Our next steps with Guohong, the manufacturer of the first Fairphone
In our strategy blog two weeks ago, I wrote that our new approach to phone design and development would trigger some additional changes in our value chain. With that in mind, we would like to share some news about Guohong, our manufacturing and design partner for producing the first edition and second batch Fairphones.
After several weeks of internal discussion followed by talks with Guohong management, worker representatives and consulting with the Made with Care working group who have supported us in setting up the Worker Welfare Fund in the Chongqing factory, Fairphone reached the conclusion that we will not be able to manufacture the next generation phone with Guohong.
We believe that long-term partnerships are crucial to achieving lasting social and environmental impact, so this was not a decision we made lightly, or quickly. I’d like to take a moment to explain the process that led us in this direction, share how we intend to maintain engagement with Guohong in the future and reflect upon a few of our achievements and challenges.
Difficult choices for future production
From the beginning, our relationship with Guohong was built on mutual trust and understanding. When we first selected the factory as our production partner in 2013 (also previously referred to as A’Hong and Changhong), both sides were taking a calculated risk by jumping into this new, unproven Fairphone experiment! From our side, we were making our first smartphone with a small manufacturer who had not produced for a European market before. Further, we were using a licensed design with which we were not certain how much influence at that time we could still have on the supplier selection. And Guohong was brave enough to agree to make a very small batch of devices for a small unknown and unproven company. And one that wanted direct involvement to improve working conditions and worker representation and include certain suppliers as well.
With 60,000 Fairphones produced in Guohong, factory-wide improvements and a newly established Worker Welfare Fund, we are pleased with the results of our partnership over the last year-and-a-half, but there is always more work to do in this area.
As we began making plans for a new Fairphone device, our planning on how we would produce this new model led us to question whether Guohong would also be the right production partner in the future.
For the next chapter of our mission, we decided it was essential to take more control of the design and engineering processes all the way to market. This would give us more influence on the selection of sustainable materials and design elements in the device itself, help increase transparency and support our efforts to improve working conditions beyond first-tier manufacturing facilities.
This new approach has consequences for the kind of design and manufacturing partner we need.
To gain more control and ownership of the full product development process, Fairphone will lead development beginning from the product specifications, to the components and materials selection, all the way to the assembly processes and everything in between.
This will allow Fairphone to own the design and give more visibility into who produces each component, under what conditions and with which minerals. It also means that our design and manufacturing partner will need to be able to deliver specific engineering capabilities and infrastructure, IT systems and technology licenses.
After discussing our new requirements with Guohong management, we came to the mutual conclusion that a partnership for the next generation Fairphone would not be wise. Both companies agreed that the investment needed to work together outweighed the benefits at this stage in our relationship. For Guohong it meant accommodating a different design concept while they are currently focusing on developing and marketing their own brand; for Fairphone it wasn’t possible to internally take on full development of product design and engineering with an ambition to release the next generation in 2015. After carefully exploring a variety of options, Fairphone and Guohong have concluded that for now, our roads will part in terms of product manufacturing.
Continued partnership through the Worker Welfare Fund
Despite the fact that Guohong management knew we would be parting ways, I felt I owed it to everyone we worked with there to have a conversation face-to-face. In September, I traveled to Guohong headquarters in China while production was still ongoing. I was greeted with the usual warm hospitality and was very pleased to be able to discuss the possibilities of moving forward together in person.
It was fairly clear that the opportunities for commercial activities were limited in the short term, and the management understood the reasons behind that decision. But I was also there to speak to the management and worker representatives about our intention to stay engaged with the Worker Welfare Fund. The fund is the best way to maintain involvement with Guohong, where Fairphone holds a board position for at least two years. We are looking into supporting the continuation of the Worker Welfare Fund, for instance with ongoing training of worker representatives to support them as they take on new responsibilities and management to continue making improvements. Currently, we are in the stage of collecting feedback on future needs before we make a final decision on the best kind of support going forward.
Guohong’s management sees the value of the mechanism of the fund and are willing to provide administrative support for future activities – a prerequisite for the continued functioning and development of the Worker Welfare Fund.
Achievements, challenges and lessons for future partnerships
As we finish the last batch of our 60,000 first Fairphones and make decisions regarding new partners, it’s not too early to reflect on our achievements and some challenges over the course of partnership with Guohong.
Running our social assessment program was a collaborative achievement of the manufacturer, Fairphone and our assessment partner TAOS. Rather than taking a policing or compliance approach, we took a participatory approach to addressing the identified issues. The first assessment was done in August 2013 and the last took place before our second production run in April this year. At the time of production, the factory (including the dorms) had completed all outstanding health and safety issues from our assessment program such as improving the lighting in the cafeteria and assembly line as well as addressing issues around emergency exits, chemicals safety and fire safety.
The Worker Welfare Fund is a first step in the direction of addressing issues from a long-term perspective. By setting up this structure, we aimed to increase worker representation and worker management dialogue.
We believe that involving workers in decision-making processes can encourage collective bargaining in the long-term and may contribute to systemic progress in higher wages and a reduction of overtime hours.
As the worker reps received training from the Economic Rights Institute (ERI), we saw them grow in their positions and increase their skills to effectively consult with the workforce and negotiate with management, but on-going support will be beneficial to further strengthen their skills.
There have been lessons learned for Guohong and Fairphone surrounding the production of our phone, as well as on how to improve working conditions. Although we managed to reduce working hours to the Fairphone code of conduct (based on ETI and ILO conventions) for Fairphone production, we acknowledge that we still have a long way to go. Communicating across two different languages and (professional) cultures has also been challenging at times, but with our project manager Mulan’s help, we successfully bridged the gap, building relationships based on trust.
Overall, we’re proud of what we have achieved with Guohong and would like to thank them for playing a crucial role during this essential phase of our journey. Our accomplishments, as well as the challenges we faced, will serve as valuable lessons as we transition to a new production partner. In the meantime, our relationship with Guohong will move forward through our shared efforts in the Worker Welfare Fund.