Howweworkwithsuppliers UpholdingApple’svaluesinoursupplychain. Ourvaluesleadtheway. Webelievethateverypersonhastherighttoasafeandhealthyworkplacewheretheyaretreatedwithdignityandrespect,andthataswebuildourproducts,theenvironmentmustbeprotected.Thisdocumentexplainshowweworkwithoursupplierstoupholdourvaluesthroughoutoursupplychain.Tolearnmoreaboutourwork,includingourmostrecentprogress,readourannualPeopleandEnvironmentinOurSupplyChainreport,availableon/supplier-responsibility.
2 HowWeWorkwithSuppliers Aglobalopportunity AtApple,wecareasmuchabouthowwemakeproductsastheproductswemake.Theproductsandservicesthatwecreaterequireresourcesfromaglobalchainofsuppliersandtheiremployeeswhoprovidelabor,goods,andservicestoApple. Theworkperformedinoursupplychainplexandvaried—fromsmeltersandrefiners,tothemanufacturingpartnersthatponentsandperformfinalassemblyofourproducts,torecyclers.Italsoincludesservicesprovidersthatsupportouroperations,suchasthelogisticspartnerswhoshipourproductsallovertheworld,andthejanitorialteamsthatmaintainourRetailstores.Ourrequirements,alongwithallapplicablelaws,applytosuppliersacrossalloftheseareasincludingdeepintoourchain,whereprimarymaterialsaresourcedbyoursuppliers. RG
C S EE RECYCLINGSUPPORTSERVICES DESIGN&NGINEERIN PRIMARYMATERIALSSMELTER &REFINEROMPONENT ETAILSTOR LOGISTICS FINALASSEMBLY
3 HowWeWorkwithSuppliers Thehigheststandards In2005,theAppleSupplierCodeofConductandtheSupplierResponsibilityStandards(“Code”and“Standards,”respectively)weredevelopedbasedonourworktoestablishstandardsforworkingconditionsatourmanufacturingsuppliers’facilities,andinalignmentwithinternationallaborandhumanrightsstandards,includingthosefromtheInternationalLabourOrganization(ILO),theUnitedNationsGuidingPrinciplesonBusinessandHumanRights(UNGPs),theOrganisationforEconomicCo-operationandDevelopment(OECD),aswellasindustry-leadinghealthandanizations. AreasaddressedbytheAppleSupplierCodeofConduct Laborand Health HumanRightsandSafety OurStandardssupplementourCodebyproviding2017,weextendedourCodeandStandardstoincludeinstitution,andnotasmeanstomeetdemandfor EnvironmentEthics additionalclarityregardingApple’srequirements. materialsprocessors.In2018,weexpandedthescopeworkforcelaborortofillshort-termgapsinlaborsupply. ApplesuppliersmustmeettheseStandardstobepliancewiththeCode.SuppliersareassessedagainsttheCodeandStandardsthroughrigorousindependent,third-partyCodeofConductassessments,aswellasotherthird-partyauditprograms. In2012,webeganextendingourCodeandStandardsbeyondmanufacturingintotheservicedomaintoincludesupplierssuchasAppleCarecontactcenters,logisticsandrepaircenters,andsoftwaredevelopmentcenters.In2014,weaddedrequirementsfortheresponsiblesourcingofminerals.In2015,ourCodeandStandardsbegantobeappliedtoApple’sRetailsupplychain,whichincludesthesuppliersthatprovidejanitorialandotherservicestoAppleRetailstoresworldwide.In ofourResponsibleSourcingofMaterialsStandardtoincludeallmaterials.In2020,weintroducedtheInfectiousDiseasePreparednessandResponse(IDPR)standard,aswellasaprovisioninourCodeprohibitingsuppliersfromhavingmanufacturingoperationsin,recruitlabordirectlyorindirectlyfrom,orsourcematerials,products,orservicesdirectlyorindirectlyfromregionswhereAppleandthird-partiescannotessandprehensive,independentevaluationsoftheirsuppliers’pliancewithourCodeandStandards.In2021,weupdatedourCodeandStandardstoexplicitlystatethatsuppliersmayonlyhirestudentsattheirfacilitiesinconnectionwithaneducationortrainingprogramataneducational Morethanfifteenyearslater,wecontinuetoevaluateandupdateourCodeandStandardsannually,raisingthebarthatoursuppliersmustmeet.Everyyear,weincorporatefeedbackfromstakeholders,togetherwithevolvinglegalnormsandbestpractices,toensurethatourCodeandStandardsreflectcurrentinternationallyeptedstandards. Ourstricthumanrightsandenvironmentalprotectionssetthefoundationofourwork.Then,wecontinuouslyevaluateourownefforts,listentopeopleinoursupplychain,andimplementrobustprogramsthathaveameasurableimpactonprotectingpeopleandthe. ManagementSystems
