Legal and Ethical Environment of Business Course at Apple, Essay Example

Introduction

Apple’s rating by the GMI Report is somewhat in contrast with the media statements and reports regarding the business conduct and ethical codes detailed on the website, and although there are adequate regulatory statements within the company’s policies, there are some rather serious issues to be examined below. The first part of the study had reviewed the rating, its competency and validity; however, it has not provided details of the discrepancies between the regulation and issues related to business ethics. The structure of the below analysis would follow the same pattern as Part One, and would review the corporate governance, social responsibility and environmental sustainability claims related to the company, researching reports of the media and regulators and comparing them to other IT companies.

Independent Evaluations and the GMI Report

The criticism of Apple is based on some of the media reports and independent evaluations carried out about the company. Apple Inc. has been criticized for its unethical competitive practices, business conduct, employee relations and social responsibility. Further, the company’s green policies have been called “green washing, based on the incidents this report is going to talk about in detail.

As public influence within the company is low, and the marketing of new products is carried out within multiple channels, it is important that the company adapt measures to avoid anti-trust and fixed price claims, reported by the GMI document. Although the information technology and digital download market is extremely competitive, the company needs to adapt ethical processes in order to comply with standards and increase the firm’s reputation.

In order to build on its existing customers’ brand preference, Apple needs to ensure that it is monitoring the demand of the market, maintains its reputation and gains trust of all stakeholders. As there is no committee for customer relations, and previously, there were some communication, issues regarding the product support of Apple products. It is recommended that the company would evaluate the opportunity of creating an international executive team or committee that would not only ensure that the company compiles with industry regulations, but also fulfills the requirements of its customers regarding delivering information, privacy, marketing and business ethics.

Innovations should be used for creating jobs, opportunities, training programs for people around the world, to fulfill the social responsibility requirements the society sets for large organizations as Apple. Making sure that green technology, recycling of old models (Apple seems to come up with a new version in less than a year) would be developed is important to increase the company’s reputations and ensure that the government guidelines are met.

Employee Relations and Social Responsibility

The second document examined (Blodget, 2012) criticizes the company for its employee relations. Just like the one dealing with the discrepancies between policies and practice regarding the environmental and social issues, this document is based on the supply chain of Apple Inc. It is important to note that although the company is not directly employing people working for Chinese firms, they still have a corporate responsibility that people who are treated fairly and have a legal standing manufacture all Apple products. Although Apple has made a commitment to oversee its suppliers closer, there are still some issues found by the report. The report is interesting because it concludes three main statements: First of all, that Apple is being more economical by moving its production to Asia, secondly, that the loose regulations are beneficial for companies like Apple, and also that the company is taking supply chain supervision more seriously. In the following review, the authors of the current study would examine these statements in the light of the facts and findings.

The study concludes that Foxconn, the main manufacturing partner of Apple in China, which has been analyzed in Part 1 of the current study, must have had Apple’s approval to carry out business the way they did. There is also a debate related to the real number of Apple jobs in the United States. Although the number of workers officially employed by Apple in America is only 47.000, the company claims that they are responsible for 514.000 jobs (Blodget, 2012). It is evident from the GMI report (2012) as well that the company has a great impact on development and the economy. However, another Business Insider study also reviews the “working class perspective” of the multinational corporation.

One of the most debated questions related to Apple’s employee practices is that it does not oversee the operations overseas. Still, there are many critics claiming that there is a great number or unfair dismissal cases within the United States, related to Facebook comments, and the strict confidentiality policies are also debated (Osborne, 2011). Although within the United States and Europe, the company is committed to diversity and equality practices, and this is also highlighted within the Apple Corporate Governance Guidelines (2012).

