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Again, has Nike provided a watershed moment in supply chain ethics?

This is an extraordinary story, if you are a labour rights campaigner. If you are Nike, it’s a one-off act of sympathetic generosity.

The New York Times headline reads: Pressured, Nike to Help Workers in Honduras.

The short version is that Nike, after severe protests from student groups at America’s top universities, has set up a “worker relief fund” for the former employees of two suppliers who laid off workers and failed to pay monies owed to their former staff.

The NY Times piece implies the $1.54 million in the fund comes from Nike alone. The Nike website states that: “Nike will contribute to a workers relief fund of $1.5 million”. The likelihood is it’s all from Nike, and they are being modest, I would warrant.

The NY Times piece also claims that “Nike also agreed to provide vocational training and finance health coverage for workers laid off by the two subcontractors.” Another extraordinary move.

Scott Nova, of the Workers Rights Consortium, who has written for Ethical Corporation in the past, says it’s a big moment in responsible business:

““This may be a watershed moment,” Scott Nova, executive director of the Worker Rights Consortium, a group of 186 universities that monitors factories that make college-logo apparel, said. “Up until now, major apparel brands have steadfastly refused to take any direct financial responsibility for the obligations to the workers in their contractors’ factories. Now the most high-profile sports apparel firm has done just that.””

The NY Times also says that “Nike pledged that other factories it used in Honduras would give priority to hiring workers laid off by the two subcontractors.”

But the company is not keen on this episode setting a precedent, of course, the NY Times reporting that:

The “…company would stick to its position that contractors and subcontractors were responsible for obligations like severance pay.”

The students have put their case too:

“Alex Bores, president of the United Students Against Sweatshops chapter at Cornell, argued that it was only fair for Nike to make good on its subcontractors’ obligations. “Nike plays a key role in setting up the worldwide apparel system that its contractors and subcontractors work in,” Mr. Bores said.

The question is, what kind of watershed moment is this?

If you read the NY Times piece, the power of the organised student movement appears to be both growing and significant:

“Last November, the student movement against sweatshops got Russell Athletic to agree to rehire 1,200 workers in Honduras who lost their jobs when the company closed their factory soon after the workers had unionized. The students had persuaded 100 universities to sever or suspend their licensing agreements with Russell.”

So this will be seen as a major victory by the activist groups. I’ve met the deeply-passionate Scott Nova, and he is not a man who gives up. His group has been at this for more than a decade, and this must be a major fillip for them.

But Nike deserves huge praise here. This is a company that is still (unfairly) synonymous, in the eyes of many, with sweatshops, yet has done as much as any company to tackle the issues head on. Some of you may remember the infamous Kasky case, which has not deterred the firm from really innovating.

For some of the latest moves by the company, download this free PDF case study and briefing from our website, published just last month.

Nike has clearly gone further than any other firm I can think of to tackle this issue, albeit in the face of pressure on a big, ever-vulnerable brand.

Many other companies, and by that I mean 99.99% of the other firms in the sector, would have shut up shop and refused a compromise deal such as this.

The long-term question is: Does this set a precedent for Nike, and other firms the students target?

The company, whose work in the area is led by the very impressive Hannah Jones, will clearly not want that to be the case.

They will see this as a special case, an act of kindness in line with their values and sustainability strategy.

Only time will tell. Most companies in the textiles and shoe-wear sector will be horrified, terrified that they will be held responsible for the actions of their suppliers all over the world. As we all know, suppliers not paying workers is a major problem from China to Latin America and Africa.

But Nike has laid down a leadership marker here. The firm has shown that principles beat rules hands down. This act shows that they are prepared to deal with the consequences. This is a brave and praiseworthy move to help poor and vulnerable workers in a country in turmoil, Honduras.

Every company that ever innovated on sustainability did so partly as a leap of faith. This is not unusual in business decisions of course, despite the fakery of corporate strategy documents and slippery ‘strategic’ management consultants. You only have to read Jim Collin’s work to know this is true.

Once the leap has been taken, in line with corporate values, leading companies figure out how to make the most of it.

This case though, does not have a specific business case surrounding it. It’s moral leadership in exceptional circumstances. And if it plays a small part in persuading a few people that Nike is one of the best companies in this space, that’s a welcome, but only additional consequence.

2 Comments

  1. Sylvia Kinnicutt

    I agree this is a good move on the part of Nike, but as the article states, it is one that they made only after significant pressure from university groups. Originally, Nike did not want to take this level of responsiblity. Do you think their initial reluctance dampens the significnace of their response?

  2. Sylvia, that's a good point. Thanks for the comment. I guess from my point of view, Nike did not have to listen to the activist groups and come up with a compromise solution.

    We all probably recall that companies such as Nike have faced this kind of action many times before.

    So I do feel it counts as a significant moment. It's important to remember, I think, that legally, (and many would argue, morally), they did not have to do this, and the fact that they did shows a progressive attitude to the issues lacking in most other companies in the sector. Thanks for the comment and I hope you'll continue to post on the blog.

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