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Responsible Supply Chain Leadership: Should Apple Just Do It?
March 7, 2012
Much has been written in the past month about Apple’s supply chain woes, as stories of Chinese labor issues have sent the company scrambling to release supplier names and join the Fair Labor Association (FLA).
While challenges with supply chain responsibility are not unique to Apple, the company’s record profits and tremendous brand value make it an easy and highly visible target.
Apple is not the first company to find itself in this situation. In the 1990s, student groups targeted Nike for working conditions in supplier factories in Indonesia. As then-CEO Phil Knight said in a 1998 press conference, the Nike brand had become “synonymous with slave wages, forced overtime and arbitrary abuse.”
Today, Nike is seen as a leader in supplier responsibility and sustainability. The company ranks 25th on Interbrand’s 2011 list of Best Global Brands, with CSR efforts explicitly mentioned. And it’s 10th on Corporate Responsibility Magazine’s 100 Best Corporate Citizens list for 2011. In contrast, Apple didn’t make Corporate Responsibility Magazine’s list.
What can Apple learn from Nike’s journey from laggard to leader?
Nike’s Corporate Responsibility Journey
In a 2004 Harvard Business Review article, Simon Zadek outlined five stages of a corporate responsibility journey, from denying responsibility to leading industry transformation.
Zadek used Nike as an example of transformation - and subsequent leadership actions by the apparel company have only strengthened the story.
The timeline below displays milestones on the supply chain journeys of Nike and Apple, approximating their positions along Zadek’s corporate responsibility ladder.
(click to enlarge image)
The key step that vaulted Nike into a leadership position was publishing the names and addresses of supplier factories - a display of radical transparency that shocked the industry in 2005. But as David Doorey outlined in a 2011 Journal of Business Ethics article, Nike needed to strengthen its foundation of compliance and management before having the confidence to reach this level of disclosure.
Throughout the late 1990s and early 2000s, Nike put in place a number of processes, tools, and organizational structures allowing them to first ensure compliance and then manage supply chain responsibility as a core part of the business. Only then could the company feel comfortable publishing specific country-level data, such as average supplier wage in 2001, or the full list of supplier factories in 2005.
In its act of radical transparency, Nike signaled to the world that the company had nothing to hide. More important, as Doorey points out, factory disclosure has allowed Nike to draw on the expertise of labor organizations and collaborate with competitors to make meaningful progress on addressing a systemic issue. In short, Nike approached supply chain responsibility with the same leadership that it brings to the market through its products and brand.
Lessons For Apple
Apple’s journey through the stages of corporate responsibility didn’t start until 2005, when the company established a code of conduct outlining expectations for suppliers. Over the next 5 years, Apple took steps to enforce compliance and began managing supply chain responsibility as a business process, setting up an internal audit system, establishing worker empowerment training in some factories, and publishing annual reports on compliance rates and improvement.
Recent actions – disclosing the names of suppliers, allowing the FLA to audit direct suppliers, and committing to monthly updates – feel like too little too late in light of some of the recent media coverage.
What we haven’t yet seen from Apple, and where the company could take a cue from Nike, is supply chain leadership concomitant with its leadership in the marketplace and its tightly controlled brand image.
Until Apple brings a proactive, value-creating approach to supply chain responsibility, it will fall short of what consumers expect from the company that challenged us to ‘think different.’