case study nike sweatshops

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• Nike Sweatshop Scandal

Nike is one of the largest athletic footwear and clothing companies in the world, but its labour practices have not always been ethical. Back in the late 1990s and early 2000s, the company was accused of using sweatshops to make activewear and shoes. Despite an initial slow response, the company eventually took measures to improve the working conditions of employees in its factories. This has allowed it to regain public trust and become a leading brand in the sportswear sector. Let's take a closer look at Nike's Sweatshop Scandal and how it has been resolved. 

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Nike and sweatshop labour

Like other multinational companies, Nike outsources the production of sportswear and sneakers to developing economies to save costs, taking advantage of a cheap workforce. This has given birth to sweatshops - factories where workers are forced to work long hours at very low wages under abysmal working conditions.

Nike's sweatshops first appeared in Japan, then moved to cheaper labour countries such as South Korea, China, and Taiwan. As the economies of these countries developed, Nike switched to lower-cost suppliers in China, Indonesia, and Vietnam .

Nike's use of sweatshop dates back to the 1970s but wasn't brought to public attention until 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factories in Indonesia.

The report described the meagre wages that the factory workers received, only 14 cents per hour, barely enough to cover basic living costs. The disclosure aroused public anger, resulting in mass protests at the Barcelona Olympics in 1992. Despite this, Nike continued making its plans to expand Niketowns - fa cilities displaying a wide range of Nike-based services and experiences - which fuelled more resentment within consumers.

For more insight into how a company's external economic environment can impact its internal operations, take a look at our explanation on the Economic Environment .

Nike child labour

In addition to the sweatshop problem, Nike also got caught in the child labour scandal. In 1996, Life Magazine published an article featuring a photo of a young boy named Tariq from Pakistan, who was reportedly sewing Nike footballs for 60 cents a day .

From 2001 on, Nike started to audit its factories and prepared a report in which it concluded that it could not guarantee that its products would not be produced by children .

Nike's initial response

Nike initially denied its association with the practices, stating it had little control over the contracted factories and who they hired.

After the protests in 1992, the company took more concrete action by setting up a department to improve factory conditions. However, this didn't do much to resolve the problem. Disputes continued. Many Nike sweatshops still operated.

In 1997-1998, Nike faced more public backlash, causing the sportswear brand to lay off many workers.

How did Nike recover?

A major shift happened when CEO Phil Knight delivered a speech in May 1998. He admitted the existence of unfair labour practices in Nike's production facilities and promised to improve the situation by raising the minimum wage, and ensuring all factories had clean air.

In 1999, Nike's Fair Labor Association was established to protect workers' rights and monitor the Code of Conduct in Nike factories. Between 2002 and 2004, more than 600 factories were audited for occupational health and safety . In 2005, the company published a complete list of its factories along with a report detailing the working conditions and wages of workers at Nike's facilities. Ever since, Nike has been publishing annual reports about labour practices, showing transparency and sincere efforts to redeem past mistakes.

While the sweatshop issue is far from over, critics and activists have praised Nike. At least the company does not turn a blind eye to the problem anymore. Nike's efforts finally paid off as it slowly won back public trust and once again dominated the market.

It is important to note that these actions have had minimal effect on workers' conditions working for Nike. In the 2019 report by Tailored Wages, Nike cannot prove that minimum living wage is being paid to any workers. 6

Protection of workers' human rights

Nike's sweatshops undoubtedly violated human rights. Workers survive on a low minimum wage and are forced to work in an unsafe environment for long periods of time. However, since the Nike Sweatshop Scandal, many non-profit organisations have been set up to protect the rights of garment workers.

One example is Team Sweat, an organisation tracking and protesting Nike's illegal labour practices. It was founded in 2000 by Jim Keady with the goal of ending these injustices.

USAS is another US-based group formed by students to challenge oppressive practices. The organisation has started many projects to protect workers' rights, one of which is the Sweat-Free Campus Campaign . The campaign required all brands that make university names or logos. This was a major success, gathering enormous public support and causing Nike financial loss. To recover, the company had no choice but to improve the factory conditions and labour rights.

Nike's Corporate Social Responsibility

Since 2005, the company has been producing corporate social responsibility reports as part of its commitment to transparency.

Corporate social responsibility (CSR) is a set of practices a business undertakes in order to contribute to society in a positive way .

Nike's CSR reports revealed the brand's continuous efforts to improve labour working conditions.

For example, FY20 Nike Impact Report, Nike made crucial points on how it protects workers' human rights. The solutions include:

Forbid underage employment and forced labour

Allow freedom of association (Forming of workers' union)

Prevent discrimination of all kind

Provide workers with fair compensation

Eliminate excessive overtime

In addition to labour rights, Nike aims to make a positive difference in the world through a wide range of sustainable practices:

Source materials for apparel and footwear from sustainable sources

Reduce carbon footprint and reach 100% renewable energy

Increase recycling and cut down on overall waste

Adopt new technology to decrease water use in the supply chain

Slowly, the company is distancing itself from the 'labour abuse' image and making a positive impact on the world. It aims to become both a profitable and an ethical company.

Nike sweatshop scandal timeline

1991 - Activist Jeff Ballinger publishes a report exposing low wages and poor working conditions among Indonesian Nike factories. Nike responds by instating its first factory codes of conduct.

1992 - In his article, Jeff Ballinger details an Indonesian worker who was abused by a Nike subcontractor, who paid the worker 14 cents an hour. He also documented other forms of exploitation towards workers at the company.

1996 - In response to the controversy around the use of child labour in its products, Nike created a department that focussed on improving the lives of factory workers.

