Putting the Boot In
Citation: Sharon Beder, 'Putting the Boot In', The Ecologist 32(3), April 2002, pp. 24-28, 66-7.
This is a final version submitted for publication.
Following years of criticism over its poor labour and environmental standards, Nike claims to have cleaned up its act, even signing onto the Global Compact to prove it. But the truth is rather different, and the company's recent behaviour is a textbook study in greenwash.
Nike spends more money on advertising and promoting the reputation of its products than most other companies in the world -- $1.13 billion in 1998. Celebrities, such as Tiger Woods, Michael Jordan, Andre Agassi, John McEnroe, Monica Seles and Carl Lewis are paid huge sums of money for their association with the company's products. In 1998, for example, Nike paid Tiger Woods $28 million and Michael Jordan $45 million.1
Contrast these vast sums with the money Nike spends on philanthropy in the countries where its products are made. In Indonesia, for example, it has spent $100,000 since 1998 on continuing education programmes for Nike workers and $150,000 on small loans to unemployed and disadvantaged people.2
These payments are also dwarfed by the amount the company spends on strategic philanthropy and cause-related marketing in the US. It gives millions of dollars to US schools and universities for sports equipment and scholarships.3 It has also donated millions to children's television and to the Boys and Girls Club of America,4 as well as giving excess inventory, sample products and used office equipment to charities.5
At the 1997 meeting of Business for Social Responsibility a Nike representative showed a video of happy workers in a Vietnamese factory. 'Unfortunately for Nike, two days later while the conference was still going on - a story appeared on the front page of The New York Times about conditions in Vietnamese Nike plants where workers were being exposed to carcinogens at 177 times safe levels, and were being paid just $10 for a 65hour work week (far longer than the local law [allowed]).'6
Nike now embraces the rhetoric of environmental responsibility - including what it calls the 'triple bottom line'.7 This approach supplements the financial/economic bottom line with a stated concern for environmental and social responsibilities. To this end the company is making efforts to recycle excess rubber from factories, converting to water-based solvents and recycling used shoes. It has developed a tank top made of 75 per cent recycled plastic and the T-shirts it sells in the US contain 3 per cent organic cotton. It promised to be able to make 90 per cent of its shoes without toxic glues, cleaners and solvents by 2001. As a result it was chosen as one of the companies to be included in the Dow Jones Sustainability Index.8 However, despite these environmental improvements, Nike's reputation in the areas of social responsibility and human rights has continued to come under attack.
Heal or Heel?
Nike does not manufacture its own products. It only designs and markets them. About 550,000 workers are employed in 700 factories in 50 countries to make Nike products, the majority in Asia.9 The contractors tend to pay close to the minimum wage.10 This cheap labour enables Nike to spend a great deal on design and marketing, pay large executive salaries, maintain large profits, and still keep the cost of the shoes affordable to the middle classes in affluent countries. Shoes that cost $16.75 to manufacture are sold for around $100 in the US.11
Since Nike spends so much on marketing and so little on the product itself, it is clear that the reputation of its brand is all-important. The writer Naomi Klein has noted: 'In many ways branding is the Achilles heel of the corporate world. The more these companies shift to being all about brand meaning and brand image, the more vulnerable they are to attacks on image.'12 So Nike was in trouble when its contractors were accused of manufacturing Nike products in sweatshop conditions, using child labour, paying less than the minimum wage, enforcing overtime, subjecting employees to verbal abuse and sexual harassment and running factories like prison camps.13
In 1991 the UK's Thames TV, The Economist and Knight Ridder reported on conditions in Nike factories in Indonesia. US television network CBC reported in 1993 that workers suffered physical and sexual abuse on top of their low wages and an exhausting quota system. It reported that Nike workers in Vietnam earned an average of 20 US cents per hour, and were subject to physical punishments such as being hit on the head by supervisors and being forced to kneel on the ground with their hands in the air for periods of time. The New York Times, The International Herald Tribune and The Economist also reported on Nike's Asian factories in 1993. Further bad press in 1994 included investigative reports in The Rolling Stone, The Boston Globe, The Los Angeles Times, The Chicago Tribune and a book by Donald Katz called Just Do It.14
By 1997 Nike had become a symbol of sweatshop labour in the Third World and was the target of several protests outside store openings and by students against their universities' links with the company. In October 1997 anti-Nike rallies were held in 50 US cities and 11 other countries.15
All the while Nike continued to defend its wage levels with commissioned studies16 and rhetoric. CEO Phil Knight claimed that working conditions in Asian factories had improved drastically since Nike had begun business 25 years before. He said that if a shoe factory worker had gone to sleep just 10 years earlier and woken up in the late 1990s they would have thought that they had 'died and gone to heaven'.17