4 HowWeWorkwithSuppliers Ourapproachtocontinuousimprovement Weachieveprogressbyholdingourselvesandoursuppliersountableeverystepoftheway,fromproductdesignthroughrecyclingandeverythinginbetween.Ourrequirementsapplyacrossoursupplychain,regardlessofthegoods,labor,orservicesasupplierprovidestoApple,andourscopecontinuestoevolveaspanyevolvesintonewlinesofbusiness. Weupholdourrequirementswhichprotectpeopleandthethroughrigorousassessments—andifwefindissues,weworkwithsupplierstohelpthemimprovetheiroperationsandmakelong-lastingchanges.Assessmentsareanimportanttoolthatprovideasnapshotofasupplier’sperformanceandhelpustoprioritizeourengagement.Becausetheyonlyrepresentonemomentintime,theyalonearenotsufficient,andweengagemanyothermethodsofholdingsuppliersountabletoourstandards. doingwellandwherewecouldbedoingmore.Thisfeedbackiscriticalforustomoveforwardinthewaysthataremostmeaningful. Finally,wereportourperformancepubliclyinseveralways,includinginourannualPeopleandEnvironmentinOurSupplyChainreport,StatementonEffortstoCombatHumanTraffickingandSlaveryinOurBusinessandSupplyChains,andConflictMineralsDisclosure. Wetrackandmeasureourperformanceacrossarangeofareas,andweapplythelessonswelearntocontinuallyimprove.Inadditiontoassessments,wealsoseekinputfromexpertsacrosstheindustryandcivilsociety,askingforfeedbackonwhatweare
5 HowWeWorkwithSuppliers Ourassessmentprocess SupplierperformanceisassessedagainstourCodeandStandardstodriveimprovementsintheareasoflaborandhumanrights,healthandsafety,environment,managementsystems,andethics.Assessmentsareprehensiveandrigorousprocessthatcantakeanywherefromaday,tomorethanaweek,dependingonthescaleofthesupplier’soperations. Conductingrigorousassessments Anassessmentconsistsofextensivedocumentreviews,athoroughsitewalk-through,andinterviewswiththesupplier’semployeesandmanagement.Supplieremployeeinterviewsareconductedintheemployees’nativelanguageandwithouttheirmanagerspresent.Wefollowupwiththesupplieremployeesweinterviewtoensurethattheyhavenotexperiencedanyretaliationasaresultofspeakingwithauditors.Weworkwithindependent,third-partyauditorstoevaluatesuppliersagainstmorethan500criteria,pliance,andidentifyareasforimprovement.Eachassessedfacilityisrankedona100-pointscaleineachofthreeassessment categories(laborandhumanrights,healthandsafety,andenvironment),withtheaverageofthoseprisingthefacility’positescorefortheyear.Wealsoconductunannouncedassessmentseveryyear,aswellasunannouncedvisitsinresponsetoallegations,ortoverifythatremediationofviolationshaspleted. Inadditiontothird-partyCodeofConductassessments,werequiremanyofoursupplierstoalsoundergotheResponsibleBusinessAlliance’s(RBA)ValidatedAssessmentProgram(VAP),afacility-wide,third-partyassessmentwidelyusedbytheindustry. High-levelfactorscontributingtoassessmentselection Isthisanewsupplier?
Whatisthesupplier’spreviousassessmentperformance?
Whatisthesupplier’spreviousrecordofCoreViolationsorallegations?
Whatisthesupplier’sgeographicallocation?
WhatistheamountofbusinessdonewithApple?