1997 - Media outlets challenge the company's spokespersons. Andrew Young, an activist and diplomat, gets hired by Nike to investigate its labour practices abroad. His critics say that his report was soft on the company, despite his favourable conclusions.

1998 - Nike faces unrelenting criticism and weak demand. It had to start shedding workers and developing a new strategy. In response to widespread protests, CEO Phil Knight said that the company's products became synonymous with slavery and abusive labour conditions. Knight said:

"I truly believe the American consumer doesn't want to buy products made under abusive conditions"

Nike raised the minimum age of its workers and increased monitoring of overseas factories.

1999 - Nike launches the Fair Labor Association, a not-for-profit group that combines company and human rights representatives to establish a code of conduct and monitor labour conditions.

2002 - Between 2002 and 2004, the company carried out around 600 factory audits. These were mainly focused on problematic factories.

2004 - Human rights groups acknowledge that efforts to improve the working conditions of workers have been made, but many of the issues remain . Watchdog groups also noted that some of the worst abuses still occur.

2005 - Nike becomes the first major brand to publish a list of the factories it contracts to manufacture shoes and clothes. Nike's annual report details the conditions. It also acknowledges widespread issues in its south Asian factories.

2006 - T he company continues to publish its social responsibility reports and its commitments to its customers.

For many years, Nike's brand image has been associated with sweatshops. However, since the sweatshop scandal of the 1990s, the company has made a concerted efforts to reverse this negative image. It does so by being more transparent about labour practices while making a positive change in the world through Corporate Social Responsibility strategies. Nike's CSR strategies not only focus on labour but also other social and environmental aspects.

Nike Sweatshop Scandal - Key takeaways

Nike has been criticised for using sweatshops in emerging economies as a source of labour .

The Nike Sweatshop Scandal began in 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factory in Indonesia.

• Nike's initial response was to deny its association with unethical practices. However, under the influence of public pressure, the company was forced to take action to resolve cases of its unethical working practices.
• From 1999 to 2005, Nike performed factory audits and took many measures to improve labour practices.
• Since 2005, the company also published annual reports to be transparent about its labour working conditions.
• Nike continues to reinforce its ethical image through Corporate Social Responsibility strategies.
• Simon Birch, Sweat and Tears, The Guardian, 2000.
• Lara Robertson, How Ethical Is Nike, Good On You, 2020.
• Ashley Lutz, How Nike shed its sweatshop image to dominate the shoe industry, Business insider, 2015.
• Jack Meyer, History of Nike: Timeline and Facts, The Street, 2019.
• A History of Nike’s Changing Attitude to Sweatshops, Glass Clothing, 2018.
• Tailored Wages Report 2019, https://archive.cleanclothes.org/livingwage/tailoredwages

Flashcards inNike Sweatshop Scandal 30

what year was Nike founded?

What was the nike sweatshop scandal about? 

Nike has been criticized for using sweatshops in Asia as a source of labour. The company was accused of engaging in abusive and verbal behaviour toward its workers. 

Does nike sweatshop scandal involve human rights violations? 

Yes. A report by the Washington Post in 2020 stated that Nike doesn't have evidence of a living wage for its workers. The same year, it was revealed that the company uses forced labor in factories. 

What is the main reason Nike is considered unethical? 

Nike has been criticized for using sweatshops in Asia as a source of labor. The company was accused of abusing its employees. In addition, some of the factories reportedly imposed conditions that severely affected their workers' restroom and water usage. 

Was Nike involved in child labour? 

In what year did Nike created the Fair Labour Association, which was created to oversee the company's 600 factories?

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Frequently Asked Questions about Nike Sweatshop Scandal

What was the Nike sweatshop scandal about?

Nike has been criticised for using sweatshops in emerging economies as a cheap source of labour that violated the human rights of the workers.

When was the Nike sweatshop scandal?

The Nike Sweatshop Scandal began in 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factory in Indonesia.

Does the Nike sweatshop scandal involve human rights violations?

Yes, the Nike sweatshop scandal involved human rights violations. Workers survive on a low minimum wage and are forced to work in an unsafe environment for long periods of time. 

What is the main reason Nike is considered unethical?

The main reason Nike was considered unethical is Human rights violations of workers in its offshore factories.

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Case study: How Nike solved its sweatshop problem

With this article, we present actions Nike has taken through the years to solve its sweatshop problem, using information published in its GRI Standards-based CSR/ ESG/ Sustainability reports.

See what action Nike has taken through the years to solve its sweatshop problem

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Nike is continuously tackling its most important environmental, economic and social impacts with the use of the GRI Standards for CSR/ ESG/ sustainability reporting: an all-round, complete, structured, and methodical approach used by 80% of the world’s 250 largest companies.

