When it comes to business and sport, we value fair play. We believe world-class manufacturing is grounded in standards that respect the environment, the people who work in factories and the principles of a healthy and safe workplace.
We have a responsibility to run our business in an ethical way, and that responsibility extends to the contract manufacturers who make our products.
Our Code of Conduct and Code Leadership Standards set our expectations for suppliers and reflect our priorities across labor, health and safety, and the environment.
NIKE is a signatory of the Social Labor Convergence Program (SLCP) and a member of the Sustainable Apparel Coalition (SAC) which seek to drive industry convergence on factory compliance to mitigate issues. Their approach is based on supplier ownership of responsible manufacturing and aligns with NIKE’s approach to drive sustainable and consistent performance with our factory partners. Our goal is to replace our current supplier factory monitoring system with this industry approach to monitor labor, health and safety, and environmental compliance. NIKE has begun scaling the use of the industry tools in 2020 with facilities in our extended supply chain in support of commitments made.
Click here to watch the full video with closed captions.
Code of Conduct
Commitment is Everything
At Nike, we believe that although there is no finish line, there is a clear starting line. The Nike Code of Conduct (Code) and Code Leadership Standards (CLS) lay out the minimum standards we expect each supplier facility to meet. We expect all suppliers to share our commitment to the welfare of workers and to use natural resources responsibly and efficiently. These minimum standards are integral to Nike’s supplier strategies – how we evaluate baseline performance and determine the suppliers with which Nike will continue to engage and grow our business. We work with suppliers who show a commitment to managing their business responsibly and sustainably and who seek to move beyond minimum standards.
We expect all suppliers to share Nike’s commitment to respecting the rights of workers and advancing their welfare, with particular care for people with unique vulnerabilities such as women, migrants, and temporary workers. We also expect suppliers to use natural resources responsibly and efficiently, focusing on areas such as carbon and waste reduction. As part of Nike’s growth strategy, we seek suppliers who are building agile and resilient management systems which enable them to drive sustainable business growth through developing an engaged and valued workforce, fostering a strong culture of safety, and minimizing their environmental impacts.
Our Vision for Collaboration
Nike recognizes that achieving our vision of a more responsible and sustainable supply chain will require increased collaboration and joint action not only with our suppliers, but with other brands and all stakeholders in the supply chain. We believe that relationships based on transparency, collaboration, and mutual respect are integral to making this happen. We will work with our suppliers as we continue to expand engagement with civil society, unions, governments, and others to affect systemic change to labor, health and safety, and environmental conditions in communities where our suppliers operate.
Code Leadership Standards
Nike’s Code Leadership Standards communicate how supplier factories should implement the Code of Conduct. The document also provides deeper detail into how we measure factories’ compliance efforts and progress.
In 2005, we were the first company in our industry to publicly disclose our factory base, in the interests of transparency and collaboration. Nike’s Manufacturing Map is a tool to learn about the independent factories contracted to make Nike, Jordan and Converse products—including the names and location of each factory, the types of product made, the factories that supply our collegiate product and demographic statistics about the workers at each factory. The interactive map is updated on a quarterly basis to reflect changes in our source base.
This resource provides extensive details about the factories Nike contracts with around the world. For each factory, you are able to learn more about the types of products made, the factories that supply our collegiate product, demographic statistics about workers at each factory and the factory address and contact information.
ZDHC Wastewater Guidelines
Nike co-led the development of the Zero Discharge of Hazardous Chemicals (ZDHC) Wastewater Guidelines, a collective effort of all member brands in the ZDHC Foundation to continuously work to improve wastewater discharges. Through the power of collective action, one wastewater test per the ZDHC Wastewater Guidelines is valid for all member brands of the ZDHC.
Manufacturing Restricted Substance List (MRSL)
After the launch of the first industry-aligned Manufacturing Restricted Substance List (MRSL) in 2014, we have worked extensively with other global brands to expand it further. The latest ZDHC MRSL, published in January 2020, includes a broader scope of production processes, and includes chemical limits on formulations used to produce textiles, leather, rubber, foam, and adhesives.
