate tax rate in the United States was the highest tax rate

in the world, even higher than France or Belgium, for decades up until recent adjustments to

the US tax law. In January 2018, in hope of attracting many corporations back to the country

and boost the US economy, there has been changes to the US corporate tax rate and decreased

from 35% down to 21% (Pomerleau, 2018). For the reason of being the highest tax rate from

all the OECD countries, many corporations decided to establish subsidiaries in other countries

known as tax havens, which offer companies more lucrative corporation tax as low as zero to

single digit number (Tax Haven, n.d.). Some of the most popular destinations for tax avoidance

are Bahamas, Bermuda or Luxembourg, which is Amazon’s chosen destination.

In case of Apple, their chosen tax haven destination for their “ghost companies” is Ireland due

to Ireland’s corporate tax of 12.5% (Ireland's Tax Regime, n.d.). Subsidiaries which are

established in Ireland own 90% of all Apple’s foreign profit (Houlder, Barker, & Beesley,

2016). However, Apple does not even pay the complete amount of 12.5%. In 2014, Apple was

found to pay only 0.005% tax rate to Ireland, which sounds unacceptable, nevertheless, it is still

a better scenario compared to United Kingdom in 2012, where Apple did not pay any taxes at

all (Price, Does Apple pay tax, how much tax does Apple pay, and why doesn't it pay more?,

2016). Two years later in 2014, Apple managed to pay £11.8m in tax to United Kingdom, which

appears to be a significant amount, but calculating from Apple’s profit in UK it still constitutes

to a 0.6% tax rate compared to standard 20% corporate tax rate in UK. When it comes to Apple

subsidiaries that are situated in the United States, Apple found a loophole how to avoid paying

high tax rates for these, by claiming that they are just renting patent from Irish subsidiaries

which hold rights to Apple’s intellectual property.

In 2016, the European Commission announced that they will step in and hold Ireland

responsible over their arrangements with Apple which led to €13billion tax benefits for the

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corporation (Apple's EU tax dispute explained, n.d.). After years of investigation, the European

Commission announced verdict that Ireland is responsible for collecting the tax benefits which

were given to Apple, because under the EU law it is considered illegal due to its unfairness to

other corporations (Agence France-Presse, 2017). However, Ireland does not want to reimburse

the money from Apple, therefore both decided to appeal against the tax ruling. Ireland does not

want to risk losing Apple’s subsidiaries in their country by raising tax rate, because it is helping

Irish economy as their corporation create job opportunities for their citizen. In addition,

collecting taxes could frighten other potential corporations which have intention to open

subsidiaries in their country. In 2017, after 14 months of not receiving any payments and not

collecting tax cash from Apple, the European Commission decide to take Ireland to court over

the affair (EU takes Ireland to court over Apple taxes, n.d.).

Chapter 6: PROGRESS ACHIEVED BY APPLE

Apple realized that they cannot just stand and watch while all the accusations are leaving a scar

on company’s reputation. Due to the substantial pressure from outside parties, Apple derived

to a conclusion that their ethical standards need to be raised. They decided to take action and

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make several changes to show they are not ignorant to issues going on in their supply chain and

that they do care about all the employees involved in production of their products.

6.1. Supplier Code of Conduct

Most of the bruises on the reputation were results from supplier’s practices. Many people

assumed that Apple’s supplying partners are manufactures that produce purely Apple products.

However, for example Foxconn, is also a supplier for other electronic companies such as

Samsung, Sony or other multinational corporations (Statt, 2016). Activists that were aware of

this fact claimed that, despite this fact, they targeted Apple, because they are the leading

corporation with a voice. Due to Apple’s high profits as well as strong brand it is not surprising

that they become main target and easiest target for ethics campaigns. As a result, Apple decided

to make changes in the company. Apple’s response to all the critique and convocations for

boycotts was ‘Supplier Responsibility Program’ which they introduced in 2006. By launching

the program, Apple wanted to prove their commitment to improving the problems in the social,

environmental as well ethical aspect. The aim is an in increasing transparency in their efforts

to improve the conditions and all stakeholders that are involved in the process of manufacturing

Apple products available to consumers. The program includes Code of Conduct, which Apple’s

supplying partners have to sign if they want to enter a partnership with the corporation. The

code consists of lengthy list of requirements, which manufacturing partners have to conform

to, otherwise they could be endangering the business partnership which could potentially be

terminated. In case of discovering that supplier is violating any standards, Apple would give

them a specific period of time to fix the problem and if the issue is not fixed then Apple would

reportedly terminate the partnership. The code covers standards for 5 main areas, which are

than further broken down into subcategories. Each year they release a report where they specify

what they added to the requirements or what they demanded specific suppliers to accomplish.