• Promoting worker-management dialogue: Nike took action to facilitate worker-management dialogue in contract factories through permanent ESH (Environment, Safety and Health ) committees, training both workers and management to engage in constructive dialogue.
• Directly intervening to protect workers’ rights:  When workers’ rights are not adequately protected by others and Nike believes it can influence the outcome, it may directly intervene, often seeking advice from external stakeholders with expertise on a topic.
• Supporting transparency:  Nike became the first company in its industry to publish online the names and addresses of all contract factories manufacturing Nike-brand products, constantly updating this list.
• Monitoring Nike and contract factories:  In addition to regular management audits in factories, Nike carries out deeper studies called Management Audit Verifications (MAV), which are both an audit and verification in one tool. The MAV tool is focused on four core areas: hours of work, wages and benefits, labour relations and grievance systems.
• Compliance with legally-mandated work hours
• Use of overtime only when employees are fully compensated according to local law
• Informing employees at hiring if compulsory overtime is a condition of employment
• Regularly providing one full day off in every seven and requiring no more than 60 hours of work per week
• Setting industry-leading compliance standards: Contract factories in Nike’s supply chain are subject to strict compliance requirements, starting with risk analysis of the host country and Nike’s Code of Conduct. Additionally, Nike’s internal team of more than 150 trained experts monitors, amends and provides improvement tools to the factories. Nike regularly audits contract factories, with assessments taking the form of audit visits, both announced and unannounced, by internal and external parties, and works with accredited third parties, such as the Fair Labor Association (FLA), to carry out independent monitoring.
• Helping contract factories protect workers’ health and safety: Nike helps its contract factories put in place comprehensive HSE (Health, Safety and Environment) management systems which focus on the prevention, identification and elimination of hazards and risks to workers, expecting its contract factories to perform better than industry averages in injuries and lost-time accidents.
• Forbidding the use of child labour: Nike specifically and directly forbids the use of child labour in facilities contracted to manufacture its products. Nike’s Code of Conduct requires that workers must be at least 16 years old or past the national legal age of compulsory schooling and minimum working age, whichever is higher. In addition, Nike’s Code Leadership Standards include specific requirements on how suppliers should verify workers’ age prior to starting employment and actions a facility must take if a supplier violates Nike’s standards.
• Promoting workers’ freedom of association: Nike’s Code Leadership Standards contain detailed requirements on how suppliers must respect workers’ rights to freely associate, including prohibitions on interference with workers seeking to organise or carry out union activities.

How Nike conducts stakeholder engagement

Nike benefits from constructive guidance from a number of external stakeholders, including civil society organisations, industry, government, investors, consumers and others. To identify and better understand emerging sustainability issues Nike works with Ceres (a sustainability nonprofit organisation), convening an external stakeholder panel and carrying out multiple dialogues that guide the development of its approach to reporting and communication.

How Nike solved its sweatshop problem

It was only 20 years ago that Nike was facing child labour and sweatshop allegations, with consumers protesting outside Niketown stores. All this is hard to believe, given the steady stream of corporate social responsibility (CSR) accolades in the last 10 years.

In 1998, then-CEO Phil Knight promised change. The company struggled to put new policies in place and enforce them. In 2005, Nike published its first version of a CSR/ ESG/ Sustainability report – in which it detailed pay scales and working conditions in its factories and admitted continued problems – and took the dramatic step of publicly disclosing the names and addresses of contract factories producing Nike products – the first company in its industry to do so.

More recently, Nike made this information available on an Interactive Global Manufacturing Map ; there, you can click on a factory to see its name, number of workers, percentage of female and migrant workers and what’s made there. A major change from the days when Nike faced accusations of labour rights in its supply chain, it takes transparency to a whole new level.

Nike recognised its issues, demonstrated transparency and worked toward change – and, today, it is counted among CSR/ ESG/ Sustainability leaders.

Which Sustainable Development Goals (SDGs) have been addressed?

The SDGs addressed in this case are:

• Sustainable Development Goal (SDG) 3 : Ensure healthy lives and promote wellbeing for all at all ages
• Business theme:  Occupational health and safety
• Sustainable Development Goal (SDG) 5 : Achieve gender equality and empower all women and girls
• Business theme: Workplace violence and harassment
• Sustainable Development Goal (SDG) 8 : Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
• Business theme: Occupational health and safety, Freedom of association and collective bargaining, Abolition of child labor, Elimination of forced or compulsory labor, Labor practices in the supply chain
• Sustainable Development Goal (SDG) 16 : Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
• Business theme:  Abolition of child labor, Labor practices in the supply chain

78% of the world’s 250 largest companies report in accordance with the GRI Standards

SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.

Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism .

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References:

This article was compiled using an article from the links below. For the sake of readability, we did not use brackets or ellipses but made sure that the extra or missing words did not change the article’s meaning. If you would like to quote these written sources from the original please revert to the links below:

http://www.theguardian.com/sustainable-business/2016/jan/02/billion-dollar-companies-sustainability-green-giants-tesla-chipotle-ikea-nike-toyota-whole-foods

http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5

http://www.triplepundit.com/special/roi-of-sustainability/how-nike-embraced-csr-and-went-from-villain-to-hero/

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Nike Sustainability and Labor Practices 2008-2013

The case discusses Nike’s sustainability and labor practices from 1998 to 2013, focusing on the successful steps Nike took up and down the supply chain and in its headquarters to make its products and processes more environmentally friendly, and the challenges and complexities it was still facing in its efforts to improve labor conditions. Nike’s labor practices were the subject of high profile public protests in the 1990s, and CEO Mark Parker said the company still had a lot of work to do in that area. The case also details how making sustainability a key part of the design process led Nike to develop more innovative and high-performing products, such as a breakthrough running shoe called the Flyknit, which was widely worn at the 2012 Olympics. Following protests in the late 1990s over unsafe working conditions, low wage rates, excessive overtime, restrictions on employee organizing, and negative environmental impacts, Nike began shifting from a reactive to a proactive mode. During the 15 years covered in this case, Nike made significant changes in its sustainability practices, including moving its Corporate Responsibility team much further upstream in the organization, where it could have a greater impact on decisions by providing input early in the process. The company also developed multiple indexes that measured its sustainability practices and those of its independent contract manufacturers. The indexes had metrics for measuring the relevant impacts of product waste, water, chemistry, labor, and energy. Nike’s critics said many labor issues had not been resolved, but Nike made progress in that area through collaboration with governments, NGOs and labor unions, and through management compliance trainings. If a contract factory did not score high enough on the company’s sustainability and labor ratings scales, Nike would impose sanctions on the factory or even drop it from the supply chain. These actions took Nike off the top of most activists’ target lists.

