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June 04, 2003
Nike and Others Increase Transparency into Their Global Labor Practices
    by William Baue

The Fair Labor Association releases a report today on the internal and independent external monitoring of apparel and footwear manufacturers' global labor practices.

It has become fashionable to question the global labor practices of apparel and footwear manufacturers such as Nike (ticker: NKE). However, such an ethical stance is often complicated by the fact that independent information verifying labor abuses, much less reliable information from the companies themselves, can be hard for the general public to come by.

Such information just became easier to access, thanks in part to industry participants such as Nike, Liz Claiborne (LIZ), Phillips-Van Heusen (PVH), and Reebok (RBK). Today, the Fair Labor Association (FLA) is releasing its first public report on these and three other participating companies' internal monitoring as well as independent external monitoring of labor practices in supplier manufacturing plants throughout the world.

The report covers the first full year of monitoring from August 1, 2001 to July 31, 2002 at the seven participating companies, which also include adidas-Salomon (ADSN.DE), Eddie Bauer, and Levi Strauss.

The FLA, which was founded in 1999, consists not only of companies in the apparel and footwear manufacturing industries, but also nongovernmental organizations (NGOs) advocating for human rights, labor rights, women's rights, and consumer rights. Also affiliated with the FLA are 179 colleges and universities, many of which license apparel with school logos and designs, and hence have a vested interest in maintaining standards.

"Working together, companies and critics have taken a big step beyond talking about social responsibility and are starting to get the facts into public view," said Auret van Heerden, executive director of FLA.

The study, entitled Towards Improving Workers Lives, reports on the monitoring of companies' compliance with FLA's Workplace Code of Conduct, which deals with such issues as harassment or abuse, work hours, and freedom of association. However, the report makes it clear that "monitoring in itself does not bring about compliance."

The report strives for transparency by also addressing companies' noncompliance, as well as tracking companies' attempts to remedy exposed problems. Interestingly, the independent external monitors (IEMs), which visited enough supplier plants for each company to be statistically significant (five percent), found much less evidence of freedom of association violations than expected.

The FLA admits that the report is a work in progress, and is more descriptive than it is evaluative. Future reports will be more rigorous as methods mature for assessing code of conduct compliance. The value of the current report lies not in its statistical analysis but in its case studies, which appear at the end of each section of the report.

For example, the study reports on a January 2001 work stoppage at a Mexican apparel contractor for Nike in response to illegal firings and forced resignations of 25 workers complaining of low wages and seeking to form an independent union. Nike commissioned Verité, an FLA-approved independent external monitoring organization, to visit and monitor the plant.

Verité found evidence that the contractor was preventing workers from forming a union, a clear violation of the FLA Code of Conduct calling for freedom of association. Nike worked out a remediation plan to reinstate the dismissed workers, and an independent union negotiated for increased wages and benefits.

Although this example demonstrates how the process functioned successfully, the study also reports on audits that revealed less successful remediation attempts and ongoing noncompliance with the standards.

"This first round of audits shows that there is room for improvement at all of these companies and in all of these factories," said Michael Posner, an FLA board member and executive director of the Lawyers Committee for Human Rights (LCHR), a member of FLA. "The companies deserve a lot of credit for trusting the public with the grit as well as the gloss, on an issue that will take persistence and struggle for many years to come."

Readers can view IEM results for themselves on tracking charts posted on the LCHR website. Nike represents an interesting case study in the limitations of transparency afforded by this mechanism. Nike is currently involved in a Supreme Court case that deals with its communications about its global labor practices, and until the high court hands down its decision, Nike is embargoing IEM reports on its operations.

In most instances, however, these tracking charts, together with the report, represent the most in-depth look into the positive and negative labor practices of the apparel and footwear industry afforded to the general public.


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