Calvert News & Commentary

Calvert Comments on the Apple Supply Chain Controversy

2/22/2012

Recent news reports, especially the February 21 Nightline broadcast and a detailed story in the New York Times on January 26, offer unsettling accounts of working conditions at Apple's suppliers in China.

As a leader in sustainable and responsible investing, Calvert constantly monitors companies in our investment portfolios for their performance on environmental, social and governance issues. We are certainly concerned about Apple's track record on these issues and are closely watching the company's response to criticisms of conditions in its factories in China in particular.

Apple must take responsibility for conditions in its suppliers' factories; first and foremost to protect workers, but also to reassure its customers and investors that the company takes these allegations seriously and will take appropriate steps to investigate and remedy such abuses. In Calvert's view, Apple has taken significant steps in recent months, and especially in recent weeks, towards full supply chain transparency and "zero tolerance" for workplace abuses:

• In its recently released 2012 supplier responsibility progress report, Apple "self identifies" a number of significant issues in its global supply chain, and discloses a list of its major suppliers, signaling an important shift in the company's attitude towards full supply chain transparency.
• To date, Apple has provided education to over a million workers in its global supply chain on their workplace rights and on ways to prevent work-related injury and disease. 
• Apple has forced certain suppliers to pay back $6.7 million dollars in "recruitment fees" collected from migrant workers.
• Apple's new CEO, Tim Cook, appears inclined to engage in dialogue with the company's critics. Mr. Cook has repeatedly and publicly asserted the company's commitment to root out and remedy any and all workplace abuses in its supply chain. At a press event earlier this month Mr. Cook stated: "We believe every worker has the right to a safe working environment. Apple's suppliers must live up to this to do business with Apple." Mr. Cook further declared: "We think the use of underage labor is abhorrent. It is extremely rare in our supply chain, but our top priority is to eliminate it entirely. Apple will fire any supplier that is caught making this offense."

Apple and the Fair Labor Association

Apple has also aggressively moved on third-party inspections/audits of its suppliers through the Fair Labor Association (FLA). The FLA is a collaborative effort of socially responsible companies, colleges and universities, and human rights organizations to improve working conditions in factories around the world. While the credibility of the FLA has itself been called into question by some, we believe that it has a demonstrated track record of supporting and contributing to the improvement of factory conditions around the world and that its own governance is being strengthened. It is important to note that:

• Apple is the first technology company to request and gain admission to the FLA.
• Apple has requested that the FLA conduct special audits of its final assembly suppliers, including the highly controversial Foxconn facility in China. The first inspections took place on February 13.
• Apple has asked the FLA to disclose the names/locations of the factories under audit in its public reports, an unprecedented step by a member of the electronics industry in terms of transparency, scale, and scope.
• Apple will post the results of these audits each month on its website, also an unprecedented move by a technology company.

Calvert will continue to closely watch this situation and to engage with Apple around these supply chain concerns. Calvert, as part of a larger investor coalition, has engaged in dialogue on these issues with senior company management—a dialogue which we expect will intensify in the coming weeks.

Read Apple's 2012 supplier responsibility progress report at http://www.apple.com/supplierresponsibility/reports.html.

As of January 31, 2012, accounts managed by Calvert Investment Management, Inc. held securities issued by Apple. Calvert may or may not still invest in, and is not recommending any action on, any companies listed.

Calvert Investment Management, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814