Nike: The Road to Respect, Analysing Moral Concerns


The Nike Corporation is one of the most powerful companies in the footwear, apparel and sports industry, and has been a major trendsetter throughout numerous countries around the globe. Many of these large corporations, including Nike, have faced criticism regarding their production methods within various countries of the "Third World", consistently involving issues of low wages, excessive working hours, child labour and hazardous working conditions (Kochan, Locke, Romis and Qin 2007:21). Although these companies have produced their goods under harsh conditions in the past, and some still do today, consumers have not been exposed to the raw truth of their actions. Nike has continually aimed to keep these facts to themselves, as they do not want to lose any of their customers by releasing any damaging information (ibid:22). A large portion of the global population has likely purchased one or two, or many more Nike products in their lives. In this effect, the Nike brand name is associated with a lot of people, both old and young, including myself. I have purchased and made use of many Nike products, including apparel, footwear and sports equipment, throughout my life. Therefore, I have a connection to the company through my consumption of their goods. The Nike logo is a predominant symbol in our modern culture today; however, no one seems to look beyond that logo into the process of how their products became ours. In order to make an informed decision, consumers must be aware of the ways in which the goods they purchase are made; otherwise they may be supporting a company that has conflicting moral standards compared to their own. Nike is one such company; many problems rose after Philip H. Knight founded it in 1968 (Alfred 2003). Since then, Nike has seen constant growth and expansion around the world, thus becoming a major transnational corporation that controls more than 33 per cent of the global athletic footwear market (Kochan et al. 2007:24). Criticisms on Nike for manufacturing their products through foreign direct investment in countries where hazardous working conditions, low wages, and weak governmental laws are present began to surface in the 1990s (ibid:25). They continued to face scandal after scandal in such areas as child labour in Pakistan, underpaid workers in Indonesia, and poor working conditions in China, which was ultimately damaging to their image. To put an end to this so they no longer had to hide from their problems, Nike began to develop a range of programs and regulations for their suppliers to abide by, such as codes of conduct that would restrict and limit particular actions (Locke, Brause and Qin 2007:4-5). They made several efforts to contain the negative proceedings taking place in their factories located in the "Third World" where human rights did not seem to be very important. In many circumstances, the effort put forth by Nike proved to be successful, thus eliminating the bad image they had previously gained, although not completely removing their problems. Further steps may need to be taken to fully clear all of the harmful accusations. Although it is difficult for Nike to enforce their codes in countries where the government has limited power and lacks global justice, they still continue to strive for improvements (Kochan et al. 2007:21). In this paper, I will demonstrate how Nike has succeeded in improving and regulating their production factories in various developing countries, proving that they care about their manufacturing methods, although it did not initially seem so.

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There are many other corporations that have been exposed to the same problems as Nike, and criticized for their production in developing countries. In these countries, labour laws and standards are not fully enforced, as the governments have limited abilities to do so (ibid). Transnational corporations are drawn to this fact so that they can have the opportunity to manufacture for cheap labour. This form of foreign direct investment may seem to only benefit the corporation, but in fact, it also provides for the country itself. They gain extra capital, employment opportunities, improvements in technology and a connection with the international market (Locke et al. 2007:3). In this sense, global supply chains are helping in the transformation process of these countries, allowing them to make advancements in their development plans. In the opposite sense, global corporations such as Nike are seen as indirectly exploiting the countries by taking advantage of their reduced wages and ineffective regulations that are not enforced, which allows them to manufacture their goods at a low cost (ibid). In this case, they are not seen as a tool of aid, but as a tool of abuse. It is difficult to evaluate whether the countries of the global South were better off before or after major western corporations entered and set up factories. If these companies had not taken any action in connection with the "Third World", then the countries would not have made any progress at all. While these factories are operating, poor citizens are working for a small salary in potentially hazardous conditions. The fact that the country is involved globally and is working towards development and change outweighs the fact that they are being exploited. If supply chains were not set up in these countries, then many poor people would be left in the same state possibly working in conditions worse than a Nike factory, just to meet their minimum living needs. A connection with the global market was needed in these countries, and one of the first steps in doing so was through transnational corporations.

