Apple and Its Suppliers: Corporate Social Responsibility – Case Solution

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Apple and Its Suppliers: Corporate Social Responsibility Case Answers

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1. Identify the multiple levels of analysis at play for Apple as it addresses the Corporate Social Responsibility challenges in its supply chain.

Nowadays, Corporate Social Responsibility is the main topic everywhere. If any firm (including Apple, Inc.) wants to create the right image in society, it should contribute some of its profit and earnings to CSR (Lee & et al., 2016).

Many companies are donating some percentage of their revenue for the welfare of society and the environment. Moreover, Apple’s brand image was degraded when they violated the worker’s rights at one of Apple’s suppliers, Foxconn.

However, after they started contributing to CSR and applying some rules and regulations to preserve labor rights, this happened at one more distribution location, that was China (Lee & et al., 2016).

Instead of having a great brand image that invests in CSR, it still has many problems due to violations of laws in its supply chain. The four main reasons for CSR’s breach are lack of stakeholder engagement, lack of triple-bottom-line thinking, lack of transparency, and lack of CSR leader (Godelnik, 2012).

After analyzing it in detail, the company got to know that this problem is not at one level. The first level of challenges arises because Apple operates worldwide because they have different cultures, values, and rights. The second level of issues is due to the distinct goals of every company. The third level of challenges grows due to the relationship between supplier and buyer.

It’s then the responsibility and opinion of how much they want to give importance to Corporate Social Responsibility. Therefore, this depends on the stakeholders, which are customers, investors, employees, and suppliers’ employees (Thompson, 2017).

Apple can address the challenges of CSR by satisfying its stakeholders:

Customers

The main stakeholders of Apple are its customers. For CSR, Apple has designed its strategy to address the issue by giving preference to its customers and their desires.

Every customer or consumer always buys the right quality products that are available at reasonable prices in any company. In contrast, Apple is a prestigious brand and offers its products at high prices.

Also, almost all individuals want to buy Apple products. They do not care about the prices because Apple is satisfying their needs by providing products of high quality and also environment friendly (Thompson, 2017).

Employees

The Second most crucial stakeholder who helps Apple attain its corporate social responsibility goals is its employees. These are those individuals who work there and the company to achieve its goals and objectives.

If they are not satisfied with the management, they would do something wrong and do not do their jobs properly, and they might sometimes violate human rights.

Therefore, to satisfy them, the main reward is compensation and benefits. Apple tries to compensate its employees after some time to help them fulfill their CSR goals (Thompson, 2017).

Investors

Investors of any organization are their primary stakeholders, which is the same case for Apple. Therefore, in Apple, this stakeholder’s only want and objective is to get an excellent financial return on their investments. If they were satisfied, then they would be able to contribute more to their CSR efforts.

Moreover, Apple is an excellent, profitable company that has a superior profit margin. Therefore, this effort in CSR helps them to satisfy their investors (Thompson, 2017).

Supplier’s employees

Along with their employees, the employees working with their suppliers are also their stakeholders. But they are indirect stakeholders. Their want is ethical employment, compensation, and job security. Therefore, to successfully present Apple company as a company with a good reputation in CSR, they have to take care of their suppliers’ employees.

Moreover, Apple follows its code of conduct, according to which they can leave their suppliers if they do some evil things. Therefore, by addressing CSR goals, Apple can satisfy its stakeholders (Thompson, 2017).

Therefore, at last, if they want to remove the allegations of violation of CSR policies, then they have to satisfy their stakeholders first. Because if they follow the ethical code of conduct, they will automatically not face CSR challenges.

2. Is Apple responsible for the alleged human rights violations that occurred?

Apple’s supply chain is global in nature. Around 90% of Apple’s exclusive products, i.e., the iPhone, are manufactured in countries other than the USA. Semiconductors are manufactured in Germany and Taiwan, display panels in Korea, and chipsets in Europe. All these parts are ultimately assembled in China (Render, 2020).

Foxconn and Pegatron are Apple’s two key suppliers operating out of China, where, as per various media reports, many human rights violations occurred. These human rights violations included long working hours, low wage rates, poor labor practices and working conditions, use of the juvenile workforce, environmental pollution, and violation of women’s rights etc. (Lee, Mol, & Mellahi, 2016).

In my opinion, Apple is responsible for the alleged human rights violations as well due to the following reasons:

These suppliers are manufacturing on a contractual basis for Apple, so Apple can also be considered a principal employer (Moorhead, 2019). Hence, it is Apple’s duty to ensure that fair labor practices are followed by their suppliers.

Apple is a key buyer for these suppliers, i.e., 40% of Foxconn’s revenue comes from Apple (Oliver, 2013). Hence, Apple holds substantial power over its suppliers and can get better labor practices implemented by their suppliers.

Apple is known for forcing its suppliers to supply parts at a shallow margin, whereas its profit margin is very high, e.g., it pays a 0.8% margin to some of its suppliers, whereas its margin is more than 35%. To cut costs and increase their margins, the suppliers resort to these unfair trade practices. To counter this, Apple should ensure that while making their internal estimates for various purchases, they should ensure that enough margin is left for the suppliers so that they do not have to resort to unfair labor practices (Lu, 2020).

As part of their Corporate Social Responsibility, they should ensure that the supplier should declare that they will follow fair labor practices as part of their contract.

Apple believes in making processes simple; however, this principle has its limitations in the case of Supply Chain Management (Lu, 2020). They will have to maintain close coordination with all their suppliers to ensure that their suppliers’ labor practices are fair.

Apple is the world’s leading company in terms of valuation, cannot neglect its corporate social responsibility, and has to keep an eye on what labor practices are followed by its suppliers as Apple itself is indirectly responsible for that also.