In a move toward greater industry transparency and collaboration, Nike, Inc. on Tuesday voluntarily disclosed, in conjunction with the release of its new corporate responsibility report, the names and locations of the more than 700 active contract factories currently making Nike-branded products worldwide. Both the contract factory list and the report are publicly available on the company's website, www.nikeresponsibility.com.
Nike becomes the first major company in the global footwear and apparel industries to disclose publicly its contract supplier base. This level of transparency is something trade unions and non-governmental organizations have been asking of many major companies to bring greater visibility to industry-wide conditions and to support collaborative efforts to resolve systemic labor, health and safety challenges in contract factories.
Nike's rationale for deciding to disclose its contract factory base is that the potential benefits to the industry and factory workers significantly outweigh the possible competitive risks of revealing the contract factories that produce the company's Nike-branded products.
“We hope that full disclosure, if also followed by other companies, will lead to more sharing of industry monitoring and resources for factory monitoring and remediation, where legal,” said Hannah Jones, Nike's vice president of corporate responsibility. “The current system has to evolve fundamentally to create broad, sustainable change for factory workers. The goal is for greater transparency and collaboration to help everyone devote more time to promoting the remediation of compliance issues by factories rather than just uncovering them.”
Nike's new corporate responsibility report is its first since October 2001. In October 2002, the company decided to stop reporting its efforts while petitioning the U.S. Supreme Court to hear the Kasky v. Nike First Amendment case. The case was settled in September 2003.
“We've been fairly quiet for the past three years in corporate responsibility because of the Kasky lawsuit, but our public silence should not be interpreted as a sign of inaction,” said Nike Founder and Chairman Philip H. Knight. “We've been hard at work, so we're using this report to play a little catch-up and draw a more complete picture of where we're at. It makes for a long report, but I urge you to read it from cover to cover to see the progress we've made and the challenges and opportunities that remain.”
The 108-page report provides a comprehensive review of Nike's corporate responsibility priorities, programs, progress and challenges. Areas covered include contract factory labor conditions, the company's employee benefits and diversity programs, environmental initiatives and community investment. The report, which primarily covers Nike's activities in its 2004 fiscal year (June 1, 2003 – May 31, 2004), relies heavily on the guidelines issued by the Global Reporting Initiative.
For advice in preparing the report, Nike invited experts from the trade union, NGO, academic, investor and business communities, acting in their capacities as individuals, to serve on a Report Review Committee. Chaired by Ceres, a coalition of investment funds, environmental organizations and public interest groups, the committee provided feedback that helped establish the scope, coverage and focus for the company's report. The committee's unedited comments on the content of the report and the reporting process are included in the report.
The Committee's statement says in part, “We recognize Nike for this candid and comprehensive report … The report's candor on the significant challenges of addressing labor standards within its global supply chain is welcome, and may facilitate discussion on how to tackle these challenges. While noting that monitoring is not a sufficient or long-term solution to raising labor standards, the report presents Nike's extensive and evolving efforts to manage monitoring, integrate compliance into its business strategy through the Balanced Scorecard, and pursue multi-stakeholder initiatives that could lead to more systemic industry-wide improvements.”
The Review Committee also provided some recommendations for further improvements in reporting. The committee encouraged Nike to report its progress as it integrates corporate responsibility into the business, expand coverage of the report to include the performance of subsidiaries and improve data collection and information management systems.
Commenting on the review process, Jones said: “Working with an external corporate responsibility report review committee accelerated our learning process, and we are deeply appreciative of their time and contributions to this report. While we've been quiet, we've been busy since our last report, and the breadth and depth of this report reflects that. Reporting is essential to driving continuous improvement. We now need common reporting standards so stakeholders can compare companies within and across industries.”
The report highlights include:
- A summary of the company's in-depth audits conducted in Nike-branded contract factories in FY03 and FY04 that highlight four ongoing noncompliance challenges: hours of work, freedom of association, wages and harassment.
- A review of the company's environmental programs, including its progress in reducing the quantity of volatile organic compounds used in making footwear; reducing CO2 emissions from owned facilities and business travel; eliminating PVC from its products; and recycling old shoes and factory waste.
- An outline of the programs Nike has implemented to help it become an “employer of choice” and make diversity a competitive advantage.
- An overview of Nike's total FY04 community investment of $37.3 million in cash, product and in-kind services to community and nonprofit organizations around the world.
“Going forward, our challenge is to integrate corporate responsibility more fully into our decision-making process in order to effect positive change,” Jones said. “We've learned we need to focus less on activity and more on strategic impact that will bring about company and industry innovations that create long-term value for our business, and ultimately on communities and the environment.”