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Given that Nike is one of the largest companies in the world, they have many foreign connections in their manufacturing methods. By 2009, they had more than 600 supply factories, and over 800,000 employees working in 46 different countries, manufacturing their Nike products (Nike, Inc. 2009:33). In becoming a very big company, it was difficult for Nike to control how their goods were created as they expanded worldwide with production factories. This was evident through the 1990s as difficulties rose in their supply chains overseas, bringing on a major crisis for the company. The issues concentrated on matters of hazardous working conditions, child labour, low wages, and excessive working hours (Kochan et al. 2007:25). Nike initially tried to eliminate the accusation by stating that it was not their responsibility and that they could not control such matters (ibid). They faced criticism from various trade unions, non-governmental organizations and consumer groups regarding these production methods. This did not translate well into the public's eye, which led them to make continued efforts to improve conditions in the contracted factories. They realized that changes needed to be made and that they could not continue manufacturing products in that way forever.

One of the very first improvements was the implementation of an official code of conduct, which ensured that factories must operate at certain environmental, labour and health and safety standards (Locke et al. 2007:8). Suppliers were also forced to sign the code and have it accessible to workers within the factory (Kochan et al. 2007:25). To simply implement this set of rules would not have been effective, so Nike decided to engage in training sessions with its suppliers, which resulted in the creation of a team of 90 compliance officers (Romis and Locke 2007:55). These staff members were based in 21 countries for the purpose of monitoring supply factories (ibid). To be confident in the workings of their staff, Nike provides training to all in their code of conduct, labour practices, and in the Safety, Health, Attitudes of Management, People Investment and Environment (SHAPE) program. Managers perform on site inspections to ensure that everything is being run in compliance with the code of conduct, thus keeping the working conditions at a reasonable state for employees. Over time, Nike has invested even more into the monitoring of its suppliers, through expanding its compliance staff, increasing the amount of training, and developing more extensive monitoring procedures (Locke et al. 2007:17). In 1998, they made some amendments to their age limits, with the minimum age for factory workers in footwear moving up to eighteen and all others to sixteen. This was a major step forward concerning the use of child labour for Nike. The code of conduct was only their first effective effort at improving the working environment in developing countries, and the M-audit came next.

To further express their care for how they manufacture their products, Nike has created three different audits that all of their supply factories are subject to. This includes "a basic environmental, safety and health audit, a more in-depth management and working conditions audit, or M-audit, and periodic inspections by the Fair Labour Association" (Romis and Locke 2007:55). The M-audit was put in place in 2002 as one of the center programs in Nike's movement for improvement, and "provides in-depth assessment of the labor-management practices and working conditions at the factories" (Locke et al. 2007:9). This audit takes places over several days as it usually takes 48 hours to complete, and is administered by a Nike-trained specialist (ibid). By conducting their own audits, Nike was ensuring that high-quality proper and truthful reports were being produced. The end result was a percentage rate of conformity with the current code of conduct, which considers over 80 different variables within the factories. It provides a detailed overview of the current state of Nike supply factories, which in turn helps them see which ones are improving operations and which ones are not. Similarly, the Fair Labour Association also conducts several random inspections of Nike suppliers each year (ibid). All of their reports are posted online for the public to look at. To put all of these ratings to use, Nike then established a compliance-rating program to grade each of their suppliers based on their evaluation results (Kochan et al. 2007:26). Each factory was assigned an A, B, C or D level rating by their compliance manager, which reiterates the information discovered in the M-audits and FLA audits (ibid). This helps the production managers in making major decisions for Nike relating to their global supply chains (ibid). They can now better accommodate the factories that are in desperate need of more improvement in their working conditions. Nike has clearly made many efforts to become a more ethical global corporation by assessing and improving their factory suppliers in developing countries. These changes have led to some modifications for the better, but Nike still needs to continue to address the issues with their contracted manufacturers if they want to produce a larger impact. One area where they have made major advancements yet still need to strive for more positive changes is in the soccer ball industry of Pakistan, where child labour is a major issue. Perhaps they need more than just audits and inspections to have control over the use of child labour.