AreForeignContractWorkersemployed?
LearnMore Tolearnmoreaboutthisyear’sprogress,seeourPeopleandtheEnvironmentinOurSupplyChainreport
6 HowWeWorkwithSuppliers Upholdingstandardsdeeperinthesupplychain AlthoughAppledoesnotdirectlypurchaseorprocureprimarysourcedminerals,aswemakeprogresstowardourgoaltouseonlyrecycledandrenewablemineralsandmaterialsinourproductsandpackaging,wecontinuetosourceprimarymaterialsresponsibly,whileworkingtoimproveconditionsinandaroundmunities. OurResponsibleSourcingofMaterialsStandardcoversallprimaryandrecycledmaterials,includingadvancedandbio-basedmaterials.Ourstandardalignswithleadinginternationalstandards,includingtheUnitedNationsGuidingPrinciplesonBusinessandHumanRightsandtheOrganisationforEconomicCo-operationandDevelopment’s(OECD)DueDiligenceGuidanceforResponsibleSupplyChainsofMineralsfromConflict-AffectedandHigh-RiskAreas. tobuildAppleproducts.Smeltersandrefinersforkeymineralsarerequiredtoreport,assess,andmitigaterisksintheirbusinesspracticesbasedonthefindingsofannualassessments.Ifasmelterorrefinerisunableorunwillingtomeetourrequirements,theyriskremovalfromoursupplychain.Ifasmelterorrefinerisunableorunwillingtomeetourrequirements,theyriskremovalfromoursupplychain. Frommappingoursupplychainandassessingrisk,toconductingindependentaudits,engagingwithcivilsocietyandindustry,andinvestingheavilyininnovation,wetakeastrategic,prehensiveapproachtoupholdingstandardsinthesourcingofmaterials. Weutilizeindependent,third-partyauditorstoassessthesmeltersandrefinersthatprocessmineralsrequired
7 HowWeWorkwithSuppliers Holdingsuppliersountabletoourhighstandards InadditiontohavingteamsfromAppleinoursuppliers’facilitiesregularly,weworkwithindependent,third-partyauditorstoperformrigorousassessmentsofoursuppliers’performanceinupholdingourstrictstandards. Takingcorrectiveaction Ifweuncoverpliance,wetakepromptactiontoensuresuppliersnotonlycorrecttheissue,butmakemeaningful,long-termchanges.WedothisthroughaCorrectiveActionPlan(CAP),duringwhich30-,60-,and90-daycheck-inswithApplearerequired. WethenconductourCorrectiveActionVerification(CAV)processtoverifythatallcorrectiveactionshavebeenessfullyimplemented,andnecessarystepshavebeentakentopreventaurrence. Non-Retaliation Weprohibitretaliationofanykindagainstsupplieremployeeswhoparticipateinourassessments.Wepartnerwithaanizationtocontactsupplieremployeesinterviewedduringassessmentstoconfirmthattheywerenotsubjectedtoretaliation. ActivitiesincludedinourCodeofConductassessments Managementinterviews WeinterviewsuppliermanagementtoconfirmthatpropermanagementpracticesandsystemsareinplaceasrequiredbyourCodeandStandards. Extensivedocumentreview Wethoroughlyreviewemployeerecords,payrollinformation,contracts,andpolicydocumentation. Employeeinterviews Weinterviewsupplieremployees,intheirnativelanguageandwithoutmanagementpresent,toconfirmthatourobservationsmatchtheirexperience. Sitewalk-throughs Ourdetailedinspectionslookatchemicalsafety,firesafety,indoorairquality,machinesafety,environmentalcontrols,andpersonalprotectiveequipment,amongmanyotherrequirements.