Learning Objective

The learning objective of the case is for students to understand how a large, high-profile global company is navigating the complexities of becoming more sustainable and improving labor practices.

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Just (Don't) Do It: Nike Case Study

Nike was not the only university supplier with labor issues, nor was it the only one to vocally oppose the university’s anti-sweatshop policies. However, due to its impressive role in American pop culture and a number of widely publicized factory scandals, Nike became a national symbol for the dangers of the sweatshop labor. On campus, Nike’s massive contract with Michigan athletics, one of the largest of any college in the country, made it an easy target for SOLE and others.  Students made the company a focal point in many of their demonstrations.

Nike's relationship with the university was rocky at best. Starting with the University of Michigan adopting a strong code of conduct in 1999, Nike began years of negotiations to weaken anti-sweatshop protections and to mitigate the impact of the university's regulations on their business. The last straw was Michigan joining the WRC, and Nike decided to would rather end its contract than comply with a set of guidelines it considered unreasonable. While the university and Nike signed a new contract in 2001 with new protections for they company's workers, Nike continued to be a target for activists.

Michigan in the World features exhibitions of research conducted by undergraduate students about the history of the University of Michigan and its relationships beyond its borders.

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Nike and Sweatshop Labour

Nike child labour.

Nike's Initial Response

How Did Nike Recover?

Protection of Workers' Human Rights

Nike's Corporate Social Responsibility

Nike Sweatshop Scandal Timeline

What is nike sweatshop scandal: timeline & key issues.

Nike ranks among the top athletic footwear and apparel companies globally, though its labor practices have not always upheld ethical standards. During the late 1990s and early 2000s, the company faced allegations of utilizing sweatshops in the production of activewear and footwear.

Following a delayed response initially, Nike implemented measures to enhance the working conditions for its factory workers. Consequently, the company managed to rebuild public confidence and establish itself as a prominent brand within the sports apparel industry. Let's delve into Nike's handling of the Sweatshop Scandal and its resolution.

Nike, similar to numerous other multinational corporations, delegates the manufacturing of athletic apparel and sneakers to developing economies to cut costs through utilizing an inexpensive labor force. Consequently, this strategy has resulted in the establishment of sweatshops - facilities where laborers are compelled to toil extended hours for meager pay amidst deplorable working conditions.

Nike initially established sweatshops in Japan, later relocating to countries with more affordable labor like South Korea, China, and Taiwan. As these nations' economies progressed, Nike transitioned to cheaper suppliers in China, Indonesia, and Vietnam.

While Nike has been utilizing sweatshops since the 1970s, public awareness heightened in 1991 after Jeff Ballinger revealed the harsh working conditions of Nike factory workers in Indonesia.

The report highlighted the meager wages of only 14 cents per hour, which were barely enough to cover basic living costs. This disclosure sparked public outrage, leading to mass protests at the Barcelona Olympics in 1992. Despite the backlash, Nike continued with its plans to expand Niketowns - facilities that showcase a wide range of Nike-based services and experiences - further fueling resentment among consumers. 

Nike not only faced the sweatshop issue but also became entangled in the child labor controversy. Life Magazine disclosed in 1996 a story showcasing an image of a young boy named Tariq from Pakistan, who was said to be stitching Nike footballs for a daily wage of 60 cents.

From 2001 on, Nike started to audit its factories and prepared a report in which it concluded that it could not guarantee that its products would not be produced by children.

Nike's Initial Response

Nike initially disclaimed any connection to the practices, asserting it had limited control over the contracted factories and their hiring decisions.

Following the demonstrations in 1992, the establishment of a department aimed at enhancing factory conditions was the company's more tangible response. Nevertheless, this proved insufficient in addressing the issue as disputes persisted, with numerous Nike sweatshops remaining in operation.

Nike laid off many workers due to increased public backlash in 1997-1998.

CEO Phil Knight acknowledged the presence of unjust labor practices in Nike's production sites during his speech in May 1998. He pledged to enhance the circumstances by increasing the minimum wage and guaranteeing clean air in all factories.

In 1999, Nike's Fair Labor Association was established to protect workers' rights and monitor the Code of Conduct in Nike factories. From 2002 to 2004, over 600 factories underwent audits regarding occupational health and safety. In 2005, a comprehensive list of its factories was released by the company, accompanied by a report outlining the working conditions and wages of employees at Nike's facilities.

Since then, Nike has released yearly reports on labor practices, demonstrating transparency and genuine efforts to rectify previous errors.

Nike has been lauded by critics and activists for not ignoring the ongoing sweatshop issue. Its persistent efforts have led to the gradual regain of public trust and the reassertion of its market dominance.

It is important to note that these actions have had minimal effect on workers' conditions working for Nike. Nike is unable to demonstrate in the 2019 Tailored Wages report that the minimum living wage is being paid to any workers.

Protection of Workers' Human Rights

Nike's factories clearly infringed on human rights, as employees were paid poorly and subjected to extended hours in hazardous environments. Following the Nike Sweatshop Scandal, numerous non-profit groups have arisen to defend the rights of manufacturing workers.

Established in 2000 by Jim Keady, Team Sweat is a group that monitors and rallies against Nike's illegal labor practices, with the goal of stopping these wrongdoings.

USAS, a US student-formed group, aims to combat oppressive practices. They have initiated several initiatives advocating for workers' rights, such as the Sweat-Free Campus Campaign. This campaign mandated university-associated brands to adhere to specific guidelines. The initiative garnered significant public backing and impacted Nike's finances. In response, Nike had to boost factory conditions and labor rights to recuperate from the setback.

