Nike Names Names

To further ease criticism of Third World labor abuses, the footwear giant is listing its contract factories. Will rivals follow suit?

By Aaron Bernstein

Ever since sweatshops became a hot-button issue in the early 1990s, activists have demanded that Nike (NKE ), Wal-Mart (WMT ), and other Western companies reveal the names and locations of the factories that produce their goods around the globe.

Now, after years of nearly unanimous refusals by companies, Nike says it will post information on its Web site about all the 750-odd factories it uses to make shoes, clothes, and other sporting goods. It plans to release the data on Apr. 13, in conjunction with a comprehensive new corporate responsibility report that summarizes the labor and environmental situation of its contractor factories.

Nike's bold move is a potential milestone in the long-running debate about sweatshops and will put pressure on other companies to be more open about the conditions in which their products are made. "This is a significant step that will blow away the myth that companies can't release their factory names because it's proprietary information," says Charles Kernaghan, executive director of the National Labor Committee, a New York-based anti-sweatshop group that has been fiercely critical of Nike over the years. "If Nike can do it, so can Wal-Mart and all the rest."


  The location of factories has been a contentious point for an obvious reason: The watchdog groups want to independently verify companies' claims that they're working hard to improve labor conditions in low-wage countries such as China and Vietnam. The standard corporate response has been that releasing factories' identities would give rivals the ability to steal a march on them.

Most large Western brands and retailers typically use hundreds of contract factories, often changing dozens of them every year as they strive to find the lowest price. Nike and others have worried that if their competitors knew which factories they were using, the rivals might be able to find out what a new product or style line looks like, or the size of a production run.

Critics never completely bought that explanation, especially since some large factories produce for several Western companies at once. Instead, they saw companies as reluctant to open themselves to close scrutiny of their labor conditions.


  So what changed Nike's mind? Dusty Kidd, Nike's vice-president of compliance, says he's still worried about giving rivals a road map to the company's factories. But Nike has decided there's more to be gained by trying to work together with other shoe and apparel makers, which often use the same factories.

Right now, Kidd points out, the same factory might be visited numerous times by different companies' labor and environmental monitors. This is costly for the factory owners and for the companies, too. So why not try to avoid some of the duplication? "The potential for collaboration is greater if we put out our factory names," he says.

The move is also easier because Nike's relationship with critics has improved over the years. Instead of simply blasting the company when they uncover egregious labor violations, groups like Kernaghan's or the Workers' Rights Consortium (WRC) now try to work with Nike to resolve the situation. Sometimes, Nike and the activists even get together to, for example, prod reluctant factory owners to rehire workers who had been fired for trying to form a union.

As a result, Nike doesn't feel quite as much like it's opening itself up to a barrage of attacks by identifying its factories. "I would have been a lot more worried about that three or four years ago, but now I'm not because we collaborate more with the nongovernmental organizations," says Kidd.


  Other companies may not jump to follow suit, but Nike's move is likely to make it more difficult for them to cite competitive pressures. A few already release some factory names and now might do more. Reebok publishes the list of its footwear factories on its Web site, along with those that produce its college-licensing goods.

Several outfits have listed their college-licensing factories as well, mostly due to pressure from the WRC. "We never felt this was a proprietary issue," says Doug Cahn, Reebok's vice-president for human rights programs.

The broader question lies with retailers such as Wal-Mart and Target (TGT ). Such companies say they monitor their contractor factories for labor abuses -- but unlike Nike and Reebok (RBK ), which submit to independent audits, the results of the retailers' inspections aren't disclosed to any outsiders. And neither are their factory locations. If that starts to change after Nike's move, the anti-sweatshop debate may move to a new level.

Bernstein is a senior writer in BusinessWeek's Washington bureau

Edited by Phil Mintz

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