Sustainable Apparel Coalition
Building on our collaboration with the Sustainable Apparel Coalition in sharing the Materials Sustainability Index industry-wide in 2012, we have recently taken a leadership role in the update of the SAC’s Higg Facility Environment Module 3.0. Nike has started scaling the use of Higg Facility Environment Module across our Tier 1 and strategic Tier 2 suppliers in 2020. As Higg FEM evolves over the coming years we intend to scale even further.
Social and Labor Convergence Program
The Social Labor Convergence Program is a pioneering initiative that seeks to develop a simple, unified and effective industry-wide way to assess labor, health and safety conditions in factories, with the goal of replacing current proprietary audit tools used by individual companies. This would reduce the number of audits, increase industry efficiency, reduce audit-related costs and allow participating organizations to invest resources previously designated for compliance audits into the improvement of social and labor conditions. It would also be a step in the direction of enabling a more collaborative approach to address risks and opportunities in the industry.
New Source Approval Process
All potential new suppliers are subject to the New Source Approval Process. Risks of starting a new supplier relationship within the requested country are considered, requiring additional approval for locations in countries identified as high risk. Suppliers must receive an overall Bronze audit rating—our base acceptable level—prior to beginning full production.
Manufacturing Index: Incentives & Sanctions
Introduced in 2012, Nike’s Manufacturing Index scores factories based on four equally weighted categories: sustainability performance (including labor practices), and three traditional manufacturing metrics (cost, quality and on-time delivery). We assess the sustainability component through our Sustainable Manufacturing and Sourcing Index and focus on bringing all factories to a Bronze rating (our minimum standard) or above.
Sustainable Manufacturing & Sourcing Index
In 2012, we launched our Sustainable Manufacturing and Sourcing Index (SMSI), a system for combining factory ratings for lean manufacturing and human resource management, as well as for health, safety and the environment. This system gives environmental and human resource management performance equal weight alongside business metrics in our sourcing, increases transparency to reduce non-compliant practices and creates targets and incentives for our suppliers to go well beyond compliance.
Factory Compliance Ownership Program
Nike monitors finished goods supplier compliance with our Code of Conduct and Code Leadership Standards through regular announced and unannounced audits conducted by internal and external parties. We call this our Factory Compliance Ownership (FCO) Program. This includes audits by accredited third parties such as the Fair Labor Association (a neutral industry body) and assessments by Better Work – a joint initiative of the United Nations’ International Labor Organization (ILO) and the International Finance Corporation (IFC), a member of the World Bank Group. Ratings assigned as a result of FCO assessments form the foundation of a supplier’s SMSI score, driving business to high performing suppliers and initiating sanctions with suppliers failing to meet minimum performance expectations (Bronze rating). This encourages Nike’s suppliers to fully own their compliance with Nike’s Code of Conduct and Code Leadership Standards through effective management systems.
Nike takes issues of non-compliance seriously. If we are alerted to an issue of non-compliance with our Code of Conduct or Code Leadership Standards within one of our contract factories, we investigate it immediately and, where improvements are required, we take a collaborative approach to working with factory managers to see that corrective actions are taken, that problems are remediated and that the managers have on-site verification of this remediation. Should a supplier fail to remediate issues identified by an audit or allegation investigation according to Nike’s requirements, it is subject to review and sanctions, including potential termination of the supply agreement.
In the event that the relationship with an existing supplier is terminated, either resulting from poor sustainability performance or other reasons, Nike’s responsible exit process is triggered. This includes evaluation of the risks to Nike, the workers, local community and environment associated with the upcoming divestment.
We take this process seriously. It includes a reduction in production orders over a determined length of time to create the least amount of disruption to a business and workers as possible. In high-risk situations, multi-stakeholder working groups are assembled to develop and monitor an exit plan designed to manage the risks identified with the divestment.