Nike's Corporate Social Responsibility

Since 2005, the company has been producing corporate social responsibility reports as part of its commitment to transparency.

Corporate social responsibility (CSR) is a set of practices a business undertakes in order to contribute to society in a positive way.

Nike's CSR reports indicated the brand's ongoing endeavors to enhance labor working conditions.

For example, FY20 Nike Impact Report, Nike made crucial points on how it protects workers' human rights. The solutions include:

• Forbid underage employment and forced labour
• Allow freedom of association (Forming of workers' union)
• Prevent discrimination of all kind
• Provide workers with fair compensation
• Eliminate excessive overtime

In addition to labour rights, Nike aims to make a positive difference in the world through a wide range of sustainable practices:

• Source materials for apparel and footwear from sustainable sources
• Reduce carbon footprint and reach 100% renewable energy
• Increase recycling and cut down on overall waste
• Adopt new technology to decrease water use in the supply chain

The company is gradually shedding its reputation for 'labour abuse' and striving to create a beneficial global influence. Its goal is to be a profitable and ethical organization.

1991 - Jeff Ballinger, an activist, releases a report revealing low pay and unfavorable working conditions in Indonesian Nike factories. As a result, Nike puts into effect its initial factory code of conduct.

1992 - Jeff Ballinger's article recounts the mistreatment of an Indonesian worker by a Nike subcontractor, paying the worker a mere 14 cents per hour. Ballinger also chronicled additional instances of worker exploitation within the company.

1996 - In response to the controversy around the use of child labour in its products, Nike created a department that focused on improving the lives of factory workers.

1997 - Media organizations question the company's representatives. Nike recruits activist and diplomat Andrew Young to examine its overseas labor practices. Despite his positive findings, some detractors contend that his assessment of the company was too lenient.

1998 - Nike faces unrelenting criticism and weak demand. It had to start shedding workers and developing a new strategy. In light of extensive protests, CEO Phil Knight remarked that the company's products had become linked with slavery and exploitative labor practices.

"I truly believe the American consumer doesn't want to buy products made under abusive conditions"

Nike raised the minimum age of its workers and increased monitoring of overseas factories.

1999 - Nike launches the Fair Labor Association, a not-for-profit group that combines company and human rights representatives to establish a code of conduct and monitor labour conditions.

2002 - Between 2002 and 2004, the company carried out around 600 factory audits. These were mainly focused on problematic factories.

2004 - Human rights organizations recognize that while there have been attempts to enhance the working conditions of workers, many issues persist. Monitoring groups have also observed that some of the most severe abuses continue to take place.

2005 - Nike is the initial prominent brand to reveal a roster of the factories it employs to produce footwear and apparel. The company's yearly report outlines the circumstances, recognizing prevalent problems in its south Asian factories.

2006 - The company continues to publish its social responsibility reports and its commitments to its customers.

Nike's brand was long linked with sweatshops, but since the 1990s scandal, the company has worked hard to change this perception. By increasing transparency in labor practices and implementing Corporate Social Responsibility initiatives, Nike aims to improve its image and make a difference in the world. In addition to labor practices, Nike's CSR efforts also address social and environmental concerns.

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• Nike Sweatshop Scandal

Nike is one of the largest athletic footwear and clothing companies in the world, but its labour practices have not always been ethical. Back in the late 1990s and early 2000s, the company was accused of using sweatshops to make activewear and shoes. Despite an initial slow response, the company eventually took measures to improve the working conditions of employees in its factories. This has allowed it to regain public trust and become a leading brand in the sportswear sector. Let's take a closer look at Nike's Sweatshop Scandal and how it has been resolved. 

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Nike and sweatshop labour

Like other multinational companies, Nike outsources the production of sportswear and sneakers to developing economies to save costs, taking advantage of a cheap workforce. This has given birth to sweatshops - factories where workers are forced to work long hours at very low wages under abysmal working conditions.

Nike's sweatshops first appeared in Japan, then moved to cheaper labour countries such as South Korea, China, and Taiwan. As the economies of these countries developed, Nike switched to lower-cost suppliers in China, Indonesia, and Vietnam .

Nike's use of sweatshop dates back to the 1970s but wasn't brought to public attention until 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factories in Indonesia.

The report described the meagre wages that the factory workers received, only 14 cents per hour, barely enough to cover basic living costs. The disclosure aroused public anger, resulting in mass protests at the Barcelona Olympics in 1992. Despite this, Nike continued making its plans to expand Niketowns - fa cilities displaying a wide range of Nike-based services and experiences - which fuelled more resentment within consumers.

For more insight into how a company's external economic environment can impact its internal operations, take a look at our explanation on the Economic Environment .

Nike child labour

In addition to the sweatshop problem, Nike also got caught in the child labour scandal. In 1996, Life Magazine published an article featuring a photo of a young boy named Tariq from Pakistan, who was reportedly sewing Nike footballs for 60 cents a day .

From 2001 on, Nike started to audit its factories and prepared a report in which it concluded that it could not guarantee that its products would not be produced by children .

Nike's initial response

Nike initially denied its association with the practices, stating it had little control over the contracted factories and who they hired.

After the protests in 1992, the company took more concrete action by setting up a department to improve factory conditions. However, this didn't do much to resolve the problem. Disputes continued. Many Nike sweatshops still operated.

In 1997-1998, Nike faced more public backlash, causing the sportswear brand to lay off many workers.

How did Nike recover?

A major shift happened when CEO Phil Knight delivered a speech in May 1998. He admitted the existence of unfair labour practices in Nike's production facilities and promised to improve the situation by raising the minimum wage, and ensuring all factories had clean air.

