NIKE STATEMENT ON FORCED LABOR, HUMAN TRAFFICKING AND MODERN SLAVERY FOR FISCAL YEAR 2018
At NIKE, we believe we have a responsibility to conduct our business in an ethical way. We expect the same from our suppliers, and focus on working with long-term, strategic partners that demonstrate a commitment to engaging their workers, safe working conditions and environmental responsibility. This includes working to combat risks of forced labor, modern slavery and human trafficking.
For more information on NIKE's sustainable engagement in our supply chain, please see our Sustainable Business Report that details some of the drivers we have in place to transform our working relationships with suppliers to incentivize changes that benefit their workers.
The following information is to provide information required under the UK Modern Slavery Act of 2015 and the California Transparency in Supply Chains Act of 2010 as it relates to NIKE’s business practices, and specifically how we address issues of forced labor.
II. NIKE OVERVIEW AND SUPPLY CHAIN STRUCTURE
NIKE is the largest seller of athletic footwear and apparel in the world. We sell our products through NIKE-owned retail stores and through digital platforms, to retail accounts and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world. Virtually all of our products are manufactured by independent contractors.
We are focusing on quality, long-term supply agreements with fewer factories, that are committed to our strict standards of sustainability and product excellence. Our sourcing strategy prioritizes and favors these suppliers that show demonstrable leadership in corporate responsibility and sustainability and who seek to move beyond minimum standards. As part of our growth strategy, we seek partners who are developing agile and resilient management systems which enable them to drive sustainable business growth through minimizing their environmental impacts, fostering a strong culture of safety and developing an engaged and valued workforce.
NIKE has disclosed a list of the independent factories contracted to make NIKE products since 2005. An interactive map of NIKE’s current suppliers including information about the factory and its workers can be found here: http://manufacturingmap.nikeinc.com/. The map includes the supplier group, location of the facility, type of products produced, number of workers, and information on the workforce profile including percentage employment of women and migrant workers.
NIKE’s commitment to ethical practices in our own operations and our supply chain begins at the highest level – from our CEO and Board of Directors. NIKE, Inc.’s Corporate Responsibility Sustainability & Governance Committee of the Board of Directors review significant strategies, policies and activities and make recommendations to NIKE’s Board of Directors regarding sustainability (including labor and environmental practices), community impact, and charitable activities. NIKE’s Performance and Disclosure Committee – composed of our Chief Administrative Officer, Chief Communications Officer, Chief Financial Officer, Chief Operating Officer and Chief Sustainability Officer reviews and confirms all company-wide sustainability policies and targets, reviews performance toward targets, receives updates on key issues and emerging trends, and provides oversight for efforts to improve data, transparency and disclosure.
III. NIKE’S CODE OF CONDUCT AND STANDARDS TO ADDRESS FORCED LABOR
NIKE takes seriously national and international efforts to end all kinds of forced labor – whether in the form of prison labor, indentured labor, bonded labor, human trafficking or otherwise.
NIKE’s requirements for suppliers are contained in our Code of Conduct and Code Leadership Standards. The Code of Conduct lays out the required minimum standards we expect each supplier factory or facility to meet in producing NIKE products and includes strict requirements around forced and child labor, excessive overtime, compensation, and freedom of association amongst other requirements. The Code Leadership Standards specify how the Code of Conduct must be implemented. The document also articulates how we measure factories’ compliance efforts and progress against our Code of Conduct including specific requirements on the management of key forced labor risks.
We have progressively raised expectations for our factory partners through evolving standards of our Code of Conduct and Code Leadership Standards. This includes adding specific requirements to address key risks of forced labor including prohibiting workers paying fees for employment, requiring worker freedom of movement, and prohibiting requirements to post bonds or make deposits as a condition of employment. The Code Leadership Standards also contain specific provisions related to management of workers with unique vulnerabilities to risks of forced labor such as foreign workers and interns.
In early FY18, we updated our Code of Conduct and Code Leadership Standards to elevate key expectations around the environment, building and machine safety, women’s rights, and chemical management, among others. The updates to our Code Leadership Standards also included changes to further clarify and tighten our requirements to address risks of forced labor. Examples include a more explicit prohibition of holding of personal documents by third parties such as labor agents, and a clear prohibition on posting bonds, deposits or requirements to participate in mandatory saving programs.
IV. DIRECT SUPPLIERS' CERTIFICATION OF MATERIALS
NIKE requires its finished goods suppliers to verify they are sourcing materials from vendors that are compliant with NIKE's Restricted Substances List (RSL) and NIKE’s Code of Conduct. NIKE's Supply Agreements also explicitly require suppliers to comply with all local and country-specific labor laws and NIKE’s Code of Conduct and Code Leadership Standards.
