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Sample Master Business CSR Report

Apple Inc.’s Ethical Dilemma

Ethics and Corporate Social Responsibility

Introduction

Context

The case of evolving globalization and ease of access to information worldwide has broaden the duties and responsibilities of many businesses. The Corporate Social Responsibility, referred as CSR, in this day and age has thus become a characteristic that has increasingly become essential
for a successful business.

However, there are still major businesses that have faced issues on their strategy towards corporate social responsibility or complete lack of it. Apple Inc, which is the focus of this study, has been criticized for its negligence towards fair labour, primarily from the supplier and manufacturing companies that outsourced the activities of producing Apple Inc. products.

Although manufacturers throughout the world, mainly East-Asia such as Foxconn, are not directly managed by Apple Inc. the company still plays a pivotal role in influencing management strategies specifically that of fair labour.

Unfortunately, since 2010 many reports have surfaced of lax labour policies and inhumane working conditions found in Foxconn; which questions Apple Inc.’s ethical stance on corporate social responsibility.

Assessing the ethical dilemma is essential in order to implement improved policies, but this can only be done from the perspective of the CEO who is considered to be more influential over policy making.

Therefore, for this particular study, the following research questions have been developed to analyze the ethical dilemma from the CEO’s perspective (i.e. Timothy Cook, CEO of Apple Inc.).

1. What are common labour issues found in Apple Inc. suppliers?

2. What are ethical issues with labour practices and policies exercised by suppliers and their impact on Apple Inc.?

3. What are the benefits to Apple Inc. from establishing stronger CSR policies with suppliers?

4. What are the advantages and disadvantages of participating in CSR policies in terms of
finances, consumers, and investors?

5. How can Apple Inc. navigate its CSR by analyzing strategies using ethical philosophies primarily through consequentialism and deontology?

It is important to note at this point that there are a vast number of cases that depict Apple Inc.’s frailty in taking action against harmful labour practices against many of its suppliers.

Conversely, for this particular study the cases of Foxconn, Jabil Circuit, and Pegatron will be reviewed. The ethical dilemma will be reviewed using consequentialism and deontology.

For the purpose of this report the following stakeholders have been identified:

● Shareholders

● Lenders

● Apple employees

● Manufacturers

● Suppliers

● Music Industry

● Customers

● Owners

Stakeholder-Map-of-Apple-Inc.s-Stakeholders-Effected-by-CSR-Issues1

External Stakeholders

Internal Stakeholders

Owners

Shareholders

Apple Employees

Lenders

Suppliers

Manufacturers

Music Industry

Customers

Employees of Suppliers

Purpose

The main aim of this report is to ‘critically’ analyze the ethical issue of Apple’s policies for corporate social responsibility towards its suppliers using ethical theories of consequentialism and deontology. Through the analysis of its ethical issues a set of recommendations can be proposed
to arbitrate the issues.

Scope

The current report is developed based on a set of objectives that need to be achieved using methods outlined in the next section. The objectives of the report include;

● Answering all the research questions outlined in the previous section.

● Examine the ethical dilemma and its impact on Apple Inc.

● Analyze how stakeholders from those identified are impacted under the ethical dilemma.

● Apply the ethical theories of consequentialism and deontology on exploring the CSR issues.

● Produce recommendations based on the evaluation of the dilemma in order to implement improved and fair working conditions for Apple Inc. suppliers’ employees.

One of the major limitations of this report is lack of academic data and reflection available as the dilemma being observed is still considered fairly new. The emergence of what is being termed as electronic sweatshops is a new phenomenon as resultant of a boom in the electronics industry.

There is also much skewed data available on the labour issues found in Apple’s supplier chain which can only be seen as a suppression of data from a strong corporate entity.

There is also conflicting data found between different organizations with Apple Inc. and the Fair Labour Association producing data that supports the idea that Apple’s suppliers are practicing fair labour standards and policies.

On the other hand, watch groups such as China Labour Watch are still producing data from investigations that point the contrary.

Procedure

The current research conducted into Apple Inc.’s ethical dilemma of corporate social responsibility to employees of suppliers is primarily based on secondary research.

This includes reports from international news agencies, Apple’s investor reports, reports from China Labour Watch (CLW),
and other human rights and labour rights agencies.

Other research from secondary sources includes journal articles that analyzed ethics from a business perspective in addition to ethical philosophies that will be used to analyze the dilemma.

Results, Discussions & Findings

Apple Inc. seems to have a chronic CSR problem and uses a more reactive strategy when dealing with these CSR issues by only acting when a complaint or protest erupts against the company.

