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Apple Supplier

Responsibility

2012 Progress Report

2Apple Supplier Responsibility

2012 Progress Report

Contents

Page 3

Apple and Supplier Responsibility

Page 5

Apple"s Auditing Process

Page 6

Labor and Human Rights

Audit Results

Core Violations

Labor Initiatives

Page 12

Worker Health and Safety

Audit Results

Core Violations

Working with Combustible Dust

Page 16

Environmental Impact

Specialized Environmental Audits

Audit Results

Core Violations

Page 22

Ethics

Audit Results

Core Violations

Page 24

Management Systems

Audit Results

Page 26

Worker Education and Development

SEED Program Expansion

3Apple Supplier Responsibility

2012 Progress Report

Apple and Supplier

Responsibility

Apple is committed to driving the highest standards for social responsibility throughout our supply base. We require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made. Our suppliers must live up to Apple's Supplier Code of Conduct as a condition of doing business with us. Drawing on internationally recognized standards, our Code lays out Apple's expectations in the areas of labor and human rights, worker health and safety, the environmental impact, ethics, and management systems. We insist that our manufacturing partners follow this Code, and we make sure they do by conducting rigorous audits with the help of independent experts. If manufacturers don't live up to our standards, we stop working with them. assembly and component suppliers. We continue to expand our program to reach deeper into our supply base, and this year we also added more detailed and specialized audits to address safety and environmental concerns. training programs educate workers about local laws, their fundamental rights as workers, occupational health and safety, and Apple's Supplier Code of Conduct. Today there are more than one million people who know their rights because they went to work for an Apple supplier. We are always looking for ways to make our program even stronger and more the Fair Labor Association (FLA), and we look forward to working with them. While its supply chain to the FLA's independent auditing team, who will measure our suppliers' performance against the FLA's Workplace Code of Conduct and the results will appear on their website. It's a level of transparency and independent oversight that is unmatched in our industry. In addition to this report, we are publishing a list of Apple's leading suppliers on our Supplier Responsibility website. These 156 companies account for more than

97 percent of what we pay to suppliers to manufacture our products.

Apple Supplier Code of Conduct

The Apple Supplier Code of Conduct spells

out responsible practices in the following areas:

Learn more about Apple and Supplier

Responsibility, including the entire Code,

at www.apple.com/supplierresponsibility.

4Apple Supplier Responsibility

2012 Progress Report

Other highlights of this year"s report include:

not audited before. Facilities where we conduct repeat audits consistently show This year, in addition to our standard audits, we conducted specialized environ number of violations. We have been working with our suppliers to correct these issues, and we will continue to build on this program of specialized environmental audits in the coming year. millionth participant completed training this year. Through this program, workers learn about our Code of Conduct, their rights as workers, occupational health and safety standards, and more. professional development courses. The curriculum continues to expand, and we toward an associate degree. and Singapore, countries known to be destinations for foreign contract workers. As a result, suppliers reimbursed $3.3 million in excess foreign contract worker corrective actions. 39
2007
83
2008
102
2009
127
2010
229
2011

Audited facilities

Repeat audits

Process safety assessments

Specialized environmental audits

2011 Apple Audits

In 2011, Apple conducted the following audits:

5Apple Supplier Responsibility

2012 Progress Report

Apple ensures our suppliers comply with the Supplier Code of Conduct through a rigorous program of onsite audits at our suppliers" facilities. An Apple auditor is thoroughly trained to use Apple"s detailed protocol and to assess requirements hundreds of records and conduct physical inspections of manufacturing facilities as with workers and managers in relevant functional areas. systems include policies and procedures, clear roles and responsibilities, and train ing programs for workers, line supervisors, and managers. of facilities deeper in our supply chain to make sure they are complying with our standards. We select these suppliers based on a number of factors including the country in which the facility is located, past audit performance, and the type of work performed at the facility. We audit the suppliers with the highest risk factors, the workplace, workers, and the environment. a violation is found, we require the facility to implement a corrective action plan We drive for the implementation of all corrective and preventive action plans within Apple considers the most serious breach of compliance to be a core violation. Core worker endangerment, intimidation or retaliation against workers participating remedied immediately, sometimes with the help of expert consultants. Every year, we reaudit all suppliers where core violations occurred. Apple"s goal is that every supplier complies with our Code. We perform a with the supplier until issues are fully addressed. However, if a supplier"s actions do not meet our demands, Apple will terminate the business relationship.

Apple's Auditing Process

Surprise audits

In addition to regularly scheduled audits

at our suppliers, we conduct a number of surprise audits every year. A surprise audit is when our team visits a supplier unannounced and insists on inspecting the facility and meeting with employees immediately. All surprise audits must begin within the hour of our arrival. During our regular audits, we may also ask a supplier to immediately show us portions of a facility that are not scheduled for review.

With a combination of regular audits and

unannounced audits, we"re working to make sure our suppliers are not just showing us what they want us to see.

6Apple Supplier Responsibility

2012 Progress Report

Labor and Human Rights

Apple requires our suppliers to uphold the human rights of workers and treat them with dignity and respect. We go beyond industry standards to be sure that workers understand their rights and that our suppliers comply fully in enabling prevention of involuntary labor, underage labor, and excessive working hours, Workers at an Apple supplier facility in Shanghai assemble parts for the MacBook Pro.

