Nike touts progress in latest corporate responsibility report
Author: Matthew Kish, Portland Business Journal
Posted: February 14, 2020

Ninety-three percent of Nike's contract factories now meet the company's minimum standards for working conditions, according to the sportswear giant's latest corporate responsibility report.

The company has released regular reports on conditions in its factories since it became the target of labor activists in the 1990s.

The latest report, the company's ninth, shows improvement in a number of metrics that measure Nike's environmental footprint, the working conditions for its overseas laborers and its ongoing efforts to make its workforce more diverse. It also shows area where Nike has room for improvement, including in renewable energy and management diversity.

"Nike's purpose is to unite the world through sport to create a healthy planet, active communities and an equal playing field for all," said new CEO John Donahoe, in a letter included in the report. "There are more than aspirations — they are foundational priorities that shape decisions across every aspect of our business."

Broadly, the report covers June 1, 2018, through May 31, 2019. Among the accomplishments touted by Donahoe:

  • Nike invested more than $81 million in communities last year, exceeding a goal of giving away 1.5 percent of pre-tax income. The money benefited 17 million kids.
  • The company now gets 100 percent of its North American energy from renewable sources.
  • Nike's contract factories recycled or converted to energy 99.9 percent of footwear waste.
  • Thirty-nine percent of Nike vice presidents are female, a 3 percentage point increase in the last year.

Portland State University associate accounting professor Kathy Rupley has studied corporate responsibility reports. She gave Nike solid marks for the report, which provides year-to-year comparisons and includes a statement of assurance from PricewaterhouseCoopers.

"They're clearly identifying whether there's an increase or decrease whether they're favorable or unfavorable," she said. "It doesn't seem like they're trying to hide it where they've declined."

She said management diversity is one area where the company needs to continue to improve.

Nike's workforce remains roughly 51 percent male and 49 percent female. Nike's mid-level management is 59 percent male and 41 percent female. At the vice president level, on step higher on the corporate ladder, 61 percent of executives are male and 39 percent are female.

The percentage of female mid-level managers increase 2 percentage points in a year. The percentage of female vice presidents increased 3 percentage points.

In terms of race, Nike's workforce is roughly 43 percent white, but 73 percent of mid-level managers are white, a 1.3 percentage point decrease in a year.

"They're making progress on women and underrepresented minorities," Rupley said. "But they still have a ways to go."

In the report, Nike noted its U.S. internship program is now comprised of 52 percent women and 40 percent from underrepresented groups. It also outlined a number of programs launched in 2019 designed to improve diversity, including an apprenticeship program with a Los Angeles community college, a 10-person design team working on tennis star Serena Williams' line and a two-year program for retiring WNBA players.

"During this past year, we've stepped up our efforts and measures of accountability to foster an inclusive environment and attract a more diverse workforce — one that's more representative of the consumers we serve," the company said in the report. "In 2019, we maintained a sharp focus on building diversity at the most senior levels, because we know increasing diversity of leadership is fundamental to progress."

The report does not disclose information about the wages paid to the company's roughly 1 million contract factory workers. Nike released that information once, in 2001. 

Wages and benefits were the most-cited reason for non-compliance with a factory audit, according to Nike, accounting for 43 of 101 infractions.

"The majority of wage and benefits findings are related to issues like annual and holiday leaves, insurance, or late payment of retirement severance," Nike said, in the report.

Nike self-reported excessive overtime in 2.3 percent of its contract factories, a 0.1 percentage point decrease from the previous year. The company said it provides incentives to factories to eliminate excessive overtime because it reduces product quality and productivity.

Among its new initiatives, the company also said it is working with Dara O'Rourke and Niklas Lollo, researchers at the University of California Berkeley's Institute for Research on Labor and Employment, on "experimental approaches to compensation" for factory workers.

"The pilot is not the whole answer to the complex challenge of wages," Nike said in a separate post on its website.

At a factory in Thailand, for instance, Nike tested linking work pay and productivity.

"The results, published in fiscal year 2019, were encouraging," Nike said in the report.

Ninety-three percent of Nike's 525 contract factories now meet Nike's minimum standards, the same percentage as last year, but 7 percentage points higher than 2015. The company's goal is 100 percent compliance with minimum standards by next year.

The company, or its providers, performed 560 supply chain audits last year.

Nike's made significant progress at reducing factory injuries, according to the report. At its footwear contract factories, the company reported a 0.39 total case incident rate, which measures work-related injuries per 100 full-time workers, well below the industry's 3.9 rate.

Arguably the biggest area for continued improvement: renewable energy. While Nike now gets 100 percent of its North American energy from renewable sources, its' companywide goal is 100 percent by 2025.

Globally, the company is only at 27 percent.

"That doesn't seem attainable," Rupley said.