Made in USA, China, India, Japan, Brazil, Congo…
Issue 22: Relationships




By Hugh Hough
From Issue 22
Date June 2011

Topics Covered


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(Welcome to the new world Global Relationships and Transparency)

I am in the middle of São Paulo witnessing one of the fastest growing economies in the world. Here there is no worry about jobs or unemployment. In fact, Brazil is facing a horrific shortage of what they call human capital. So much so, that there is talk of opening the borders to Portugal (which is facing an 11.1% unemployment rate and received a 78 billion-euro bailout from the International Monetary Fund and the European Union) and allowing Portuguese take some of the jobs that Brazil can’t fill!

When the devastating earthquake and tsunami hit Japan on March 11, it had a ripple effect on businesses around the world. For example, 60% of all silicon wafers (the building blocks of computer chips) come from Japan. The earthquake shut down two factories or 25% of the supply. Suddenly, many companies depending on the global supply chain were facing parts shortages that led to temporary shutdowns. In the first quarter, South Korea’s Hyundai surpassed Honda in global vehicle sales, as Honda's production was cut by the Japan earthquake.

A global economy means we are losing jobs here in the U.S. mainly to China and India, whose growing economies are creating global companies. This has led various Chinese and Indian companies to open factories all over the world, including in the U.S.. This is illustrated by Chinese appliance maker Haier, whose US operations employ 450 people, not one of whom is Chinese.

These three examples illustrate the new global supply change and our relationship to it. Everything is connected, and the way to succeed in this crazy world is through transparency.

More and more, we are consuming products that may have complex, global supply chains. It is becoming harder to tell where the components of a product come from and where the product is actually made.

We are living in a world where we have access to information at our fingertips, and more and more Awakening Consumers are demanding transparency from the companies and brands they patronize. This new global relationship is shining a harsh spotlight on how their global “sausage” is made, putting some companies in an uncomfortable position.

How companies are reacting to this can lead unintentional consequences. Take the example of two of my favorite brands: Apple (computers) and Patagonia (apparel).

I love Apple, and like many Apple consumers, whether awakening or not, I am passionate about all things Apple. Apple has developed the image of a progressive company with values that can do no wrong. But lately that progressiveness and those values has been tarnished.

First there was the story that some of the minerals that go into our iPads and iPhones come from illegal mines in Congo, and are being used to fund one of the most brutal and barbaric wars in Africa.

When hearing that Apple was using so-called “Conflict Minerals” in their iPads, some consumers started asking questions – some of them directly to Steve Jobs himself. Unfortunately Jobs’s response - sent from his iPhone - was less then forthcoming: “Yes. We require all of our suppliers to certify in writing that they use conflict few materials. But honestly there is no way for them to be sure. Until someone invents a way to chemically trace minerals from the source mine, it’s a very difficult problem” Maybe he was hoping it would go away and consumers would forgive Apple – but the pressure kept mounting and finally Apple announced it was setting a committee to ensure that no conflict minerals were in its products.

While that was happening, we started hearing all about how the iPhone and IPad are made in one of China’s largest and most notorious sweatshops, Foxconn. At Foxconn, conditions for employees are so harsh that the company installed suicide nets around the building (in 2011, 10 employees jumped to their deaths). Apple’s initial response to criticism was an incredible lack of transparency, bordering on arrogance.  A spokesperson for a leading NGO working on worker safety issues said, “Apple is unique among all hi-tech companies, for being the most unresponsive.” (To its credit, Apple has subsequently pressured Foxconn to improve working conditions, and according to Bloomberg BusinessWeek, things have gotten better.)

Conflict minerals and suicide nets. Is this the Apple I know and love – whose values are in line with my own?

Another favorite company of mine is Patagonia. Unlike Apple, Patagonia has embraced transparency as a way of engagement with all its consumers. Patagonia’s global supply chain is also complex and filled with pitfalls. We have all heard horror stories of garment industry sweat shops in developing countries using child labor or female slave labor in appalling conditions.

Patagonia has embraced this head-on by creating the Footprint Chronicles, which is a way that a consumer can analyze more than 150 Patagonia products: Where does the raw material come from? What is its environmental footprint? Where is it manufactured in the world? Who is sewing those buttons, and how are they being treated? How the product is shipped, what is the entire carbon footprint? It is taking a complex issue in their global supply change and, through transparency, educating consumers every step of the way – talking both about the good and the bad. Patagonia believes that transparency in its supply chain appeals to their consumer base. And they are being rewarded by it.

The perception of how both Apple and Patagonia talk about their supply chain could not be seem to more stark. But the reality is much more complex and nuanced, says Dan Veiderman, Executive Director of Verité, a labor-rights non-profit that monitors manufacturing facilities around the world. “Consumers currently have no way to distinguish between two companies like Apple and Patagonia, both of which disclose substantial information, but which do so in a way that makes it very hard to compare,” says Viederman.

We like to say that Awakening Consumers are not perfect, and they do not expect companies to be perfect either, but they expect them to be honest.

Two amazing, progressive companies that have created a special values-driven culture. While Patagonia is evolving with today’s more and more complex world of global engagement, the perception is that Apple seems to have become what it rebelled against in it early days: a big, monolithic, arrogant, multinational that answers to no one.

Apple, welcome to the new reality of global engagement. Patagonia, thank you for showing us how to embrace it.

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