8 HowWeWorkwithSuppliers Understandingassessmentresults Our100-PointScaleforSupplierAssessmentScores 100 89-60 ≤59 High-performer •Maturemanagementsystemsandconsistentimplementation •MinorandisolatedCodeviolations •Assessmentstypicallyidentify50%orfewerfindingsparedtoothersuppliers Medium-performer •Typicallyhavesomemanagementsystemsinplace,butmaybeunderdevelopedorimplementedinconsistently •Mayhavemajor,isolatedCodeviolationsand/ornumerousminorviolations •Averagenumberofassessmentfindingsparedtoothersuppliers Low-performer •Managementsystemsareseverelyunderdevelopedornon-existent •MajorviolationsfoundacrossanumberofCodecategories •Assessmentstypicallyidentify2xthenumberoffindingsparedtoothersuppliers FindingsinourassessmentsarecategorizedBeyondimmediatelyaddressingtheCoreViolation, bylevelofseverity: suppliersmustalsomakechangesintheirmanagement AdministrativeNon-Compliance:Denotespolicy-,procedure-,training-,munication-relatedfindingsExamplesofadministrativeplianceinclude:•Inadequaterecord-keeping•Inadequatedocumentationofpolicyorprocedures•Insufficienttrainingonpolicy Violation:DenotespliancewithourStandardsExamplesofviolationsinclude:•Insufficientprovisionofbenefits•Inadequatepre-placement/on-job/post-employment upationalhealthexams•Inadequateenvironmentalpermits systemthataddresstherootcausesoftheviolation,takeandsustainpreventivemeasurestoensuretheviolationdoesnotur,andprovideremediestoaffectedworkersinlinewiththeUNGuidingPrinciplesonBusinessandHumanRights(UNGPs). SomeCoreViolationsofourCodeinclude:•Abuse•Underagelabor•Debt-bondedlabor•Forcedlabor•Falsification•Retaliation•Obstructionofanassessment CoreViolation:ThemostseriousviolationofApple’s•Bribery SupplierCodeofConduct •Unsafeorunhealthyenvironmentprovidedto WhenaCoreViolationisidentified,thesupplier’sChiefExecutiveOfficer(CEO)isnotified,andthesupplierisimmediatelyplacedonprobation.ProbationistheperiodbeginningwhenaCoreViolationisdiscoveredbyApple,andendingwhenAppledeterminesthesupplierpletedallcorrectiveactions.Examplesofconsequencesresultingfromprobationincludereceivingnonewprojects,nonewbusiness,andtheterminationofexistingbusinesswithApple. workersthatmaycauseimminentsignificantriskofseriousinjury,illness,propertydamage,oranyformofloss•Defeatedsafetydevicesorimpairedlosscontrolsystemwithoutadditionalcontrolstopreventseriousincident•Inadequatemaintenanceorintentionalcircumventionthatdemonstratesthefailureofanenvironmentalabatementsystem•Lackofrequiredenvironmentalapprovalsorcontrols •Useofprohibitedsubstances •Illegaldisposalofhazardouswaste
9 HowWeWorkwithSuppliers Addressingassessmentfindings Ourgoalistoworkhand-in-handwithsupplierstohelpthemimprovetheirmanagementsystems,ratherthantosimplyremovethemfromoursupplychainwithoutcorrectingtheissueswediscovered.Intheeventthatasupplierisunwillingorunabletoimprovetheiroperationstomeetourrequirements,theyriskremovalfromoursupplychain. Achievingprogressrequiresstrongprocessestoholdsuppliersountable,addressviolationswhentheyarediscovered,andvalidatethatcorrectiveactionshavepleted.WecalltheseprocessesCorrectiveActionPlansandCorrectiveActionVerifications. Followinganassessment,wediscussfindingswiththesupplierattheirfacility,andworkwiththemtocreateaCorrectiveActionPlan.Thesupplierisprovidedwithfeedbackandidentificationofissues,andisthenrequiredtoconductroot-causeanalysistodevelopcorrectiveactions.Aspartoftheprocess,ourcapability-buildingteamprovidessupplierswithtrainingonindustrybestpracticesandguidanceinresolvingidentifiedissues,aswellashelptostrengthentheir