Corporate social responsibility (CSR) is something that we as a general public are taking more and more notice of. Because of this, many com
Nov. 12, 2020
Corporate social responsibility (CSR) is something that we as a general public are taking more and more notice of. Because of this, many companies have pledged to make business practices more transparent, fair, and green.
Whilst Apple (NASDAQ: AAPL) has pledged to 'give back to society' it has also had its fair share of damning reports, notably the book Dying For An iPhone published earlier in 2020 detailing the working conditions of the Foxconn factory in China, where many Apple products are produced.
Yet, Apple recently announced a suspension of business for Pegatron, a Taiwanese supplier. Pegatron's probation is due to its reported labor abuses whereby it intentionally mislabelled student workers in an attempt to bypass Apple's code of conduct that all suppliers are subject to. We wonder if this could be a turning point in Apple's handling of such reports and how will this impact its business moving forward?
Is this damaging for Apple?
Although Apple stock did decrease 4% on the day of its announcement, it leveled out the day after. In general, the company will not likely be hurt by this in the long run as Apple's decisive action shows it is taking the violations seriously. However, delays for new deliveries might occur and its other partnered factories will have to pick up the slack. Also, the new generation of Macbooks being launched in the same week will ease any investor's fears of stock price fluctuations due to the news.
For now, Pegatron's stock also took a hit, but they will be subject to a huge revenue gap as business with Apple will not be resumed unless the manufacturer shows it has carried out several corrective actions as laid out by the iPhone-maker.
This turning point in its attitude towards suppliers and reported business malpractices can only do good things for Apple's overall reputation. By addressing what has previously been a dark spot for many Apple investors, and acknowledging the large and generous donations towards COVID-19 relief, the company will continue to appear as the most admired company in the world.
What about Foxconn?
Foxconn has had numerous reports over the years of labor violations, including reports of forced labor in its Zhengzhou factory, known colloquially as iPhone City. Although strongly denied by Foxconn and Apple, it is reports like this that can damage even the most popular company's reputation.
Foxconn, much like Pegatron is subject to the same rules and codes of conduct that Apple requires of its partners. As Apple has seemingly turned a corner in its handling of labor violations, it would be advisable for Foxconn to keep its nose clean in the future.
CSR moves for Apple
When talking about corporate social responsibility and Apple, it is good to also look at the positives that have been implemented over the years. For example, did you know that all Apple stores, offices, and data centers are 100% powered by renewable energy? Whilst on the human side Apple actively addresses issues of debt bondage labor by providing training sessions on rights and by repaying suppliers for recruitment costs; in 2019 $1.3 million was repaid.
Indeed, CEO Tim Cook recently stated in an interview with CBS that Apple always aims to 'give back to society' and that it does 'a lot more than just paying taxes'. Whilst the popular Airpods-maker can be, in some respects, considered a modern social architect, this now comes with heightened responsibilities in an era of transparency. This means making sure that all links in the supply chain are playing by the same rules.
Key takeaways for investors
Apple is not going to take too much of a loss once the news of this latest labor violation has died down. By both suspending business and stating that it does not condone practices that are outside its code of conduct, Apple has surely set a precedent for any future reports similar in nature to this most recent one.
For investors, this is good news, being a favorite stock of many, and in particular socially conscious millennials, Apple will continue to hold its top spot as one of the most popular companies in the world.
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