Reference no: EM131793126

Nike agrees to third-party audits in new deal with Georgetown University

Dive Brief:

Nike and Georgetown University re-signed their retail license agreementlast week, with a twist: the Worker Rights Consortium (WRC) will now have access to all of Nike supplier factories producing collegiate products.

The deal follows a contentious two years between advocacy groups and the apparel brand, which featured a worker strike in Vietnam, an undercover audit and a student sit-in on Georgetown University's campus.

The protests led Georgetown to commit against re-signing a license until the apparel maker signed its code of conduct, which includes allowing WRC access to supplier factories. The new protocol details specific request for access, investigation, disclosure and remediation procedures for the auditor.

Dive Insight:

The new protocol for allowing WRC access to Nike supplier factories is a hopeful harbinger for future collegiate licensing agreements, and a clear victory for workers' rights advocacy groups.

The WRC and Nike have had a contentious relationship in the past. The WRC was created by United Students Against Sweatshops, an advocacy group which in April 2016 announced it was "waging a campaign" against Nike. As a result, a certain level of distrust exists between Nike and the auditor.

"We believe there are inherent conflicts of interest between campaigning and auditing," a Nike spokesperson told Supply Chain Dive in March. "We respect WRC’s commitment to workers’ rights, but we believe that a multi-stakeholder approach provides valuable, long-lasting change."

Nike prefers to use the Fair Labor Association to audit its factories, as it represents universities, academics, NGOs, civil society and companies at once. Allowing other auditors with unique standards and signing independent codes of contracts muddles remediation processes, according to Nike, as it is difficult to measure progress based on distinct metrics.

However, advocates argue such audits are too light on companies, leaving workers vulnerable despite suggested remediation efforts. Fortunately, efforts to address worker abuses within overseas factories are driving forward. Now other universities are coming forward to renegotiate their existing contracts, including the University of Texas at Austin and the University of Michigan. Further progress shows Nike already complying with efforts to create a map of supplier factories in Bangladesh.

The Georgetown Solidarity Committee cites problems with audits as a reason for protesting Nike. According to the advocacy group, one worker told the WRC the following during the auditor's independent investigation: "When Nike came to the factory, we had to keep our head down and only say nice things about Hansae. We were told over and over if we said bad things about the factory, we would be fired."

The new protocol is a breakthrough achievement, not just for advocacy groups, but also for Nike, as it presents the first time the major apparel brand allows unfettered access to a third-party group.

The text of the agreement provides further clarity as detailed standards reflect Nike's position. The WRC may access Nike factories within 15 days' notice, provided they disclose their motives, agree to protect the company's proprietary information, and provide Nike with the audit report prior to publishing it. This way, Nike will have the chance to propose remediation steps within the report, and the WRC, Nike and the factory can work together to implement it.

Resolution of worker abuses are difficult to achieve from a distance, so auditors play a key role in keeping companies accountable. Nike's new protocol recognizes this while maintaining its ability to take the lead in remediation efforts so as to remain consistent with its general sustainability policy.

A. What legal and liability issues threaten corporations in using unethical suppliers?

B. How can procurement mitigate these issues?