How Nike Solved Its Sweatshop Problem
The recent factory collapse in Bangladesh was a reminder that even though Nike managed to turn around its image, large parts of the industry still haven't changed much at all.
Nike was an early target for the very reason it's been so successful. Its business model was based on outsourcing its manufacturing, using the money it saved on aggressive marketing campaigns.
Nike has managed to turn its image around. Nike hasn't been completely successful in bringing factories into line, but there's no denying that the company has executed one of the greatest image turnarounds in recent decades.
Here's the timeline of how Nike became a global symbol of abusive labor practices, then managed to turn things around:
- After prices rose and labor organized in Korea and Taiwan, Nike begins to urge contractors to move to Indonesia, China, and Vietnam.
- 1991: Problems start in 1991 when activist Jeff Ballinger publishes a report documenting low wages and poor working conditions in Indonesia.
- Nike first formally responds to complaints with a
factorycode of conduct.
- 1992: Ballinger publishes an exposé of Nike. His Harper's article highlights an Indonesian worker who worked for a Nike subcontractor for 14 cents an hour, less than Indonesia's minimum wage, and documented other abuses.
- 1992-1993: Protests at the Barcelona Olympics in 1992, CBS' 1993 interview of Nike factory workers, and Ballinger's NGO "Press For Change" provokes a wave of mainstream media attention.
- 1996: Kathy Lee Gifford's clothing line is shown to be made by children in poor labor conditions. Her teary apology and activism makes it a national issue.
- 1996: Nike establishes a department tasked with working to improve the lives of factory laborers.
- 1997: Efforts at promotion become occasions for public outrage. The company expands its "Niketown" retail stores, only to see increasing protests. Sports media begin challenging spokespeople like Michael Jordan.
- Abuses continue to emerge, like a report that alleging that a Vietnamese sub-contractor ran women outside until they collapsed for failing to wear regulation shoes.
- Nike tasks diplomat and activist Andrew Young with examining its labor practices abroad. His report is criticized for being soft on Nike. Critics object to the fact that he didn't address low wages, used Nike interpreters to translate, and was accompanied by Nike officials on factory visits. Since Young's report was largely favorable, Nike is quick to publicize it, which increases backlash.
- 1997: College students around the country began protesting the company.
- 1998: Nike faces weak demand and unrelenting criticism. It has to lay off workers, and begins to realize it needs to change.
- The real shift begins with a May 1998 speech by then-CEO Phil Knight. “The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse,” Knight said. “I truly believe the American consumer doesn’t want to buy products made under abusive conditions.”
- At that speech, he announces Nike will raise the minimum age of workers; significantly increase monitoring; and will adapt U.S. OSHA clean air standards in all factories.
- 1999: Nike begins creating the Fair Labor Association, a non-profit group that combines companies, and human rights and labor representatives to establish independent monitoring and a code of conduct, including a minimum age and a 60-hour work week, and pushes other brands to join.
- 2002-2004: The company performs some 600 factory audits between 2002 and 2004, including repeat visits to problematic factories.
- 2004: Human rights activists acknowledge that increased monitoring efforts at least deal with some of the worst problems, like locked factory doors and unsafe chemicals, but issues still remain.
- 2005: Nike becomes the first in its industry to publish a complete list of the factories it contracts with.
- 2005: Nike publishes a detailed 108-page report revealing conditions and pay in its factories and acknowledging widespread issues, particularly in its south Asian factories.
- 2005-Present: The company continues to post its commitments, standards, and audit data as part of its corporate social responsibility reports.
Nike wasn't the only or worst company to use sweatshops. But it was the one everybody knew.
Transparency doesn't change ongoing reports of abuses, still-low wages, or tragedies like the one in Bangladesh.
But by becoming a leader instead of denying every allegation, Nike has mostly managed to put the most difficult chapter in it's history behind it and other companies who outsource could stand to learn a few things from Nike's turnaround.