Nike Inc - Supply Chain Management

Nike Inc  >  Supply Chain Management

Middle Ethical Consumer rating for supply chain management

In June 2016 Ethical Consumer viewed Nike Inc's website for the company's supply chain management policy. Its Sustainable Business Report 2014/2015 was downloaded. The company also responded to Ethical Consumer's request for information, but only provided a link to its Sustainable Business Report 2014/2015. Supply chain policy (reasonable) Nike's Code of Conduct was viewed which stated: "Our Code of Conduct binds our contract factories to the following specific minimum standards that we believe are essential to meeting these goals." The clauses on child labour, freedom of association, forced labour and discrimination were considered to be adequate. There was a clause on working hours which stated "employees do not work in excess of 60 hours per week, or the regular and overtime hours allowed by the laws of the manufacturing country, whichever is less." This was also considered adequate. There was no provision for a living wage. Overall Nike was considered to have a reasonable supply chain policy. Stakeholder engagement (rudimentary) Nike's Sustainable Business Report was viewed which stated that it would continue to be part of the Sustainable Apparel Coalition (SAC) in order to "simplify and consolidate the way baselines are applied and data is collected." It said it had also partnered with Better Work, a joint project of the International Labour Organization (ILO) and the International Finance Corporation (IFC) (part of the World Bank Group), to improve labor standards and competitiveness in global supply chains. It said that its partnership with Better Work aimed to improve "worker management co-operation, working conditions and social dialog, helping workers understand their rights and gain the skills needed to realise them." However this was not considered to be systematic input from NGOs into the verification of labour standards within its supply chain. Its report stated that the Fair Labor Association and Better Work had audited some of its suppliers however this only appeared to cover a select few rather than a majority. Nike was a member of the multi-stakeholder initiative Fair Labor Association. Overall Nike received a rudimentary rating for its stakeholder engagement. Auditing and reporting (rudimentary) Nike stated that every factory in its supply chain was subject to a “rigorous set of compliance requirements.” It said: “This starts with risk analysis of the host country and our Code of Conduct, supported by our internal team of over 150 trained experts who monitor, remediate and provide improvement tools to the factories. We regularly audit contract factories, which are monitored on a schedule based on their performance. These assessments take the form of audit visits, both announced and unannounced.” No further details were given regarding its remediation process. It was assumed to include a staged process. With regards to the schedule of audits it stated that “Factories that exhibit consistently successful ratings will be able to have less frequent audits. We will also consult with factories rated bronze or better on a range of topics to help them continue to implement lean processes and develop their capabilities in health, safety and environment and human resource management. Factories rated red or yellow will be reviewed at quarterly meetings through elevated NIKE leadership reviews.” No further information was provided on how often factories rated red or yellow would be re-audited. With regards to disclosure of audit results Nike only reported on the general violations of its Code of Conduct. It said “the issues that audits find continue to show familiar patterns, with wages and hours the most frequent causes of non-compliance.” The company disclosed a list of all its directly-contracted manufacturers' names and addresses on its website However this did not include audit results per factory. Nike's Sustainable Business Report stated that beginning in FY16, all factories will pay for their third-party audits and provide results to NIKE. Nike was considered to have a rudimentary approach to auditing and reporting as it was only considered to have shown that its policy was to audit its whole supply chain and there was some remediation strategy. Difficult issues (rudimentary) Nike's report listed several pilot projects that it had been running since 2012. It said "we have run a number of pilot research programs in four countries dedicated to, among other topics, testing leadership mindset and worker engagement, creating new compensation and benefit models for workers, and delivering smartphone services to support and meet the needs of workers...At one apparel factory in Thailand we are testing different compensation models, enabling factory management to value their workers, increase wages and improve factory performance, and also to retain their talent, to attract the right skills and to develop their workforce. This work was started in 2014 and is ongoing." While the company was looking at compensation issues within its supply chain it did not explicitly mention that it was working towards paying at least a living wage. The company stated that it was conducting unannounced audits visits. It also stated "We’ve reduced our supply chain from 785 factories in FY13 to 692 at the end of FY15, while still growing the volume of products we make by 11%. We are focusing on quality, long-term partnerships with fewer factories." Nike was considered to have a rudimentary approach to difficult issues. Overall the company received Ethical Consumer's middle rating for supply chain management.

Nike Inc Corporate Communications:Email response Laura Herbert (9 June 2016)