A controversial ethical dilemma that is plaguing Apple in for the last decade is the working conditions faced by labourers in supplier companies such as Foxconn, Pegatron, and Jabil Circuit which are all based in China.

According to Duhigg and Barboza (2012) more than half the suppliers that have been audited by Apple have violated at least one aspect of the code of conduct since 2007 and in some cases might have broken the law.

The extent of the issue moves from upper management to supplier factories and suppliers of supplier factories.

Based on deontology the moral judgement produced by Apple is against its moral principle/duty underlying its inaction towards supplier labour policies.

One of the main corollaries of deontology is that those taking action have duties regarding their own action and that actions are right or wrong in themselves.

Branching from deontology is W. D. Ross’s interpretation that there are several prima facie duties that determine the action that needs to be taken. According to Ross (1930), when there is a prima facie duty to an action there is at least a fairly strong moral reason that favors it.

Apple’s take on unfair labour and CSR ignores six of the seven prima facie duties presented by Ross (1930); reparation, gratitude, justice, beneficence, self-improvement, and non-maleficence.

Through its lack of action Apple went against the moral duties of repairing harm, recognizing a granted benefit and expressing it, fairly distributing goods, making itself a better entity, and not harming anyone.

Apple is indeed morally bound to improving factory conditions and worker conditions in supplier factories as the actions it takes for improvement are right in themselves regardless of the consequences.

Labour violations in Apple Inc. ‘s supplier companies have not yet directly impacted the sales and revenues produced by Apple Inc. annually. Of the stakeholders identified in figure 1-1, the direct intense impact is mostly on employees of supplier companies, suppliers, manufactures, and owners of Apple.

However, indirect impact can come to secondary stakeholders such as customers once they begin to boycott Apple products due to unfair labour practices in its supplier factories. If a lax stance continues, Apple will be reaching the brink of being the poster child for worker abuse.

These unethical abuses may become a threat to damaging the long term prospects of Apple for continued growth and success. The responses patterns of Apple on worker mistreatment are in line with its competitors in the industry which diverges from Apple’s innovative culture.

From Apple’s perspective, the issues of workers’ wages and working conditions have been considered as unnecessary distraction that needs to be minimized or completely avoided.

This is due to the absence of strong and persistent disapproval of Apple’s three main constituencies; that being the customers, stockholders, and regulators resulting in the company not being compelled to go beyond their minimum as there are no apparent and measurable positives that can be expected from choosing a course of action that is more involved within its suppliers’ labour policies.

However, new leadership (i.e. Tim Cook, CEO) has the perception of Apple being in the larger world of public policy and social good.

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Analyzing Apple’s actions based on consequentialism also produces the same results.Consequentialism although the exact opposite of deontology holds that consequences of one’s conduct are the ultimate basis for any judgement about the rightness or wrongness of the conduct
(Anscombe 1958; Audi 2009).

Basically from such standpoint a morally right act or the omission of that action is one that will produce a good outcome. To analyze the actions of Apple Inc. the theory of negative consequentialism is used, this is a branch of consequentialism that focuses on minimizing bad consequences.

Based on Apple’s current stance towards supplier labour abuse the company is following an extreme form of consequentialism in that “the end justifies the means”.

Apple, like many companies, are faced with five kinds of external pressures that influence its strategies and operational policies to turn a blind eye to worker conditions; customer loyalty, industry best practices, expectations of major shareholders and investment community, civil society organizations, increased government pressure and regulatory oversight.

Although the situation in Foxconn, Jabil Circuit, and Pegatron have received intense media coverage Apple has lost no demand for its products.

Therefore, Apple’s goal to become the number one technology company in the world is morally important enough to use any method possible to achieve it making the action acceptable.

On the contrary, no massive good has come about with the steps that Apple has taken other than benefiting from increased profits.

According to reports from the New York Times, The Guardian, BBC, and China Labour Watch employees in factories work excessive overtime commonly seven days a week and live in crowded dorms.

There have been reports that allege the employment of under-aged workers in supplier factories. According to CLW (2015) in 2010, 137 workers at Foxconn were injured after they were ordered to use poisonous chemical n-hexane to clean iPhone screens.

These chemicals had also caused an explosion at iPad factories in Chengdu killing four people and injuring 77. Based on 229 audits conducted in 2012 by Apple, 93 facilities have at least half of its population of workers exceeding the 60-hour work week limit (Garside, 2012).

