Dive Brief:
- Activist investment platform Tulipshare rebuked Nike in an open letter this week for “willingly ignoring” shareholders’ concerns over potential abuses in the retailer’s supply chain, including forced labor.
- “[W]e are concerned by the lack of transparency relating to Nike’s disclosures on whether the Company is on track to meet certain targets,” Tulipshare said in the letter. “We are also gravely concerned that Nike lacks an adequate remediation process for aggrieved supply chain workers, which could lead to human rights violations, such as wage theft.”
- The letter also pointed to “legal, financial, and reputational risk” to Nike of not doing more to root out abuses in its supply chain. Nike did not respond to Supply Chain Dive’s request for comment.
Dive Insight:
Nike is one of the largest apparel sellers in the world. The company made $46.7 billion in revenue in fiscal 2022, and has one of the most valuable brands and companies in the fashion industry.
As such, it commands sizable leverage in production markets and has a vast supply chain that includes well over 1 million workers.
Last year, the company reported 120 footwear suppliers making finished goods for Nike across 11 countries, with most of that production in Vietnam (44%), Indonesia (30%) and China (20%).
Another 279 factories, in 33 counties, made finished apparel for Nike, with most of those facilities in Vietnam (26%), China (20%) and Cambodia (16%). The company has another 139 “strategic” Tier 2 suppliers, and does not currently make disclosures around its third tier and beyond.
The Tulipshare letter highlighted Nike’s score on KnowTheChain, which provides company benchmarks around forced labor. Nike most recently scored 62 out of 100 possible points, making it the sixth highest-ranked apparel and footwear business among 37 peer companies. The brand drew its lowest scores for purchasing practices (48 out of 100), worker voice (38) and remediation (58).
“Nike takes seriously and fully supports national and international efforts to end forced labor, human trafficking and modern slavery,” the retailer previously said in a statement condemning the human rights violations.
Meanwhile, a group of 20 unions along with labor organizations filed a complaint against Nike last month with the Organisation for Economic Co-operation and Development over treatment of workers in the brand’s supply chain.
The group said in a fact sheet that workers in Nike’s supply chain “experienced layoffs and terminations, arbitrary pay cuts, unpaid wages for hours worked, and gender discrimination at an unprecedented scale” and alleged that the company contributed to negative conditions for garment workers without remedying them.
Multiple labor groups tied to the OECD complaint found that garment workers were still owed millions of dollars in wage claims going back to the early pandemic period in 2020, when brands, including Nike, canceled orders with suppliers en masse.
Claims for unpaid wages by workers in Nike’s supply chain in just the small sample of factories surveyed amounted to $9.3 million, according to the report from Asia Floor Wage Alliance and Global Labor Justice-International Labor Rights Forum.
The groups said in the report that “the unresolved claims show that the scope of wage losses can only be addressed by the fashion companies at the top of these supply chains.”
Tulipshare recommended that Nike include the American Bar Association’s Model Contract Clauses into its supplier contracts, which aims to create shared responsibility between buyers and suppliers for workers’ human rights. Tulipshare also recommended Nike work with unions and other organizations to improve freedom of association in its supply chains.
Forced labor in supply chains has come under increasing scrutiny. In the White House’s recently released trade agenda for 2023, the Biden administration called forced labor out as one of its main points of focus, along with securing other rights for domestic and international laborers.
FAQs
“We are also gravely concerned that Nike lacks an adequate remediation process for aggrieved supply chain workers, which could lead to human rights violations, such as wage theft.” – The letter also pointed to “legal, financial, and reputational risk” to Nike of not doing more to root out abuses in its supply chain.
What are the ethical issues with Nike supply chain? ›
Questions regarding supply chain ethics have plagued Nike since the early '90s. Concerning Nike's connection to forced labor, child labor, and sweatshops, problems arose when the company advised contractors to move to Indonesia, China, and Vietnam after a price jump in Korea and Taiwan, per a 2013 Insider piece.
What human rights issues and abuses are included in the production of Nike? ›
Nike has been criticized for using sweatshops in Asia as a source of labor. The company was accused of abusing its employees. In addition, some of the factories reportedly imposed conditions that severely affected their workers' restroom and water usage.
What supply chain strategy does Nike use? ›
What is it that makes Nike's supply chain so unique and so effective? The key principles behind Nike's supply chain are outsourcing and diversification. Nike contracts 100% of its manufacturing for footwear and apparel out to independent suppliers. It was one of the earliest multinationals to adopt this approach.