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It is estimated by the International Labour Organization that "250 million children between the ages of five and fourteen work in developing countries on a full time basis" (Alfred 2003). It is definitely a global problem that has a large impact on developing countries, especially Pakistan. In Sialkot, a major city in Pakistan, child labour has become a large issue throughout several supply chain factories. This specific area is known as a major soccer ball producer for many worldwide corporations, including Nike. According to a study conducted by the International Labour Organization, more than 7,000 children were stitching soccer balls for a living, working very long unnecessary hours (Hussain-Khaliq 2004:102). The soccer ball industry accounts for a large amount of export income in the economy of Pakistan, generated specifically from Sialkot, since this is where 60 to 80 per cent of the world's hand-stitched soccer balls come from (Khan et al. 2007:1056). It is a historical practice to have children working in Pakistan, therefore hard for companies to control. Nike' child labour issue became apparent to the entire world in 1995, when a CBS documentary aired regarding the soccer ball industry in Sialkot (Boje and Khan 2009:12). Nike suppliers in Pakistan would subcontract the work out to villages and homes, where the sewing would be performed. The stitching in these homes was done by both parents and children, who were paid based on the number of balls sewed, not hours worked (ibid). Due to the subcontracting, many manufacturers were unaware that children were involved in the production of their soccer balls, until it was exposed through a worldwide documentary (Hussain-Khaliq 2004:102). After Nike discovered this issue with their soccer ball supplier, Saga Sports, they proceeded to try and eliminate the use of child labour. According to a written deposition to the US Department of Labour in 1996, Nike "implemented more steps to protect worker rights than companies that have operated in the country for decades" (Boje and Khan 2009:13). Nike did indeed implement more steps by insisting that their suppliers build stitching centers in Pakistan where labour can be monitored so that no children are permitted to work (ibid). They had to do this in order to stay conformed with their code of conduct, since it prohibits child labour (Alfred 2003). This movement into stitching centers was part of a bigger global program called the Sialkot Child Labour Elimination Project, which was put in place in 1997 (Boje and Khan 2009:15). ILO monitors would continually inspect the stitching centers to ensure that no children were at work. A social protection was also added to this program, which would make sure that children were not getting involved in any worse labour than stitching soccer balls. They would assist the child and their families in providing for themselves through other working opportunities (ibid). Education for the children was an important factor, thus they would be enrolled in government schools or education centers (ibid). Although Nike did not solely take some of these initiatives on themselves, they still played a role in the global transformation of child labour. As well, the 2010 labour policy in Pakistan now states that young persons under the age of 18 will not be exposed to damaging working conditions, neither mentally nor physically (ILO 2010). With these stitching centers in place along with the Nike code of conduct and M-audit, it is demonstrated that they have put forth a valiant effort to control their foreign production matters.

It is clear that Nike has had several problems regarding their global supply chains in the past, yet they have been and still are trying to find appropriate solutions. They have faced pressure from numerous sources to deal with these issues, which has encouraged and somewhat forced them to make changes, as they do not want their public image destroyed with negative accusations. It is a complex situation, one that Nike and many other corporations find difficult to solve. In attempting to improve their production in foreign countries, Nike has tried various approaches to inspire positive change (Nike, Inc. 2009:33). They have created a code of conduct for their factories, implemented auditing procedures to ensure compliance, and made extra efforts to eliminate child labour in Pakistan, although this was quite difficult to enforce. Child labour is accepted in Pakistan as a way of life and present in many economic sectors, thus in 2006 Nike was reported as having cancelled all orders from Saga Sports, the supplier using child labour (Greimel 2006:1-2). They have also recently stated that they will go beyond monitoring and auditing to improve working conditions, as these efforts have fallen short in some areas (Nike, Inc. 2009:34). Instead, they want to focus on more sustained, long-term improvements that will provide strong partnerships with there contracted manufacturing bases (ibid). As well, Nike believes that collaboration with other major governments, manufacturers, corporations and industries will help them produce the solutions they need to advance in corporate responsibility (ibid). Once they discover the root causes of their problems, they will become more aware and knowledgeable, which they can then incorporate into generating effective improvements. If Nike can provide sustained working conditions for their factories, they will be benefiting themselves as well as the country they are producing in. With safe working areas and normal wages, citizens of the "Third World" will be better off than they were before, thus bringing some development into the labour sector. All of this lies in the hands of Nike, and whether or not they decide to fulfill what they have proposed to do. The path to success is a rocky road for Nike, although they have made it through several major incidents in the past and came out in a better light. They are ultimately aware that a lot of work and change still needs to occur in their global supply chains, as stated in their corporate responsibility report, and have set future goals for improvement which they intend to attain (Nike, Inc. 2009:33).