When it comes to business and sport, we value fair play. We believe world-class manufacturing is grounded in standards that respect the environment, the people who work in factories and the principles of a healthy and safe workplace.
We have a responsibility to run our business in an ethical way, and that responsibility extends to the contract manufacturers who make our products.
Our Code of Conduct and Code Leadership Standards set our expectations for suppliers. They respect the rights of the people who work in factories, including requiring at least minimum wage or prevailing wage (whichever is higher), equal pay for equal work and a commitment to safe and healthy work environments.
Nike has a longstanding commitment to working with suppliers on improving manufacturing conditions and minimizing negative impacts to workers, local communities and the environment. Since we first launched our Code of Conduct in 1992, we have continued to evolve our standards and programs to drive improved outcomes for the workers in the supply chain and communities where our suppliers operate.
Every supplier factory that makes products for Nike must meet a rigorous set of compliance requirements. The Nike Code of Conduct lays out the minimum required standards we expect each supplier factory or facility to meet.
We expect all our suppliers to share our commitment to the welfare of their employees and to using resources responsibly and efficiently. We will only work with suppliers who show leadership in sustainability and who have achieved a foundation of compliance and want to move into new and innovative labor practices.
The Code of Conduct is an integral component of our sourcing strategy and is how we determine the suppliers we’ll work with to create a more green and equitable supply chain.
We regularly review supplier factories to assess their ability to meet our high standards. These assessments take the form of audit visits—both announced and unannounced—by internal and external parties who measure against the Code Leadership Standards and our Code of Conduct.
Nike’s Code Leadership Standards communicate how supplier factories should implement the Code of Conduct. The document also provides deeper detail into how we measure factories’ compliance efforts and progress.
Our Code of Conduct applies to finished goods suppliers (the contract manufacturers who make our product) and materials suppliers (who produce the materials that go into our product).
We insist all our suppliers to share our commitment to the goals of respecting the rights of workers with particular care for the unique vulnerabilities and needs of worker groups such as women, migrants and temporary workers, and to advancing the welfare of workers and communities.
We also expect our suppliers to share in our commitments to reducing waste, using water efficiently, applying chemistries responsibly and working to reduce carbon emissions in line with international climate targets.
In 2005, we were the first company in our industry to publicly disclose our factory base, in the interests of transparency and collaboration. Nike’s Manufacturing Map is a tool to learn about the independent factories contracted to make Nike, Hurley and Converse products—including the names and location of each factory, the types of product made, the factories that supply our collegiate product and demographic statistics about the workers at each factory. The interactive map is updated on a quarterly basis to reflect changes in our source base.
This resource provides extensive details about the factories Nike contracts with around the world. For each factory, you are able to learn more about the types of products made, the factories that supply our collegiate product, demographic statistics about workers at each factory and the factory address and contact information.
In FY15, Nike co-led the development of the Zero Discharge of Hazardous Chemicals (ZDHC) Wastewater Guidelines, a collective effort of all member brands in the ZDHC Coalition to continuously work to improve wastewater discharges. We also developed a global wastewater disclosure database to help suppliers optimize testing and disclosure of wastewater quality. Through the power of collective action, one wastewater test per the ZDHC Wastewater Guidelines is valid for all member brands of the ZDHC.
After the launch of the first industry-aligned Manufacturing Restricted Substance List (MRSL) in 2014, we worked extensively with other global brands in FY16 to expand it further. The latest ZDHC MRSL, published in December 2015, now includes additional guidance for controlling priority chemicals from possible use in natural leather production.
Building on our collaboration with the Sustainable Apparel Coalition in sharing the Materials Sustainability Index industry-wide in 2012, we have recently taken a leadership role in the update of the SAC’s Higg Facility Environment Module 3.0.
The Social Labor Convergence Program is a pioneering initiative that seeks to develop a simple, unified and effective industry-wide way to assess labor, health and safety conditions in factories, with the goal of replacing current proprietary audit tools used by individual companies. This would reduce the number of audits, increase industry efficiency, reduce audit-related costs and allow participating organizations to invest resources previously designated for compliance audits into the improvement of social and labor conditions. It would also be a step in the direction of enabling a more collaborative approach to address risks and opportunities in the industry.
All potential new suppliers are subject to the New Source Approval Process. Risks of starting a new supplier relationship within the requested country are considered, requiring additional approval for locations in countries identified as high risk. Suppliers must receive an overall Bronze audit rating—our base acceptable level—prior to beginning full production.
Introduced in 2012, Nike’s Manufacturing Index scores factories based on four equally weighted categories: sustainability performance (including labor practices), and three traditional manufacturing metrics (cost, quality and on-time delivery). We assess the sustainability component through our Sustainable Manufacturing and Sourcing Index and focus on bringing all factories to a Bronze rating (our minimum standard) or above.
In 2012, we launched our Sustainable Manufacturing and Sourcing Index (SMSI), a system for combining factory ratings for lean manufacturing and human resource management, as well as for health, safety and the environment. This system gives environmental and human resource management performance equal weight alongside business metrics in our sourcing, increases transparency to reduce non-compliant practices and creates targets and incentives for our suppliers to go well beyond compliance.
Nike monitors finished goods supplier compliance with our Code of Conduct and Code Leadership Standards through regular announced and unannounced audits conducted by internal and external parties. We call this our Factory Compliance Ownership (FCO) Program. This includes audits by accredited third parties such as the Fair Labor Association (a neutral industry body) and assessments by Better Work – a joint initiative of the United Nations’ International Labor Organization (ILO) and the International Finance Corporation (IFC), a member of the World Bank Group. Ratings assigned as a result of FCO assessments form the foundation of a supplier’s SMSI score, driving business to high performing suppliers and initiating sanctions with suppliers failing to meet minimum performance expectations (Bronze rating). This encourages Nike’s suppliers to fully own their compliance with Nike’s Code of Conduct and Code Leadership Standards through effective management systems.
Nike takes issues of non-compliance seriously. If we are alerted to an issue of non-compliance with our Code of Conduct or Code Leadership Standards within one of our contract factories, we investigate it immediately and, where improvements are required, we take a collaborative approach to working with factory managers to see that corrective actions are taken, that problems are remediated and that the managers have on-site verification of this remediation. Should a supplier fail to remediate issues identified by an audit or allegation investigation according to Nike’s requirements, it is subject to review and sanctions, including potential termination of the supply agreement.
In the event that the relationship with an existing supplier is terminated, either resulting from poor sustainability performance or other reasons, Nike’s responsible exit process is triggered. This includes evaluation of the risks to Nike, the workers, local community and environment associated with the upcoming divestment.
We take this process seriously. It includes a reduction in production orders over a determined length of time to create the least amount of disruption to a business and workers as possible. In high-risk situations, multi-stakeholder working groups are assembled to develop and monitor an exit plan designed to manage the risks identified with the divestment.