Fairphone’s Supply Chain Revolution: Changing the World, a Handset at a Time

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With a second batch of phones distributed in the European market in April 2014, it is hoped that Fairphone smart phones will prove competitive among with young, socially conscious and social-media savvy buyers.

The really “smart” phone of the future? Fully recyclable, responsibly produced in the People’s Republic of China, and built on blood-free minerals from Congo’s South Kivu province.

Good news: in Amsterdam, apparently, the future has just begun, since a young organization is attempting to change the way we look at our mobiles and−more in general−remind us of the role we play with our daily choices as consumers in defining socio-economic development patterns worldwide.

Fairphone, a social enterprise launched in 2013, employs a truly hands-on approach that utilizes existent market forces and supply chain systems to produce smartphones whose every stage of production is closely monitored to ensure compliance with sustainable practices and fair working conditions.

Globalization has meant faster, cheaper, easier trade across the entire world. But that has not necessarily entailed equal levels of well-being and grassroots development for all parties involved. Supply chains have become complex, hard to monitor, and this has occasionally created fertile ground for murky deals, unlawful exploitation, disregard of basic human rights, and even outright incentive for armed conflict and civil strife (e.g., Democratic Republic of Congo’s conflict minerals, Sierra Leone’s blood diamonds, etc.).

Fairphone’s founders aim to address this wider problem. Mobile phones represent a mere initial focal point in sparking a trade-based, consumer-driven, peaceful “revolution.”

Fairphone wasn’t founded by experts of the electronics industry, but by activists with a broad mission: reminding consumers about the power of their demand to shape any market.

Their roadmap seems reasonably clear: indentifying a common, but at times “socially problematic” manufacturing supply chain; introducing alternative, sustainable practices into all of its stages; setting an example for the industry; and−most of all−providing consumers with a viable alternative that may kindle their conscience.

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Fairphone
Fairphones are fully recyclable and responsibly produced in China using conflict-free minerals sourced from the DRC.

That is, of course, easier said than done. Fairphone has, in fact−purposefully−jumped right into the thick of a series of problems.

Smartphones are popular, sought after items cherished by millions of consumers, but they are also the end product of some of the most intricate, hard-to-map production cycles in modern economy, involving activities ranging from mining to soldering, from software engineering to design, and carried out by different actors in virtually every corner of the globe.

Moreover, Fairphone is not a charity, but a social business: it’s a no-loss entity that must be self-sustaining and self-perpetuating, not depending on philanthropy or donations and operating in the very same market as major, long established corporations. It has therefore had to build a network of relevant partners and suppliers that would not only commit to transparency and sustainability along the whole production cycle, but that could ultimately deliver quality and profitability, too.

Sustainable from Cradle to Grave−and back

The phone’s essential raw materials such as tantalum and tin are sourced from the Democratic Republic of Congo’s (DRC) Katanga and South Kivu provinces through projects such as Solutions for Hope and Conflict-Free Tin Initiative (CFTI), which guarantee that the minerals sourced from their mines do not finance any of the many warlords active in the region.

The whole of eastern DRC, and in particular the provinces of North and South Kivu, represent some of the most conflict-ridden regions in the world. Various rebel groups−offshoots and remnants of the belligerents of the two Congo wars−have been wreaking havoc in the area since the 1990s: Rwandan-backed militias (e.g., RDC, CNDP, M23) and Hutu armed groups (most of which fled Rwanda after the genocide, for fear of Tutsi retaliation, such as FDLR) are hardly contained by the ill-equipped and often corrupt DRC army.

Rebels have managed to finance their prolonged guerrilla warfare by controlling, among others, the export revenues of many local mines, which also happen to employ most of the local population1. The 2010 US Dodd-Frank Act (Sections 1502 and 1504) implemented a de facto ban on the export of minerals from eastern DRC, by mandating strict traceability certifications for minerals sourced in the region by any company listed on the US stock exchange. The new requirements were considered so vexing and unrealistic in such a resource rich, but uniquely chaotic and restive region that big electronic companies simply shifted their sourcing elsewhere, as the risk of being publicly associated, albeit indirectly, with the brutality of rebels’ activities was deemed far too high. This scenario did reduce the militias’ income from minerals, but it also caused a dramatic loss of livelihood for local miners and their families.

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Fairphone ensures their supply chain does not perpetuate conflict by working with mines such as this one in the Katanga region of the DRC, which has ensured that minerals sourced here do not finance warlords.

CFTI was among the very first schemes, in 2012, to bring them back to work. The initiative, in fact, kick-started the export of certifiable conflict-free minerals from selected pits in the region in compliance with the Dodd-Frank requirements, thanks to the participation−i.e., the renewed demand−of established electronics industry giants like Philips, Motorola, HP and, more recently, Apple, as well as emerging actors like Fairphone itself.

The key task of actually manufacturing the “fair” phones was entrusted to A’Hong, a Shenzhen-based subsidiary of the Chinese group Changhong.

