In the early 1990’s Nike was unwittingly responsible for bringing factory worker treatment and supply chain issues to the forefront. This was of course many years before the “CSR movement” gained a foothold within corporate operations. And while I would not go as far as to say that it gave birth to the modern CSR movement, it did make many people, consumers mostly, aware of issues that were both literally and figuratively once only behind closed doors.
Last week there was an article that popped up in the Huffington Post basically stating how minimal the improvements were that Nike has made in the last two decades, citing an Indonesian factory that is having considerable problems with worker treatment. Those employees making errors in the work place have allegedly been forced to stand out in the sun for hours at a time. I would argue that’s a terrible move both humanitarian and business-wise. However the poor treatment does not end there, with name-calling and even physical violence.
Clearly, even a company such as Nike that was one of the first to make a conscious effort to stop abuses in their factories is still having a hard time practicing what they preach. They have a code of conduct like most apparel firms. They supposedly audit their factories and they publish annual corporate responsibility reports. So, what’s the problem?
The problem is the same with almost any garment manufacturer and is based on the fact that there have been no fundamental changes in how the supply chain works. That is, Nike (or any other company) does not own these factories. They contract the work out to factories throughout Southeast Asia and Eastern Europe. Presumably, in the contract the factories are required to follow the rules and regulations set forth by Nike and these factories are subject to audits in order to determine whether they are doing so. Further complicating matters, these firms subcontract to other firms for a variety of reasons. As a result, Nike has even less control if any, over the subcontractors. If you’re thinking, having little control of who manufactures your products and how is a bad way to run a business, we’re probably on the same page.
So what can be done? I once did a study on worker treatment regarding those in the Polo Ralph Lauren supply chain (side note, PRL does nothing regarding sustainability with no information published externally and no response to multiple phone calls regarding CSR, so they have a long way to go) and not surprisingly the issues were much the same. They also sold license to manufacture their products at various facilities abroad. In order to have greater control over worker conditions it seemed reasonable for the company to begin buying back some of the licenses. Nike could potentially do the same. On the other hand, it’s no secret why these companies are in these countries in the first place, cheap labor costs. Should Nike repurchase licenses and have a more direct role to play in manufacturing, the costs will rise and almost surely be passed along to the consumer.
It’s an extremely difficult situation. The above solution is not the only option but quite possibly a reasonable one. Auditing more regularly and stringently would help too, but again at a greater expense. I’m absolutely all for Nike and others providing jobs in developing countries particularly when they are often positions that require less intensive labor and pay more than the alternative (believe it or not that it often the case). But these companies must do more than publish reports and issue codes of conduct. Enforcement and accountability have to be part of the picture as well.
Image Credit by myretailmedia via Flickr under a CC license