By 1998, however, the damage to Nike's reputation was beginning to be felt in the account books. Share prices were dropping and sales were weak.18 Knight admitted: 'The Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse'.19 To counter this Nike poured its marketing expertise into its own corporate reputation and sought to portray a caring company that was concerned about working conditions in its contractors' factories. It hired a former Microsoft executive to be vice president for corporate and social responsibility, and expanded its corporate responsibility division to 70 people.20
This public relations campaign also included upgrading its own code of conduct and participating in a range of coalitions. These included the Global Alliance for Workers and Communities (aimed at helping workers in Third World shoe and clothing factories)21 and other business coalitions with a stated social responsibility agenda like the aforementioned Business for Social Responsibility.22 The company, however, continued to oppose labour and human rights linkages to trade agreements.23
Stitched in time
In response to the ongoing criticism, Nike formulated a code of conduct for its contractors. The code, first formulated in 1992 and amended in 1997 and 1998, is supposed to apply in all factories producing Nike products. It includes recommendations for minimum wages (as set in the host country), maximum mandatory working hours of 60 per week, a minimum age for workers of 16 years old, a ban on forced labour and minimum safety and environmental standards.24
Nike also repeatedly referred to its membership of the Fair Labor Association (FLA), which was set up in 1998 with the help of the White House, the US Department of Labor and the apparel industry - purportedly to safeguard working conditions in factories contracted to US companies.25 Although a number of NGOs were involved in the FLA's formation, two unions, a department store and the Interfaith Center on Corporate Responsibility pulled out because they disagreed with the final agreement and were concerned that the FLA was little more than a public relations exercise.26
The FLA has a voluntary code of conduct and member companies can attach a 'No Sweat' label to their goods.27 The code says that companies will pay the minimum wage or prevailing industry wage of the country in which they are operating, but makes no provision that companies should pay a wage that workers can live on. Since many poor countries compete for international investment by keeping the minimum wage low, the minimum wage is often below a subsistence income, especially for supporting a family.28
The code limits mandatory overtime so workers cannot be made to work more than 60 hours a week. However, a compulsory 60-hour week is excessive and there are no limits on voluntary overtime above and beyond this. Furthermore, the very low wages ensure that workers need to work overtime in order to earn enough to live on.29
The code gives very limited support for the right of workers to organise in unions. It merely says that corporations will not 'affirmatively seek the assistance of state authorities to prevent workers from exercising these rights'. According to Alan Howard from the Union of Needletrades, Industrial and Textile Employees (UNITE), this means 'you can let the army into the factory to put down a strike, as long as you don't pick up the phone and call them.'30
As Medea Benjamin of Global Exchange has pointed out, according to this agreement companies could still pay their workers 20 cents an hour, coerce them into countless hours of 'voluntary overtime', use accounting firms that have no connection to workers as their external monitors and be rewarded for this behavior with a `no sweatshop' seal of approval.31
For companies like Nike, whose financial bottom line does not allow it to deal with the deep-seated causes of its poor reputation, the UN now offers additional support to bolster their reputations. In 1999 the UN sponsored a partnership with corporations centered on a code of principles entitled the Global Compact.32 The compact commits corporations who sign up to uphold nine human rights principles. These include the right to join unions, the elimination of child labour and the development of environmentally-- friendly technologies.33
However, critics argue that the compact is merely a means by which companies that have been accused of human rights violations can 'win UN endorsement and use the UN emblem to give their corporate activities a branding makeover, while doing nothing of substance to clean up the conditions in their factories and industrial sites'.34
Furthermore, the compact is voluntary and has no monitoring or enforcement mechanisms. All that is required of companies is that they place information on a UN website about the steps that they are taking to improve working conditions and reduce environmental degradation. Joshua Karliner, executive director of the Transnational Resource and Action Center, says: 'It allows companies like Nike... to wrap themselves in the UN flag without any binding commitment to change.'35
In order for its code and internet pronouncements to have credibility, Nike needed to have them endorsed by parties that are seen to be independent and to have integrity. The UN is just one of many organisations and individuals that have filled this role. A number of other NGOs have also participated in the compact, so adding to its credibility. These include Amnesty International, the World Wide Fund for Nature and labour organisations such as the International Confederation of Free Trade Unions. However, this is no guarantee that the material posted on the website will be more than empty rhetoric, as these organisations are not expected to do any monitoring of the claims made.36
In 1997 Nike paid former UN ambassador Andrew Young to visit its contractors' factories in Asia and report on working conditions in the hope that he would provide a much needed independent endorsement. However, human rights groups criticised his tour as a public relations sham.37 The company also gave handpicked students and journalists tours of selected factories.