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The main categories that the code is concerned with is – Labor and Human Rights, Health and

Safety, Environment, Ethics and Management Systems.

The first category orders suppliers to treat their employees with respect and dignity and reports

that employees are entitled to a fair as well as ethical workplace. Employers have to guarantee

that they do not discriminate workers based things such as race or sexual orientation and they

do not employ underage workers. The category is further broken down and touches upon issues

such as working hours, wages, anti-discrimination or anti-harassment.

Under second category, suppliers are obliged to maintain and provide their workers with safe

working environment and give them right to reject working if the criteria are not satisfied and

report the problems without fear of retaliation. Suppliers are not allowed to expose employees

to work that would put employee’s health or safety at risk. Specific subcategories under this

area are for example health and safety permits or working and living conditions. A particular

example could be that Apple requires all suppliers to keep the working space clean and

ventilations uncluttered to prevent explosions to occur.

Third category deals with supplier’s environmental responsibility and requires them to develop

business practices that are sustainable in order to protect the environment. Suppliers are bound

to dispose waste in a manner that does not harm the environment. This section further clarifies

how suppliers are expected to manage hazardous waste, storm and waste water as well as the

air emission control which could have unfavorable impact on the environment and people living

around. Fourth classification defines ethical and moral guidelines that suppliers should follow

during partnership with Apple. Suppliers should sustain business integrity and not get involve

into corruption or falsification of information on its business activities reported to Apple

authorities under the code.

For the last category, Apple requires their suppliers to have sound management systems. They

should take the commitment to social and environmental sustainability seriously and

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commission a representative that will be hold accountable for Corporate Social Responsibility

and will be responsible for reports to authorities. In addition, employers are required to provide

proper trainings to workers and accordingly inform them about all the rights that they have

(Apple, Apple Supplier Code of Conduct, 2018).

By examining the first edition of “Supplier Responsibility - Progress report” that Apple released

in 2007 and the most up to date progress report which Apple published in 2018, it is clearly

visible how much effort has been put into the program throughout the years. The first edition is

composed of 4 pages while the latest edition is 56-pages long. In 2017, Apple has achieved

some remarkable progress and they managed to inspect facilities in over 30 countries and

conduct 756 assessments, which is 51 more assessments than previous year (Clover, 2018). As

part of the supplier conduct they also launched a health program specifically for women

working for supplying partners in China or India. The program provides access to services as

well as education about self-examinations of cancer, nutritional, personal and maternal

healthcare. Other interesting statistics from the 2018 progress report include all final assembly

facilities for iPhone have achieved zero waste certifications worldwide and in order to achieve

the same in all facilities, 625 000 metric tonnes of waste had been successfully diverted away

from landfills since 2015. In the fight to protect the climate change and reduce carbon footprint,

Apple suppliers also managed to decrease carbon emission by 320 000 metric tonnes and water

used has been decreased as well. Progress report also stated that there has been 35% increase

in the number of high performers among supplying partners and 71% decrease among low

performers (Apple, Supplier Responsibility 2018 Progress Report, 2018).

6.2. Greenpeace’s Green Guide to Electronics

Greenpeace’s first edition of their Green Guide to Electronics ranked Apple on the bottom half

of the scale. However, in the most recent guide which they released in October 2017, Apple

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climbed all the way up from the bottom to being second the best (Cook & Jardim , 2017 ).

Apple is right behind the Dutch mobile phone company Fairphone, which was launched in 2013

and their goal is ethical manufacturing with minimum environmental impact (Fairphone, n.d.).