managementsystemsandpracticestopreventtheissuefromurring. Duringthisperiod,30-,60-,and90-dayrequiredcheck-inswithAppleensurethatsupplierquestionsareaddressedandthatclarification,awareness,andtrainingareprovidedwhereneededaspartofourcapability-buildingefforts. WethenconductourCorrectiveActionVerificationprocesstoverifythatallcorrectiveactionshavebeenessfullyimplemented,andnecessarystepshavebeentakentopreventaurrence. Weprohibitretaliationofanykindagainstsupplieremployeeswhoparticipateinourassessments.We partnerwithaanizationtocontactsupplieremployeesinterviewedduringassessmentstoconfirmthattheywerenotsubjectedtoretaliation. Addressingallegations Wetakeallegationsconcerningoursuppliersveryseriously.Allegationsefromdifferentsources,includingcivilanizations,newsoutlets,peopleinthesupplychain,andanonymousreportsthroughthechannelswemakeavailabletosupplieremployeesandthepublic. Thoroughinvestigationsofallegationsareconducted.Ifaviolationisdiscovered,aCorrectiveActionPlanisputinplace. 10 HowWeWorkwithSuppliers Capability-buildingthroughexpertguidance AponentofeveryCorrectiveActionPlaniscapability-building,whereAppleexpertssupportsupplierteamsinimprovingtheirmanagementsystemstoresolveimmediateissuesandpreventthemfromurring. In2016,theSubjectMatterExpert(SME)programwasintroducedtosendAppleexpertson-siteatsupplierfacilitiestohelpdefinecustomizedcapability-buildingplans.TheSMEteamprisedofmorethan30expertswithrobustindustryexperienceandknowledgetosolvebothmanagementandtechnicalissues.OurexpertsconnectdirectlywithsupplierstoworkthroughimprovementsandCorrectiveActionPlansusingavarietyofcapability-buildingtools. Theseincludeone-on-oneassistanceandonlinelearningthroughillustrated,self-pacedlearningmanualsthatprovideinstructionandrequirementsforareasofourmonlyencounteredindailyoperations.Wecontinuetoexpandicareascoveredbythesetools. Knowledgeareascurrentlyincludedincapability-buildingandtheassociatedtoolsandtraininginclude: LaborandHumanRights •Laborrecruitmentprocess•Protectedclassmanagement•Disciplinemanagement•Third-partyemploymentagency/schoolmanagement•Wageandbenefitmanagement•Grievancemanagement•Exitprocess•ForeignContractWorkermanagement EnvironmentalManagement •Environmentalpermitmanagement•Wastemanagement•Wastewatermanagement•Stormwatermanagement•Airemissionmanagement HealthandSafetyManagement •Riskassessment•Emergencypreparednessandresponse•PersonalProtectiveEquipment(PPE)andsignage•Industrialhygiene•High-risktasksmanagement(workatheight, hotwork,confinedspaceentry)•Lock-outtag-out•Chemicalmanagement•ErgonomicsIncidentmanagement 11 TestedprocessesforremediatingCoreViolations Aftermorethan15yearsofengagementandcapability-buildingwithoursuppliers,CoreViolationsofourCodehaveeincreasinglymon,andsupplierperformancecontinuestoincreaseyear-overyear.WhenaCoreViolationdoesur,weimmediatelyenactourstrictremediationprocessestoresolvetheviolation.FollowingareexamplesoftheseremediationprocessesastheyrelatetoCoreViolationsfordebt-bondedlabor,workinghoursviolations,andunderagelabor.WecontinuetoreporttransparentlyonCoreViolationseachyear. 12 HowWeWorkwithSuppliers Remediationofdebt-bondedlabor Applehaszerotolerancefordebt-bondedlabor.Ourremediationprocessfordebt-bondedlaborfocusesondirectremedy,wheresuppliersrepayemployeesforanyfeespaidintheprocessofobtainingajob. Ifdebt-bondedlaborisdiscovered,thesupplier’sCEOisnotified,andthesupplierisplacedonprobation,requiringthemtosubmitaworkerrepaymentplanforapprovalbyApple.Onceapproved,thesupplierdirectlyrepaystheiremployeesforallfeespaid,andrepaymentisverifiedbyathird-partyauditor. Debt-bondedlaborremediationprocess ViolationIdentification Appleandthird-partyauditoridentifydebtbondedlaborviolation ViolationCommunication municatesviolationtosupplier’sCEO SignTerms Suppliersignsprobationandrepaymentterms RepaymentPlan