Some websites report that contracts outline that firing employees for inappropriate Facebook posts is legal, and the strict confidentiality and requirements have been criticized by many business analysts. To protect its interests, Apple has come to an agreement with various other companies, often called as an “anti-poaching” deal, (The Register, 2012) to promise not to hire away employees from each other. This might bring up several ethical concerns; however, as employees usually have to sign a confidentiality agreement, and a statement that they would not seek employment at competitors, looks like a policy that has no use, anyway. Apart from the unethical approach of these companies the concerns regarding the interests of employees is also relevant. If an employee gains experience at one field and works for Apple for a couple of years, they would have to face difficulties when leaving or being made redundant, as they would be limited at choices. They would either have to settle their own consulting firm, look at a smaller scale company, which would possible result in a cut of wages and benefit packages. This process seems to be unethical, and although the case is not featured in the GMI report, it is an important example of market power misuse and disadvantaging employees.

Apple published two relevant documents: Business Conduct (an ethical code), and Supplier Code of Conduct. This addresses Apple’s supply chain working conditions. In the ethical code, it is meant to protect the company and is not committed to the employees and the society. These codes also cover work home balance and customer data protection. This ethical code focuses mostly on employee ethics and governance than corporate ethics. For the supplier code, it focuses on several standards in areas of Health and Safety, Labor and Human Rights and Ethics. Apples CSR activities is more of corrective and reactive in response to scandals and outer pressures. It lacks audited CSR reports to provide more information to various stakeholders.

Environmental Impact

Business Insider (2012) has published a report regarding the company’s practices in China. The document features details about the environmental impact of the company’s outlet: Meiko Electronics, which is one of the main suppliers and contractors of Apple. The report features a photo of the white water discharged into the Lake Nantiazi and the test results of the water showed excessive and above normal levels of copper. The water discharge is likely to affect the living environment around the River Yangce, as the water flows directly there. The presence of heavy metals has a great impact on the environment, and can lead into mass extinction of various species. Further, the water quality of the river has a huge importance in the lives of local people, who rely on it every day. The lake Nantiazi results showed 4270 mg per kg copper, compared to the recommended 56-93. Further, the amount of Nickel found in the lake was also high, and both the Yangtze River and the Lake Nantiazi were classed as quality standard category IV. The report quoted in the study (2012) concluded that “the possibility of producing harmful toxicity effects is very large” (p. 17).

Comparing this report and the results obtained by verified measurements, the statement included in the GMI Report (2012) concluding that Apple Inc. is a low environmental impact company are proven to be invalid. However, the company does not only affect the environment through production, but – as it has been discussed in the first part of the study – also through its product. Changing the models and encouraging people to change devices also has a tax on the environment, and as not the entire Apple customers have access to the recycle centers or are aware of their existence, this problem can become serious long term. As compared to Microsoft that has succeeded in targeting and managing the enterprise, Apple is focused on the experience of the user and design. Additionally, Microsoft is in the business of technology democratizing whereas, Apple is a company that is consumer oriented. These are some facts that give basis to Apple’s invalid assumptions of having a low impact on its environment. It is also true to conclude that Apple is expensive, but Microsoft is inexpensive. Apple on the other hand, is growing unlike Microsoft, which is doing well financially, but no growth observed in the company.

Section 2 of the document published by Business Insider (2012) concludes that the environmental impact has a negative effect on the lives of communities as well. Public complaints have been submitted against Apple’s suppliers multiple times, and one of the largest problems appears to be located in the Jiangsu Province, at the company called Kaedar Electronics. The report also confirms that the relationship between the company and Apple Inc. is confirmed through documents and a bribery scandal. The reports by local authorities confirm excessive pollution and untreated water discharge. The company has also been subject to a 100.000 RMB penalty, and had to suspend its operations back in 2006 (p. 18).

The rating of the company in 2010 by the local authorities (Kunsual Municipal 2010 Industrial Enterprises Environmental Conduct Rating) was yellow, which means that although the discharge and pollution was below the limits, the checks have revealed some violations. The report (2012) mentions other companies within China; however, the correlations between Apple and these firms have not been confirmed officially. Although Apple has stated that they would publish the list of all their business partners and suppliers in order to promote open communication and discourse, this does not seem to be true.