Fairphone took advantage of all the scandals that other mobile phones companies such as Apple

or Samsung received for unethical and unsustainable behavior and decided to fill in the gap

with mobile phones that does not have ethical issues with inhumane labor practices or unsafe

working conditions in their supply chain. However, despite their considerable objective for

people that do not want to deal with guilt of ruining the planet, not many people know about

this company and those individuals that are familiar with their products say that Fairphones are

ugly and have dated hardware (Williams A. , 2016). In Fairphone case, ethics came at the

expense of design, which is similar to earlier versions of electric cars of Mercedes or BMW

which were so ugly that no one wanted to purchase those cars despite its environmentally

friendly feature, until Tesla launched their electric cars which people felt proud to own not only

its ecological side but also its design. Apple’s design is definitely far ahead of Fairphone,

nevertheless to compete with a company for which main goal is to be ethical and have fair

supply chain is difficult to beat.

In the 2017 edition, we can see many praiseworthy changes that happened in Apple. In the

category of greenhouse gas reduction/renewable energy and eliminations of hazardous

chemicals from the manufacturing processes as well as the products Apple even received a

better rating than Fairphone got. The only category in which Apple is behind Fairphone is

resource consumption, which rates products’ sustainable design and the use of recycled

materials (Cook & Jardim , 2017 ). Out of all 17 companies that were examined by Greenpeace,

Apple was the only corporation that is 100% committed to renewable energy not only at their

facilities but also for their supply chain. Apple receives excellent ratings in renewable energy

& climate change for their attitude towards achieving the 2020 goal and their building of solar

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and wind farms not just in United States but in China as well. In addition, Apple is also

demonstrating excellent job in promoting the urgency of climate change and support of

renewable energy. Apple is also doing well with elimination of hazardous chemicals in the

supply chain as well as product itself. They have shown improvement in transition to and usage

of secondary materials such as aluminum or tin and ceased to use PVC and BFR in the

production of their gadgets. Greenpeace rated Apple B for transparency, commitment,

performance as well as advocacy. A category in which Apple received the most of criticism is

for moving in the wrong direction with their sustainable product design, because repairs of

Apple devices are difficult as well as expensive to do. This leads to potentially shorter lifespan

of their product, which on one hand helps Apple to sell more products, nevertheless on the other

hand it increases the negative impact of their products on the environment (Cook & Jardim ,

2017 ).

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6.3. Changes of Foxconn

Other improvements that were made were by supplier partners themselves. As a response to all

the critiques some of the manufacturing companies, such as Foxconn, publicly announced that

they will take measures in making adjustments as they see fit (Greenhouse & Duhigg, 2012).

CEO of Foxconn stated that in order to align with Apple’s Supplier Code of Conduct they made

major changes in the factory.

Transformation within their factory included raising salaries for employees as well as building

safe nests around their facility to prevent workers from committing suicides and jumping off

building, opening up 24-hour counselling centers, psychiatrists for employees to talk about their

problems whenever they would have a problem and building new dormitories to accommodate

39

workers (Boudreau, 2012). In addition, they also introduced educational and supervisor-

training programs to ensure that employees in the factory will not be mistreated. Foxconn’s

CEO Terry Gou was interviewed by BusinessWeek about the situation in their factory and his

opinion on it. According to his words, he did not find the first three suicides as a serious issue

and did not think that he needs to take responsibility for that. After the fifth suicide, he realized

that he has to do something about it. However, it had to take nine people to take away their own

life for Mr. Gou to take some action and three million square meters of netting was ordered to

be installed around the Foxconn building (Clarke & Boesma, 2015). They also agreed to address

one of the most critical issues that employees have to deal with and that is overtime hours.

Foxconn also announced that they are committed to strictly reduce overtime and that all workers

will be allowed maximum of 49 hours of labor per week, which is the maximum limit permitted

by Chinese law. However, despite the decrease in working hours, employees’ salaries will not

be decreased (Greenhouse & Duhigg, 2012). Terry Gou’s special assistant Louis Woo stated

that they are trying to change the company’s culture and adjust their management styles to be

more people-centric (Boudreau, 2012).

