• 25 sep 2023
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  • Assetmanagement
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Pressing Nike to respect labor rights

PGGM wants Nike to enable full payments to workers in its supply chain, writes Rui Chang.
Rui Chang 480X480 Pggm (1)

Rui Chang

Advisor Responsible Investment

Ramatex and Hong Seng Knitting, two large garment manufacturers contracted by Nike, have not paid their employees legally owed wages and benefits in full. It amounts to a collective $2.2 million for more than 4,500 garment workers in Cambodia and Thailand. Both companies are part of the vast supply chain of Nike, of which PGGM is an investor. Attempts to seek remedy have failed for three years. We are keen to see the company take up its responsibility to enable full payments to the workers.

Nike offers sports products that improve the well-being of its customers, but how about the well-being of the vulnerable workers that manufacture its products? When asked about responsible investing, our pension participants find human rights the most important topic for engagement. It is therefore our role to push for responsible production through our active ownership.  

Our engagement with Nike
Back in 2018, the Dutch pension sector signed an agreement on responsible business conduct. The agreement makes clear reference to the United Nations Guiding Principles for Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines), which has become the base for PGGM’s human rights due diligence.

In this process, Nike became one of the focus companies. Operating in the high risk apparel sector with several human rights controversies, we see the need to further mitigate the risks in the supply chains. For two years, as a member of the Platform Living Wage Financials, we engage alongside like-minded investors asking Nike to close the living wage gap. From the assessment results of the Platform, Nike has been in the ‘maturing category’ for four years. This means the company is not lagging, but the improvement is somehow stagnant.

From policy to implementation
Although Nike has strong human rights commitments, human rights controversies continue. Nike is supplied by 490 factories involving more than one million workers.1 This makes a clean supply chain a big challenge. The key however, is how the company remediates the adverse impacts, and how the remediation process leads to a proper review of the root cause – be it policy, governance, or even company culture. We deemed the response by Nike with regards to the case of Ramatex and Hong Seng Knitting not satisfactory, which led us to support an investor letter.

PGGM signed a joint Investor letter to Nike on outstanding wage payments
Typically, we engage with companies on thematic indicators and their human rights due diligence process. However, when appropriate, we also support cases initiated by different stakeholders. Process-oriented conversations have long-term effects, but can be strengthened by pushing for individual cases. In the end, human rights engagement is about ensuring positive outcomes for the rightsholders.

This investment letter calls for full repayment of the wages to the workers. In addition, we encourage Nike to improve access to remedy and further commit to responsible purchasing practices through fair collaboration with suppliers.

Strengthening our position by voting at the AGM
PGGM voted FOR the Tulipshare shareholder proposal related to the effectiveness of Nike’s supply chain management. We believe the proposal helps shareholders gain better insights on how the company lives up to its human rights commitments. We see a clear convergence between the proposal and the investment letter. Although the proposal did not receive significant support among investors, we will continue engaging with Nike consistent to the asks of it.

1. Nike Sustainability - Interactive Map (nikeinc.com)

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