The effects of the companies’ operations on the public have been various: noise pollution, waste water discharge, gas emissions, especially at Unimicron Electronics, of which the relationship with Apple is not confirmed officially. It seems that there is little or nothing done in response to the complaints, and as a socially responsible company that claims to check and regulate its suppliers, it would be expected from Apple to take preventive steps and start a public discussion. Although, treatment facilities have been constructed by the companies to reduce the water and air pollution, the close proximity of the factories to residential areas increases the level of impact on communities (Business Insider, 2012, p. 20). Indeed, the report concludes that the company is only separated by an iron fence from the local kindergarten. Although the permissions for building the factory in a close proximity from the residential area was not the decision of Apple, more of the Chinese government’s, still, environmental studies have clearly been neglected during the selection process when Apple Inc. designed its supplier chain. This makes many analytics conclude that these principles and environmental, public and ethical considerations are not included in the documents and regulations. Therefore, to conclude that the governance of the company regarding to supply chains is satisfactory is not founded. The repeated complaints about pollution by residents seem to be ignored and neglected. Further, accusations of anti-competitive behavior have occurred as well, examined in the previous part of the study.

While Apple states on its website (2012) that it has removed toxic materials from its products, there is no evidence that the production process is free of them, too. While this step might have an impact on the recycling and e-waste processes, and it is important that there is no lead, BFR, PVC, Mercury or Arsenic gas in the Apple products, the company should also focus on the manufacturing process. The company claims that the products require less material today than years ago, due to their compact size, still this might not result in the fact that the environmental impact during productions would be reduced at the same rate.

General Principles in Light of the Reports

The Best Practices of Green companies are in contrast with Apple’s business conduct. It is evident that the company is taking some steps to make their products greener, still, as much of the factory and manufacturing work is outsourced overseas, it is evident that there is no adequate supervision regarding to the company policies and the compliance of subcontractors. The claims made by the Friends of Nature – Institute of Public & Environmental Affairs (2012) are serious, and this means that the supervision of the selection process and the monitoring of business partners are not sufficient within the company.

Green-Washing at Apple Plc. – Facts and Corporate Governance Responses

According to Know more (2011), the worldwide organization of Greenpeace has featured Apple in the “E-Waste Hall of Shame”. The company does not remove chemicals from the product before recycling them or disposing them in the scrap yards. This means that in addition to the waste and heavy metals released in the nature during the production process, the products are harmful for the living environment after the lifecycle has finished. The short lifecycle of the products also means that more and more waste is generated. Greenpeace further examined the green practices of the company, and found that out of 14 computing companies, it was the least environmentally friendly, with regards to production, digital dump, heavy metals, chemicals and recycling phases. The fact that the products are manufactured in Asia and distributed throughout the world from there indicates that the company uses excessive amount of petrol for their distribution. Evidence has been found that in Lagos, Nigeria, toxic digital waste, originated from Apple products has appeared.

As the company is an electronic and computing device developing and manufacturing firm, it is important to review the Greenpeace “Guide to Greener Electronics” document, (2011) and compare the company’s practices, policies and the recommendations. The Apple Report Card rates the company 4.6/10. This is based on the following findings (most serious issues):

• No information about green energy policy advocacy
• Not focusing on absolute and relative reductions of GHG emissions
• No information about using recycled plastic in products
• No evidence that the estimates of life cycle GHG emissions published on the website (2012) are correct
• No policies regarding sustainable sources of paper

Obviously, some developments have been noted by the report, as well, for example the fact that Apple has introduced its worldwide recycling program and extended the coverage to Costa Rica, India and Korea, among other developing countries. The Energy Star Certification of Apple Products by the United States Environmental Protection Agency has also been noted by the report (2011). Other computer manufacturers have also criticized Apple by featuring the “Gold” status by Electronic Product Environmental Assessment Tool, as other companies have also achieved the same rating. Therefore, the Better Business Bureau has made the company change the line” The World’s Greenest Family of Notebooks”. It is important that the company is trying to reduce the amount of packaging and recycle devices, these policies should still be extended to suppliers and green policies should be made compulsory to apply, no matter which country the firm is operating in (Heimbuch, 2009).

