Hon Hai Precision Industry Co., Ltd. (trading as Foxconn) is the world's biggest maker of electronic components. Its clients include the world's best known electronics and information technology companies, and products manufactured at its plants include iPads, iPhones, iPods for Apple, Kindles for Amazon, PlayStations for Sony and Xboxes for Microsoft.
How waiting longer for the iPhone could help workers
Richard Locke faults a production system geared to speed at all costs
Two decades after Nike faced heat for poor working conditions in its suppliers' overseas factories, Apple has been responding to a series of scandals - health and safety problems, worker suicides and riots by workers employed at Foxconn, one of its lead suppliers in China. And, once again, consumer activists and others are calling for better standards, more workplace inspections and other steps to prevent such abuse.
To its credit, Apple has agreed to work with Foxconn to improve wages and conditions and hire more workers in an effort to reduce excessive overtime. Other companies are also renewing their commitments to improve conditions in their supplier operations. It would seem progress is being made under the watchful eyes of non-governmental organisations. Ethical codes are in place. Audits and inspections are under way.
But if the goal is to make factories more efficient and ethical places both for the companies they supply and the workers they employ, such steps are not sufficient. What is truly needed is fundamental change up and down the entire supply chain, from how products are designed and commercialised to how local managers are trained and also how many and how quickly new products and product lines are introduced.
Perhaps most challenging of all, we need to do a much better job at helping consumers understand that if they truly want to see overseas factory conditions improve, they may have to pay a little more or wait a bit longer for those products they so crave.
As part of the research for a forthcoming book, I analysed data from several major global firms seen as leaders in trying to implement and operate ethical supply chains. I found that while audits and compliance programmes can help identify problems, they do not in and of themselves resolve them or lead to lasting improvements in labour conditions.
Hewlett-Packard, for example, has a strong supply chain code of conduct and an excellent team of employees auditing its suppliers but few of its suppliers comply fully with the company's and industry's code. This was true for the other major brands - for example, Nike - I studied.
The problem is not as simple as bad managers who either don't understand or care about promoting ethical supply chains. Rather, these managers are often not properly trained and equipped to do so. When companies were willing to invest time and money in such managerial capability, working conditions did improve.
But the biggest impediment to lasting improvement lies in the very business model used by global firms. When a brand-name company schedules a major product launch without properly considering the capacity of its supply chain, the result is enormous pressure on local plant managers, who, in turn, pressure employees to meet deadlines they did not set. Who pays the costs for such upstream decisions? Workers at the Foxconns of the world.
Companies feel they must maintain the current production system to satisfy demand by consumers. Since they are at the end of the upstream supply chain, it is these consumers who can perhaps be most effective in enabling companies to implement true reforms.
If consumers were less insistent on new products every few months, companies could produce fewer product lines but sell them at higher margins. In other words, you may have to wait longer for that new tablet - but it will be made under better working conditions. Having labels like "Fair Trade" on coffee is a good thing, but not if it's just a way for consumers to check off their conscience box. We need an education effort among consumers on these issues.
As long as the world remains organised around the current supply chain system, with all of its negative incentives, there will always be another crisis, and another wave of response. If the goal is sustainable development, we must instead fix the way global business is done.
Richard M. Locke is a professor at MIT and serves as both the deputy dean of the MIT Sloan School of Management and the head of MIT's political science department