Based on the report, there have also been incidents of worker discrimination, improper safety precautions, and failure to pay required overtime. From 2008 to 2010 at least 18 Foxconn employees had attempted suicide (Duhigg and Barboza 2012).

Based on Apple’s deplorable ethical stance only suppliers and their employees are directly impacted by their actions.

Labour-Violations-of-Apple-Inc.-in-Supplier-Factories-Source-The-Verge

Figure 2-1: Labour Violations of Apple Inc. in Supplier Factories (Source; The Verge)

From the negative consequential perspective, Apple Inc. has caused more suffering than increasing pleasure for employees of suppliers such as those in Foxconn, Jabil Circuit and Pegatron. Stronger versions of negative consequentialism require an active form of intervention to prevent bad image and amend existing harm.

According to Karl Popper, “from a moral point of view, pain cannot be outweighed by pleasure” (Myers and Fellow n.d.). Hence Apple cannot justify that their own-end justifies the means by which they use to reach that goal; meaning the process of making Apple products does not justify the use of unfair labour practices in their supplier factories.

It is obvious that these stakeholders are not direct Apple employees, but they are the main source of production of Apple products making their wellbeing a direct responsibility of Apple. Based on reports, Apple Inc. marginalizes the profits of suppliers by ensuring maximum low cost, potentially forcing suppliers to take short cuts and abuse workers to meet production demands giving rise to this dilemma in the first place.

This specific method goes against the very principles of deontology and negative consequentialism. When weighing this decision against deontology proposed by Kant, Apple Inc. can be perceived as not acting out of good will when trying to take small steps to tackle issues in supplier factories.

These factors thus may suggest that the only reason Apple seems to be taking even small miniscule steps is to produce a consequence of showing good will when indeed it is only trying to lessen its reputation of being an exploiter of harsh working conditions.

Apple, however, can have good will if the company acts out of respect for moral law, which means taking CSR steps to minimize human suffering because it is the rights of the workers and out of respect for the law.

Continuing with such labour abuses or being associated with it is indeed considered as a human rights violation and a workers’ right violation.

Based on deontology and consequentialism, no action conceived by Apple on grounds of duty to moral law suggests that the company feels it right to continue standing silent while workers experience distraught conditions and abuses to produce its products (Godiwalla and Damanpour, 2006).

It is evident that other stakeholders such as consumers, lenders, shareholders, and even the owners are not affected by the dilemma as it is
producing the goods for them, but the outcome that is produced for their goods is probably at the cost of human rights violations. Regardless of what ethical theory this dilemma is analysed from, such obstruction of basic human rights must have no moral or ethical stance (Godiwalla and
Damanpour 2006).

Also, violating human rights is not justified as a means to achieve a goal or aim. Human rights abuses are not directly executed by Apple but they are probably provoked by them according to various reports reviewed in this study.

According to China Labour Watch (2012; 2014; 2015a; 2015b; 2016a; 2016b) Apple asks its supplier to specify how much every part costs, how many workers are needed, and the size of worker salaries.

With this excessive financial detail, Apple calculates how much it will pay for the part which only allows suppliers the slimmest of profits. This probably results in suppliers trying to cut corners by replacing expensive chemicals with less costly alternatives or push their employees to work faster and longer. Then the company comes back the following year to force a ten percent price cut.

These drastic tactics of cutting costs to maximizing on profits are the instigators of human rights abuses to factory workers. This strategy does provide owners and shareholders of Apple to increase their profits while customers are so loyal that they are willing to pay extra for the product.

But as a result, external stakeholders such as the directly affected suppliers and their employees are potentially left with marginal profits and destitute conditions for working. Apple Inc. is able to produce $100 billion dollars in revenue from sales of products but does not participate in active corporate social responsibility (CLW 2016a).

Morally and ethically, the company is accused of being unable to execute their moral duty (i.e. principles of deontology) or justify their methods (i.e. principles of consequentialism) or produce the least negative impact (i.e. principles of negative consequentialism) (Doyle 2015).

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Conclusion

An analysis of Apple Inc.’s stance on corporate social responsibility towards the ethical dilemma of unfair and unjust labour practices in supplier factories using consequentialism and deontology suggest that Apple Inc. is much accused of acting unethically.

The logic and the analysis of the situation presents that external stakeholders of suppliers and their employees are the only one affected by the lax corporate social responsibility of Apple.

The company, although value based to its customers, is more price based to its suppliers which can be seen as the dual standard of the
company.

From the literature reviewed, it was observed that as a technological innovator, Apple might still not be implementing innovative ideas or policies that could change the way technology companies manage their supply chain. Instead the company has produced what the modern era
describes as electronic sweatshops.

