Nike Releases Remediation for Indonesian Factories

Nike Releases Remediation Plan for Indonesian Factories

Plan identifies specific action items to address workplace issues reported by factory workers in Global Alliance research report

Beaverton, Oregon (February 22, 2001) – As part of its ongoing efforts to improve working conditions in the factories where its products are made, NIKE, Inc. made public today a comprehensive remediation plan that addresses the issues raised by Indonesian factory workers in a just-released recent assessment study conducted by the Global Alliance for Workers and Communities, of which Nike is a member.

"The Global Alliance report raised some disturbing issues about the workplaces in Indonesia where some Nike products are made. No worker should be subject to some of the working conditions reported in this assessment," said Nike's Vice President for Corporate Responsibility Dusty Kidd. "Our remediation plan is designed to address each issue head on, working collaboratively with our factory partners and the Global Alliance to ensure its implementation. This is the most comprehensive information we have about worker opinions in our Indonesian partner factories and we will use it to continue to improve our partner factories in Indonesia and throughout our global supply chain, employing more than 500,000 workers in 55 countries," Kidd said.
Nike website: http://nikebiz.com

ONGOING REMEDIATION
Nike's remediation plan includes specific action items and timelines to address worker concerns raised in the Global Alliance report about verbal and physical abuse and sexual harassment; overtime issues; grievance procedures; health and safety; and annual, sick and menstrual leave. It incorporates remediation initiatives that were underway in some of Nike's Indonesian partner factories as a result of Nike's monitoring processes. Nike will use independent monitors certified by the Fair Labor Association. We are reviewing the effectiveness of our PricewaterhouseCoopers monitoring and our overall compliance system.

In addition, Nike will work with its contract factories to ensure that the process of remediation, to the maximum extent possible, involves trade unions or other means of worker representation. Nike seeks to support the ability of trade unions or other forms of representation to more effectively build their capacity to represent workers' interests to management.

Some specific action items in the plan include:

HARASSMENT TRAINING – Conduct comprehensive harassment training for both managers and factory workers using a credible, local external resource with expertise in women's issues

GRIEVANCE SYSTEM – Implement a grievance system for workers that allows them to bring workplace issues to the attention of management without fear of retribution, including piloting an ombudsman program

WORKPLACE POLICIES – Strengthen our existing workplace policies and penalties, including those related to voluntary overtime; harassment; annual sick and menstrual leave; and the reporting of serious injury or deaths regardless of the cause or location

HEALTH AND SAFETY – Implement the recommendations of International SOS, a respected health provider, including improving food service delivery and facilities as well as factory health clinic and medical attention standards

COMPENSATION – Verify through independent audits that all factories have fully implemented the new minimum wage, are paying the required wage and that workers clearly understand the wage calculation and compensation structure

INDEPENDENT VERIFICATION AND MONITORING – Conduct an independent verification of the factories' compliance with Nike's remediation plan using a certified Fair Labor Association monitor; report quarterly on our progress to the Global Alliance

RE-ASSESSMENT – Conduct a follow-up assessment by the Global Alliance on the impact of Nike's remediation plan in 12 months

RESEARCH FINDINGS
The Global Alliance, a partnership of non-profit, public and corporate members, surveyed 4,000 workers out of 54,000 working in nine Nike contract factories in Indonesia, including focus group discussions with more than 450 workers. The results of the survey revealed a number of insights into the perceptions of Indonesian factory workers – perceptions that in some cases mirror those of workers in other countries, like Thailand and Vietnam, about which the Global Alliance published assessment reports in September 2000. For example, workers generally want higher wages and better food. They hope their current job will bring a brighter future for their children and they want access to more information that can improve their health, education, job skills and life skills.

There is, however, troubling information in the Indonesian report that vastly differs from the findings in Thailand and Vietnam. For example, thirty percent of workers in Nike's Indonesian partner factories said they have experienced verbal abuse. Nearly two and a half percent said they have received unwanted sexual touching and nearly eight percent said they received unwelcome sexual comments. More than three percent said they received physical abuse at the hands of their supervisors or managers. Workers also reported deeply concerning incidents of sexual favors for employment at two factories and two reported incidents of worker deaths, which, according to Nike's independent investigation and worker reports from the focus group discussions, occurred off factory premises.

"While the report raised a number of troubling issues, Nike is encouraged by some of the Global Alliance's findings and the ongoing development initiatives that will result from this research," added Kidd. "Initiatives like these aren't always easy and in this case some of the findings were tough for us to hear. But experience has taught us that we learn from open and collaborative processes, like the Global Alliance, and that the more information we have about workplace conditions and worker attitudes, the more likely we are to change those lives, those workplaces, and our business – for the better."

POSITIVE SIGNS
The report also had some positive information about workers' relationships in the factory and their attitudes about factory facilities. For example, the majority of workers reported satisfaction with their relationship with supervisors and managers. The majority said they would feel comfortable asking a line supervisor for assistance if they were having a problem with unhealthy work conditions and a majority say they would feel comfortable asking for assistance from a line supervisor or their factory union representative if they were having a problem with unfair treatment at work. An overwhelming majority of workers also expressed satisfaction with some of the services at some of the factories, like the non-formal education program, job skills training, family planning services and recreation facilities. Using the findings of this research, Nike plans to implement processes that over time will further enhance these relationships and services and how workers feel about them.

