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Smartphone with a heart

A Dutch company trying to manufacture and market a fair trade mobile faces hard-to-solve sourcing and human rights problems.

Smartphones are the flagship of the global economy — the slogan on the back of every iPhone is “Designed by Apple in California. Assembled in China” — and 1.4bn were made in 2015 (1). The two biggest brands, Apple (231m phones sold in 2015) and its South Korean rival Samsung (324m) (2), compete ruthlessly, which has led to terrible working conditions in their Asian assembly plants, under the spotlight after a spate of suicides at Foxconn, one of the biggest subcontractors in China. In 2015 Samsung was forced to create an $85m fund to compensate workers in its factories, where more than 200 have developed leukaemia. The world’s third-largest maker, Chinese multinational Huawei, had to close a factory in 2014 after accusations of using child labour (3).

Making smartphones also involves more than 30 different minerals, many sourced from places where there is little regard for the social and environmental impact of mining, which may fund armed conflicts, as in the Democratic Republic of the Congo (DRC).

Manufacturing a smartphone while respecting human rights and the environment may seem a utopian goal, even a mission impossible; but the Dutch social enterprise Fairphone has set out to do just that, and since 2013 has sold 60,000 Fairphone 1 “ethical smartphones”. In 2015 it launched the Fairphone 2, of which it hopes to sell 100,000 a year. Selling points are that Fairphone products do not fund militias in the DRC, and are assembled in Chinese factories with decent working conditions and a workers’ welfare fund. The Fairphone 2’s design helps to extend its lifespan and reduce its environmental impact, by making it easy for the user to remove and replace components, and by incorporating as much recycled plastic and copper as possible. Fairphone has set up a recycling programme in Europe and an e-waste collection programme in Ghana.

Fairphone doesn’t rely on investors but on users, recruited through an Internet crowdfunding campaign that raised nearly €7m in a few weeks in 2013. The Fairphone 2 was funded through pre-orders: buyers paid €525 for phones that would be delivered months later.

‘Still far from fair’

The media greeted the launch of these phones enthusiastically, despite the many limitations of this new mode of production. Fairphone admits the phones are still far from fair: its modest ambition is to build a movement for fairer electronics though it knows the path will be steep. I met the founder and CEO, Bas van Abel, at headquarters, in a former industrial warehouse in the port of Amsterdam. He said that one of Fairphone’s first business expenses in the DRC was a bribe to a local official in charge of mines, for permission to film. Fairphone next had to come to terms with another unpalatable reality: a video made in 2011 in the province of Katanga shows how mining operations in the DRC are mainly small-scale or even family-run, with young children working beside their parents. To obtain certified conflict-free tin, Fairphone joined a consortium of industry, local and international stakeholders and NGOs, which established a system of certification with specific packaging and labelling (4). This programme, launched on the recommendation of a UN expert group, became indispensable after the US Congress passed the Dodd-Frank Act in 2010; section 1502 requires companies quoted on US stock exchanges to check whether they are using minerals that fund armed groups in the DRC or adjoining countries. But the mine certification process was new, and five years later only a few dozen extraction sites are legally permitted to sell tin. Many electronics giants have stopped purchasing tin in these countries, creating a de facto embargo on the three Ts — tin, tantalum and tungsten — and causing chaos in the mining sector, on which 8-10 million people depend for a living.

Doctoral students Christoph Vogel of the University of Zurich and Ben Radley of the International Institute of Social Studies in The Hague visited four “clean” areas in 2013 and 2014, but found the economic situation dire (5): the system has created new costs for miners, prices have stagnated and the black market has strengthened. The size of the territory to be regulated and the mobility of armed groups mean that a certified mine can fall under their control or that of their civilian accomplices. Many miners have returned to farming, which brings in only a sixth of the profit. Others have joined militias.

In 2014 a group of 70 academics (including Vogel and Radley), NGO representatives and other Congolese and international experts criticised the situation and called for greater attention to local stakeholders: “While the minerals help perpetuate the conflict, they are not its cause. National and regional political struggles over power and influence as well as issues such as access to land and questions of citizenship and identity are just some of the more structural drivers of conflict. […] progress has been made in producing more ethical products for consumers, but stakeholders have not yet proceeded to improve the lives of Congolese people.” They are concerned that fair trade will be used as a screen for economic neocolonialism in eastern DRC. Van Abel said: “There is some truth in that. Certification initiatives have not contributed to the development of local communities as we had hoped. But they have made it possible to restart trade and are essential to restore customers’ trust in the DRC. The next issue we must tackle is child labour. Our ambition is always to do better.” Fairphone describes the problems on its website, asking critics to be patient.

