Supply Chain Management
Best Ethical Consumer rating for supply chain management
In May 2015 Ethical Consumer viewed Nike's website, www.nikeinc.com, for the company's supply chain management policy.
Supply chain policy (reasonable)
The Nike Inc Code of Leadership Standards (dated May 2014) set out minimum labour standards for suppliers. It prohibited forced labour, child labour and discrimination. The code permitted freedom of association and stated that the length of the working week must not exceed a maximum of 60 hours per week. However, there was no committment to pay a living wage - only the minimum wage according to local law, which in many garment-producing countries was insuufficient to provide for basic needs such as food, housing and healthcare.
The document did not clearly state that it applied to the entire breadth of the company's supply chain, plus some depth. However, the report did state that its FY20 target was "for all contract factories from which we source to be at the bronze level or above on the SMSI." the SMSI was the company's Sourcing & Manufacturing Sustainability Index and bronze level included the fact that companies had had a successful labour audit.
The company's supply chain policy was rated as reasonable.
Stakeholder engagement (rudimentary)
Nike was an affliate member of the multi-stakeholder intiative the Fair Labor Association. However a search of its latest corporate responsibility report found no evidence that it had third party involvement into the verification of labour standards. The report mentioned that a grievance system was a requirement for all Nike contractors, but it was not described as anonymous and was not independent but rather provided by the contractor.
Nike received a rudimentary rating for its stakeholder engagement.
Auditing and reporting (reasonable)
According to Nike's Corporate Responsibility Report, in FY13, 94% of factories went through a full assessment of labor, health, safety and environmental compliance.
There was some information about how many factories had received what rating, and a breakdown of the noncompliances most commonly found. The results were not broken down to factory level.
The company disclosed a list of all its directly-contracted manufacturers' names and addresses on its website manufacturingmap.nikeinc.com.
The report stated that "We’re spending more time with, and have processes in place to direct more business to high-performing factories (i.e., bronze or better). At the same time, we are requiring lower-performing factories to pay for their own audits and to remediate any issues found."
There was evidence of a staged approach to non-compliances, with a set timeframe for improvement after which a supplier's orders were reduced or even stopped completely.
There was no clear commitment to audit Nike's whole supply chain. However, the company did say that a target for FY2020 was that all suppliers would achieve the Bronze rating in its SMSI, mentioned above, which meant the company had passed a labour audit.
Nike stated that in the next report it will have moved to a different rating system therefore companies which were underperforming would be required to pay for their own third party audits suggesting that it paid for the current audits. Nike stated that it audit factories every 12 to 18 months based on its schedule of audits. That schedule took into account timing considerations, relative risk associated with individual factories and their overall ratings.
Overall Nike received a reasonable rating for auditing and reporting due to the fact it did not have a commitment to audit its whole supply chain.
Difficult issues (reasonable)
The company stated that during FY13 it had "worked with the Fair Labor Association to launch an accredited fire safety train-the-trainer program. The program began with national trainers from Sri Lanka, Bangladesh, Indonesia and India, with a target to cascade globally."
It mentioned another pilot project which looked at valuing workers - investing in their skill building, listening to their ideas on how to improve factory processes, communicating about issues that matter to them, facilitating aspects of their lives that help them show up every day at the factory healthy and on time.
There was no mention of other difficult issues found in supply chain's such as audit fraud and scheduled training for buyers.
Nike was given a reasonable rating for its difficult issues.
Overall Nike received a best Ethical Consumer rating for supply chain management.
Nike Inc Corporate Communications:http://www.nikeresponsibility.com (18 May 2015)