In 1999, Nike's Fair Labor Association was established to protect workers' rights and monitor the Code of Conduct in Nike factories. Between 2002 and 2004, more than 600 factories were audited for occupational health and safety . In 2005, the company published a complete list of its factories along with a report detailing the working conditions and wages of workers at Nike's facilities. Ever since, Nike has been publishing annual reports about labour practices, showing transparency and sincere efforts to redeem past mistakes.

While the sweatshop issue is far from over, critics and activists have praised Nike. At least the company does not turn a blind eye to the problem anymore. Nike's efforts finally paid off as it slowly won back public trust and once again dominated the market.

It is important to note that these actions have had minimal effect on workers' conditions working for Nike. In the 2019 report by Tailored Wages, Nike cannot prove that minimum living wage is being paid to any workers. 6

Protection of workers' human rights

Nike's sweatshops undoubtedly violated human rights. Workers survive on a low minimum wage and are forced to work in an unsafe environment for long periods of time. However, since the Nike Sweatshop Scandal, many non-profit organisations have been set up to protect the rights of garment workers.

One example is Team Sweat, an organisation tracking and protesting Nike's illegal labour practices. It was founded in 2000 by Jim Keady with the goal of ending these injustices.

USAS is another US-based group formed by students to challenge oppressive practices. The organisation has started many projects to protect workers' rights, one of which is the Sweat-Free Campus Campaign . The campaign required all brands that make university names or logos. This was a major success, gathering enormous public support and causing Nike financial loss. To recover, the company had no choice but to improve the factory conditions and labour rights.

Nike's Corporate Social Responsibility

Since 2005, the company has been producing corporate social responsibility reports as part of its commitment to transparency.

Corporate social responsibility (CSR) is a set of practices a business undertakes in order to contribute to society in a positive way .

Nike's CSR reports revealed the brand's continuous efforts to improve labour working conditions.

For example, FY20 Nike Impact Report, Nike made crucial points on how it protects workers' human rights. The solutions include:

Forbid underage employment and forced labour

Allow freedom of association (Forming of workers' union)

Prevent discrimination of all kind

Provide workers with fair compensation

Eliminate excessive overtime

In addition to labour rights, Nike aims to make a positive difference in the world through a wide range of sustainable practices:

Source materials for apparel and footwear from sustainable sources

Reduce carbon footprint and reach 100% renewable energy

Increase recycling and cut down on overall waste

Adopt new technology to decrease water use in the supply chain

Slowly, the company is distancing itself from the 'labour abuse' image and making a positive impact on the world. It aims to become both a profitable and an ethical company.

Nike sweatshop scandal timeline

1991 - Activist Jeff Ballinger publishes a report exposing low wages and poor working conditions among Indonesian Nike factories. Nike responds by instating its first factory codes of conduct.

1992 - In his article, Jeff Ballinger details an Indonesian worker who was abused by a Nike subcontractor, who paid the worker 14 cents an hour. He also documented other forms of exploitation towards workers at the company.

1996 - In response to the controversy around the use of child labour in its products, Nike created a department that focussed on improving the lives of factory workers.

1997 - Media outlets challenge the company's spokespersons. Andrew Young, an activist and diplomat, gets hired by Nike to investigate its labour practices abroad. His critics say that his report was soft on the company, despite his favourable conclusions.

1998 - Nike faces unrelenting criticism and weak demand. It had to start shedding workers and developing a new strategy. In response to widespread protests, CEO Phil Knight said that the company's products became synonymous with slavery and abusive labour conditions. Knight said:

"I truly believe the American consumer doesn't want to buy products made under abusive conditions"

Nike raised the minimum age of its workers and increased monitoring of overseas factories.

1999 - Nike launches the Fair Labor Association, a not-for-profit group that combines company and human rights representatives to establish a code of conduct and monitor labour conditions.

2002 - Between 2002 and 2004, the company carried out around 600 factory audits. These were mainly focused on problematic factories.

2004 - Human rights groups acknowledge that efforts to improve the working conditions of workers have been made, but many of the issues remain . Watchdog groups also noted that some of the worst abuses still occur.

2005 - Nike becomes the first major brand to publish a list of the factories it contracts to manufacture shoes and clothes. Nike's annual report details the conditions. It also acknowledges widespread issues in its south Asian factories.

2006 - T he company continues to publish its social responsibility reports and its commitments to its customers.

For many years, Nike's brand image has been associated with sweatshops. However, since the sweatshop scandal of the 1990s, the company has made a concerted efforts to reverse this negative image. It does so by being more transparent about labour practices while making a positive change in the world through Corporate Social Responsibility strategies. Nike's CSR strategies not only focus on labour but also other social and environmental aspects.

Nike Sweatshop Scandal - Key takeaways

Nike has been criticised for using sweatshops in emerging economies as a source of labour .

The Nike Sweatshop Scandal began in 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factory in Indonesia.

• Nike's initial response was to deny its association with unethical practices. However, under the influence of public pressure, the company was forced to take action to resolve cases of its unethical working practices.
• From 1999 to 2005, Nike performed factory audits and took many measures to improve labour practices.
• Since 2005, the company also published annual reports to be transparent about its labour working conditions.
• Nike continues to reinforce its ethical image through Corporate Social Responsibility strategies.
• Simon Birch, Sweat and Tears, The Guardian, 2000.
• Lara Robertson, How Ethical Is Nike, Good On You, 2020.
• Ashley Lutz, How Nike shed its sweatshop image to dominate the shoe industry, Business insider, 2015.
• Jack Meyer, History of Nike: Timeline and Facts, The Street, 2019.
• A History of Nike’s Changing Attitude to Sweatshops, Glass Clothing, 2018.
• Tailored Wages Report 2019, https://archive.cleanclothes.org/livingwage/tailoredwages

Flashcards inNike Sweatshop Scandal 30

what year was Nike founded?