Apple’s Response

Apple has responded to many of the criticism, and the 2012 policy documents, as well as the transparent policies are confirming the fact that the company is taking its responsibilities seriously. However, publishing the list of contractors and allowing outsider companies to check the practices is not enough if the worldwide organization would like to change the public image. Well-outlined compulsory regulations should be issued for companies Apple Inc. works with, and these policies should be made public.

In 2012 (Palazzolo, 2012), the company has responded to many claims and criticism. The company submitted a motion to dismiss complaints regarding the Plaintiff case (complaint about misleading advertisements of iPhone 4S). The criticism is a serious issue regarding the social responsibility of the company, as misleading the public is what the lawsuit claims to prove. The clearly stated 30-day return policy is mentioned, however, the clarity of product information at the point of sale, within the advertisements and on the website. Therefore, the business ethics principles, detailed in the previous part of the study are not followed.

Conclusion

It is evident that the source of the governance problems within Apple lies in the uncontrolled, unsupervised supply chain management and the lack of effective company and supplier policies. Although the company has claimed that they have taken steps to involve environmental agencies and create new policies regarding the issue (Apple Business Code of Conduct, 2012), the analysis has found little results and no changes in the quality of control over companies working as suppliers of Apple Inc. The most urgent issues within the company are making the supplier chain more transparent and publishing independent and reliable claims regarding the green efforts and carbon footprint reduction campaigns.

The training programs are only mentioned in the end of the document, and there is no provision for monitoring or consequences of non-compliance. This suggests that Apple would need to take its Supplier Code of Conduct document one step further and ensure that the policies are adhered to; either by using an independent organization for monitoring or appointing a supplier contract management board to oversee operations and supply chains. Apple has not truly integrated the CSR into the business mode. It has not made a report on its initiatives and how it plans to develop them in a sustainable manner. The only focus Apple has done is in the design of the products which are designed to be energy efficient and can be recyclable.

While the new Apple Supplier Code of Conduct (2012) has been published on the Apple Website, it is reduced to the prevention of human trafficking, unfair treatment, as well as health and safety regulations. The only responsibilities of suppliers regarding wastewater are: “Suppliers shall monitor, control, and treat wastewater generated from operations before discharge as required by applicable laws and regulations. Suppliers shall take appropriate precautions to prevent contamination of storm water runoff from their facilities.”

From this, it is evident that Apple has not put into consideration all environmental policies, governance and compliance codes. Good governance is an essential tool for any technological company because it aligns investment of technology to key goals of the business enterprise by ensuring that return and risk balance. This strategy provides the company with an approach that is well-structured in identifying and clarifying all fundamental dependencies of the company like people, technology and the process. Apple’s evaluation on governance needs to be emphasized in order to tailor with all managerial information and regimes of performance reported. It is clear that, Apple has neglected many aspects of governance that have contributed to environmental issues and social responsibility that spills down to low operations and strategies implemented by executives. Environmental planning issues need to be looked into in order to foster a community that is risk-free and devoted, motivated and inspired to work together in building the reputation of the company like other IT companies.

Governance, social and environmental planning aspects of Apple need to be revised because they have not met all requirements of people’s needs. These three aspects are essential tools relating to business strategies and operations of the company. They are all related since they contribute to the success of each other and add up to increased performance, productivity and goal attainment by employees and management. Therefore, the unethical issues presented in the essay show how reluctant Apple has been in complying with governance, social and environmental planning.

References

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