• All
    companies
  • All
    industries
Email | Print    Type Size  -  +

Nike (pg. 2)

By Eugenia Levenson, writer-reporter
Last Updated: November 17, 2008: 12:18 PM ET

This one didn't disappoint. It looked sharp and played even better. But it also scored high on the index by using recycled materials and a new, less toxic bonding process. Suddenly green design looked less like a crunchy-granola compromise and more like best in class.

"Before, somebody might have said, 'I can't do it. My product has so much stress on it. It's in the Olympics,'" says Vogel. "The Jordan XX3 stopped them from talking on that end."

In fact Parker, who started out as a designer at Nike in 1979, likes to stoke friendly rivalries by posting each footwear division's Considered Index tallies after every season. "People see each other's scores, and they huddle and really look at how they can make it better next season," says Parker. "I always try to see what's going on that's great and to make sure we're leveraging that in a bigger way."

Scale, after all, is the only way corporate responsibility can make the leap from sideshow to strategy. Showcase shoes like the Jordan XX3 are one thing, but the bigger impact comes from workhorse sneakers that retail for less than $75.

Nike sells more shoes in this category than in any other, about 40 million pairs each year, so it's no small matter that the entire spring line meets top green targets. And last month Nike unveiled a broader roster of shoes, from basketball high-tops to soccer cleats, that made the sustainability cut. On average, those shoes use 20% more green materials and produce at least 17% less waste than previous models. The designers' reward: even tougher targets next time.

Easing pressure on suppliers

The farther you get from Beaverton, out in a world where the working conditions at Nike's 700 contract factories are subject to local culture and economic conditions, the more elusive those types of elegant solutions become.

Starting in the late 1990s, Nike's efforts to improve labor conditions in its factories focused on monitoring programs. The company sent auditors, including external observers, into suppliers' plants to gauge conditions, then tried to enforce compliance with its code of conduct. In 2005, Nike became the first in its industry to release the names and locations of its factories (see nikeresponsibility.com), both as a show of transparency and to encourage its competitors to join the effort at improving conditions.

The company also handed over its audit data to Richard Locke, a professor at MIT's Sloan School of Management, who released his findings in 2006. They were stark: Despite "significant efforts and investments by Nike ... workplace conditions in almost 80% of its suppliers have either remained the same or worsened over time."

Nike rates its factories on a scale of A to D; in a fiscal 2006 audit of 42 factories, seven got A's, and 13 got D's because of multiple transgressions, like failing to pay the local minimum wage or making employees work more than 14 days in a row without a break.

By itself, monitoring turned out to be a failure, and not just for Nike. "The compliant factory doesn't exist in my experience. We find an average of 17 to 18 violations per factory around the world," says Auret van Heerden, CEO of the Fair Labor Association, a labor-rights group that independently audits members' factories, including Nike's.

Dig deep, and the reasons for that pile up. In emerging economies, government regulations tend to be weak, which leaves the brands to police their suppliers. That's a major task for Nike, which produces 98% of its shoes in factories in China, Vietnam, Indonesia, and Thailand to capitalize on low costs.

As a buyer, Nike has different degrees of leverage, based on how long the company has been in business with a supplier or how much of the factory's revenue depends on Nike alone. Here the contrast between footwear and apparel manufacturing can be sharp. For shoe manufacturing, Nike does business with a group of 40 suppliers, many of them long-term partners that work closely with Nike designers throughout the production process.

In apparel, Nike deals with many more players on short-term contracts, so the company's influence can be limited. Even the toughest code of conduct gets trampled when tight deadlines leave suppliers little margin for error. One power outage or late adjustment on a rush order, and the easiest solution is to push workers to excessive overtime or long stretches without a day off. (Nor do workers have the wherewithal to push back. Nike estimates that 80% of its workers are women ages 18 to 24 with little education and few skills.)

Since the company isn't about to abandon its outsourcing model, Nike is trying to change it. One of its aims is to convert suppliers from using low-skilled assembly lines to so-called lean manufacturing, which organizes workers into multitasking teams. That requires more on-the-job training, which in turn can motivate factory owners to improve conditions in order to hold on to their high-skilled labor.

Jones and her team are also looking at how decisions made back in Beaverton, like last-minute design adjustments or changes to orders, add to the strain that can lead to forced overtime or other violations on the factory floor. By measuring the impact of its own design or sourcing practices on production schedules, Nike hopes to retrain those divisions to think about labor in much the way that the Considered Index has focused designers on sustainability.

"Buyers can miss market forecasts, they delay product development, and they get the orders out late, which puts a lot of pressure on suppliers," says MIT's Locke. "If Nike can crack that nut, that would totally change the paradigm. Because what you're doing is you're cleaning up your own house and working with your suppliers instead of pushing it onto them."

It's also a key step toward Nike's own target: By 2011 the company aims to eliminate excessive overtime across all its contractors' factories.

Even when Nike tries to do the right thing by dropping a troubled supplier - as it did with a Pakistani contractor that made hand-stitched soccer balls - there are troubling consequences, like the loss of local jobs. Being responsible, it turns out, is far more complicated than running a feel-good marketing campaign. But as Nike strives to be a good citizen, the slogan still applies: Just do it.  To top of page

Company Price Change % Change
Bank of America Corp... 16.13 -0.26 -1.59%
Facebook Inc 59.72 -0.01 -0.02%
Yahoo! Inc 36.35 2.14 6.26%
Intel Corp 26.93 0.16 0.60%
Alcoa Inc 13.42 0.37 2.84%
Data as of Apr 16
Index Last Change % Change
Dow 16,424.85 162.29 1.00%
Nasdaq 4,086.23 52.06 1.29%
S&P 500 1,862.31 19.33 1.05%
Treasuries 2.64 0.01 0.34%
Data as of 4:53am ET
More Galleries
8 CEOs who took a pay cut in 2013 Median CEO pay inched up 9% in 2013 to $13.9 million. But not everyone got a bump last year. Here are eight CEOs who missed out. More
7 businesses Amazon wants to shake up From industrial supplies to educational software, Amazon is about more than just retail and books. More
Don't miss these Tax Day deals From massages and paper shredding to cookies and queso, celebrate the end of tax season with these Tax Day freebies and discounts. More
Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.