Labor activists applauded their changes and Foxconn’s improvements were also acknowledged

by the Fair Labor Association after their audits in June and July 2012. They pointed out that

Foxconn managed to reduce worker’s weekly overtime in order to meet their code, nevertheless

there still needs to me slight adjustments to meet the Chinese legal limit (Kan, 2012).

However, reducing overtime drastically could possibly result in Foxconn’s need to hire more

employees to cover work, which was supposed to be done by employee’s overtime hours.

Moreover, some workers complain about reduction of overtime because it results in lower

wages for them (Boudreau, 2012).

6.4. Apple’s New Headquarter

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Due to the fact that, Apple grew from a small company with just several friends that gathered

together in a garage to construct machines into a large multinational corporation with more

than 123 000 full-time employees out of which 12 000 working in their headquarter, it is

understandable that they would eventually out-grow the headquarter and a new building will

be a necessity (Statista, Apple's number of employees in the fiscal years 2005 to 2017 (in

1,000s), n.d.). Steve Jobs announced plans regarding new headquarter in 2006 and presented

proposal to the City of Cupertino in 2011, nevertheless first constructions on the building

begun in late 2013 (Kahn, 2015). On the website of City of Cupertino, authorities published

the environmental impact report that Apple submitted to them in 2013 and is more than six

hundred pages long (City of Cupertino, n.d.). In April 2017, company started to transfer

employees into the new Apple Park despite on-going construction.

Plans for the new headquarters seem very ambitious and promising as Tim Cook declared that

building could potentially be the “greenest building on the planet” (Hering, 2014). The

building is supposed to be the biggest on-site solar installation in the world and is presumed to

receive certification as the biggest LEED Platinum Building (which stands for Leadership in

Energy and Environmental Design) in North America, nevertheless the application is still

pending at the US Green Building Council. Another environmentally friendly aspect of the

building is the fact it is reportedly world’s largest naturally ventilated building, which means

that the building does not require heating or air conditioner for about nine months a year

(David, 2017). Apple Park is powered entirely on renewable energy which come from 17-

megawatt solar panels that are located along the whole rooftop of the building, 4 megawatts

of baseload biogas fuel cells as well as from on-site low carbon Central Plant. On weekends,

when the usage of energy is lower, the excessive energy that is no used will be delivered to

public’s use (Apple, Environmental Responsibility Report 2017 Progress Report, 2017). In

addition to that, the building will put recycled materials back into cycle, such as use of

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recycled water which will be stored in a 13 300 feet pipeline in order to share supply with

Cupertino. Campus of the headquarters is also supposed to be surrounded with a park that will

include 7000 different species of trees, including endangered species which could potentially

be extinct in the future (Moore A. , 2018). Claiming that the building is the greenest in the

world is probably an exaggeration, nevertheless, Apple is showing proficient performance

with the Apple Park in terms of environmental consciousness and step toward renewable

energy.

6.5. Apple’s Renewable Energy Efforts

Apple is one of the leading technological companies, which are recognized and known for their

efforts to create an environmentally conscious economy. They are aware of the fact that climate

change is happening, saying that it is “undeniable”, as well as limited resources that the planet

can offer us which cannot last forever (Evans, 2017). For this reason, Apple became devoted to

building their facilities to be powered by clean energy and encourage their manufacturing

partners to use other energy alternatives as well (Cook & Jardim , 2017 ). They already managed

to achieve 100% use of renewable energy across their facilities in United States and in 2016

Apple’s Environment Vice President Lisa Jackson announced that 96% of electricity that is

used across all Apple’s global facilities such as data centers, corporate offices or retail stores is

green energy (Barbosa, 2017). Few years later in April 2018, they published that all of their

retail shops, data centers and office spaces across 43 countries, including India, China, UK or

