• 10 oct 2024
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Human Right9

Pushing Nike for more worker-driven social responsibility

PGGM in cooperation with other investors, is stepping up engagement with Nike about their worker-driven social responsibility (WSR).
Geen Pasfoto 480X480 Pggm

Lydia Kapeti

Junior Advisor Responsible Investment

At the recent Nike AGM, PGGM, along with Domini Impact Equity Fund, Trillium Asset Management, SHARE (Shareholder Association for Research and Education), Triodos Asset Management, and CCLA, co-filed a shareholder resolution.

This resolution builds on a history of investor engagement with Nike. On September 7, 2023, a coalition of investors, including PGGM, sent a joint letter to Nike. This letter called on the company to address outstanding wage payments to more than 4,500 garment workers in Cambodia and Thailand, employed by its largest international suppliers, the Ramatex Group and Hong Seng Knitting Group.

The workers were owed a collective USD 2.2 million in unpaid wages and benefits, following factory shutdowns in 2020. Despite being aware of these violations for over three years, Nike has yet to provide a remedy. This letter, supported by investors representing over USD 4 trillion in assets under management, underscores the need for effective remedy and supply chain leadership.

Complex supply chain
Nike, as one of the world’s largest apparel companies, operates a complex global supply chain that includes over 1.1 million workers in 505 factories across 36 countries. Many of these factories are located in high-risk countries like Cambodia, Thailand, and Vietnam, where weak law enforcement and systemic labor rights abuses persist.

While Nike has implemented human rights due diligence (HRDD) practices, it relies heavily on social audits. Concerns are growing about the efficacy of these audits in identifying and addressing labor rights violations. Social audits are often insufficient for uncovering issues like gender-based violence, which require more in-depth worker engagement and private interviews.

PGGM and its co-filers believe that WSR is an effective approach to addressing such systemic labor issues. WSR places workers at the center of the process, allowing them to design, monitor, and enforce labor standards, leading to more reliable identification of risks and quicker remediation.

Binding agreements are a key feature of this model, ensuring enforceable commitments and providing transparency, especially in regions where corruption or intimidation are prevalent. Nike’s reliance on voluntary corporate social responsibility initiatives, which lack enforceable mechanisms, falls short in comparison.

Investor interest
Although the resolution did not pass, its 17% support of independent shareholders is a signal of growing investor interest in more robust human rights practices. Notably, it received a similar level of support to another human rights resolution at the same AGM, which called for a straightforward evaluation of Nike’s HRDD effectiveness (13.2%). This suggests that investors are increasingly willing to support forward-thinking proposals that push beyond traditional compliance models.

PGGM and fellow investors argue that adopting WSR principles would not only protect workers but also safeguard Nike’s long-term value by reducing the operational disruptions, legal liabilities, and reputational damage that arise from labor rights violations. With new regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) on the horizon, companies like Nike are expected to demonstrate stronger human rights due diligence in their supply chains.

Together with the co-filers of this resolution we are committed to continuing our engagement with Nike, aiming to see greater transparency and outcome-oriented practices that go beyond “tick-the-box” approaches. By urging Nike to explore the potential benefits of WSR and binding agreements, this resolution serves as a critical step in advancing corporate accountability and ensuring that the company’s supply chain management aligns with evolving investor expectations.

 

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