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Sunday, March 2, 2014

Strategic CSR - Apple

The article in the url below reports on an effort by the U.S. Federal government to improve the lives of low-paid workers overseas (Chapter 7; Issue: Supply Chain, p428):
“[The end of the year] is the deadline for corporate suppliers of the world’s biggest consumer—the U.S. government—to have a say in new regulations aimed at ending indentured servitude overseas. The rules stem from an executive order Obama signed last year, called ‘Strengthening Protections Against Trafficking In Persons In Federal Contracts.’ The President’s dictate is unequivocal on one key point: If a company wants to keep the government as a customer, it must stop hiring overseas workers who had to buy their jobs. You read that right: Workers actually buy jobs. … Obama’s administration now appears ready to change the conversation. The debate is no longer, How much is too much? It’s, Why should foreign migrants have to buy these jobs at all?”
The regulation is  aimed at curbing the practice by which some prospective employees overseas use brokers to secure the opportunity for a job. Although widespread in a number of countries, the article focuses in particular on the implications of this change for Apple:
“Washington is a huge and growing business for Apple. The company has a dedicated online store tailored for government buyers, including simplified ways for federal contractors to purchase Apple gear with government-issued SmartPay credit cards. According to IDC Government Insights, which tracks government spending, iPads and iPhones have become commonplace equipment at NASA, the National Oceanic and Atmospheric Administration, the Fish and Wildlife Service, the U.S. Geological Survey, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives.”
What I find most interesting about the article, however, is its reach:
“Procurement lawyers in Washington say the ban applies all the way down the supply chain. It even applies to contractors selling what are known in government-speak as COTS items—commercial off-the-shelf goods.”
This is important because it advances a debate that has not made much progress recently—how far does a company’s responsibility for its supply chain extend? In other words, while we may be able to agree that a firm is responsible for its immediate suppliers, there is little agreement on the suppliers of a firm’s suppliers; or those suppliers’ suppliers and sub-contractors, who can often be several steps removed from the retail brand that draws all the attention. Issues like this are particularly important for firms like Walmart, which has around 60,000 suppliers. If we assume, conservatively, that each of those suppliers has ten suppliers, and if we hold Walmart accountable for only two steps in the supply chain (i.e., the suppliers of their suppliers), then Walmart is responsible for the operating conditions of 600,000 firms. And, what about three steps in the supply chain? Again, with a conservative estimate of 10 suppliers, Walmart would be responsible for the actions of 6 million firms.
Holding a firm accountable for its supply chain is easy to say in theory, but incredibly difficult (and possibly ‘unfair’) to implement in practice. More importantly, it is not clear that such oversight and accountability generates more value than the associated costs.
Take care
David Chandler & Bill Werther
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What Obama’s Anti-human Trafficking Order Means for Apple
By Cam Simpson & Adam Satariano
December 18, 2013
Bloomberg Businessweek