What was the nike sweatshop scandal about? 

Nike has been criticized for using sweatshops in Asia as a source of labour. The company was accused of engaging in abusive and verbal behaviour toward its workers. 

Does nike sweatshop scandal involve human rights violations? 

Yes. A report by the Washington Post in 2020 stated that Nike doesn't have evidence of a living wage for its workers. The same year, it was revealed that the company uses forced labor in factories. 

What is the main reason Nike is considered unethical? 

Nike has been criticized for using sweatshops in Asia as a source of labor. The company was accused of abusing its employees. In addition, some of the factories reportedly imposed conditions that severely affected their workers' restroom and water usage. 

Was Nike involved in child labour? 

In what year did Nike created the Fair Labour Association, which was created to oversee the company's 600 factories?

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Frequently Asked Questions about Nike Sweatshop Scandal

What was the Nike sweatshop scandal about?

Nike has been criticised for using sweatshops in emerging economies as a cheap source of labour that violated the human rights of the workers.

When was the Nike sweatshop scandal?

The Nike Sweatshop Scandal began in 1991 when Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factory in Indonesia.

Does the Nike sweatshop scandal involve human rights violations?

Yes, the Nike sweatshop scandal involved human rights violations. Workers survive on a low minimum wage and are forced to work in an unsafe environment for long periods of time. 

What is the main reason Nike is considered unethical?

The main reason Nike was considered unethical is Human rights violations of workers in its offshore factories.

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Sweatshops Almost Killed Nike in the 1990s, Now There are Modern Slavery Laws

One of the biggest threats to a retailer’s reputation is an allegation of involvement in slavery, human trafficking, or child labor. ask nike. in the 1990s, the portland-based sportswear giant was plagued with damning reports that its global supply chain was being ....

September 27, 2019 - By TFL

Case Documentation

One of the biggest threats to a retailer’s reputation is an allegation of involvement in slavery, human trafficking, or child labor. Ask Nike. In the 1990s, the Portland-based sportswear giant was plagued with damning reports that its global supply chain was being supported by child labor in places like Cambodia and Pakistan, with minors stitching soccer balls and other products as many as seven days a week for up to 16 hours a day. All the while, sweatshop conditions were running rampant in factories Nike maintained contracts with, and minimum wage and overtime laws were being flouted with regularity.

The backlash against Nike was so striking that it served to tarnish the then-30 year old company’s image and negatively affect its bottom line. “Sales were dropping and Nike was being portrayed in the media as a company that was willing to exploit workers and deprive them of the basic wage needed to sustain themselves in an effort to expand profits,” according to Stanford University research.

That was not the case according to Nike’s chairman and chief executive at the time Phil Knight, who  told the New York Times in 1998 that he “truthfully [did not] think that there has been a material impact on Nike sales by the human rights attacks,” and pointed instead, to “the financial crisis in Asia, where the company had been expanding sales aggressively, and its failure to recognize a shifting consumer preference for hiking shoes.”

Yet, the company was, nonetheless, forced to spend the next decade cleaning up its act in order to hold on to – and in some cases, win back – consumers, from overhauling its supply chain oversight efforts to include independent monitoring and audits to releasing public-facing vows to “root out underage workers and require overseas manufacturers of its wares to meet strict United States health and safety standards.”

It is critical to note that Nike took hits for its nefarious labor practices long before consumers were readily learning about and connecting with brands on social media, and during a time when retailers’ supply chains were generally less expansive than they are today. Fast forward to 2019 and with the rise of digital media and social media, and the larger trend towards cause-oriented consumerism, paired with the increasingly complicated and multi-national nature of corporate entities’ supply chains, the stakes are significantly higher than they were in the 1990s.

The demands and the level of risk at play is exacerbated by the fact that shoppers, particularly of the millennial type, are actively calling on fashion brands and retailers to be transparent in terms of how and where their products are made. But even more than consumer-driven calls for clarity and principled activity, in many jurisdictions, the law requires it. For instance, in the United Kingdom, the Modern Slavery Act of 2015 requires commercial entities that have a global turnover above £36 million ($43.5 million) to publicly file an annual slavery and trafficking statement, highlighting what steps –  if any –  they are taking to combat trafficking and slavery in their operations and supply chains.

Meanwhile, in the U.S., California passed the Transparency in Supply Chains Act in January 2012, thereby requiring retailers and manufacturers with global revenues that exceed $100 million and which do business in California (a low bar given the sheer size of California’s economy and the sweeping business ties that come about as a result of e-commerce operations) to publicly disclose the degree to which they are addressing forced labor and human trafficking in their global manufacturing networks.

Two years later, the Federal Business Supply Chain Transparency on Trafficking and Slavery Bill was introduced to the House of Representatives. The bill proposed required all companies with worldwide annual sales exceeding $100 million, and which are currently required to file annual reports with the Securities and Exchange Commission, are to disclose what measures, if any, they have taken to identify and address conditions of forced labor, slavery, human trafficking and child labor within their supply chains, either in the U.S. or abroad.

Although not ultimately enacted, the bill “demonstrates the continued attention that the issues of forced labor, slavery, human trafficking, and child labor in manufacturers’ supply chains is receiving in the U.S. and around the world,” according to Pittsburg-headquartered law firm  K&L Gates .

