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Apple to name-and-shame suppliers of ‘conflict minerals’

Tim Bradshaw
Thursday, 13 Feb 2014 | 3:13 AM ET

Apple is extending its supply chain clean up beyond Chinese factories and into African mines, using name-and-shame tactics to cut the amount of"conflict minerals" that end up in its iPhones and iPads.

As it touts fresh improvements to working conditions in the factories that produce its devices, the world's most valuable technology company is now combining its might in electronics-component purchasing and marketing to pressure smelters to make their sourcing more ethical.

(Read more: Apple drops 5% on weak iPhone sales, revenue outlook)

Apple employees walk towards the Apple Headquarters in Cupertino, California.
Kimihiro Hoshino | AFP | Getty Images
Apple employees walk towards the Apple Headquarters in Cupertino, California.

Jeff Williams, Apple's senior vice president of operations, told theFinancial Times that last month was the first time it was able to verify that none of the tantalum used in capacitors and resistors in its devices had comefrom mines in conflict regions.

It is now urging "conflict-free" audits for gold, tin and tungsten suppliers by publishing a list of all its suppliers' smelters and their compliance with ethical sourcing guidelines every quarter.

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"We think it has the chance to make a difference," Mr Williams said."The smelters are a choke point where all this flows through. If we can get as many smelters verified [as possible] through this pressure, then we have a real chance of influencing the various activities on the ground."

The electronics industry faces growing criticism from human-rightsorganisations and impending regulation from US financial authorities over itsextensive use of conflict minerals mined from sites controlled by violentmilitias in the Democratic Republic of Congo and nearby areas.

"The fastest way for Apple to become conflict-free would be to channel our demand through a couple of verified smelters," Mr Williams said ahead of the publication of its annual "Supplier Responsibility" report.

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"But quite honestly, if we did that, we could wave our conflict-freeflag but it would do nothing to affect the workers on the ground. And so whatwe are focused on is getting a critical mass of suppliers verified such that wecan truly influence the demand situation and change things."

More than half of the world's tantalum flows through the electronicsindustry, Mr Williams said, making it easier to exert pressure through its supply chain to cut down the use of mines that are seen as "unacceptable from ahuman-rights standpoint".

However, for tin, tungsten and gold, Apple and other technology companies are a smaller customer, and so it is using the glare of public scrutiny to encourage change.

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The first publication of its quarterly report named 59 smelters that were already compliant, and 23 that were participating in the Conflict-Free Smelter Programme.

This scheme is run by the Electronic Industry Citizenship Coalition, an independent organisation that counts Apple, Microsoft, IBM, HP, Sony and Dellamong its fee-paying members. The adherence to ethical guidelines of a further104 smelters, mainly processing gold and tin, was not known.

Under the new Dodd Frank regulations, certain US companies are requiredto provide information to the Securities and Exchange Commission about their conflict mineral usage before a May deadline.

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A report by research group IHS in 2012 found that only 11.3 per cent of electronics component manufacturers provided such data but companies such as Samsung and LG have recently stepped up their efforts to detail sourcing. Last month, Intel said that it was manufacturing the first micro processors with validated conflict-free gold, tin, tantalum and tungsten.

Elsewhere in its annual Supplier Responsibility report, Apple said that95 per cent of more than 1m of its suppliers' workers adhered to a maximum 60-hour work week, up from 92 per cent a year ago.

After the 2012 audit found more than 100 instances of underage labour in 11 of its suppliers' facilities, Apple last year found 11 active cases and 12 historical cases of children under 15 working in eight facilities.

Mr Williams said that these improvements were accompanied by wider education of health and safety and working conditions among its suppliers.

"We'd like to drive [working hours compliance] up above 95 per cent butthe right answer is close to somewhere where we are," he said. "I don't think asingle week here or there where someone works longer is the end of the world…The real win is to go deeper in the supply chain and find more and more places where 70-80 hours a week is the norm and get those pulled in line."

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In a report published in December, the Fair Labor Association, which has worked with Apple in the past to audit its suppliers, found that Foxconn had implemented 356 of its 360 recommendations to improve working conditions at three Chinese factories making Apple products.

The FLA found that "steady progress" in terms of working hours had beenmade at the facilities, which it estimates employ 170,000 workers, but noted that they were still "not in compliance with Chinese labour law regarding hours of work".

Carolina Milanesi, a mobile industry analyst with Kantar Worldpanel, said: "We've definitely seen an increase in the level of detail and the focus[Apple] put on this sort of thing since Tim [Cook] became chief executive."

Mr Williams now holds most of Mr Cook's former duties as chief operating officer, having been promoted in 2010 after 16 years working at Apple.

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