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January 11, 2018

How Apple's corporate transparency scored a huge win

Written by Investis Digital

Public interest groups and nongovernmental organizations have often critiqued Apple's regulatory compliance and corporate social responsibility (CSR). Going after high-profile companies is part of basic advocacy PR. For organizations looking to avoid ending up in the cross hairs, corporate transparency is key, as Apple's efforts have shown. 

Apple under scrutiny 

Not only is Apple high-profile, but it's also viscerally understood by hundreds of millions of consumers who can reach into a pocket and touch an iPhone. The power of the brand means that people want to hear more about Apple, and the press loves to queue up and run stories that will get attention. 

Apple has been the subject of critiques in such areas as contract labor practices and pollution. Over the years, the company has learned to effectively respond. It addresses the issues and uses corporate transparency in its efforts to change. That recently resulted in a big win through third-party recognition of its efforts in the area of conflict minerals.

Conflict minerals — including tantalum, tin, gold and tungsten, all of which are important in electronics — often come from war-torn areas (including the Democratic Republic of Congo). The concern is that "exploitation and trade of conflict minerals by armed groups is helping to finance conflict ... and is contributing to an emergency humanitarian crisis," according to the Securities and Exchange Commission. Mine workers are often forced laborers subject to a litany of abuses. The proceeds from their coerced work is then used to fund rebel groups and warlords, who commit additional human rights abuses while seeking to exert control over local populations.

Instead of side-stepping the issue, Apple took proactive steps to safeguard against reliance on conflict minerals. And they made information about those steps available to the public.

Apple's disclosure 

Companies that use materials in their manufacturing that could come from a conflict zone must file an annual Form SD. Apple's SD, which runs 25 pages, is a model of disclosure, emphasizing the steps it takes beyond what most companies claim to do: 

  • Apple put all smelters and refiners in its extended supply chain through an independent third-party conflict minerals audit program that it says "goes far beyond legal requirements."
  • Apple removed any smelters or refiners that refused to take part. As of 2015, all of smelters and refiners in the company's supply chain participate in the audit.
  • The company makes its risk-assessment tool available to the industry as a member of the Electronic Industry Citizenship Coalition. Three-quarters of its smelters used the tool and provided responses.
  • Apple has cooperated with the Conflict-Free Sourcing Initiative "to incorporate its supplier audit methodology into an industry-wide, downstream audit program.
  • Part of the compliance program included review of more than "1,300 smelter, refiner and mine-level reports including human rights and security concerns."
  • Apple uses separate third-party data and reports to help identify potential problems with materials that go unreported by its providers and then investigates and follows up on the results.
  • Apple supports a number of civil society initiatives in the Democratic Republic of Congo.

 Transparency, progress and positive press

The current state of Apple's conflict minerals rule compliance is a vast improvement over 2012, when the company's Supplier Responsibility Report disclosed that only 34 out of 175 smelters had received onsite training and consultation on conflict-free mineral use. 

The result of the efforts has been continued positive press and recognition by the Enough Project as the clear leader among public companies that had to address the use of conflict materials, scoring 122 out of a possible 130 points.

Transparency alone clearly is not enough. As the details outlined in Apple's Form SD suggest, real efforts are necessary to address CSR concerns. However, only by combining those efforts with transparency does a company have a hope of explaining to critics and customers the difficulties faced in addressing a problem and showing the degree of effort — and progress — made.  

Erik Sherman is a freelance journalist covering business, finance, technology, communications, personal finance, and public policy.

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