This month, CCLA Investment Management called out management at Nike’s AGM over workers’ rights, demanding the apparel giant be more transparent on how it protects vulnerable workers in its global supply chains.
CCLA called on the firm to undertake an independent report on worker-driven social responsibility programs, as prompted by past issues with modern slavery severance pay for workers affected by factory closures during the pandemic. However, the proposal received 12.4% support from shareholders, and Nike continues to be unresponsive.
This comes at a time when workers’ rights, especially at retail and apparel companies, have come under increasing scrutiny by investors. CCLA has been engaging with many companies on this front, and recently spoke out about the potential Shein London listing over concerns of worker exploitation in its supply chain, and called out Amazon over its workers’ rights.
PA Future spoke to Martin Buttle, better work lead at CCLA, who has 20 years’ experience in labour standards in global fashion supply chains, to understand the timeline of the firm’s engagement with Nike and the importance of investor engagement, despite the AGM result.
Timeline of engagement
Buttle explained how supply chain issues at Nike were uncovered during the Covid-19 lockdown, which prompted CCLA to collaborate with other stakeholders to address the issue.
Thulsi Narayanasamy, director of international advocacy at the WRC, contacted Buttle during the pandemic in 2022, alerting him to Nike closing down many factories due to a decreased demand for products. Many workers had been let go in the middle of the pandemic without severance pay.
Buttle noted: “There was one case involving Violet Apparels, which is part of the Ramatex Group, and has over a 12-year relationship with Nike. They closed down a Violet Apparel unit in 2020, and 1,284 workers let go without pay. The WRC and labour rights NGOs have been campaigning for three years for Nike to step in and enable a remedy for these workers.”
However, Nike “failed to provide remedy in both cases of social responsibility and binding agreements.” Further, it has not joined any worker driven social responsibility programmes, which Buttle said is concerning. He added there is “no evidence of Nike considering any worker driven social responsibility initiatives such as established international accords: for example, Nike is sourcing from Pakistan and have not signed up to the Pakistan Accord and it also hasn’t joined the Act initiative in Cambodia on living wages.
This makes Nike an outlier amongst its competitors that have signed up, Buttle added. Further, this comes as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) has put a growing expectation for all companies to carry out human rights due diligence and provide remedy where appropriate.
After not seeing sufficient action from Nike, CCLA wrote a letter to its management and uploaded this to the Principles for Responsible Investment (PRI) platform for other investors to read. As a result, a further 60 investors – including the Dutch bank ABN AMRO – co-signed the letter, but Nike still did not respond.
Whilst Buttle hoped there would be dialogue between Nike and its shareholders, he said he felt “disrespected” by the company’s silence. As a result, CCLA escalated the situation at the upcoming AGM. It co-filed a shareholder proposal, which “called on Nike to undertake an independent report on the degree to which worker driven social responsibility principles and binding agreements would support better human rights due diligence, particularly in high risk geographies,” Buttle explained.
AGM result
The resolution gained only 12.4% support and although Buttle was “expecting the percentage to be higher,” he highlighted it was in the ballpark of where human rights proposals have been in recent years. He also flagged the “uniqueness of the proposal,” where shareholders were asking for Nike to specifically publish an evaluation report and support binding agreements.
Further, CCLA is not the largest shareholder in the company investing some £61m in Nike while its top shareholders include – the world’s largest asset management firms – Vanguard, BlackRock, and Morgan Stanley. There was one notable change at Nike, however, perhaps expressing shareholders disappointment with management, as Nike’s chief executive, John Donahoe was abruptly replaced last month.
Stakeholder power
Despite the resolution not being passed, Buttle is optimistic about the case and emphasised “investors are a very powerful stakeholder.” NGOs have been campaigning on the controversies at Nike for years, and have made minimal progress, but the fact the issues raised by CCLA have been discussed at Nike’s AGM is a step in the right direction, he added.
However, what does force retailers to address and work on these issues if stakeholder pressure is not enough? Given Nike’s prominence at the recent Paris Olympics in August – it set up the Nike Athlete House and hosted interviews and sponsored Olympians – perhaps if these issues were more widely addressed by its consumers, Nike would have responded to the shareholder proposal.
Buttle agreed, saying it “takes pressure from all angles”. Consumer pressure and boycotting brands pushes companies to step further, however, “investors are particularly influential” because they have the platforms to address issues and take them to AGMs.
Wider human rights issues
Besides from the issues CCLA raised to Nike, Buttle commented on how hard it is to track human rights issues. He mentioned the Uighur cotton controversy, where the cotton industry in Xinjiang has been accused of using large-scale forced labour to produce the cotton. “The traceability of the cotton down to that stage in the supply chain is difficult. It comes down to factories and countries having poor human rights records and poor environmental standards.”
Interestingly, Martin observed how changing geopolitics has impacted NGOs ability to track the working conditions and environmental standards. He added some poorer countries “are becoming more authoritarian”, whilst the US is “bringing production and manufactory back into the country” and is “using tariffs or block goods from being imported into the US based on them being linked to forced labour.”
An ideal outcome
Buttle’s ideal is the antithesis of fast-fashion: “I want to see a shortened supply chain in Europe and the US, more circular business models, a wider use of recycled products and environmentally friendly materials designed for longevity.”
Realistically, in the next five years, CCLA plans to make the “biggest difference by engaging with companies and urging them to change practices,” Buttle said, and added that “it will be incremental change, where business will become more worker-driven and undertake more human rights and environmental due diligence processes”.