The report used the principles of deontology as presented by both Kant and Ross and consequentialism, primarily focusing on negative consequentialism. Deontology is best described as duty based ethics that are concerned with what people do and not the consequences of their
actions. They depend on a moral pendulum to justify an action and it cannot be justified by action.

However, Apple Inc.’s actions do not satisfy the principles of Kant’s theory of deontology nor Ross’s prima facie duties. It is hence evident that Apple’s lacks moral high ground.

On the other hand, the company’s actions analyzed against consequentialism painted another picture. Consequentialism is the theory that believes actions are considered morally right if they provide the best overall consequences.

Based on this principle solely, Apple’s action is able to provide the best products to a great number of people around the world and has also advanced technology and human interaction with technology.

However, a branch of this theory, negative consequentialism potentially cancels out the benefits that Apple has produced, in that there might be a great number of negative consequences from Apple’s actions that outweigh its good.

Also, various reports suggest that there is a great deal of human rights abuses with Apple’s actions which cancel out the overall outcomes of innovative technology to the masses.

Recommendations

The justification of private enterprises and competitive markets such as those of Apple Inc. do not rest solely on profitability but ultimately on the impact that their activities have on the wellbeing of all stakeholders and society at large.

Based on the analysis, it is evident that Apple needs to implement a cultural change in regards to it taking more innovative steps to corporate social responsibility.

Therefore, the following recommendations have been made to implement a socially
responsible culture from top management, particularly its CEO.

Apple Inc. needs to play a more active part in its supplier’s labour policies. For one thing, Apple Inc. can allow suppliers more profit margin giving them incentive for implementing fairer labour policies.

Apple Inc. needs to be the leader in developing agreements with factory owners to improve factory conditions through rigorous monitoring and sufficient transparent actions.

Apple Inc. needs to comprehend that improvement to factories such as better work conditions, provision for safety equipment, and better air filtration systems require additional factory space which is considered as non-productive capital resulting in increased operating costs without proportionate increase in the number of units produced per worker/per hour/per machine.

However, Apple Inc. has strong brand loyalty because of its innovative technology. With a loyal consumer base, customers will still purchase Apple items regardless of reasonable price increase.

Going beyond the minimum will allow Apple Inc. to emerge as a market innovator in corporate participation in social policy which has become a necessity in today’s pluralistic society.

Apple Inc. also needs to start becoming more transparent in terms of providing public information in regards to working conditions in supplier factories. With transparency brings inadmissible facts that allow top management such as the CEO to make more informed decisions that can come for the benefit of all stakeholders both internal and external.

References

Anscombe, G.E.M., 1958. Modern Moral Philosophy. Philosophy (London, England), 33(124), pp.1–19.

Audi, R., 2009. The Place of Ethical Theory in Business Ethics. In Oxford Handbooks Online. Oxford University Press.

China Labour Watch. 2016a. Apple making big profits but Chinese workers’ wage on the slide.

China Labour Watch. [report].

China Labour Watch. 2016b. Study cases doubts on Apple’s ethical standard. China Labour Watch.
[report].

China Labour Watch. 2015a. Something’s not right here. China Labour Watch. [report].

China Labour Watch. 2015b. Analyzing labour of Pegatron and Foxconn. China Labour Watch.
[report].

China Labour Watch. 2014. exploitation’s: Apple’s supplier Jabil circuit. China Labour Watch.
[report].

China Labour Watch. 2012. Beyond Foxconn: Deplorable working conditions characterize Apple’s entire supply chain. China Labour Watch. [report].

Doyle, T. E. 2015. Deontological international ethics. International Studies Association Compendium Project, pp. 1-43.

Duhigg, C. and Barboza, D. 2012. In China, human costs are built into an iPad. The New York Times.

Garside, J. 2012. Apple’s factories in China are breaking employment laws, audit finds. The Guardian.

Godiwalla, Y. H., and Damanpour, F. 2006. The MNCs global ethics and social responsibility: A strategic diversity management imperative. Journal of Diversity Management, 1(2), pp. 43-

52. Myers, C, and Fellow, K. n.d. Corporate social responsibility in the consumer electronics industry: A case study of Apple Inc. George University. [dissertation].

Ross, W. D. 1930. The Right and the Good. Oxford, Oxford University Press. Sethi, S. P. 2012. Two faces of Apple. Carnegie Council for Ethics in International Affairs.

[online] Retrieved <http://www.carnegiecouncil.org/publications/ethics_online/0068.html>. [Accessed: 10th
November 2016].