Reference no: EM131497822

Question: Apple and Private Politics in China Apple had revolutionized mobile communications with its iPhone, iPod, and iPad, and its product introductions were closely-guarded secrets. The company also held information on its operations close to its vest. Apple provided on its website an "Apple and the Environment" section with information on products and its environmental footprint. The section also included a report on supplier compliance with Apple's policies and workplace standards, including summaries of steps taken as a result of its supplier audits. In contrast to Nike, however, Apple did not release the audit reports or identify its suppliers. This made it a target for environmental activists in China. The Beijing-based Institute of Public & Environmental Affairs issued a 46-page report entitled "The Other Side of Apple II" that focused on Apple's Chinese suppliers that it cited for discharging hazardous materials into the environment. The report said that Apple was "‘stubbornly evasive' and its refusal to discuss suppliers ‘can only be seen as a deliberate refusal of responsibility' for environmental issues."52 The Institute had released a report earlier in the year to which Apple had not responded, which resulted in the Institute focusing on Apple. Ma Jun, director and founder of the Institute, said, "Apple has made this commitment that it's a green company. So how do you fulfill your commitment if you don't consider you have responsibility in your suppliers' pollution."53

"Mr. Ma said the IPE focused its latest report on Apple because other technology companies have been willing to discuss their suppliers with the IPE, while Apple hasn't."54 He said, "The company refuses to make the identities of suppliers public and to fulfill its responsibility to disclose information about the environmental effects of suppliers' actions."55 The report was based on inspections of 22 factories believed to be Apple suppliers. Some information was also obtained from people living near the factories. Li Chunhua of the environmental group Green Stone, who had inspected the Kaedar Electronics (Kunshan) Co. Ltd. factory and had interviewed local residents, said, "Only about 50 people live in the village [Tongxin], and nine of them have had cancer."56 The report named seven factories supplying Apple and identified specific problems primarily concerning the disposal of hazardous materials including copper, cyanide, and nickel. The Institute also released videos posted on a video sharing website of pollution at "suspected" Apple suppliers. The report contained maps of suspected and confirmed suppliers and photos of environmental damage.

Ma said, "We believe Apple customers cannot accept the fact that these faddish gadgets are made at the cost of poisoning the environment, harming communities, and sacrificing employees' rights."57 Apple spokesperson Carolyn Wu responded to the report stating that the company "is committed to driving the highest standards of social responsibility throughout our supply base."58 Apple's Steve Dowling said, "We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made."59 Apple responded to the Institute by letter and said that it took the report seriously but that there were inaccuracies in it. The company asked for a "private conference call" with the Institute and the other sponsors of the report. One of the plants identified as an Apple supplier was Unimicron (Kunshan) near Shanghai, where the report said the residents faced toxic wastes and noxious odors. Mr. Wang of the Kunshan local government said, "It's true that it smells here, but the level of pollution is actually better than national standards. But when the wind blows, the smell is just unavoidable."60 Pollution and the disposal of toxic wastes were regulated by the government, but Mr. Ma said, "The costs of flouting a regulation are lower than following it."61

1. What should Apple do about the Institute report? Does this have the potential to turn into a crisis?

2. How much responsibility should Apple assume regarding its suppliers?

3. Should Apple disclose the names and locations of its suppliers? Why or why not?

4. What effect might the report have on Apple's market in China? In the United States?

5. Formulate a strategy for dealing with this issue.