What is the Nike supplier controversy? ›
Nike, Inc. has been accused of using sweatshops and worker abuse to produce footwear and apparel in East Asia. After rising prices and the increasing cost of labor in Korean and Taiwanese factories, Nike began contracting in countries elsewhere in Asia, which includes parts of India, Pakistan, and Indonesia.
What are three major ethical issues Nike faced as a company? ›
Our research highlights allegations of forced labour in the Nike supply chain, gender discrimination towards female athletes and parents, and failure to ensure all employees receive a living wage.
Does Nike have an ethical supply chain? ›
These incidents reveal that there are still flaws in Nike's supply chain, both in contract negotiation and supplier oversight. Although some experts herald Nike as a leader in CSR, its use of hundreds of international contractors makes detection and enforcement of abuses incredibly difficult.
What was the biggest issue with Nike? ›
Nike sweatshops and its brand image
Nike had been accused of using sweatshops to produce its sneakers and activewear since the 1970s, but the issues really came into the spotlight in 1991 when activist Jeff Ballinger published a report detailing the low wages and poor working conditions in Nike's Indonesian factories.
Who are the activists against Nike? ›
Origins of Anti-Nike Activism
Their membership included the Huron Valley Green Party, the Coalition of Asian Social Work Students, the East Timor Action Coalition, the College Democrats, the Women's International League for Peace and Freedom, and the Vietnamese Student Association, along with others.
What is the Nike shareholder proposal? ›
The proposal said that 30% of Nike's leadership is comprised of minorities although minorities represent 60% of the workforce overall. Nike doesn't report unadjusted pay gaps, which the shareholders said would reveal the structural bias women and minorities face.
Nike: Nike is another company that uses a pull strategy.
How does Nike utilize members of the supply chain such as producers? ›
Some ways in which the company handles its supply chain: Supplier selection: Nike works with suppliers from around the world to source raw materials and produce its products. The company carefully selects its suppliers based on factors such as quality, reliability, cost, and sustainability.
How Nike is transforming supply chain? ›
Accelerating automation
Nike has introduced new AI and machine learning technologies to predict and order the products that will be popular among consumers and to deliver products faster and more accurately. The company also incorporated over 1,000 "cobots" – collaborative robots – within distribution centres.
Does Nike have any supply or demand issues? ›
Nike, along with many of its peers in apparel, spent much of the past year and a half whittling down its inventory to navigate a world of lower demand. Inventories in the period ending Nov. 30 fell 14% year over year to $8 billion, reflecting a decrease in units, the company said in a press release.
What did Nike get in trouble for? ›
Unprecedented concerns are mounting from Nike investors, human rights groups, unions, and consumers that Nike has become a corporate outlier on human rights issues, once again achieving notoriety for failing to ensure that women workers in their supply chain are given their basic rights, despite the company's own ...
How does Nike approach and manage ethical issues? ›
At NIKE we encourage employees to do the right thing. This includes reporting all violations of law or company policies, including incidents of harassment or discrimination. NIKE will take appropriate steps to investigate all such reports and will take appropriate action.
What are the ethical issues in supply chain? ›
Key Ethical Issues
Labor Rights: The treatment of workers across the supply chain is a major ethical concern. This includes issues such as fair wages, working conditions, and forced labor. Organisations must ensure that their operations, as well as those of their suppliers, uphold labor rights.
What is the ethical controversy with Nike? ›
Nike under fire over the sportswear giant's three-year refusal to pay its garment workers. Nike is facing growing pressure in anticipation of its online AGM on 12 September over its steadfast refusal to pay more than 4000 garment workers $2.2 million in unpaid wages and benefits since 2020.
What are the unethical situations with Nike? ›
What is the main reason Nike is considered unethical? Nike has been criticized for using sweatshops in Asia as a source of labor. The company was accused of abusing its employees. In addition, some of the factories reportedly imposed conditions that severely affected their workers' restroom and water usage.
What is the main problem facing Nike? ›
The company also faced a few challenges over the years. And here are a few of them: Nike has been accused of child labor, forced labor, low wages, and terrible working conditions. The brand's debt accumulation is estimated at $9.4 billion in November 2021, which is a 0.07 percent increase year on year.
