Audit Report on Apple’s China Factories Issued. No Surprises Here.

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I don’t think anyone expected any dramatic revelations here, but just for the record, there aren’t any. The audit report, issued by the Fair Labor Association, is pretty much what you would expect if you’ve been paying attention to the Apple-Foxconn labor story over the past couple of years.

First, some housekeeping. Here’s a link to the report itself (PDF), the main Foxconn investigation page on the FLA website, and Apple’s Supplier Code of Conduct.

Summaries of the report are all over the news, but all you need is 5 or 10 minutes to skim the report yourself (minus the data/methodology sections), which is only 13 pages long – the introduction is three pages in length.

The report basically presents the set of problems that the FLA audit uncovered at Foxconn facilities in Guanlan, Longhua and Chengdu. These include:

  • Working Hours

During peak production, the average number of hours worked per week at Foxconn factories exceeded both the FLA Code standard and Chinese legal limits. This was true in all three factories. Further, there were periods during which some employees worked more than seven days in a row without the required minimum 24-hour break. The root causes include high labor turnover, which undermines efficiency, and gaps in production and capacity planning.

  • Health and Safety

The investigation revealed that a considerable number of workers felt generally insecure regarding their health and safety. The issue of aluminum dust was of particular concern, as this was the cause of an explosion at the Chengdu facility last year. FLA found that, one year after the Chengdu explosion, Foxconn had improved operating procedures, measurement, and documentation to reduce risk related to aluminum dust where Apple products are made.

  • Industrial Relations and Worker Integration

Investigators found that workers were largely alienated, in fact or in perception, from factories’ safety and health committees and had little confidence in the management of health and safety issues.

[ . . . ]

It should be noted that committees may not be truly representative of the workers, because management nominates candidates for election.

  • Compensation and Social Security Insurance

While Foxconn wages are above the Chinese average and the legal minimum, the assessment found that 14 percent of the workers may not receive fair compensation for unscheduled overtime.

Problems in each area are discussed and remedial measures, which have already been promised by Foxconn, are laid out. I won’t repeat all the data from the report, but I will note that none of the major findings should be news to anyone. Problems with overtime, environmental and safety issues, and social insurance irregularities have been discussed for a long time.

Is this report, and the entire exercise, useful? Absolutely. As the FLA itself says, this is a first step, and it will be conducting other audits within Apple’s supply chain. I suspect that the report, and the negotiations with Foxconn that went on behind the scenes, put into place a very public standards platform that will now be referenced in the future by Apple, the FLA and other organizations, by critics, and even Foxconn. All those promises that the latter has made raises the bar, and now we’ll have to wait and see whether, and to what extent, those deadlines will be met.

I just want to make two additional points. First, as we already knew, it should be acknowledged that none of these infractions (or abuses, or whatever language you wish to use) are out of the ordinary with respect to China factories. The report does not uncover any newly-discovered dodgy practices that would make Foxconn stand out in this regard. In fact, some of the abuses sensationalized by Mike Daisey, including the use of underage workers, are not cited as a problem in the report at all.

Second, as always, it’s always useful to think about both the causes of these labor problems and the best way to solve them. The report does cite a few underlying causes, such as high worker turnover rates requiring additional overtime. Other news sources and Op/Eds will no doubt rehash the usual arguments about government enforcement, tougher labor laws, corporate social responsibility, grassroots action, the role of social media, etc.

As you may know, I’m big on government enforcement of existing labor law. China law is not bad, particularly since the 2008 Labor Contract Law was passed, and if those provisions were better enforced, a lot of this discussion would be unnecessary. I almost never read about the government side of all this, but The Economist surprised me with this:

“Governments are not pulling their weight,” complains Aron Cramer of BSR, an NGO. He thinks there has been “too much outsourcing of enforcement to the private sector”. Individual firms may find enforcement difficult. Governments may do better, but few governments of emerging markets like to be bossed around.

Exactly my point, and I love that “outsourcing of enforcement” language. It’s all well and good for Apple, Foxconn and FLA to agree on remediation, but in the long term, and for the sake of all the other workers out there, enforcing overtime, social insurance and worker safety laws is, in my opinion, the best (though certainly not easiest) way to go. Moreover, without consistent enforcement, there will always be competition problems between enterprises and the legitimate question/complaint of some multinationals: “Why am I being singled out for these problems when my competitors do the same thing?”