Strategic Purchasing

Enforcing CSR codes of conduct is essential

Most electronics companies have adopted corporate social responsibility (CSR) codes of conduct in an effort to assure fair treatment of workers.

Many companies have signed on to the Electronics Industry Citizenship Coalition (EICC) code of conduct, which stipulates how workers should be recruited and treated, how many hours they should work per week and per month, and sets standards for conditions of dormitories. For instance, the code states that workers should not work more than 60 hours per week, no more than six days per week, and that companies should not employ anyone under 16 years old. Workers should be paid overtime and have the right to safe working conditions. Bonded labor is prohibited and recruited workers cannot be charged more than one month’s salary by a recruiter.

However, a recent BusinessWeek article that detailed the nightmarish ordeal of a man from Nepal who was recruited to work in a factory in Malaysia that builds part of Apple's iPhone 5 was a reminder that corporate social responsibility is still an issue in the electronics supply chain.

The article described the plight of the man, who was forced to pay more than $1,000 in recruitment fees to secure a job at the factory run by Flextronics, an Apple supplier.  He had to borrow money in order to pay the fees.

The man and hundreds of others were recruited from Nepal and other countries and flown to Malaysia to work 12-hour shifts at the factory, which built the camera for the iPhone 5. The job paid $178 per month, the minimum salary required by the government of Nepal for its citizens working in Malaysia, according to the article.

However, production problems resulted in the manufacturing line being shut down and production line employees were sent to a worker’s hostel and told to wait. After about three weeks the workers were told that they would be sent back home and about 200 were soon flown back to their homes. However, about 1,200 were told to continue to wait at the hostel and their passports were taken. They were paid about $600; many of the workers sent the money back to their families at home thinking that they would soon be home as well.

However, weeks passed and the workers remained in the hostel and ran out of money and food.  Fearful, angry, and hungry, some of the workers smashed windows and threw televisions out of the hostel. Police responded, but the workers were not arrested. Police insisted Flextronics provide them food and begin to repatriate the workers to their home countries, the article said.

Many of the abuses cited in the article, including the confiscation of passports and payment of high fees to recruiters is prohibited in Apple’s code of conduct.

The incident shows that having a code of conduct in place and requiring suppliers to adhere to it is no guarantee that employees will be treated fairly and the code will be followed. Rather, it is an example of the need for OEMs to more aggressively audit their suppliers and recruiters.

In its 2013 corporate social responsibility report, Apple said it conducted 393 audits in its supply chain and ceased doing business with some suppliers that violated the code. It conducted 27 targeted bonded labor audits in an effort to try to protect workers from excessive recruitment fees.

Apple said when it learns that workers were charged excessive recruitment fees; it requires suppliers to reimburse those employees for the charges. Last year, the total that was reimbursed to workers for excessive recruitment fees was $6.4 billion, according to its CSR report. Apple says it is the only electronics company that requires such a reimbursement.

Apple appears to take CSR seriously and has made strides to correct past CSR issues it had with other of its suppliers such as Foxcon. However, the incident in Malaysia indicates it still has work to do concerning CSR.

While Apple is cited in the article, other electronics OEMs have similar CSR issues. Adherence to the code and enforcing it by taking away business from a supplier that has serious code of conduct violations concerning workers is good supplier management policy for OEMs. It sends a message to suppliers that fair treatment of workers is not optional if the supplier wants to do business with an OEM.

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