Nike has selected Silver Star, a Pakistani manufacturing company, to replace Saga as its producer of footballs in the Sialkot region of the country. Nike terminated its contract with Saga because of repeated violations of Nike’s corporate social responsibility policies as Saga was using home-based outsourcing for the sewing of footballs.
Although many workers in the region could potentially lose their jobs, Nike has vowed to try to keep production in the area. More than 100,000 balls per month were being made by Saga, but Nike will not start Silver Star out at this level, hoping to bring it up to speed later. The Swoosh has ball production in China and Thailand, too, but supplies will be strained for the time being.
Meanwhile Nike has set out ambitious new targets to be reached by 2011 in human rights, the environment and other aspects of corporate social responsibility. In its second report of the kind, the Swoosh vows to make all the production facilities and retail stores and all business travel related to the Nike brand “climate neutral.” The company also wants to eliminate excessive overtime in all footwear factories. It will spend $315 million on programs intended to promote sports among young people. Nike also pledges to design shoes that will reduce waste and to reduce waste in apparel plants by 2015.
Nike will incorporate these goals into its basic business processes as a way to foster innovation in product design and in the supply chain, going well beyond the monitoring the compliance of labor and safety issues by its contractors, which was the focus of its first corporate social responsibility report. The report goes well beyond the measures proposed in the first report, which essentially focused on the processes that were developed by the brand to monitor its contract factories.
The monitoring process will go on, and Nike is inviting other brands to share the cost of the monitoring program, contributing to a certain standardization of the procedures. The company hopes that 30 percent of the factories that work for the Swoosh will be monitored by other brands as well based on similar criteria by 2011.
The implementation of lean manufacturing methods at contract factories is expected to allow them to raise the low wages that they are now paying to their employees while increasing labor productivity as well as product quality. These methods are due to be used in 90 percent of the footwear plants that work for Nike by 2011, as compared to the present ratio of 40 percent, and about half of the clothing factory have started to tackle lean manufacturing, too.
Nike’s factories currently employ about 772,000 workers, with producers of apparel and footwear each employing roughly 344,000 and equipment manufacturers another 84,000. In the financial year ended in May 2006, sales of Nike products per contract employee were $23,145 for footwear, $12,108 for apparel and $10,440 for equipment.
The report gives some indications of Nike’s sourcing pattern. For apparel, it is basically getting 9 percent sourced in the Americas, 7 percent in Europe, 36 percent in Northern Asia and 48 percent in Southern Asia. In footwear, the Americas represent 3 percent of the global production, Europe less than 1 percent, Northern Asia 70 percent and Southern Asia 26 percent. About 10 percent of the equipment production comes from the Americas, 4 percent from Europe, 69 percent from Northern Asia and 17 percent from Southern Asia.
Nike says it spent $54 million in charitable contributions during the 2005/06 financial year, including $22 million in cash and $32 million in the free supply of products contributions, and the annual minimum spend will grow to $56 million over the next five years. It has spend about 56 of the total in the USA, 28 percent in Europe, 6 percent in Asia, 2 percent in the rest of the Americas and 8 percent elsewhere.