US, are completely powered by alternative energy by now (Statt, Apple says it’s now powered

by 100 percent renewable energy worldwide, 2018). Their efforts toward sustainable economy

and financial incentives invested into building facilities to generate renewable energy are

relatively commendable

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In addition, in 2015 Apple launched a program called “Clean Energy Program” aimed at

reducing Apple’s carbon footprint even more and that is by helping their supply partners to

achieve 100% renewable energy as well (Supplier Clean Energy, 2017). The most recent update

on the program, which was released on April 2017 demonstrated that as of now, 7 supplying

partners are fully committed to 100% renewable energy by year 2018 for manufacturing

processes of all Apple products, by constructing solar farms, alternatives such as wind power,

floating solar photovoltaic systems or by simply putting a solar panel on rooftop of their

buildings. Manufactures are already taking measures in achieving this goal – Apple’s iPad

supplier ‘Compal Electronics’ is building solar panels on their rooftop which are estimated to

be in total 224 000m2; glass supplier Biel Crystal Manufactory is already using 50 percent of

the energy from renewable sources and is making efforts in increasing the number to 100 by

the end of 2018. Other manufacturing partners that are also moving towards 100% clean energy

include Catcher technology, Ibiden, Lens technology, Solvay Specialty Polymers as well as

Sunwoda Electronics (Supplier Clean Energy, 2017).

Apple wanted to show how serious they are about helping their supplying partners with

reduction of the carbon footprint and transition to renewable energy, therefore they invested

money into Chinese wind turbine manufacturing company Goldwind and bought 30%share of

the company (Horwitz & Huang, Apple just invested in China’s largest wind-turbine maker to

power its supply chain, 2016). For the reason that the greatest share of greenhouse gas emissions

develops during the production process and most of Apple’s manufacturing processes happen

in China, it makes perfect sense that Apple is contributing into renewable energy projects in

China and is attempting to decrease the environmental impacts caused by their manufacturing

and operations. Apart from renewable energy projects, Apple also conducts researches aimed

at improving design of their products, making products themselves more environmentally

friendly by incorporating reusable materials. With each newly launched model, Apple tries to

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improve their products and attempts to design the gadgets in a way that would result in lower

emissions or less negative impact to the environment. For instance, greenhouse emissions that

resulted from production of the iPhone 7 were 60% lower compared to emissions that were

released during manufacturing processes of the iPhone 6 (iPhone 7 Environmental Report,

2016).

Apple has invested a tremendous amount into building solar panels or other variety of

renewable energy sources such as wind farm, biogas fuel cells or micro-hydro generation

systems to power their facilities. In North Carolina Apple has a solar farm that spread out over

171 acres of land, equaling to 20 megawatt array of solar panels and it is supposed to be the

world’s largest solar array dedicated to data operations (Miller, 2012). They also managed to

construct solar farms in Catawba County, Nevada, California as well as other countries.

Just like Supplier Progress Reports that are annually released to show improvements achieved

in their supply chain, Apple also publish Environmental Responsibility Progress Report every

year which covers progress on environmental impact initiatives. On the most recent report

which was published in 2017, can be seen significant decrease in carbon emission per product

from 137.2 to 97.

6.6. Apple Bans All Benzene

After raised objections, by activists of China Labor Watch and Green America, against the use

of potentially hazardous chemicals in the production, Apple decided to modify requirements

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for their suppliers. Five months after Green America launched their “End Smartphone

Sweatshops” campaign in March 2014, which was supported by 23 000 comments, Apple

ordered all their manufacturing suppliers to abandon the use of benzene and n-hexane during

the final assembly of all Apple products (The Associated Press, 2014).

In a statement that Apple released in August 2014, they stated that supplying partners have to

adhere to “some of the toughest standards in the electronics industry” and suppliers also have

to follow Apple’s Regulated Substance Specification which includes limits for use of benzene

and n-hexane corresponding to safety standards set by National Institute for Occupational

Safety and Health. Furthermore, the report also informs about trainings that Apple provides to

managers of manufacturing facilities, which also includes management of hazardous chemicals,

industrial hygiene or necessary equipment for protection of employees and in order to make

sure that suppliers do not violate these standards, Apple conducts general audits as well as

factory inspections with a focus on hazardous chemicals. Conclusion of the statement claimed

that audits did not discover any “evidence” of workers being exposed to a danger but they still

decided to prohibit in the final assembly the use of benzene or n-hexane in cleaning agents and

degreasers. Updated arrangement is implemented into the Regulated Substance Specification

which suppliers will have to adjust to from September 1st, 2014 (Apple, Apple’s Commitment

To Safe Working Conditions In Our Supply Chain, 2014).

