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Nike Sweatshop Scandal

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Business Studies

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.

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 - facilities 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.

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.

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.

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 - The 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.

Source:

1. Simon Birch, Sweat and Tears, The Guardian, 2000.

2. Lara Robertson, How Ethical Is Nike, Good On You, 2020.

3. Ashley Lutz, How Nike shed its sweatshop image to dominate the shoe industry, Business insider, 2015.

4. Jack Meyer, History of Nike: Timeline and Facts, The Street, 2019.

5. A History of Nike’s Changing Attitude to Sweatshops, Glass Clothing, 2018.

Nike Sweatshop Scandal

The Nike Sweatshop Scandal is the accusation that used unethical labour practices in its factories worldwide. Although Nike initially claimed it was not involved in the contracted factories' operations, the company eventually made changes to improve the working conditions by the raising minimum wage, applying clean air standards to factories, and forming an association to protect workers' rights. 

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. The employees were reported to receive a wage of 14 cents per hour. 

Sweatshops are a violation of human rights since workers are not paid a fair salary. They also suffer deteriorating health due to long hours working in unsafe conditions. 

While Nike has made a lot of effort to improve its brand image, many of its practices are still considered unethical; for example, sweatshops using cheap labour in emerging economies continue to be used to produce apparel and shoes. 

Final Nike Sweatshop Scandal Quiz

Question

what year was Nike founded?

Show answer

Answer

1964

Show question

Question

What was the nike sweatshop scandal about? 

Show answer

Answer

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. 

 

Show question

Question

Does nike sweatshop scandal involve human rights violations? 


Show answer

Answer

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. 

Show question

Question

What is the main reason Nike is considered unethical? 


Show answer

Answer

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. 

Show question

Question

Was Nike involved in child labour? 

Show answer

Answer

Yes

Show question

Question

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

Show answer

Answer

1991

Show question

Question

In what year did the company started improving the conditions of its factories?

Show answer

Answer

1998

Show question

Question

Where was the first Nike store to be open?

Show answer

Answer

First Niketown store to launch open in Portland, Oregon. 

Show question

Question

When was Nike first founded?

Show answer

Answer

1964

Show question

Question

Life magazine in America did a report on child labour in 1996, which included a shocking photo of a 12-year-old boy sewing a Nike football. What country was he from?


Show answer

Answer

Pakistan

Show question

Question

What is corporate social responsibility?

Show answer

Answer

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

Show question

Question

How does Nike try to make a positive difference through sustainable practices?

Show answer

Answer

  • 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

Show question

Question

What is Nike doing to address the human rights issues that they face?

Show answer

Answer

  • 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

Show question

Question

Other than the sweatshop problem what was one of the unethical practices employed by Nike?

Show answer

Answer

Child labour

Show question

Question

What does Nike's CSR report entail?

Show answer

Answer

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

Show question

Question

What are sweatshops?

Show answer

Answer

 factories where workers are forced to work long hours at very low wages under abysmal working conditions. 

Show question

Question

Why did Nike outsource production to deveoping economies?

Show answer

Answer

To save costs because these economies have lower labour wages.

Show question

Question

When did Nike start benefitting from sweatshops?

Show answer

Answer

From the 1970s.

Show question

Question

When did the use of sweatshops by Nike gain public attention?

Show answer

Answer

1991

Show question

Question

How was the public made aware of sweatshops?

Show answer

Answer

Jeff Ballinger published a report detailing the appalling working conditions of garment workers at Nike's factories in Indonesia.  

Show question

Question

Who was the CEO of Nike during the scandal?

Show answer

Answer

Phil Knight  

Show question

Question

When and why was Fair Labour Association established?

Show answer

Answer

It was established in 1999 to protect workers' rights and monitor the Code of Conduct in Nike factories. 

Show question

Question

Name one of USAS's campaign.

Show answer

Answer

Sweat-Free Campus Campaign.

Show question

Question

A set of practices a business undertakes in order to contribute to society in a positive way is knwon as ____________

Show answer

Answer

Corporate social responsibility (CSR).

Show question

Question

Fill in the blanks:

Nike's solutions to protect workers' human rights include:

  • ______________________

  • Allow freedom of association (Forming of workers' union)

  • ____________________ 

  • Provide workers with fair compensation 

  • _____________________

Show answer

Answer

  • 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

Show question

Question

Fil in the blanks:

Nike's sustainable practices include:

 

  • ______________________

  • ______________________

  • Increase recycling and cut down on overall waste

  • Adopt new technology to decrease water use in the supply chain

Show answer

Answer

  • 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

Show question

Question

What is the significance of the year 2005 for Nike?

Show answer

Answer

Nike became the first major brand to publish a list of the factories it contracts to manufacture shoes and clothes. Nike's annual report detailed the conditions. It also acknowledged widespread issues in its south Asian factories.  

Show question

Question

Human rights groups acknowledged that efforts to improve the working conditions of workers had been made in the year ____.

Show answer

Answer

2004

Show question

Question

How much did Nike initially pay their Indonesian labourers?

Show answer

Answer

14 cents an hour

Show question

Question

Who was Andrew Young?

Show answer

Answer

Andrew Young was an activist and diplomat, gets hired by Nike to investigate its labour practices abroad.  

Show question

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