Nike's attempt at getting the endorsement of NGOs and unions for the FLA agreement was similarly unsuccessful. It therefore encouraged many university administrations to join the FLA so as to give it credibility. Well over 100 did so, but student activists remained concerned about the involvement of companies like Nike and the effectiveness of the monitoring process. In response they formed their own alliance together with unions and human rights groups in October 1999 - the Workers' Rights Consortium (WRC).38
The WRC promotes a `living wage' rather than a minimum wage - that is, that workers be paid enough to meet their basic needs of food, clothing and shelter and be allowed a little extra for discretionary spending.39 Phil Knight has called the requirement for companies to pay a living wage 'unrealistic',40 but Benjamin estimated in 1998 that if Nike doubled the wages of workers in its Indonesian factories from 10 cents per hour to 20, it would only cost an extra $20 million a year. This is what Nike spends on sponsoring the Brazilian football team, and is less then 3 per cent of the company's annual advertising budget.41
Nike has 'partnerships' with over 200 tertiary US colleges and universities,42 many of which involve cause-related marketing deals providing them with a financial reason for supporting the company. Increasingly, however, under pressure from student activists, universities have been joining up with the WRC rather than the FLA. To the dismay of Nike, some 50 universities have joined up so far,43 thus undermining the credibility of the FLA.
The company has retaliated against some of the universities that have joined the WRC. It has withdrawn from a contract to supply hockey equipment to Rhode Island's Brown University and has also withdrawn $8m in funding from Michigan University after the latter joined the WRC.44 When the University of Oregon joined, Phil Knight, who had personally given what is his alma mater $50m over the years, announced he would not be making any further donations 'of any kind' to the university. He claimed that 'by joining the Worker Rights Consortium, the University of Oregon inserted itself into the new global economy where I make my living, and it inserted itself on the wrong side, fumbling a teachable moment'.45
Nike's efforts to boost its reputation and get third-party endorsement have been more successful in the environmental area. In 1998 Nike joined 20 other major US companies that committed themselves to no longer using or selling wood and paper products made from 'old growth' forests. The agreement was negotiated by a coalition of environmental groups including Greenpeace, the Natural Resources Defense Council and the Rainforest Action Network."46
In 1998 Nike promised to phase out the use of polyvinyl chloride (PVC) from its shoes. It enrolled Greenpeace, which has a worldwide campaign against PVC, to publicise the promise. In a press conference in Oregon, Nike's home state, Greenpeace read a Nike company statement which said that the search for a suitable substitute for PVC had `barely just begun'. It was unable to predict when its shoes would be PVC-free.47
Nike stated that the 'action was not intended to divert attention away from criticism it [had] received over its labour practices in lowwage countries'.48 Nike director of corporate responsibility Sarah Severn stated that it did not choose to publicise its decision to remove PVC from its shoes because it would have been accused of greenwashing.49 Apparently, Nike believed that if Greenpeace did the PR for it the greenwashing label would not be used. Severn was speaking at a Greenpeace Business and the Environment conference in Sydney in July 2000 at which Nike had been invited to be present as a model of corporate environmental progress and responsibility.
Swoosh or Shush
Recent surveys continue to find that Workers making Nike products suffer inadequate wages, abusive treatment and excessive work hours as well as intimidation if they try to form unions. Huge disparities remain. Chinese workers receive about $1.50 per pair of shoes that sell for $80-$120.50 The rewards for those who manufacture the products (an average of $786 per year in Indonesia)" are minute compared with the remuneration for those who endorse them.51 'In one year, Nike paid Michael Jordan [pictured above] as much (about $25m) to pitch the shoes as its subcontractors paid 35,000 Vietnamese to make them.'52 Nike executives are also very well paid. Knight is a billionaire, one of the richest men in the world, who in the year ending 31 May 2000 earned a salary of $1.2m and a bonus of $1.3m -- up 26 per cent on the previous year.53
Community Aid Abroad in Australia points out: 'As the company with the largest profit margins Nike could more easily afford to ensure decent pay and conditions in its suppliers' factories.'54 Instead Vietnamese workers making Nike products earned less than half of what other foreign companies (apart from Reebok) pay their least skilled factory workers in Vietnam.55
Nike's response to all the criticisms directed at it has been largely superficial. It has employed reputation management rather than instigated real reforms that addressed the underlying issues. It is the appearance of social and environmental responsibility that Nike has aimed for, and it has employed the classic public relations tactics of codes and pledges with third-party endorsements to achieve this.
Just Do it
Reputation is more important than ever to sales, shareholder value and attracting employees. And corporate responsibility is an increasingly vital element of reputation. But this does not mean that we can depend on the enlightened self-interest of corporate management and boards of directors to ensure that human rights and the environment are safeguarded.
It is for this reason that community groups that concentrate their efforts on consumer boycotts, shareholder activism and partnerships with business will often only be able to achieve superficial reforms rather than fundamental change. Real long-term change will involve the cultivation of grassroots power to oppose the muscle of companies whose fundamental products or ways of doing business need to be changed.
1 Holger Jensen, Low pay, high desire: a tale of 2 swooshes in Indonesia, Denver Rocky Mountain News, July 2, 2000 p. 41A; Esther de Haan and Vivian Schipper, 'Nike Casefile', (Clean Clothes Campaign, www.cleanclothes.org/companies/nik ecase99-11-2.htm), 1999
Professor Sharon Beder is a visiting professorial fellow at the University of Wollongong.
Sharon Beder's Publications can be found at http://www.uow.edu.au/~sharonb