Information Concerning Nike’s Indonesia Production

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To:WRC Affiliate Universities and Colleges
From:Scott Nova
Date:November 7, 2018
Re:Information Concerning Nike’s Indonesia Production

 

A number of universities have asked the WRC for our assessment of concerns that students and other activists have raised about a substantial shift of Nike’s collegiate garment production from Indonesia to other countries. We have responded individually to those institutions that have inquired, and I want to share our assessment with all affiliates, since other schools may also find it useful.

As we understand the situation, Nike is implementing a significant relocation of production – including, though not limited to, university logo product – from Indonesia to other countries from which Nike sources. Several factories will be affected, including multiple factories producing university logo product. Because Nike is a particularly large buyer from some of these facilities, there will be a major impact on workers, including sizable layoffs or outright factory closure. Nike has, appropriately, provided substantial advance notice to the affected factories, and managers have shared at least some information with workers at these facilities. Understandably, there is great concern on the part of affected workers and on the part of labor organizations representing these workers. This has led to international outreach by those labor organizations to activist groups in North America and Europe, including USAS, which has, in turn, brought the issue to the attention of some university administrations.

Nike has been in regular communication with the WRC about the situation. The WRC is also communicating, on an ongoing basis, with unions and other stakeholders in Indonesia.

We can offer the following points of information and analysis:

  • We do not have comprehensive information on how many factories, and which factories, will be affected. We know that the relocation impacts several collegiate factories and at least one non-collegiate factory. We know that the timing of Nike’s withdrawal of order volume varies from factory to factory. We know that the move impacts thousands of workers. In one case, at a factory called PT Kahoindah Citragarment, which made university logo goods for Nike, orders have already been withdrawn and the factory has closed, resulting in the loss of between 2,000 and 3,000 jobs.
  • Relocation of production by university licensees can cause serious hardship for workers and their families, even though relocation is not – in and of itself – prohibited by university labor codes. The exception would be a case where the intent of the relocation is discriminatory or retaliatory; for example, if a factory had just become unionized and a licensee decided to remove production from that factory because of animus toward unions. In the present case, we have no evidence to indicate that Nike’s intent is discriminatory, and we have received no worker complaints to this effect. Thus, while we recognize that the hardship for workers is very real, Nike’s decision to relocate production does not constitute a violation of its obligations under university labor codes. It is important to note that Nike is responsible to ensure that the reduction of employment by affected factories is carried out by those factories in a lawful manner, including legally mandated consultation with worker representatives and payment of legally mandated severance.
  • The fact that relocation of production is permissible under university standards does not mean that workers won’t be harmed by the relocation and react accordingly. When a major brand like Nike relocates production away from a longtime supplier, the lives and wellbeing of workers and their families are upended and, in some cases, permanently harmed. Those effects result from a decision made thousands of miles away, and, in whose making, workers have no opportunity to directly voice their own human needs and interests, because the brand is not their legal employer. This is why the industry’s prevailing sourcing model, which often involves major production shifts between factories and countries, is a long-standing humanitarian concern, one the WRC has raised on previous occasions. This sourcing model is not unique to Nike – indeed, it is the industry norm – but it is the largest buyers, like Nike, whose decisions have the largest impact. If workers affected by a major relocation are represented by unions, as some of the workers at Nike’s Indonesian suppliers are, those unions are going to defend their members as best they can: by raising international concern, contacting the buyer and urging reconsideration of the withdrawal of production, holding demonstrations, etc. In seeking to understand the intensity of the local reaction to the relocations and impending job loss, it may be helpful to consider what happens in a community in the US when a company announces that a factory that has been a mainstay of local employment will close and relocate overseas. Invariably, the response from workers and the community is fear, anger, and efforts to reverse the decision.
  • It is, thus, not surprising that workers at these Indonesian factories are raising their voices in protest and that activists in other countries, including student activists, are echoing their concerns and pressing Nike to reconsider. Nike should not be – and I am sure is not – surprised by this. The workers, of course, have every right to fight to keep their jobs, and we anticipate that they will continue to do so.
  • There is conflicting information about what percentage of Nike’s garment production will leave Indonesia. Activists, citing worker sources, have stated that Nike intends to remove all garment production from the country. Nike has challenged this assertion. The company has told the WRC that it will still keep significant garment production in Indonesia. The WRC has recommended to Nike that it share detailed information concerning the production volume that will remain in the country and the specific factories it will continue to use in the future, in order to correct any misperceptions and ensure that everyone involved in the discussion has the best possible information. Nike is not obligated under university standards to make such detailed disclosure, and the company has not done so.

We credit Nike’s representation that it will maintain some garment production in the country, as we do not see why the company would state this to the WRC and to universities if this were not its intent. Nike voluntarily publishes a quarterly list of all supplier factories, as well as provides the required quarterly disclosure of the smaller list of factories it uses for collegiate product, so the company’s actions will ultimately be a matter of public record.

In the end, the dispute over exactly how much production will remain is of limited relevance. Nike acknowledges that it is removing work from multiple factories in Indonesia. Thousands of workers are unquestionably impacted. It is these basic facts that underlie the concerns workers are expressing.

Please note that Nike has reported to the WRC that its footwear production will not be substantially affected by the relocation (Indonesia is a large producer of footwear for Nike, adidas, and other sports apparel brands).

  • Unions representing affected workers in Indonesia have asked to meet with Nike to discuss the situation. Nike has, so far, declined to meet. The WRC has recommended that Nike meet with the unions on a voluntary basis, since this is not a formal requirement of university codes. Nike’s view is that it is the workers’ direct employers, not Nike as the buyer, that are responsible for engagement with worker representatives. We have pointed out to Nike that, in this case, the unions’ objection is to sourcing decisions made by Nike, not the labor practices of the employers, and that the employers are not in a position to address the unions’ concerns. Given that Nike’s relocation decision is affecting the lives of tens of thousands of people (workers and their families), an opportunity to talk face-to-face is not a lot for worker representatives to ask. Nike’s unwillingness to meet falls short of industry best practice. We will continue to encourage Nike to sit down with the unions.
  • The provision of university labor codes that could have bearing on Nike’s relocation process is the requirement that licensees ensure that collegiate factories pay all legally mandated benefits to workers who lose their jobs, including severance benefits. As you know, non-payment of legally mandated severance has been a major issue at collegiate factories around the world. Indonesia is a country where severance violations have been particularly common. Many universities will recall the case of the PT Kizone factory in Indonesia, a supplier of collegiate product, whose largest buyers were adidas and Nike, and which closed owing workers more than $3 million in severance. In that case, Nike moved quickly to ensure that its buying agent made a large contribution to workers to satisfy these obligations. Adidas initially refused to ensure that workers received the remaining outstanding funds, but ultimately did so after a long push by USAS and strong encouragement by many of its university licensors. The workers were made whole.

Given the prevalence of severance violations in Indonesia, the WRC applies robust scrutiny to all cases involving mass layoffs or closures at collegiate factories. We are working on another case involving unpaid severance benefits in Indonesia now, at a factory which made collegiate goods for Gear for Sports and Under Armour, and we expect to report to you on that case soon. We are also closely following events at the factories that are affected by Nike’s relocation decision, including PT Kahoindah Citragarment, which has just closed – the first affected factory to do so. If any concern arises about non-payment of benefits at any affected factory, we will engage with Nike and report, as appropriate, to affiliate universities.

I hope the information outlined above is useful. We are available to affiliate universities, as always, for further discussion.

Scott Nova
Executive Director
Worker Rights Consortium

nova@workersrights.org