Still yet, since then, the Trafficking Victims Protection Reauthorization Act (“TVPA”) has come into effect. As the first comprehensive federal law to address modern slavery, the TVPA creates a private right of action for victims of forced labor against third parties, such as fashion brands and retailers, that benefit from participating in a venture if they knew or “should have known” that the venture engaged in modern slavery.  In other words, the TVPA imposes civil liability for corporate negligence.

Looking beyond the fact that supply chain oversight and accountability is a legal issue in many jurisdictions, it is worth noting that avoiding supply chain scandals, and in fact, being able to point to efforts aimed at transparency, is just good business. Given consumers’ increasing interest in the supply chains of their favorite brands and with the potential damage that could come about – potentially, virally – as a result of ties to slavery, human trafficking, and/or child labor, companies are being advised to consistently assess and identify potential instances of slavery and trafficking risks in their operations and supply chains, and prioritize those risks for further investigation and/or action.

In furtherance of such efforts, retailers and fashion brands are encouraged to exercise due diligence before entering into a supply agreement or contract, including requiring the supplier to provide information necessary to establish whether or not it – or any of its sub-contractors and sub-suppliers – are involved in misconduct.

Contractually speaking, brands should establish and require that their the suppliers, in performing their obligations under the agreement, comply with an anti-slavery policy and with all applicable anti-slavery and human trafficking laws, statutes, regulations and codes in force, and also require the supplier to include similar provisions in its own contracts with its sub-contractors and sub-suppliers.

Ideally, a brand’s contract with a supplier should  include terms to prevent the supplier from sub-contracting or sub-supplying without its written consent, thereby giving the retailer the opportunity to vet the third party and veto the engagement if necessary; and it should require the supplier to maintain documentary evidence of the age of each of its employees to ensure that minimum legal age requirements are being met.

However, in many cases, this has proven futile from a practical perspective even with dedicated oversight, as contracting and sub-contracting runs rampant in many manufacturing centers, such as Bangladesh, particularly when there are “tight deadlines to meet and/or unanticipated orders” at play, according to the not-for-profit Centre for Research on Multinational Corporations . In these instances, “manufacturers subcontract certain production processes to other factories and workplaces, without informing the buyer.

Because brands and retailers may inadvertently become involved if malpractice claims are risen in connection with their supply chains, turning a blind eye or failing to take active steps to prevent slavery will not be sufficient in the eyes of the law or consumers.

Nicola Conway is a Trainee Solicitor at Bryan Cave in London. Edits/additions courtesy of TFL. 

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Can Lean Manufacturing Put an End to Sweatshops?

• Greg Distelhorst

A new study shows that global trade doesn’t always mean poor working conditions.

While no one advocates for labor abuses, poor working conditions are often seen as an inevitable consequence of global trade.  Producers in less-developed countries compete by keeping costs low. Conventional wisdom holds that improving working conditions (which typically costs money)  would undermine the competitive advantage these firms enjoy.

• GD Greg Distelhorst is an associate professor of international business at Said Business School, University of Oxford. In July 2016, he will join the faculty of the MIT Sloan School of Management.

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Nike: the Sweatshop Debate Case Study

The host country governments have played a role this global business operation. The global managers have faced strategic and operational challenges. Sweatshops are described as “work environments that violate laws and where workers are subject to extreme exploitation, Including the absence of a living wage or long work hours; poor working conditions, such as health and safety hazards; arbitrary discipline, such as verbal or physical abuse: and/or fear and intimidation when they speak out, organize, or attempt to form a union” (Radian & Calking, 2006).

According to a 1997 report y the San Francisco based Global Exchange several factories in Southern China, owned by Korean subcontractors for Nikkei, had “workers as young as 13 earning as little as 10 cents an hour who toiled up to 17 hours daily in enforced silence” (Hill, 2009). This was in violation of the Chinese labor and minimum wage requirement laws. In many of the subcontracted sweatshop factories the workers are exposed to hazardous chemicals that exceed local legal standards and they are not provided with protective gear.

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These legal violations have been exposed in various factories In there countries also. Nikkei responded by requiring the subcontractors to abide by the minimum Limits for working conditions and pay, has arranged for Independent auditors to inspect the factories, and has terminated contracts with factories that do not comply with its standards (Hill, 2009).

Sweatshops continue to exist because of economic and social circumstances and have become integrated in various cultures, especially in emerging and developing countries. “Deference to cultural diversity is also to blame for the continuing presence of sweatshops.

Although Western thinking tends to censure sweatshop labor practices, Westerners are sometimes hesitant to interfere in other cultures. The imposition of Western values on non-western cultures is widely regarded as inappropriate and undesirable “(Radian & Calking, 2006). These factory workers are often displaced agricultural workers, sometimes illiterate, and possibly have no marketable skills. They may have no choice but to accept the conditions of sweatshop work or face starvation.

Governments In developing countries frequently permit and support sweatshops because the whitewash create tax revenues and other income. Sweat shops often receive the tactic approval AT isosceles attempting to Improve tenet economic standing Decease sweatshops are viewed as a way to enliven a nation’s domestic markets and export activity’ (Radian & Calking, 2006). In 2005 Christine Basics conducted a study and found that Nikkei had closed all U. S. Factories and moved production to overseas subcontracted facilities.

These facilities are located in countries that are trying to improve their global economies and do not have the same workplace standards mound in the U. S. Sweatshops are often established to lower the cost of labor in production and to bring about higher profits for managers and shareholders” (Radian & Calking, 2006). Global managers for Nikkei have had to make some strategic and operational changes in the manufacturing area without having a negative affect for the stakeholders. One example off positive change is the Ye Yen industrial complex in southern China that manufactures approximately one-third of the world’s shoes. Nikkei successfully pressed its suppliers to improve the working conditions in the factory.

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