Two monitoring groups have published grisly reports about working conditions at a Nike contract factory in Vietnam that show the decades-long effort to protect those who glue and stitch the world's sneakers and sweatshirts is far from finished.
The reports document numerous violations of labor standards, including wage theft, bribes paid in exchange for jobs, pregnancy discrimination, factory temperatures above 90 degrees, unsafe use of chemicals, padlocked exit doors and the "chronic" problem of workers collapsing at sewing machines due to exhaustion and excessive heat.
In a lengthy statement (included below in its entirety), Nike acknowledged the reports and said its "commitment to ... worker's rights is unwavering." The factory has committed to a plan to address problems identified in the reports. Several issues already have been resolved. Nike also has sanctioned the factory by reducing orders.
"Nike's been deeply committed to workers and improving conditions in contract factories for more than 20 years, and that commitment remains as strong today as ever," Nike said, in the statement.
The reports came after the University of Washington and Cornell University filed complaints about the Hansae factory in Ho Chi Minh City in the wake of 2015 news reports about worker mistreatment at the 12-building complex. Many universities require apparel partners sign a code of conduct to ensure apparel with school logos is made in safe working conditions.
Some Georgetown students also have asked the university to sever its ties with the sportswear company because of the factory's conditions.
The factory employs nearly 9,200, according to Nike's website. Nike at one point accounted for roughly 9 percent of the factory's production, which also makes products for other major retailers, including Under Armour, Old Navy, H&M and Target. As a result of the sanctions, Nike now accounts for 3 percent of the factory's production.
Nike's supply chain includes roughly one million workers at contract factories. Like other sportswear and apparel companies, Nike does not own the factories that make its products.
Hansae did not immediately return a message.
Nike granted the Worker Rights Consortium and the Fair Labor Association access to the factory as a result of the complaints.
The groups collaborated on an investigation and published separate reports last week. The 113-page report from the Worker Rights Consortium and a 14-page report from the Fair Labor Association include similar findings.
The Worker Rights Consortium's report identified numerous violations of labor standards:
- Wage theft
- Verbal abuse of workers
- Pregnancy discrimination
- Forced overtime
- Restrictions on bathroom breaks
- Denial of sick, family and bereavement leave
The monitoring group interviewed 41 current and former employees and inspected the factory. Workers were interviewed offsite, consistent with best practices, to prevent intimidation.
The investigation documented "intense and relentless pressure on employees to produce garments as quickly as possible," and "pervasive verbal harassment" of workers. It also documented workers refraining from drinking water in order to minimize bathroom breaks and avoid losing production time.
The group estimated "several hundred" workers faint annually at the factory due to excessive heat, exhaustion and dehydration.
“Fainting happens every day, maybe one or two persons," it said in the report. "They are carried to the clinic to rest half an hour, and then they (are told to) return to work." The group said it has "never previously encountered an incidence of physical collapse this widespread at any factory in the collegiate supply chain."
The Fair Labor Association, which serves as Nike's designated factory auditor, was equally as unsparing in its report, coming to nearly identical findings, including that the factory violated all nine elements of the association's workplace code of conduct.
The investigation found some hazardous chemicals were stored in soda bottles, bathrooms lacked soap and toilet paper, and the cafeteria lacked enough food. It also said the factory's clinic didn't record information when workers fainted.
The report says the factory took some immediate steps during its visit, including fixing exit doors that opened inward, replacing a missing fire extinguisher and installing emergency exit signs.
It agreed to a remediation plan that includes eliminating "recruitment fees" or bribes paid to hiring managers and ending discrimination against pregnant workers. It also agreed to shut off electricity during lunch time to ensure workers aren't forced to work off-the-clock.
Similarly, the Worker Rights Consortium said the factory and Nike now have a plan to address problems it identified.
Workers Rights Consortium Executive Director Scott Nova called the level of coordination between the two monitoring groups "unprecedented" and said the reports show the need for increased access to factories.
"We need access as required by universities and Nike is currently not agreeing to provide that access to its factories in general," he said.
Nike spokeswoman Sabrina Oei reiterated the company's long-held position that it prefers to work with the Fair Labor Association. She said the group's report on the Hansae factory shows its monitoring is just as rigorous.
"When the WRC brings things to our attention we act immediately," she said. "We don't take them lightly."
The reports illustrate the difficult process of improving conditions at overseas factories. Nike has more than 600 contract factories worldwide, according to its website. They employ more than 1 million workers.
Nike was the subject of harsh criticism about working conditions in the 1990s.
