Breaking the Chain: The Link Between Subcontracting and How Corporations Evade Human Rights Responsibilities

Aisling Doherty

Many of us have heard the well-known lyrics, ‘Never break the chain’.  For multinational corporations, these lyrics take on a darker truth.  Global supply chains are the backbone of modern business in today’s globalised world.  However, with each link in their supply chains the accountability of corporations is eroded.  Behind the logos that cloak many household brands lie workers bound by a chain that can too often link profit to exploitation. 

Outsourcing is an umbrella term that refers to when a company delegates a non-core business function to an external party.  Subcontracting, a specific form of outsourcing, involves engaging another company to perform certain elements of a larger contract.  Subcontracting attracts many large corporations as a minimal-input, maximal-output operation that creates distance between the company itself and its manufacturing operations.  It also allows them to focus on the research, design and development of new products and services, with the technicalities of manufacturing and assembly being left to the subcontractor.  

Subcontracting is not inherently a problematic system.  In fact, it has the scope to benefit the local economies, as some companies require their contractors to reach a quota of subcontractors hired from the local area, resulting in money being invested back into the local economy.  It can also encourage more hands-on involvement, rather than a single principal company controlling all operations from a distance.  However, many corporations abuse this business strategy, often contracting with third parties in developing countries, where costs are kept low by paying workers below minimum wage and investing very little in improving factory conditions.  

Large multinationals can hide behind their multi-layered supply chains by contracting away liability to their subcontractors, who then face liability for human rights violations, while the principal company continues operating with an untarnished name.  This is evident in the Apple and Foxconn relationship.  Foxconn, Apple’s main subcontractor, employs over 1.3 million people across 30 factories in China alone.  Alongside Apple’s notorious slogan, ‘Designed by Apple in California’, sits another: ‘Assembled in China’ - a simple phrase that encompasses layers upon layers of rights violations in Apple’s global supply chain.  

The world has come to associate the infamous apple silhouette with the company Apple itself.  Yet multitudes of other companies can claim a chunk of this figurative ‘apple’, including over 300 direct suppliers.  Many of these companies also have their own subcontractors and suppliers, which all contribute to the vast ecosystem of Apple’s supply chain.  Unfortunately, much like a literal ecosystem of this scale, it is almost impossible to monitor and enforce human rights obligations at each level. 

Apple commands 41.4% of the global smartphone market.  This results in an imbalance of bargaining power, meaning that Apple has the upper hand to impose unreasonable targets on Foxconn.  This imbalance is worsened by the fact that Apple remains free to seek other subcontractors to carry out its manufacturing operations if Foxconn cannot meet these targets. This threat that would not exist if Apple manufactured these products in-house themselves. 

Foxconn has been the subject of controversy in recent years following reports of twelve attempted or completed suicides in their factory in Shenzhen, within the first five months of 2010 alone.  There have also been allegations of meal times and toilet breaks of the workers being cut or restricted, in order to meet Apple’s production deadlines.  The conditions in which these workers have to endure lengthy shifts are substandard.  They are overexposed to aluminium, which can lead to them developing long-term respiratory conditions. This accumulation of aluminium dust later caused a fatal explosion at Foxconn's Chengdu factory in 2011.

It is these situations that bring the issues specific to subcontracting to the forefront.  On paper, it is Foxconn that is enabling these rights violations, and Apple can escape public controversy.  Following the 2011 explosion, Apple’s spokesperson issued a public statement stating that they were ‘working closely’ with Foxconn to ‘understand’ the cause.  However, the same thing occurred later that year at a Shanghai-based supplier to Apple, which proved how little Apple had done to make amends for the previous disaster.  While these subcontractors are indeed liable, it is Apple’s sales forecasting and resulting regimental deadlines that leads to subcontractors like Foxconn cutting corners in human rights compliance to meet these deadlines.    

Tragedies like Chengdu highlight the lack of human rights due diligence carried out by companies like Apple.  Perhaps if these large multinationals were to conduct proper investigations into the operations of these subcontractors prior to entering into large, lucrative contracts with them, then manufacturing companies like Foxconn would be incentivised to properly safeguard workers’ rights.  In other words, instead of abusing the imbalance of power that exists in these contracts, Apple could utilise it in the interests of human rights.  

There is no denying, however, that corporate social responsibility (CSR) is becoming increasingly prevalent.  More businesses are beginning to focus on their social impact, as reflected in the research by the Wharton ESG initiative, which found that 92% of the surveyed organisations place high priority on CSR.  In addition, the UN Human Rights Council endorsed the Guiding Principles on Business and Human Rights in 2011.  These principles set out guidelines to prevent and remedy human rights violations, with Pillar Two of ‘Respect’ for human rights applying especially to large corporations, such as Apple.  

While both of these developments indicate a positive trend in increasing the accountability of multinational corporations, neither framework is legally binding.  Companies are under no legal obligation to adhere to the Guiding Principles, or to prioritise CSR.   However, the recent implementation of the Corporate Sustainability Due Diligence Directive (CSDDD)by the EU is a significant step forward.  This will require EU and some non-EU companies to implement mandatory environmental and human rights due diligence processes.  However, the effectiveness of this Directive in safeguarding human rights will be largely dependent on thorough enforcement mechanisms that can distinguish genuine due diligence strategies from ‘mere box ticking’.  Even so, many further developments like this will be needed to ensure that companies like Apple can no longer turn a blind eye to the exploitation of workers in their supply chains.