SuppliersubmitsworkerrepaymentplanforAppleapproval EmployeePayment Supplierrepaystheiremployee(s) PaymentVerification Third-partyauditorverifiesrepaymenttoemployeesatsuppliersite 13 HowWeWorkwithSuppliers Remediationofworkinghoursviolations Propertimeforrestandleisureisfundamentaltoasafeandhealthyworkenvironment.WereviewworkinghoursaspartofourassessmentsandestablishCorrectiveActionPlansasneeded. Iffalsificationofemployeeworkinghoursisdiscovered,thesupplierisplacedonprobationandtheirCEOisnotified.Thesupplier’sethicspolicyandmanagementsystemsarethenthoroughlyreviewedtoidentifyrootcauses.Thesupplierisalsorequiredtoundergoadditionalauditstoensurethatpolicychangesareimplementedtopreventfutureviolations.Inaddition,ifemployeehoursweremisrepresented,thesuppliermustreviseallrecordstoreflectanurateountingofhoursworked. Workinghoursfalsificationremediationprocess ViolationIdentification Appleandthird-partyauditoridentifyrecordsfalsificationviolation ViolationCommunication municatesviolationandnoticeofprobationtosupplierCEO;suppliersignsprobationterms RootCauseIdentification Appleandsupplierreviewsupplier’sethicspolicyandmanagementsystemstoidentifyrootcause RegularAudits Supplierisrequiredtoundergoregularauditstoensurethereviewedpolicyisimplementedtopreventfutureviolations CorrectAllRecords Suppliermustreviseallrecordstoreflecturateountingofhoursworkedbytheiremployees 14 HowWeWorkwithSuppliers Remediationofunderagelabor Ifunderagelaborisdiscovered,specializedthird-partyassessorsarebroughtinforanin-depthreview,andthesupplierisrequiredtoimmediatelypreventtheemployeefromcontinuingtoworkandtoreturntheunderageindividualtohisorherhomesafely. Educationalopportunitiesarepresentedtotheunderageemployeeandhisorherguardians.Thesupplierisrequiredtopayalltuitionandeducationalfees,andtocontinuetopaytheindividual’swagesthatwouldhavebeenearnedatthesupplierfacilityuntiltheindividualreacheslegalworkingage.Follow-upisconductedtoverifytheindividual’soverallwell-being,bothatschoolandathome.Oncethestudentreacheslegalworkingage,thesupplierisalsorequiredtooffertheindividualemployment. Underagelaborremediationprocess ViolationIdentification Appleandthird-partyauditoridentifyviolation,supplier’sChiefExecutiveOfficeisnotified ReturnHome Supplierisrequiredtoimmediatelyprovidesafepassagehometounderageemployee WagesPaid Supplierisrequiredtocontinuetopaywagestosupplieremployeeuntilheorshereacheslegalworkingage Education Supplierisrequiredtoprovideeducationalopportunityforsupplieremployee EmploymentGuarantee Supplierisrequiredtoprovideemploymentopportunitywhentheindividualreacheslegalage 15 HowWeWorkwithSuppliers Additionalreferences VisittheAppleSupplierResponsibilitysiteforadditionalinformationonourworktoupholdApple’svaluesinthesupplychain.Resourcesavailableinclude: AppleHumanRightsPolicy AppleSupplierList PeopleandEnvironmentinOurSupplyChainreport AppleSupplierCodeofConductandSupplierResponsibilityStandards ConflictMineralsReport AppleSmelterandRefinerList AppleRegulatedSubstancesSpecification EffortstoCombatHumanTraffickingandSlaveryDisclosure AppleEnvironment,SocialandGovernance(ESG)Report 16 Acontinuouspursuitofbetter Weknowourworkwillneverbedone.Webelievethatifwearen’tfindingwaystoimprove,wearen’tlookinghardenough.Astheworldandourbusinesscontinuetochange,ourstrategychangeswithit.We’realwayslistening,learning,andchallengingourselvestodobetterandweshareourbestthinkingwithanizations,industryassociations,andgovernments.Byingsolutionstogether,everyonecanachieveprogressmorerapidly. 17 ©2022AppleInc.Allrightsreserved.AppleandtheApplelogoaretrademarksofAppleInc.,registeredintheU.S.andothercountries.Otherproductpanynamesmentionedhereinmaybetrademarksoftheirpanies. 18