V. DUE DILIGENCE, RISK ASSESSMENT AND MONITORING
NIKE continually evaluates and updates its systems to identify and address risks in its supply chain, including those related to slavery and human trafficking. This process includes information from external sources such as risk assessments for key human rights risks, supplier specific risk profiling based on location including the employment of vulnerable worker groups and areas of improvement identified in audits, as well as information on key and emerging risk areas identified through our engagement with external stakeholders. NIKE is also working towards mapping and understanding impacts further up the supply chain and to expand its engagement with upstream suppliers of contracted manufacturers where additional risks of forced labor may occur.
We regularly audit contract factories, which are monitored on a schedule based on their performance. These assessments take the form of audit visits, both announced and unannounced to measure against the NIKE Code of Conduct, Code Leadership Standards and local law.
NIKE uses both internal and external third-party audits to assess compliance with our requirements and local law. We also monitor conditions at contract factories through audits and assessments by independent organizations, including the Fair Labor Association and the Better Work Programme, a joint project of the International Labour Organization (ILO) and International Finance Corporation (IFC). In FY18, we conducted 471 total audits and assessments.
NIKE audits include detailed criteria to look at risks for forced labor or human trafficking including the employment of vulnerable worker groups such as foreign migrants, interns and temporary workers and high risk practices such as payment of recruitment fees or restrictions on freedom of movement.
In FY18, following the update to our Code of Conduct and Code Leadership Standards, we also made improvements to our audit tool. This included adding new questions and updating existing questions to expand the depth of coverage of key forced labor risks.
VI. REMEDIATION AND EFFECTIVENESS
NIKE works with internal, external, and independent monitors to carry out audits and help in remediation and capability-building efforts. If we are alerted to an issue of non-compliance within one of our contract factories, we investigate it immediately. Where improvements are required, we seek to drive ownership by factory management to identify and correct issues, and also improve systems to address root causes in order to prevent future reoccurrences.
NIKE also continuously seeks to improve our approach to evaluating working conditions in our supply chain and working with our suppliers to enhance their capabilities. In recent years we have made significant changes to improve monitoring of supplier compliance with our Code of Conduct and Code Leadership Standards. This included a significant overhaul of our audit program, tools and processes which included increased auditor rotation, broader use of third party auditors, and more unannounced audits.
In FY18, through our enhanced audit program, we found a few isolated instances of foreign migrant worker employment practices that were in violation of NIKE’s Code of Conduct and Code Leadership Standards. The issues involved workers paying fees related to their recruitment and employment and one instance where the facility had penalties for early contract termination. In each case we worked with the supplier to remediate the identified issues and to strengthen their systems to prevent future reoccurrence. For the situations where it was found workers had paid fees for their employment we required suppliers to repay workers for such fees. In all instances full re-audits are conducted to verify corrective actions have been completed.
If a factory fails to make progress against required remediation, it is subject to review and sanctions, including potential termination.
VII. TRAINING AND ACCOUNTABILITY
NIKE believes suppliers that successfully address the well-being of their workers, by engaging with them directly to understand their needs, will improve factory performance. However, we know that our ability to influence our supply chain is dependent in part on how we build the right incentives and sanctions into our business relationships. Our Manufacturing Index (MI), introduced in 2012, scores factories on sustainability – including labor practices – on a par with traditional metrics of cost, quality and on-time delivery.
To more fully integrate our sustainability criteria into sourcing decisions and to help employees and management who have direct responsibility for supply chain management, NIKE provides training to enhance understanding and compliance with our sustainability policies and requirements including our Code of Conduct. That training is required annually for individuals who manage production relationships with suppliers.
NIKE frequently convenes supplier events, or learning communities, designed to share information on NIKE expectations, developments on local policies/legislation, and other sustainability and labor best practices, including those related to management of migrant workers. For example, in FY18 our learning community events included officials from the International Labour Organization and Malaysian government to discuss programs and policy developments impacting migrant workers.
VIII. COLLABORATIVE SOLUTIONS
NIKE believes addressing critical human rights risks, such as forced labor, often requires a collective approach. NIKE has long partnered with multi-stakeholder and external organizations such as the Fair Labor Association, Sustainable Apparel Coalition, the International Labour Organization’s Better Work Programme, and the Better Cotton Initiative to address labor risks in our supply chain. Through our partnerships with these and other organizations we work on a wide range of human rights risks, including those related to forced labor and human trafficking.
In FY18 we joined a project facilitated by the FLA in partnership with İyi Pamuk Uygulamalari Derneği, as well as several other international brands, on improving employment practices in the Turkish cotton sector. The project focuses on preventing and addressing child labor risks and improving labor recruitment practices at the farm level.
NIKE has also been involved with leading brands and retailers in Europe developing an approach to supporting factories to recruit and manage a modern day multinational workforce, with the aim to enable manufacturers and their workers to adapt best practices in recruitment, integration and end of service.
We will continue to expand our collaboration with other peers, NGO, organizations to increase respect for human rights and to accelerate positive impact in the countries where we and our suppliers operate.