For the phone issue, a company (somewhere in Northern Europe if I remember right) built an android phone using materials entirely from non-conflict areas etc. Not a sweatshop issue, but I would bet a company that is trying to take on that element of the manufacturing process would not opt for a bottom of the line sweatshop.

On another note, many of the issues I have faced while working on my JD have involved looking at supply chains while tackling issues like climate change & corporate social responsibility. There's a lot of research being put into things to track where products are coming from & new standards in things like requests for proposals requiring suppliers to be socially & environmentally responsible. Still, not every business participates in this practice. Partially because of the cost & also because it's hard to demonstrate this type of responsiblity to the consumer. Oddly, there's other companies like Red Lobster which buys 100% of its seafood from sustainable fisheries, but you'll never see a single hint of this in their stores & advertising.

Relating to the concept above, I am working on an idea for a virtual complementary currency that is used to both finance socially responsible companies & steer money through supply chains etc. to other responsible companies. That was a long winded explanation, but just think "Bitcoin meets responsible investing." Another way to imagine it would be to think about trading Certificates of Deposit when buying / selling goods instead of trading cash. The receiver gets something of value, but the fact that it's in a CD means that they cannot break the investment you created without incurring a penalty.

The part that relates to supply chains / sweat shops is that to exchange the currency for its cash value there is a hefty exit fee. This prevents companies you do business with from immediately liquidating the currency and ending the socially responsible investments you committed the currency to. It also opens the opportunity to vary the exit fee depending on how responsible a company is. Thus, you could leave something like an 8% exit fee (like an exit load on a mutual fund) on all businesses, including sweatshops in other countries. But if you find a sweatshop that is treating employees better etc. you could reduce or eliminate the exit fee. Doing this would cause the responsible sweatshops to value the currency more & make it more likely that businesses who accept the currency will seek out these suppliers in their supply chains. So I could go on, but basically the idea is to create entitlements (in the legal sense) through private contracts that cause the currency you spend to flow to more ethical businesses.

I've slowly started exposing my idea to friends to get more input and hoping to turn it into a company. Most of my discussions have been on the investment side of the currency & not the Coasean approach to ethical supply chains. Im also looking to do possibly do an independent study during my final semester of law school this fall that would look into all the legal aspects of securities/banking/financial regulation involving an alternate currency where the deposits finance socially responsible / clean energy companies. There's a ton of ways to do it, but each comes with a different set of legal burdens.

I'm also slowly starting to network through friends to find a possible co-founder for a company based on this idea with the hope of applying to Y-combinator this winter. (I have dabbled w/ programming for fun, but haven't built anything too complex. I also realized that I mostly just liked learning the syntax & solving puzzles so my latest efforts have just been solving Project Euler stuff w/ Haskell for fun but with no intention of using the language in the real world).

For anyone wondering where the companies' profit would come from, it would come from exchanges on the system. Unlike bitcoin's P2P system, this would be a centrally managed currency. This means that the payment systems would also be managed by the company. They would take a small fee for each payment made with the currency system. However, since all payments would have to happen through the company's system, the company could charge a lower rate than square & other competitors (because the company gets to take a fee off of all future transactions instead of just the individual transaction & then passing the cash off to a private individual who is free to use whatever payment/banking system they want.)

Sorry if this was a a bit rambling / not too clear. Didn't want to spend too much time writing this before work.