Manny Pacquiao didn't realize it then, but he may have just given a boost to gay rights. Nike's quick reaction to homophobic comments by the Philippine boxing star could open the door to pressure on the company to review where it manufactures its sneakers and sports bras.
Good news for human rights activists, bad news for investors in the clothing industry. Social-responsibility issues have already led to additional costs for some companies as they source products from factories that treat workers more fairly, which often means paying them more and making the product a bit less profitable.
Shareholders should get used to it. Given Nike's speedy response, gay rights may start to feature in the list to be checked as many of these companies shift production away from China to places where labor is cheaper, such as East Africa.
At this stage, the awareness doesn't seem to have reached the point where the biggest apparel makers are weighing sexual freedom in the countries where they manufacture. The U.S. imported $16.3 billion of clothing in 2014 from India, Bangladesh and Pakistan, respectively the number 3, 4 and 5 countries from which Americans buy these products, according to the Census Bureau. All three countries have legislation that treats homosexuality as a criminal offense.
Those nations have a lot to lose if clothing companies start to take the right to sexual freedom into account when they source their products. According to the World Bank, 19 percent and 29 percent of the manufacturing in Bangladesh and Pakistan, respectively, related to the textile industry in 2006, the last year for which the multilateral bank had data on the two.
Bangladesh, India and Myanmar comprise three of the top five prospective sourcing destinations for apparel businesses over the five years to 2020, according to a McKinsey survey last year. Ethiopia and Egypt are also in the top 10, according to the survey. All five penalize homosexual acts with prison sentences, according to a 2015 report by ILGA, the International Lesbian, Gay, Bisexual, Trans and Intersex Association.
This means politicians there are probably listening as large global apparel manufacturers begin to react to attacks on the right to sexual choice. Whether this will be limited to canceling contracts with sports figures who speak out against homosexuals or will become a social-responsibility issue is an open question.
Nike may need to change less than some companies. About 95 percent of its footwear is produced in China, Vietnam, and Indonesia, according to its 2015 annual report. Of the seven countries where Nike apparel mainly is made, only Sri Lanka and Malaysia criminalize homosexual acts, and ILGA points out that homophobic laws aren't enforced anywhere in Asia at present. (Nike declined to comment beyond saying in a written response that it's committed to diversity, inclusion and human rights and has policies against workplace discrimination ``including in our code of conduct for production.")
As gay rights gain traction in the developed world, the issue may increasingly feature in the agenda of clothing makers. For investors, that can mean smaller profits, but the impact will be vastly outweighed by the resulting good karma.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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