CONTINUED TRANSPARENCY

The Global Alliance research has established for the first time a methodologically sound baseline to which Nike and others can compare future assessment results and progress. Because of the confidential nature of the GA interview process, it is difficult to gather specific information about some of the issues described in the Global Alliance report. Irrespective of the issue or the extent to which it was raised, Nike is addressing each one with equal seriousness and will require the same of its factory partners.

Nike believes that its detailed remediation plan, along with stepped up third-party monitoring efforts, will allow the company to create a better working environment in these factories. As Nike learns more through its various monitoring vehicles, the company's remediation efforts will be adjusted to match its learnings and hopefully have a significant impact on improving the workplaces in these Indonesian factories and throughout its global supply chain. Nike hopes other companies will not shy away from processes like the Global Alliance, as the company is certain that the more information it has about workplace conditions and worker attitudes, the more likely it is to positively impact those lives and workplaces, and Nike's business.

Following please find excerpts from Nike's Remediation plan

NIKE REMEDIATION PLAN RESPONSE TO THE GLOBAL ALLIANCE'S REPORT
Workers' Voices:
An Interim Report of the Assets and Needs
Of Nike Vendor Factory Workers in
Indonesia February 22, 2001
Introduction

Our goal with this remediation plan is to address the issues that have been raised through the Global Alliance (GA) assessment process in Indonesia. Many of the issues raised in the report were ones Nike was aware of and addressing through our normal compliance procedures. Others were serious issues we were not aware of or we were not aware of their scale or scope.

While the attached remediation plan is an action plan to address specific issues of concern, it is insufficient if it can not be verified, if the voice of workers cannot be consistently and safely heard as a standard practice in our factories and if we do not commit to changes across Indonesia and our whole system versus only the factories that were involved in this assessment. Hence, the GA assessment results and our own knowledge of problems in our compliance system have led us to a more systemic response to the results.

There has been much criticism of Nike over recent years around global manufacturing issues. Many of the criticisms are similar in nature to some of the findings in the GA assessment. One of the key differences is that normally such information has been brought to Nike in an adversarial manner, making dialogue and progress difficult for us. In contrast, the goal of the GA is to bring such information forward, in a scientifically valid and professional approach, and then to work with us collaboratively alongside NGOs, experts, universities and our factories in finding solutions and making progress for our workers. We have learned through the GA process how tough messages, conveyed in spirit of collaboration can engender real progress.

Review of Nike's Oversight System
Nike began a business and oversight system review shortly after the first meeting with the Global Alliance where we were presented the initial findings of the GA Indonesia assessment. The goal of this review is to get to the problems behind the problems in our compliance system and to understand the fundamental business dynamics that lead to non-compliance. We are addressing how industry pressures on margin, price, timelines and business practices drive non-compliance. We are looking at our resource allocation and governance structures and analyzing their effectiveness. We are considering the effectiveness of our policies, procedures and programs and analyzing the effectiveness of our internal and external auditing systems, including our PricewaterhouseCoopers monitoring.

We are committed to independent monitoring through the Fair Labor Association and the learnings it will bring us. We are taking a fresh look at the worker-management relationship and how communication, collaboration and improvements can be fostered more effectively through various means, including trade unions. We will be identifying and implementing with the help of various experts different approaches to a credible, effective and safe grievance system for workers to bring issues to management. We will be consulting with our factory base and external resources to address weaknesses in our compliance systems and improve the effectiveness of our work. We will report on our review to the GA operating council and externally.

We hope this outline of our review process gives the reader context for our response to the issues raised in the GA assessment detailed in the comments and tables in sections 4 and 5 of this plan. Each issue is addressed in the plan in text and in charts to assist the reader in comparing actions for each issue area. We have also conducted independent investigations into some specific issues in greater detail such as the worker comments around sexual favors for jobs and reported deaths of factory workers. The results of those initial investigations show different views than those expressed by the workers.

Finally, while the GA was not designed to identify compliance issues, the findings in Indonesia have challenged the GA and raise questions about the role of the GA in the future that we look forward to exploring to the benefit of workers.

It is our goal and the policy of the GA to be transparent about our findings and our process. We remain committed to transparency, appreciative of the excellent work of the GA and the Atma Jaya team in country and focused on addressing the issues identified effectively, expeditiously and comprehensively. This plan is in process and will evolve as we act and learn from addressing the issues.

Executive Summary
The Global Alliance assessment in Indonesia of nine Nike contract factories' worker opinions and aspirations produced a broad range of information on which Nike, and Nike with the Global Alliance, can act. We will apply the lessons learned from this information to all of our contract factories in Indonesia, and, where applicable, to our global contract factory supply chain as well as to China, the country in which the GA will conduct its next assessment.

The information, gathered by research teams from the Centre for Societal Development Studies of Atma Jaya University Social Research Institute, is broadly divided into two categories: (a) information on what workers think about their jobs, their workplaces, their lives and the things that would bring improvements, and (b) information about factory compliance with Indonesia's labor law and the Nike Code of Conduct.

