Nike ranks among the top athletic footwear and apparel companies globally, though its labor practices have not always upheld ethical standards. During the late 1990s and early 2000s, the company faced allegations of utilizing sweatshops in the production of activewear and footwear.
Following a delayed response initially, Nike implemented measures to enhance the working conditions for its factory workers. Consequently, the company managed to rebuild public confidence and establish itself as a prominent brand within the sports apparel industry. Let's delve into Nike's handling of the Sweatshop Scandal and its resolution.
Nike and Sweatshop Labour
Nike, similar to numerous other multinational corporations, delegates the manufacturing of athletic apparel and sneakers to developing economies to cut costs through utilizing an inexpensive labor force. Consequently, this strategy has resulted in the establishment of sweatshops - facilities where laborers are compelled to toil extended hours for meager pay amidst deplorable working conditions.
Nike initially established sweatshops in Japan, later relocating to countries with more affordable labor like South Korea, China, and Taiwan. As these nations' economies progressed, Nike transitioned to cheaper suppliers in China, Indonesia, and Vietnam.
While Nike has been utilizing sweatshops since the 1970s, public awareness heightened in 1991 after Jeff Ballinger revealed the harsh working conditions of Nike factory workers in Indonesia.
The report highlighted the meager wages of only 14 cents per hour, which were barely enough to cover basic living costs. This disclosure sparked public outrage, leading to mass protests at the Barcelona Olympics in 1992. Despite the backlash, Nike continued with its plans to expand Niketowns - facilities that showcase a wide range of Nike-based services and experiences - further fueling resentment among consumers.
Nike Child Labour
Nike not only faced the sweatshop issue but also became entangled in the child labor controversy. Life Magazine disclosed in 1996 a story showcasing an image of a young boy named Tariq from Pakistan, who was said to be stitching Nike footballs for a daily wage of 60 cents.
From 2001 on, Nike started to audit its factories and prepared a report in which it concluded that it could not guarantee that its products would not be produced by children.
Nike's Initial Response
Nike initially disclaimed any connection to the practices, asserting it had limited control over the contracted factories and their hiring decisions.
Following the demonstrations in 1992, the establishment of a department aimed at enhancing factory conditions was the company's more tangible response. Nevertheless, this proved insufficient in addressing the issue as disputes persisted, with numerous Nike sweatshops remaining in operation.
Nike laid off many workers due to increased public backlash in 1997-1998.
How Did Nike Recover?
CEO Phil Knight acknowledged the presence of unjust labor practices in Nike's production sites during his speech in May 1998. He pledged to enhance the circumstances by increasing the minimum wage and guaranteeing clean air in all factories.
In 1999, Nike's Fair Labor Association was established to protect workers' rights and monitor the Code of Conduct in Nike factories. From 2002 to 2004, over 600 factories underwent audits regarding occupational health and safety. In 2005, a comprehensive list of its factories was released by the company, accompanied by a report outlining the working conditions and wages of employees at Nike's facilities.
Since then, Nike has released yearly reports on labor practices, demonstrating transparency and genuine efforts to rectify previous errors.
Nike has been lauded by critics and activists for not ignoring the ongoing sweatshop issue. Its persistent efforts have led to the gradual regain of public trust and the reassertion of its market dominance.
It is important to note that these actions have had minimal effect on workers' conditions working for Nike. Nike is unable to demonstrate in the 2019 Tailored Wages report that the minimum living wage is being paid to any workers.
Protection of Workers' Human Rights
Nike's factories clearly infringed on human rights, as employees were paid poorly and subjected to extended hours in hazardous environments. Following the Nike Sweatshop Scandal, numerous non-profit groups have arisen to defend the rights of manufacturing workers.
Established in 2000 by Jim Keady, Team Sweat is a group that monitors and rallies against Nike's illegal labor practices, with the goal of stopping these wrongdoings.
USAS, a US student-formed group, aims to combat oppressive practices. They have initiated several initiatives advocating for workers' rights, such as the Sweat-Free Campus Campaign. This campaign mandated university-associated brands to adhere to specific guidelines. The initiative garnered significant public backing and impacted Nike's finances. In response, Nike had to boost factory conditions and labor rights to recuperate from the setback.
Nike's Corporate Social Responsibility
Since 2005, the company has been producing corporate social responsibility reports as part of its commitment to transparency.
Corporate social responsibility (CSR) is a set of practices a business undertakes in order to contribute to society in a positive way.
Nike's CSR reports indicated the brand's ongoing endeavors to enhance labor working conditions.
For example, FY20 Nike Impact Report, Nike made crucial points on how it protects workers' human rights. The solutions include:
- Forbid underage employment and forced labour
- Allow freedom of association (Forming of workers' union)
- Prevent discrimination of all kind
- Provide workers with fair compensation
- Eliminate excessive overtime
In addition to labour rights, Nike aims to make a positive difference in the world through a wide range of sustainable practices:
- Source materials for apparel and footwear from sustainable sources
- Reduce carbon footprint and reach 100% renewable energy
- Increase recycling and cut down on overall waste
- Adopt new technology to decrease water use in the supply chain
The company is gradually shedding its reputation for 'labour abuse' and striving to create a beneficial global influence. Its goal is to be a profitable and ethical organization.
Nike Sweatshop Scandal Timeline
1991 - Jeff Ballinger, an activist, releases a report revealing low pay and unfavorable working conditions in Indonesian Nike factories. As a result, Nike puts into effect its initial factory code of conduct.
1992 - Jeff Ballinger's article recounts the mistreatment of an Indonesian worker by a Nike subcontractor, paying the worker a mere 14 cents per hour. Ballinger also chronicled additional instances of worker exploitation within the company.
1996 - In response to the controversy around the use of child labour in its products, Nike created a department that focused on improving the lives of factory workers.
1997 - Media organizations question the company's representatives. Nike recruits activist and diplomat Andrew Young to examine its overseas labor practices. Despite his positive findings, some detractors contend that his assessment of the company was too lenient.
1998 - Nike faces unrelenting criticism and weak demand. It had to start shedding workers and developing a new strategy. In light of extensive protests, CEO Phil Knight remarked that the company's products had become linked with slavery and exploitative labor practices.
"I truly believe the American consumer doesn't want to buy products made under abusive conditions"
Nike raised the minimum age of its workers and increased monitoring of overseas factories.
1999 - Nike launches the Fair Labor Association, a not-for-profit group that combines company and human rights representatives to establish a code of conduct and monitor labour conditions.
2002 - Between 2002 and 2004, the company carried out around 600 factory audits. These were mainly focused on problematic factories.
2004 - Human rights organizations recognize that while there have been attempts to enhance the working conditions of workers, many issues persist. Monitoring groups have also observed that some of the most severe abuses continue to take place.
2005 - Nike is the initial prominent brand to reveal a roster of the factories it employs to produce footwear and apparel. The company's yearly report outlines the circumstances, recognizing prevalent problems in its south Asian factories.
2006 - The company continues to publish its social responsibility reports and its commitments to its customers.
Nike's brand was long linked with sweatshops, but since the 1990s scandal, the company has worked hard to change this perception. By increasing transparency in labor practices and implementing Corporate Social Responsibility initiatives, Nike aims to improve its image and make a difference in the world. In addition to labor practices, Nike's CSR efforts also address social and environmental concerns.