Large corporations are feeling the pressure to develop sustainable strategies. Chief Strategy Officer, Jay Wagamon shares his thoughts on Apple’s Sustainability Time Machine.
Environmental Corporate Responsibility
If Apple could go back 10 years, now knowing the popularity and revenue source of their new phone design, they would source materials and manufacture their main products in the US. That is, if they are truly committed to their goal “to leave the planet better than we found it” (Apple Inc. 2018). This would mean less dependence on suppliers and manufacturers abroad and closer proximity to areas of consumption. But are companies and consumer truly committed to being environmentally focused, or does cost truly outweigh any other concerns? As a Strategic planner and price-to-win leader, I am often confronted with whether my customer is more concerned with price or sustainability.
The Supply Chain Environmental Impact
The effects on the environment from a global supply chain are far reaching, and in many cases damaging. An increasingly globalized world has shifted and centralized both commodity and manufacturing centers in remote locations. This has led, in many cases, to farther distances required to move from finished to unfinished goods, thus forcing increased transportation requirements. In addition, many areas that extract commodities have relaxed environmental practices in order to be financially competitive, and manufacturing centers face additional cost pressures that result in labor issues.
This environmental issue is being driven by developed world consumers, where the finished goods typically are purchased. This demand pressure means that design typically occurs in developed nations, while commodities and manufacturing occur in developing world hubs. Therefore, if you consider the location of consumption or purchase, the largest polluters are typically citizens of Western Europe and the United States; with China on the rise.
The impact from these shifts, which have been taking place since the beginning of the industrialized era, have resulted in concentrated areas of heavy ambient air pollution (WHO 2018).
Figure 1 Global Ambient Air Pollution
The issue is further compounded because these manufacturing and commodity hubs also have very weak national emission requirements for power production. Some still depend on biomass for electricity, which compounds air quality issues. These issues are further compounded by the need to move the goods via plane or ship, both of which carry significant environmental impacts.
The United Nations Global Compact has stepped in to try define a value systems for corporate sustainability. If executed upon, ethical manufacturing and material extraction can continue in emerging nations that depend on the developed world consumers, all while reducing the environmental footprint. The ten principles are (UN Global Compact 2017):
- Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
- Principle 2: make sure that they are not complicit in human rights abuses.
- Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
- Principle 4: the elimination of all forms of forced and compulsory labour;
- Principle 5: the effective abolition of child labour; and
- Principle 6: the elimination of discrimination in respect of employment and occupation.
- Principle 7: Businesses should support a precautionary approach to environmental challenges;
- Principle 8: undertake initiatives to promote greater environmental responsibility; and
- Principle 9: encourage the development and diffusion of environmentally friendly technologies.
- Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
Developed World Impact
Unfortunately, there is not a governing body with teeth to ensure that corporate interests do not supersede the UN goals. It is dependent on first world consumers to hold companies accountable from a sustainability perspective. While developing nations may be a source of environmental and human exploitation, it is done to serve the needs of the consumers. It is important to look at the impact from consumption because “carbon output of countries such as China are generated as a result of producing goods that are ultimately consumed in richer nations” (Clark 2011). Essentially, the developed world enables poor practices in emerging nation manufacturing hubs; Belgium being the top offender. The following charts looks the carbon footprint of large nations based upon their total carbon footprint including consumption (Clark 2011):
- Belgium 29
- United States of America 20.2
- Ireland 16.2
- Finland 15.1
- Australia 13.8
- United Kingdom 11.5
- China 4.3
- Brazil 2.1
- India 1.3
- Nigeria 0.5
- Malawi 0.2
Many large companies have acknowledged the environmental impact of their supply chains and have begun taking steps toward sustainability. Apple and Ikea both praise themselves for stores and factories that are solar powered while continuing to maintain manufacturing locations in high pollution areas, with lax environmental laws, often thousands of miles from their primary consumer. They use their small steps toward 100% sustainability as a marketing theme to appease the consumers that happily pay less for products.
So is Apple, a company with ~$250B in cash on hand according to 2018 3rdquarter earnings reports, doing enough to create a sustainable supply chain? In Apple’s case they now “power 100 percent of [their] operations around the world with 100 percent renewable energy” (Apple 2018) The key term here is operations, which means stores and offices, not manufacturing. However, according to their reporting, they are investing in new renewable manufacturing centers (Apple 2018).
Figure 2 Apple New Construction
We often say optics are everything in business. Apple is trying to evolve into a more sustainable supply chain model and putting out reports on their progress. That being said, I believe that if they could go back 10 years, their supply chain would be completely redesigned with manufacturing occurring in primary countries of consumption. This would flip the above map, putting the US as the primary manufacturer and Europe and China as emerging sustainable manufacturing areas. The net result is manufacturing occurring closer to the point of consumption, which would have a more positive environmental result.
Apple Inc., (2018) Environmental Responsibility Report.[online] Available at: https://www.apple.com/environment/pdf/Apple_Environmental_Responsibility_Report_2018.pdf (Accessed November 4, 2018)
Clark, D., (2011) Which nations are most responsible for climate change? [online] Available at: https://www.theguardian.com/environment/2011/apr/21/countries-responsible-climate-change (Accessed November 10, 2018)
World Health Organization (2018) WHO Global Ambient Air Databasehttp://www.who.int/airpollution/data/cities/en/ [online] Available at: http://www.who.int/airpollution/data/cities/en/ (Accessed November 15, 2018)