The world today is more complex and volatile than ever. The cadences of uncertainty and need have increased around the world, affecting communities, employers, governments, workers, and economies in new ways. Change has never happened so fast in some respects—and yet not fast enough in others.
That matters because, today, we must have a new conversation. For too long, our conversations have been confined to silos. An environmental conversation. An economic conversation. A labor-rights conversation.
Now, we need to expand the conversation to cover the issue of labor rights in supply chains within the context of rapid shifts in economics, politics, human capital, the environment, and technology.
The work of the past two decades by unions, some business leaders, academics, NGOs, and institutions such as the International Labour Organization has positively affected factory conditions. But as Richard Locke demonstrates, and as we at Nike are the first to acknowledge, the industry as a whole is still a long way from supply chains qualifying as consistently good. The gains we’ve made are fragile, especially considering that these supply chains were not built to cope with the volatility and pace of change we now see across the world.
Change has a ripple effect. That means the factory worker is more vulnerable. She became vulnerable in the 2009 recession when, practically overnight, factories closed their doors, and severance and health laws failed to protect her. She became vulnerable when severe weather flooded factories and drove cotton prices up nearly 300 percent in just two years.
When human capital is valued, labor rights are not far behind.
But these changes also make her more valuable. In many countries labor is no longer a plentiful resource; it’s a competitive market. The demands of innovation mean trained and skilled workers are more valued by factory owners. Workers are now better informed and have access to technology, and a choice of jobs.
Change occurs unevenly. Many apparel and footwear manufacturers still don’t think about the hidden costs of a poorly managed, disempowered workforce or a factory reliant on wasteful processes that can result in higher operating costs, lower product quality, and excessive worker turnover. Many manufacturers remain wedded to a model of low-cost, transactional, commoditized production. In the face of rapid changes and stressed systems, and in countries that may not adequately enforce the rule of law, labor rights are most vulnerable.
At the same time, another pathway is emerging. Informed factory managers and brand leaders are recognizing that the future of competitive, successful supply chains depends on higher-skilled and valued workers, and on manufacturing processes and new technology that eliminate water, energy, and waste. This transforms the relationship between the buyer and supplier, leading to joint investments in innovation and a fundamental shift from a transactional relationship to a collaborative one. When human capital is valued, labor rights are not far behind.
That is our vision of Nike’s supply chain. We expect to work with mature, well-governed companies running lean, green, and empowered factories. The people who run our contract factories all know this now.
As part of that vision, Nike has spent three years building a new approach to measuring factory performance starting with a clear set of performance indicators. We’re now beta testing our Manufacturing Index, which elevates the importance of sustainable manufacturing practices. According to the Index, a factory’s labor and environmental performance is equal in importance to quality, on-time delivery, and cost. The Index enables us to reward contract factories that score consistently well across all categories with investment in areas such as innovation technology, management capability building, and environmental programs. As we test and learn from the implementation of such new tools, we are committed to transparency in our work to help improve, scale up, and accelerate change across the industry. We voluntarily report on our progress and our challenges in our sustainability report available at nikeresponsibility.com.
Advocates for change approach labor-rights challenges from different perspectives. But whether we are pursuing growth, profits, flows of capital, freedom of association, jobs, equitable income, or economic development, here’s the reality: only innovation will make the difference because these issues are simply too big and complex for Nike or any one business to address on its own. We need coalitions to drive systemic change at scale. We also need to redesign the incentives to create changes that benefit workers, factories, communities, and companies.
Let’s start by having a new conversation.