The problem of overtime

Fairphone has identified responsible tungsten mines in Rwanda and aims to use fair trade gold from Peru and Colombia. Van Abel said its greatest difficulty is penetrating the Chinese gold market. He had just come back from visiting Fairphone’s new assembly subcontractor in China, Hi-P International. Fairphone regularly sends employees to check that its phones are manufactured under satisfactory conditions, and commissioned Chinese auditing firm TAOS to conduct a social assessment of Hi-P. At Hi-P’s Suzhou factory, TAOS reported problems with safety, extensive use of temporary labour (61% of the workforce) and working hours, noting that “working hours exceeded 60 hours per week when production schedules were tight and […] some workers worked 28 days without a day off in July 2014” (6). Fairphone says Hi-P has undertaken to restrict its use of temps and limit working hours to 60 a week. But, said Van Abel, “if we reduce hours too far, the workers will earn less and may leave. Overtime is an important part of their wages, so we need to find some kind of monetary compensation.”

Fairphone took advice from the German trade union IG Metall and research organisation SOMO (7), and came up with a welfare fund to improve workers’ lives and give them a new voice within the company. Fairphone and its assembly subcontractor at the time, Guohong, invested $5 for each phone sold, and the fund accumulated $300,000 on the Fairphone 1. Some of this was used to provide fresh fruit in the canteen and organise evenings and days out, but most was paid out in bonuses to Guohong’s workers (between 500 and 900, depending on the volume of orders), who received an average of about $100 a month extra. But as Fairphone has chosen a new subcontractor for the Fairphone 2, the fund will in future serve only as a communication channel between Guohong’s workforce and management. Fairphone is setting up a similar fund for the 3,000-strong workforce at Hi-P’s assembly plant in Shenzhou (Hebei province).

I asked why the company calls its phones “Fairphone” if they don’t meet the criteria for fair trade. Van Abelsaid: “The name doesn’t describe what we are, but what we are aiming to be.” The project began as an awareness campaign on conflict minerals, which Van Abel launched in 2010, while he was creative director at the Waag Society, a Dutch foundation that fosters experimentation in art, science and technology, with the help of the NGO Action Aid. “We didn’t want NGOs to be involved on a regular basis. Since I’m a designer, I thought creating a phone would be a good way to shed light on the hidden issues in the supply chain.”

After two years searching for a conflict-free tin mine in the DRC, and a Chinese factory prepared to raise its social norms (slightly), Fairphone was officially established as a social enterprise in 2013. There was an in-house debate about the name: “We wanted to use the word ‘fair’ so that people would ask themselves what that really means. It could also make those who have an iPhone or a Samsung consider whether they are being socially and environmentally responsible.” Hence Fairphone’s transparency: on its website, it publishes a list of suppliers, a breakdown of manufacturing costs, and social assessments of its business partners, without trying to hide negative aspects.

When Fairphone launched its crowdfunding campaign, the PR strategy was designed to put it in a position of vulnerability. Van Abel said: “Every time someone criticised us — and they did — we were grateful for that criticism.”He went as far as to tell German and Dutch newspapersabout the bribes Fairphone had had to pay to officials for permission to film. Seen as “a narrative process that serves as an effective metaphor for the complexity of a supply chain”, the Fairphone leads consumers to question practices throughout the supply chain. In comparative tests it easily outperformed Samsung’s Galaxy S4 — the first phone certified as ecologically and socially responsible by the Swedish organisation TCO Development — which did little better than a non-certified phone.

Emilie Durochat, coordinator of the French Fair Trade Platform (Plateforme pour le Commerce Equitable), salutes the Fairphone as “a tool for the denunciation of poor working conditions”. Dominique Royat, director of the fair trade foundation Max Havelaar France, sees Fairphone’s approach as “striving for continuous improvement. In this sense, it has the same approach as the fair trade movement, which was created with the aim of changing the rules of global trade.”

Last year, with a turnover that had gone from zero to €16m in 18 months — all reinvested — Fairphone was crowned Europe’s fastest-growing technological startup by the specialist online publication, The Next Web (8). This sends a message that consumers want more ethical products.

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