Co-founder Phil Knight confronted critics in a 1998 speech at the National Press Club in which Nike committed to six specific reforms, including additional factory monitoring and raising the minimum work age at a footwear factory to 18.
The speech was seen as a turning point in Nike's effort to address working conditions. Since then it's published regular, lengthy "corporate responsibility" reports that outline its efforts.
This year Nike released its sixth such report. It shows significant progress, including 86 percent of Nike's contract factories now meet its basic standards, including worker rights and lean manufacturing, up from 68 percent two years ago.
The sportswear giant has made other important progress.
Roughly a decade ago, Nike was the first company to disclose its footprint of contract factories in order to improve transparency and collaboration with other companies seeking to improve working conditions. The information is now presented on a searchable map on the company's website.
"By joining together, we can raise standards in far more factories, and affirm far more workers are protected, valued and engaged," said CEO Mark Parker, in a cover letter included in this year's corporate responsibility report.
Nike has steadily decreased the number of overseas factories it uses while steering more business to those who meet its top standards. As of fiscal 2015, Nike worked with nearly 12 percent fewer factories than it did two years earlier. In that time, Nike revenue increased nearly 21 percent and its ratings of its factories improved nearly 27 percent.
"We have worked alongside others for over 20 years to improve labor standards in contract factories. We’ve learned a lot in that time. And we've seen the limitations of the existing system," Parker said, in the cover letter. "We expect any contract factory partner we work with to understand that an empowered and engaged workplace is a productive and profitable business model."
Activist Jim Keady, who's tracked working conditions at Nike's contract factories for nearly two decades, said the reports show "nothing has changed in Nike's production facilities."
Keady visited Vietnam last year, where he talked to workers.
"It's the same stuff, year in and year out."
Nike provided the Business Journal the following statement in response to questions about working conditions at the Hansae Vietnam factory:
Nike’s been deeply committed to workers and improving conditions in contract factories for more than 20 years, and that commitment remains as strong today as ever. We established a Code of Conduct in 1992, were the first in our industry to disclose our supply chain locations to drive collaboration and transparency, and have led in establishing a consistent process for independent third party investigations across our 665 contract factory suppliers. The Fair Labor Association (FLA) is Nike’s accredited auditor and we remain committed to the vital role they play in the industry. We helped co-create the FLA as the international body for conducting audits representing universities, academics, NGOs, civil society and companies. They have been resolute in making significant progress for workers across the industry. We respect the Worker Rights Consortium’s (WRC) commitment to workers’ rights while recognizing that the WRC was co-created by United Students Against Sweatshops, a campaigning organization that does not represent the multi-stakeholder approach that we believe provides valuable, long-lasting change. We value the role of campaigning bodies; however, we believe there are inherent conflicts of interest between campaigning and auditing. We have been consistent and transparent in our position with all of our University partners, including Georgetown, from the inception of our relationships through to now. Our transparency on factory locations enables other non-affiliated groups to rapidly alert us to issues they may see, and we take every alert seriously, responding with both internal, external and independent monitoring. Upon discovering issues, we engage with the management of the factory, providing resources, a roadmap of expectations on changes and remediation, and where necessary, we trigger meaningful sanctions, up to and including a severance of our contract. For over a year, Nike has engaged extensively with Hansae factory management recognizing that the issues in their factory are complex, systemic and require sustained rigor and diligence to correct.
Regarding Hansae, in July, the FLA completed a comprehensive audit of the entire Hansae manufacturing facility, which includes 12 factory buildings across more than 30 brands. Nike manufacturing occurred in two buildings and, at the time represented approximately 9% of factory production. In October, under specifically agreed terms with Georgetown University and the FLA, the FLA facilitated access to the WRC to conduct a joint investigation of the factory in an effort to overcome an impasse among all parties. We continue to stand by our commitment to encourage the FLA and WRC to partner together as we did in the recent Hansae situation.
Hansae management, with Nike and FLA’s oversight, has developed a comprehensive remediation plan that addresses all of the issues identified in the joint investigation. Many corrective actions have already been implemented and we are closely monitoring Hansae’s progress against its remediation plan. Nike has also imposed sanctions on the factory that have reduced our production orders so that Nike now represents 3% of current production volume.
Our investment in transparency and commitment to protect worker’s rights is unwavering. We are committed to going far beyond simply uncovering the issues, and to working to elevate standards across not just our supply chain but the industry as a whole. Our Code of Conduct is the strongest in the industry. We remain hopeful of reaching an agreement on Georgetown’s licensing contract.
Matthew Kish covers footwear, apparel, banking, finance and general assignment news.