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July 12, 2016

Fairphone Offers a Model of Ethical Transparency in Business

By Lewis Golove

How are our smartphones made?

Underneath the sleek design are dozens of minerals processed in hundreds of factories by thousands of workers. From minerals sourced from militia-owned mines in the Democratic Republic of the Congo to the widespread use of slave labor in Malaysia’s electronics industry, smartphones’ supply chains are riddled with human rights abuses, and consumers have begun to worry about the ethics of their beloved gadgets.

Because of pervasive trade secrets and the complexity of these supply chains, it’s sometimes hard to know who is responsible for abuses. Many of the larger phone companies, including Apple and Samsung, have taken important steps towards tracing and avoiding human rights abuses. But one small company stands out as a model. In 2010, the Dutch company Fairphone grew out of an awareness campaign over conflict minerals. Dedicated to producing an ethical product, it has sold 100,000 phones in Europe and hopes to expand its market to the United States next year.

Is it possible for phone-makers to be aware of what goes on in their supply chains? Can they make a smartphone that’s both reasonably priced and untainted by slavery and other human rights abuses? Fairphone openly acknowledges how challenging its task is. Execs go out of their way to avoid criticizing larger phone companies, recognizing that they face a myriad of additional challenges. Fairphone’s goal is not to snipe from the sidelines, but rather to dive into the muck and see what can be done.

Fairphone has taken care to avoid the kinds of abuses rampant in the industry. It sources minerals from mines in the DRC and Rwanda known to have better business practices, so that it supports local economies, not violent militias. It’s the first electronics company to use fair-trade gold (from a mine in Peru). And while it is still too small to have its own factory, it has stationed a representative at its factory site in China to supervise work conditions.

Fairphone doesn’t have a perfect ethical record. For instance, it has not always met its own goals for work conditions. Unanticipated spikes in demand have led to the hiring of temporary workers and 60-hour plus work weeks—both known to increase risk for labor abuses and trafficking.

But what sets Fairphone apart is its openness and transparency. Where other companies may remain ignorant of the practices within their own supply chains, Fairphone demands to know more and shares that information with its consumers. Whether or not Fairphone will be able to scale up and compete with the giants, it’s already a model for ethical and transparent business.