6.7. Steve Jobs and Tim Cook

There were many changes, including the tone at the top, in Apple after Steve Job’s death in

October 2011 (A&E Television Networks, 2017). Steve Jobs was the passionate genius, the

visionary that had one goal in mind and that was to create “insanely great products” even if it

meant that he will be the tyrant who will call his employees to work even on Christmas eve

(Padhiyar, n.d.). Steve did an astonishing job in terms of product innovation and managed to

45

get Apple through their rough time with his aggressive management style and development of

great electronic gadgets. However, product innovation was his only strength, because he was

not great with company management, handling employees or financial performance as well as

operational management was poor (O'Marah, 2015). Under his leadership, Apple was ruthless

moneymaker that was not too concerned about social programs.

Tim Cook, on the other hand, has a very distinctively different management style compared to

his predecessor. He is a gentler leader that cares about everything around the company,

including employees’ wellbeing, Apple’s financial health or social responsibilities. In addition,

Mr. Cook has long been outspoken advocate for human rights and in his commitment to

promote equality and civil rights. Tim Cook cites Robert F. Kennedy as his personal hero as

well as role model and he has also been a longtime supporter of Robert F. Kennedy Center for

Justice and Human Rights, which is an international nonprofit human rights organization that

advocates for social change. In April 2016, one year after he was honored with Ripple of Hope

award for commitment to sustainable business practices and human rights, he even joined the

board of directors in the organization (Chmielewski, 2016). Compared to Steve Jobs, who did

not pay much attention to his employees or labor concerns, Tim Cook has repeatedly

communicated the importance of addressing human rights for all Apple workers and in 2015 in

annual Employee Choice awards, where anonymous employees give approval ratings to their

CEOs across many large corporations, Tim Cook become eight highest rated CEO (Hein, 2016).

Apple has also been praised for their progress in acceptance of lesbian, gay, bisexual,

transgender, or queer (LGBTQ). Human Rights Campaign introduced the Corporate Equality

Index, in which they measure inclusion of LBGTQ employees in workplace, and for many years

in row Apple receives 100 percent rating (AppleInsider Staff, 2014). Tim Cook himself

understands how important it is to fight against discrimination in workplace based on sex

46

orientation or gender identity, since he publicly revealed, after feeling tremendous

responsibility towards the public, that he himself is gay as well (Feeney, 2015).

Tim Cook also spoke out about the recent controversy regarding Facebook and how a

whistleblower revealed that they handed over personal information on more than 50 million

Facebook users to a company Cambridge Analytica, which they in return used to influence

outcomes of United States presidential election in 2016. Tim Cook criticized and disapproved

of Facebook’s business practices and said that “privacy is a human right, a civil liberty”

(Brockington, 2018). For Apple and Tim Cook the privacy of their customers is very important,

as Cook said “The truth is we could make a ton of money if we monetized our customer, if our

customer was our product. We’ve elected not to do that.” They have also proved that in many

situations, the most out-standing and popular case was Apple vs. the US Federal Bureau of

Investigation (FBI), in which a federal judge requested Apple to provide FBI technical

assistance to unlock the iPhone, which belonged to the San Bernardino shooter who killed 14

people in December 2015. However, Apple declined to offer help in unlocking of the iPhone,

saying that encryption is key to protect users and their personal information from accessing by

hackers and that it would require Apple to release a new software that would serve as a master

key and it could unlock hundreds of millions of phones (Kharpal, 2016). Apple refused to help

government with the case and was determined to protect their customers as well as putting

emphasis on privacy.

