Ending excessive work hours.

Ending the industrywide practice of excessive overtime is a top priority for Apple. Our Supplier Code of Conduct limits work weeks to 60 hours except in unusual circumstances, and all overtime must be voluntary. Unfortunately, work weeks in excess of 60 hours have historically been standard rather than exceptional, and little has changed for many years in our industry. In the past, we tried different ways to fix the problem, but we weren’t seeing results. So in 2011, we took a more basic approach: We tracked work hours weekly at a handful of suppliers, and when we found excessive hours, we were able to address the problems quickly with the supplier.

In 2012, we expanded that program and tracked work hours weekly for over 1 million employees, publishing the data every month. As a result of this effort, our suppliers have achieved an average of 92 percent compliance across all work weeks, and the average hours worked per week was under 50.

Addressing underage labor.

Our approach to underage labor is clear: We don’t tolerate it, and we’re working to eradicate it from our industry. When we discover suppliers with underage workers or find out about historical cases — where workers had either left or reached legal working age by the time of the audit — we demand immediate corrective action as part of our Underage Labor Remediation Program. Suppliers must return underage workers to school and finance their education at a school chosen by the family. In addition, the children must continue to receive income matching what they received when they were employed. We also follow up regularly to ensure that the children remain in school and that the suppliers continue to uphold their financial commitment.

In 2012, we found no cases of underage labor at any of our final assembly suppliers. While we are encouraged by these results, we will continue regular audits and go deeper into our supply chain to ensure that there are no underage workers at any Apple supplier. Many suppliers tell us that we are the only company performing these audits, so when we do find and correct problems, the impact goes far beyond our own suppliers.

How dishonest third-party labor agents conspire to corrupt the system.

In many of the cases of underage labor we’ve discovered, the culprit behind the violation was a third-party labor agent that willfully and illegally recruited young workers. In January 2012, for example, we audited a supplier, Guangdong Real Faith Pingzhou Electronics Co., Ltd. (PZ) (广东昭信平洲电子有限公司), that produces a standard circuit board component used by many other companies in many industries. Our auditors were dismayed to discover 74 cases of workers under age 16 — a core violation of our Code of Conduct. As a result, we terminated our business relationship with PZ.

But we didn’t stop there. We also learned that one of the region’s largest labor agencies, Shenzhen Quanshun Human Resources Co., Ltd. (Quanshun) (深圳全顺人力资源有限公司), which is registered in both the Shenzhen and Henan provinces, was responsible for knowingly providing the children to PZ. In fact, to obtain the workers, this agency conspired with families to forge age verification documents and make the workers seem older than they were.

We also alerted the provincial governments to the actions of Quanshun. The agency had its business license suspended and was fined. The children were returned to their families, and PZ was required to pay expenses to facilitate their successful return. In addition, the company that subcontracted its work to PZ was prompted by our findings to audit its other subcontractors for underage labor violations — proving that one discovery can have far-reaching impact.

Providing tools to enable responsible hiring.

Last year marked the third year of our Prevention of Underage Labor training program, an initiative to help suppliers identify and prevent underage labor. We conducted training for 84 suppliers that were chosen because their facilities are located in provinces at high risk for underage labor. The training outlines methods and provides tools for implementing and sustaining effective age verification processes. It also specifies the steps suppliers must follow if underage labor is found during an audit.

An independent auditor checks identification and other documents to verify the age and status of workers at a facility in Shanghai. Suppliers are required to maintain all relevant documentation and to produce it during audits.

New in 2012, we provided a guidebook to help with identifying legal IDs and assessing recruitment practices of third-party labor agents. We also added a layer of support beyond the classroom. After the training, suppliers now assess their internal and external risks and create action plans to revise policies for preventing underage labor. Then we follow up to review their new systems. For suppliers that need additional help, industry consultants provide onsite support in implementing action plans and improving management practices.

In addition, we give at-risk suppliers the names of labor agents that have been associated with the recruitment of underage workers. We also offer guidance on working with other agents, including ensuring that the agent has appropriate licenses and permits, conducting regular audits of the agent’s recruitment practices, and reporting violations to Apple and the local government.

Setting standards for hiring students.

In China, many students are required by their school programs to complete fieldwork (internships) as part of their curriculum. Our suppliers must follow strict standards when hiring students as interns or apprentices. For example, student working hours must comply with legal restrictions and not conflict with school attendance. Suppliers must also ensure that the education program requirements adhere to laws and regulations. We’ve discovered that some elements of these programs are poorly run, and the cyclical nature of internship work makes it difficult to catch problems. In 2013, we will require suppliers to provide the number of student workers along with school affiliations so we can monitor this issue more carefully. We’ve begun to partner with industry consultants to help our suppliers improve their policies, procedures, and management of internship programs to go beyond what the law requires.

Stopping excessive recruitment fees and bonded labor.

Third-party labor agencies help many suppliers recruit contract workers from other countries. The agencies often use multiple subagencies, which in turn do business through smaller local agencies in the workers’ home countries. Workers are often required to pay fees to each of these agencies to gain employment. And many find that they have taken on huge debt even before they start the work. As a result, they must hand over a high proportion of their wages to recruiters to pay this debt, and they have to remain at the job until the debt is paid. We consider this a form of bonded labor, and it is strictly prohibited by our Supplier Code of Conduct.

When we find violations, suppliers must reimburse excessive recruitment fees — anything higher than the equivalent of one month’s net wages — for any eligible contract worker found working on Apple projects. Knowing that factories in certain countries are more likely to employ foreign contract labor, we target these factories for bonded labor audits, and we help them modify their management systems and practices to comply with our standards. Apple is the only company in the electronics industry to mandate these reimbursements, and our suppliers have reimbursed a total of US$13.1 million to contract workers since 2008, including US$6.4 million in 2012.

Sourcing conflict-free materials.

Apple is committed to using conflict-free minerals, and we’ve joined the Public-Private Alliance for Responsible Minerals Trade, a joint initiative among governments, companies, and civil society to support supply chain solutions to conflict minerals challenges in the Democratic Republic of Congo. As one of the first electronics companies to map its supply chain for conflict minerals, we actively survey suppliers to confirm their smelter sources. As of December 2012, we have identified 211 smelters and refiners from which our suppliers source tin, tantalum, tungsten, or gold.

Apple suppliers are using conflict-free sources of tantalum, are certifying their tantalum smelters, or are transitioning their sourcing to already certified tantalum smelters. We will continue to work to certify qualified smelters, and we’ll require our suppliers to move their sourcing of tin, tungsten, and gold to certified conflict-free sources as smelters become certified.

In an industrywide effort to help suppliers source conflict-free materials, we continue to align our program with Organisation for Economic Co-operation and Development (OECD) guidelines, and we are working with the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI). The primary focus of the EICC and GeSI Conflict-Free Smelter programs is to certify qualified smelters as conflict-free through an independent third-party audit process.