The choice may sound like another surprise: China isn’t exactly the first place that pops to mind when thinking of sound labor laws enforcement and corporate social responsibility. Shenzhen itself− among the very first ever Chinese Special Economic Zones (SEZs), located along the coast of “the world’s factory,” Guangdong province, right next to Hong Kong−has long been considered the symbol of outsourced manufacturing, too often in the form of sweatshops. Even the contractors of internationally renowned brands have found it hard to remain immune to occasional criticism: many may remember, for instance, the recent debate on working conditions sparked by the suicide cases among the several-hundred-thousand strong Chinese workforce of Hon Hai / Foxconn, the world’s largest maker of electronic products such as iPad, iPhone, or Xbox.

But that’s another aspect in which Fairphone shows vision−and outright courage. “We purposefully intend to go where the problem is, not run away from it,” Roos Van de Weerd, Public Engagement Officer at Fairphone, said in a personal interview in fall 2013. “What real impact would we make if we decided to artificially create from scratch a ‘niche’ supply chain that remains foreign to the mainstream ones? We want to demonstrate that in DRC, just like in China, it is possible to implement sustainable practices, and that a growing number of relevant actors on the ground are actually willing to [do so].”

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Fairphone
A Fairphone representative meeting with a local business man in Kolwezi, in the Katanga region of the DRC.

For instance, Changhong Electric Co., headquartered in Sichuan, was chosen on the basis of a series of criteria including commitment to fair workers’ conditions, transparency, accountability, use of sustainably sourced materials, as well as the delivery of technologically sound products. TAOS (Training and Auditing Organization Systems) Network, an organization founded in 2006 to promote corporate social responsibility in China, conducts regular assessments at both the level of management and among the workers to verify short-term and long term “social compliance.”

Attention to transparency and accessibility translates also into flexible configuration of the phone’s operating system and user-friendly assembling of spare parts such as batteries, that are meant to be removable and replaceable.

Last but not least, Fairphone has paired up with Closing the Loop Foundation and the Dutch-based Techreturns to maximize the reuse of dismissed phones−in part transferred from high to low income countries−and to ultimately promote safe e-waste recycling in countries such as Ghana, Nigeria, Kenya, and Uganda, once handsets have completely exhausted their full life cycles.

Relevance that Transcends Tech Specs

While the concept of fair trade isn’t a novelty, Fairphone’s model does mark an interesting progress−perhaps a paradigm shift−within the movement, increasingly heading towards composite, even technologically advanced industrial products in addition to traditional agricultural commodities−such as coffee, tea, or cocoa−that have constituted the bulk of fair trade so far.

This is an inevitable sign of changing times: today’s global society encompasses economies whose manufacturing and service sectors have expanded far beyond national borders by creating elaborate supply chain networks−intertwining countries and realities thousands of kilometers apart.

In order to be effective in such a challenging context, fair trade organizations must be able to reflect and follow these new complex patterns by conceiving solutions that are increasingly “multi-dimensional” and by promoting transparent and socially responsible practices at all stages of production−in different countries−at the very same time.

Fairphone does attempt to do so, employing a bold yet pragmatic approach.

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Fairphone
Fairphone has partnered with organizations to maximize the reuse of dismissed phones and promote safe e-waste recycling, through efforts such as this “Urban Mine” event in 2011.

This single, relatively small organization has built a solid network of partnerships without which the mission it initiated could never be attained: even just mapping all actors involved in modern phones’ production cycles can prove to be cumbersome, let alone ensuring their continued “responsible conduct.”

It targets real-world supply chains, and brings the solution to the very locations where problems are more acute.

Moreover, Fairphone uses “natural” market dynamics −namely demand−as a driver for change. It does not intend to aggressively divert or “re-educate” consumers, but rather to merely inform and present them with an alternative.

In late January 2014, the very first batch of 25,000 phones was delivered to European buyers that had, months before, subscribed to the purchase of a piece of technology they had never seen or tested, displaying a remarkable readiness to buy into a sheer idea for the hefty price of 325 EUR. Word-of-mouth seems to have spread quickly, mostly within young, educated, social-media-savvy circles. A new batch of 35,000 phones is in production at the time of writing (April 2014), again exclusively for the European market. If the phone’s performance and functionality prove comparable to its competitors’, future expansion to other markets seems a logical and promising prospect.

In an era driven by the converging forces of liberalism and unavoidable economic interconnectedness, consumer demand−especially in developed countries−is essential to create an actual market for the very traceability, transparency, and responsibility that have a shot at making global trade truly conducive to sustainable, inclusive development.

Endeavors such as Fairphone’s can significantly contribute to a process of “parallel evolution” in this direction, both in terms of trade practices and consumer behavior. Be it the morning coffee, a chocolate treat, or your daily dose of texts, chats, and internet surfing on your (really smart) smartphone, it is now increasingly conceivable for socially and environmentally conscious patrons to make comprehensive, sustainable living choices that, on a daily basis, invest in multiple sectors and make a difference across the world.