Apple Supplier Code of Conduct:

Labor and human rights

The Apple Supplier Code of Conduct

requires that suppliers carry out responsible practices in the following areas to uphold the human rights of workers:

7Apple Supplier Responsibility

2012 Progress Report

Audit Results

Each year, Apple audits suppliers in eight areas relating to labor and human rights. We look for compliance of both their practices and management systems.

Labor and human rights 2011 audit data

Category

Practices in compliance Management systems in place

Antidiscrimination

Fair treatment

Prevention of involuntary labor

Prevention of underage labor

Working hours

Freedom of association

Overall Compliance74%67%

Category percentages represent the average across all facilities of the line items scored under that category. Overall

Compliance percentages are the average of every line item in every category. Below are the issues and Apple responses for the standard audits in the labor and human rights category.

2011 labor and human rights audit issues and responses

Antidiscrimination

Apple"s Code protects against discrimination on the basis of race, color, age, gender, sexual and marital status, and prohibits pregnancy tests or medical tests for discriminatory use.

IssuesApple response

current workers for hepatitis B, and 52 facilities lacked policies and procedures that prohibit discrimination based on results of medical tests.

24 facilities conducted pregnancy tests,

and 56 facilities did not have policies and procedures that prohibit discriminatory practices based on pregnancy. even if permissible under local laws. At our direction, the suppliers have stopped discrimi natory screenings for medical conditions or pregnancy. We also required them to establish clear policies and procedures to prevent recurrence.

8Apple Supplier Responsibility

2012 Progress Report

Working hours

Apple's Code sets a maximum of 60 work hours per week and requires at least one day of rest per seven days of work, while allowing exceptions in unusual or emergency circumstances.

IssuesApple response

93 facilities had records that indicated more

than 50 percent of their workers exceeded weekly working hour limits of 60 in at least

1 week out of the 12 sample period.

At 90 facilities, more than half of the records

we reviewed indicated that workers had worked more than 6 consecutive days at least once per month, and 37 facilities lacked an adequate working day control system to in every 7 days.

We began weekly tracking of working hours

at facilities where excessive work hours were commonplace. We also required facilities to make changes to their work shifts and hiring to drive compliance. We hired a consultant to provide additional training to facilities on factory planning to avoid excessive work hours. timely as required by applicable laws and regulations, and prohibits using deductions from wages as a disciplinary measure.

IssuesApple response

42 facilities had payment practice violations,

including delayed payment for employees' wages and no pay slips provided to employees.

We required facilities to pay employees in a

timely manner as required by laws and regula tions and to provide pay slips to employees.

We also required facilities to strengthen their

current systems to prevent recurrence. and regulations, such as social insurance and free physical examinations. 49 facilities did not provide employees with paid leaves or vacations.

We required facilities to provide adequate

including social insurance to all employees, free physical examinations, and paid leaves and vacations. We also required facilities to strengthen their current systems to prevent recurrence.

67 facilities used deductions from wages as

a disciplinary measure.

While disciplinary pay deductions are

legal in some countries, they are a violation of

Apple's Supplier Code of Conduct. We required

facilities to repay employees' deducted wages and strengthen their management systems to prevent recurrence. wages as required by laws and regulations. overtime pay for holidays.

We required facilities to repay employees

due wages from historical miscalculations and change their current payment system to prevent recurrence.

9Apple Supplier Responsibility

2012 Progress Report

Core Violations

In addition to issues found in our standard audits, our supplier responsibility program discovered the following core violations in supplier labor and human rights practices. When a core violation is found, suppliers are put on probation and required to immediately address the violation. Every year, we reaudit all suppliers with core violations. The following chart shows the core violations and the actions we required in response.

2011 labor and human rights core violations and actions

Facilities

Violation Apple Response

Involuntary labor

2 facilitiesWe terminated business with one

supplier and are correcting the practices of the other supplier.

15 facilitiesWe discovered foreign contract

workers who had paid excessive recruitment fees to labor agencies.

We required suppliers to reimburse any

fees that exceeded Apple"s limits. In 2011, $3.3 million was reimbursed, bringing the total that has been repaid to workers

Underage labor

5 facilitiesWe discovered a total of 6 active and

13 historical cases of underage labor

at 5 facilities. In each case, the facility or detect false documentation. We found no instances of intentional hiring of underage labor.

We required the suppliers to support the

young workers" return to school and to such as labor recruitment practices and recurrences.

Labor Initiatives

Ending Indentured Migrant Labor

workers from countries such as the Philippines, Thailand, Indonesia, and Vietnam. These agencies, in turn, may work through multiple subagencies in the hiring country, the workers" home country, and, in some cases, all the way back to the workers" home village. By the time the workers have paid all fees across these agencies, the total cost can equal many months" wages, forcing workers into debt. labor, which is strictly prohibited by our Code. We limit recruitment fees to the equivalent of one month"s net wages and require suppliers to reimburse over paid fees for all foreign contract workers in their facilities, including workers not assigned to Apple projects. in Singapore. contract worker fees, bringing the total to $6.7 million repaid to workers since industry that mandates reimbursement of excessive recruitment fees.

Educating Indonesian workers

By educating potential contract workers,

Apple is working to prevent involuntary

labor before it happens. Apple partnered with nongovernmental organizations (NGOs) and local suppliers in Northquotesdbs_dbs17.pdfusesText_23