Under Tim Cook’s leadership Apple has also shown dramatic progress in diminishing

environmental footprint of their business. He is well aware of the climate change happening

and tries to raise social awareness and stress out its importance in the corporate community. In

one of Apple’s annual meetings in 2014, Tim Cook got visibly outraged by investors doubting

his pledge to combat greenhouse emissions and the profitability of investing into renewable

energy. He responded to one of the investor’s complaints by saying that if he does not believe

47

in climate change, then he should get rid of Apple stocks. In his exact words: “if you want me

to do things only for return on investment reasons, you should get out of this stock”

(Shankleman, 2014). Mr. Cook is committed to reducing environmental impact and “leave the

world better than we found it”. Tim Cook also proved his devotion to fighting climate change

after president Donald Trump decided to withdraw the United States from the Paris Agreement

on climate change mitigation, which aimed to keep global temperature rise well below 2 degrees

Celsius. After finding out about president’s decision, he decided to personally contact Trump

by calling him and attempted to change president’s mind (Chen, 2017). Mr. Cook tried to make

him realize that retracting from the accord is not in the best interest of United States and that it

is important to combat climate change on the global basis. Unfortunately, Mr. Cook’s

convincing did not help and president Trump still decided to cease participation of the United

States in the Paris agreement.

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Chapter 7: DISCUSSION

As presented in chapter 6, Apple is showing numerous strategies to decrease the activists’

antipathies and improve their image in the public eye. They are showing great effort in

becoming more ethical and showing some corporate social responsibility. Apple has also shown

significant work in improving their supply chain and address the issues. However, effectiveness

of these strategies is in question. Their effort to fight the climate change and become more

environmentally friendly is evident with each solar or wind farm that they build. But how about

effectives off the Supplier Code of Conduct? How objective and authentic are audits? To which

extent are employees honest in the interviews done by Apple’s authorities? Are there any

chances of employees being bribed before being interviewed?

Even 12 years after Apple enforced their Supplier Responsibility Code of Conduct there are

still allegations about employee working conditions in supplying factories. According to China

Labor Watch and Bloomberg, who examined Apple’s supplier Catcher Technology Co.,

employees in the factory are lacking sufficient hazard protections such as earplugs, goggles or

gloves when working with spray tiny metallic particles or noisy machines of 80 decibels or

more. Workers reported experiencing headaches as a result of extreme noises. Moreover,

49

employees reported “my hands turned bloodless white after a day at work” and that dormitories

are in horrendous conditions with lacking hot water, resulting in employees not showering for

days. CLW reported that they found 14 violations of Apple’s Supplier Standards, yet they are

still supplying products for Apple (Gao & Webb, 2018).

In November 2017, Apple got under fire for accusations of supplying manufacturers employing

students for the iPhone X, which was struggling with catching up with demand and behind with

the production. According to Financial Times, students claimed that they were “forced” at

Foxconn factory in order to graduate. Students also reported that they were part of a group of

3000 students from Zhengzhou Urban Rail Transport School, which was assigned to work in

the factory from September 2017. Employees were ages between 17 and 19 and were obliged

to work 11 hours a day, which is illegal overtime for student interns not only under Chinese

law but it also violates Apple Supplier Responsibility Code. According to one of the Foxconn

employees, practice of employing students from the period of August to December is a common

strategy, to ensure that production matches the demand of newly launched products in

September (Yang, 2017).

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Chapter 8: CONCLUSION

Probably no one would argue that Apple was a company with deeply embedded in their

corporate culture. It is clear that Apple did not put much attention into ethical and moral

behavior and they also did not put much consideration into employees working in

manufacturing factories on their electronic gadgets. After pressure coming from outside parties

Apple did move quickly to address the issues and initiated new programs to improve the

problems with their ethical practices. Apple’s projects aimed at combating climate change and

reducing the carbon footprint are impressive and Apple should be applauded for powering all

their facilities purely on renewable energy and investing a profound amount of financial capital

into building facilities to generate renewable energy.

In terms of supplying factories, Apple’s new programs do show an improvement in employee

working conditions as well as increasing employee minimum wages or reducing employee

overtime. Apple showed a lot of effort in increasing transparency and with each year they

managed to conduct more audits. However, the difference achieved is not staggering and there

are still ongoing issues in the Apple’s supply chain. There is still more work required to do in

51

the supply chain and Apple needs to think of new strategies how to make suppliers adhere to

the code of conduct and follow it strictly. Since the developing countries do not have strict laws

to protect employees, Apple should be the one setting laws and standards for their

manufacturing partners. They have showed that they do care about all the stakeholders and

employees involved in the production of Apple products, but it will require Apple more time to

completely remove all the ethical problems in the supply chain.

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