The information from the first category, worker opinions and aspirations, will provide the basis on which the Global Alliance and Nike can act to invest in programs to better the lives of workers and their families.

Information from the second category, compliance issues, is in some cases troubling, and it is in reaction to this information that this remediation plan has been written and is now being acted upon by Nike and, where appropriate, other partners in Indonesia.

We will adjust our compliance oversight and monitoring processes to make them better. These changes will include: (a) new efforts to incorporate better social monitoring into the process, using local organizations with specific expertise in women's issues; (b) grievance procedures in which workers can pass along information in a secure manner; and (c) independent verification of the steps taken against specific compliance issues by a monitor certified by the Fair Labor Association. (Please see Appendix V.) In addition, Nike will report back to the GA on a quarterly basis on the progress against this pan and has asked the Global Alliance to engage in a second assessment within 12 months to gauge whether steps taken as outlined in the following sections have had impact on worker perceptions of the workplace.

There are two other related issues in which we intend to invest our resources. First, workers clearly do not have confidence in the health and safety aspects of the workplace. These include the food, the sanitation, the manner in which illnesses are dealt with by supervisors, and the manner in which health care is provided by the factory-based clinics. Nike and 11 footwear factories already have invested in health and safety profiling and action plans by International SOS, a respected medical service provider. We will continue to invest in this work and track carefully the progress made against ISOS/factory action plans, and ensure these issues and the steps being taken are transparent to workers.

In addition, we also will work with our contract factories to ensure that the process of remediation, to the maximum extent possible, involves trade unions and seeks to build the capacity of trade unions to more effectively build their capacity to represent workers' interests to management.

A summary of key compliance issues and planned remedies follows:

Compliance Issue Nike Responses
Compensation Information. The GA data suggests that some workers may have been unpaid. It is also clear that not all workers understand how their wages are calculated. The report also indicates that 95 percent of the workers have received pay increases in the last year, consistent with government minimum wage increases and with small exceptions the base wages in these factories are above the region's minimum wage.

Action. Through an independent monitoring certified by the FLA, Nike will conduct a re-audit of factory accounting records. We also will ensure the factories have a clear communication process in place to educate workers on their compensation structure and calculation.
Terms of Work Information. The GA assessment indicated worker concerns with illegal forms of overtime; refusal to allow proper forms of sick leave, menstrual leave and annual leave; and underpayment of wages.

Action. Through Nike compliance teams and independent monitors certified by the Fair Labor Association, Nike will focus the monitoring on these issues in the near term, in combination with training for both management and workers on the rights and obligations enshrined in the Indonesian law and the Nike Code of Conduct.

Harassment Information. Quantitative and qualitative results indicated high levels of verbal abuse in some factories, and lower but still troubling levels of sexual and physical abuse or harassment in other factories. Reports varied widely by factory and patterns varied irrespective of whether the factory is owned and operated by Indonesian or foreign nationals. There were also reports of isolated incidents of sexual favors to obtain employment in two factories.

Action. Nike launched an independent investigation retaining outside legal counsel and local investigators and lawyers, who interviewed 39 workers who had recently left the two factories in question. The investigators received no information to support the allegation of sexual favors being asked in exchange for employment, consistent with reports from workers in the focus group discussions. To address the issues of verbal abuse and harassment, Nike has initiated renewed training with factory management and Nike's own personnel, to raise awareness of the issues of all forms of harassment. In the coming weeks Nike will seek out, with Global Alliance assistance, local organizations that can provide advice, counseling and secure channels for workers to bring harassment issues to factory management and/or Nike for action.

Conditions of Work Information. The GA assessment indicated high levels of worker concern for the workplace environment, including specific concern about the physical environment in the factory; the quality of services and benefits provided such as food, health care and transportation.

Action. Through Nike's compliance team, and working with external partners such as International SOS, a health care organization, Nike has already done health and safety surveys of all footwear factories, and those factories individually are working to develop plans of action to begin to improve conditions and services identified by the surveys or the GA assessment. Nike will track that progress, be involved in aspects of it related specifically to workplace safety, and share the learning to factories not involved in either the GA or ISOS assessments.

Reporting Worker Deaths Information. In the course of the research, there were two reports of workers' deaths, one each in two different factories in which the respondents reported they believed denied sick leave and medical attention were contributing factors.

Action. Nike launched a thorough and independent investigation into one of the two reported deaths it had enough information to go on by retaining outside legal counsel, local investigators and lawyers. More than 30 line workers, supervisors, factory executives, clinic staff and care providers were separately interviewed along with various family members, many offsite and without the knowledge that Nike was conducting the investigation. That investigation determined that the death did not occur on the factory premises, which was confirmed by several focus group respondents, and that the worker did have access to the health clinic consistent with standard factory practice.

Action. As a result of this process, Nike now has adopted a standard operating procedure that requires all factories to report to us the death of any worker, regardless of the cause or location of that death. This procedure also guides how Nike will follow up to determine any facts or issues in dispute.
ENDS

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