Jan. 13 (Bloomberg) -- Apple Inc. agreed to let outside monitors into factories of suppliers such as Foxconn Technology Group following at least 15 deaths at its Chinese parts makers.
The world’s most valuable technology company joins Nike Inc., Nestle SA and Syngenta AG in turning to the Fair Labor Association, set up in 1999 to monitor workplace conditions globally in an initiative by former U.S. President Bill Clinton. Apple is the first technology business to sign up to the FLA as a participating company, the Washington-based body said today in a press release.
Apple’s affiliation with the FLA highlights the risk to multinational companies’ brands due to difficulties in policing suppliers as they outsource manufacturing to cut costs. Nike became a founding member of the association after reports of low pay, abuses and poor conditions at sportswear factories in Asia sparked boycotts and protests in the 1990s.
“Most big corporations have their ‘Nike moment’ at some stage -- when they realize the difficulties of maintaining their standards, particularly in an increasingly global environment,” said FLA President Auret van Heerden. “The problem with the supply chain is that it’s a moving target.”
The move by Cupertino, California-based Apple will intensify scrutiny of its suppliers, including Seoul-based Samsung Electronics Co. and Inchon, South Korea-based Hynix Semiconductor Inc. The FLA makes unannounced checks on about 5 percent of its members’ supply chains each year, according to Van Heerden.
At least 12 workers have committed suicide at plants in China owned by Taiwan’s Foxconn, Apple’s biggest supplier, while three died last year and more than 70 were hurt in blasts at two iPad facilities, one of which was also owned by Foxconn. In response to pressure from Apple and the media, Foxconn more than doubled wages in 2010 for some workers in China and employed counselors.
Apple will now subject itself and its suppliers to the FLA’s membership criteria, including submitting to audits and enforcing a code of conduct based on standards approved by the United Nations’ International Labor Organization.
Growing scrutiny of global companies by investors and consumers means they are more likely to insist suppliers introduce best practices in countries where governments are unable or unwilling to do so, Van Heerden said.
“If you’re a 16-year-old girl in a developing country, your best chance of enjoying proper rights is if you get to work at a multinational,” he said. “The power of their contract is more powerful than the power of law.”
Apple has 380 direct suppliers, according to data compiled by Bloomberg. Taipei-based Hon Hai Precision Industry Co., Foxconn’s flagship listed unit, gets 22 percent of its revenue from Apple, the data show. Pegatron earns 16 percent of sales from the U.S. company.
Apple already publishes an annual report on its partners’ responsibilities and the violations it has uncovered.
The company’s 2010 audit of suppliers found 91 cases of underage workers at factories producing its goods. Apple has been “aggressive” in helping underage workers return to their families and get back to school, it said in a report published last year. Suppliers are required to pay education and living expenses, and lost wages until the worker reaches 16, according to the report.
Those efforts to improve conditions have failed to appease some activists and labor groups. Demonstrators at the September opening of Apple’s flagship store in Hong Kong called on the company to protect workers’ rights. China Labor Watch last month said the explosion at Foxconn’s plant in May and another on Dec. 17 at a factory owned by Taipei-based Pegatron Corp. were caused by ignition of aluminum dust produced by polishing iPad cases.
Independent monitoring isn’t the panacea to problems in China’s factories, said Geoffrey Crothall, communications director of workers-rights group China Labour Bulletin.
“The problem isn’t whether or not they do audits, but whether workers are treated in a reasonable manner,” he said. “What the workers need is an effective voice in the workplace.”
Apple is more vulnerable than most to damage to its reputation, according to an annual ranking compiled by Interbrand. The brand was valued at $33.5 billion last year, the eighth-highest in the world and up from 17th place in 2010, according to the index.
The company’s affiliation to the FLA marks a further broadening of oversight for the Washington-based agency. The association was formed in 1999, primarily by the apparel industry, after Clinton challenged companies and pressure groups to address rising complaints about standards at factories operating overseas, according to its website.
Beaverton, Oregon-based Nike, the world’s largest sportswear maker, was a founding member. Adidas Group, Hennes & Mauritz AB and Juicy Couture owner Liz Claiborne Inc. are among 33 participating companies.
Basel, Switzerland-based Syngenta, the world’s largest maker of agricultural chemicals, sought FLA help in 2004 to address concerns over child labor and working conditions on Indian cottonseed farms. Vevey, Switzerland-based Nestle SA in November commissioned the agency to assess the use of child labor and conditions at West African producers of cocoa used in its products such as KitKat and Quality Street candies.
Microsoft Corp. said yesterday that a protest on Jan. 4 by 150 workers at a Foxconn factory in southern China wasn’t related to working conditions and the majority of employees who took part had returned to work. Some had threatened to jump from the roof of a factory building, the Daily Telegraph reported, citing an unidentified person said to have participated in the action.
Forty-five of the 150 workers, who were protesting against a plan to transfer them to another business unit, resigned, according to a Foxconn statement.
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