U8_DQs

The Transparent Supply Chain:

from Resistance to Implementation at Nike

and Levi-Strauss David J. Doorey

ABSTRACT. Information disclosure is a common reg-

ulatory tool designed to influence business behavior. A

belief is that transparency can provoke learning and also

positive institutional change by empowering private

watchdogs to monitor and pressure business leaders to

alter harmful behavior. Beginning in the late 1990s, a

private movement emerged that pressured corporations to

disclose the identify of their global supplier factories.

These activists believed that factory disclosure would lead

to greater accountability by corporations for the working

conditions under which their products are made, which

in time would improve labor practices. In 1995, Nike and

Levi-Strauss (Levis) surprised the business community by

publishing their supplier lists. This paper describes case

studies of Nike and Levis, tracking the evolution from

resistance to supply chain transparency through to the

decision to be industry leaders in factory disclosure. The

paper evaluates the contribution of factory disclosure and

proposes that other companies should be urged to move

toward supply chain transparency.

KEY WORDS: labor practices, information disclosure,

transparency, corporate social responsibility, supply

chains, Nike, Levi-Strauss

Louis Loss once wrote that ‘‘people who are forced

to undress in public will presumably pay some

attention to their figures’’ (Loss, 1988, p. 33). He

was describing securities disclosure laws, but his

colorful metaphor describes a philosophy underlying

much modern information disclosure regulation.

The idea is that transparency can provoke institu-

tional learning and behavioral changes of the sort

desired by the state. By forcing corporations to

publicly report on performance indicators that

may reflect poorly on the company’s financial or

ethical management, transparency requirements might

encourage corporate managers to improve their per-

formance.

While transparency has long been used as a means

to influence corporate behavior in areas such as

securities and environmental law, it has played a less

prominent role in the governance of work practices.

That may be changing. In recent years, scholars have

proposed a range of laws that would require com-

panies to disclose information about how they treat

their own employees (Estlund, 2009; Williams,

1999). In Australia, laws have already been enacted

that require the identity and location of suppliers

throughout domestic supply chains to be disclosed in

order to help improve compliance with labor stan-

dards and industry-wide collective agreements in the

apparel industry (Marshall, 2010; Rawling, 2006).

Transparency advocates have also targeted labor

practices within the vast global supply chains of

multinational corporations. A range of private actors

and organizations have in recent years promoted the

idea of transparency of information about supply

chain labor practices as a means of encouraging

better management of those practices, with the

expectation that better management will ultimately

lead to better labor practices (Doorey, 2005; Sabel

et al., 2001). One proposal that has garnered atten-

tion is a requirement that corporations be ordered to

disclose the identity and address of their global

suppliers in a manner similar to ‘‘country of origin’’

labeling that is common in many countries. Advo-

cates of ‘‘factory disclosure’’ argue that, if corpora-

tions knew that the identity of their suppliers would

become public, they would pay closer attention to

what goes on in those factories, including working

conditions under which their products are manu-

factured (ETAG, 2003).

Journal of Business Ethics (2011) 103:587–603 � Springer 2011 DOI 10.1007/s10551-011-0882-1

For example, in a consultation commissioned by

the Canadian government on a proposal to require

factory disclosure for apparel goods sold in Canada, a

labor rights nongovernmental organization (NGO)

called the Ethical Trading Action Group (ETAG)

argued that a factory disclosure law would encourage

companies ‘‘to become more knowledgeable about

their supply chains, establish longer-term business

relationships with trusted suppliers, and better moni-

tor labor practices in their supply chains’’ (Doorey,

2005, p. 394). ETAG theorized that these positive

responses would occur because factory disclosure

empowers the many antagonistic actors (includ-

ing NGOs, unions, journalists, and academics) who

research supply chain labor practices, making it

easier for them to discover labor abuses, link those

abuses to specific brands, and then target those

brands in negative consumer campaigns. Rational

corporations would be expected to take measures to

reduce the risk of being targeted by such campaigns,

including paying closer attention to working con-

ditions in their suppliers’ factories and perhaps

making changes to improve the probability that local

laws or vendor codes of conduct were complied

with.

This remains just a theory, because there are

presently no laws that require disclosure of the

identity of the factories within global supply chains.

The demands of labor activists for corporations to

disclose the identity of their suppliers have been met

with hostile reaction from most corporate officials,

who argue that this information is of great proprie-

tary, economic, and competitive value (Doorey,

2011, p. 995). Nike Inc. (Nike) once led the charge

against supplier factory disclosure. However, in

2005, Nike surprised its competitors by publishing a

list of its global suppliers on its website, followed

several months later by Levi-Strauss (Levis), and then

others. 1

Although relatively few corporations have

adopted it to date, factory disclosure has become a

new corporate social responsibility (CSR) strategy to

deflect criticism about supply chain labor practices, a

strong signal that corporations have ‘‘nothing to

hide.’’

This paper explores the events that led to this

unlikely development. It provides case studies of the

decisions by Nike and Levis to disclose their global

supply chains. The paper examines the period from

the early 1990s, when labor advocates began to push

for factory disclosure, through the decision by the

companies to disclose their factory lists in 2005, and

then the 2-year period after the disclosure in order to

track the immediate effects of the move to supplier

transparency of two of the world’s largest brand-

based corporations. It draws on interviews with

senior executives of both companies, as well industry

professionals experienced in the management of

supply chain labor practices, and representatives of

unions and NGOs who were involved in the push

for factory disclosure and active in campaigns

targeting labor conditions at both companies.

The paper makes no claims about whether factory

disclosure has in fact led to improvements in labor

conditions in the companies’ supplier factories. That

is the task for a follow-up study. The purpose of this

paper is to provide an analysis of the developments

that led the corporations to publish their global

supplier lists while virtually all of their competitors

refused to do so. The story is useful for what it tells

us about how companies perceive and respond to

risks associated with the efforts of nonstate actors to

influence business practices by means of private

investigations and corporate campaigns that seek to

tarnish brand image in the eyes of consumers and

investors. The developments at Nike and Levis are

also pertinent to the ongoing dialog about whether

legislated factory disclosure might produce useful

changes in how corporations manage their supply

chain labor practices. 2

By observing what steps these

prominent companies took to prepare for voluntary

factory disclosure, we further our understanding of

how other companies might prepare for mandatory

factory disclosure.

Finally, the decision of some prominent corpo-

rations to adopt supplier transparency raises ques-

tions about the claim of other companies that factory

identity is valuable proprietary information. This is a

claim that attracts considerable suspicion and deri-

sion from labor activists, who doubt there is any

great secrecy among competitors in terms of iden-

tifying supplier factories. Critics assert that resistance

to factory disclosure is based more on a desire to

impede private oversight of factory conditions than

on competitive reasons. If supplier identity is in fact

so valuable to competitors, then we must question

why Nike and Levis would give it up for free. On

the other hand, if the value lies in helping corpo-

rations avoid oversight of labor practices by private

588 David J. Doorey

inspectors (such as NGOs, journalists, academics,

and unions) who might use the information to

pressure the corporations to improve those practices,

then different questions arise. Is it appropriate for

corporations to adopt supply chain secrecy as a

business strategy in the global economy? Should

factory disclosure be mandated by regulation in or-

der to level the playing field and push laggards closer

to the transparency standard set by companies such as

Nike and Levis?

The paper begins with a description of the origins

of factory disclosure advocacy from its seeds in the

United Students Against Sweatshop (USAS) move-

ment of the 1990s. It then provides case studies of

the decisions by Nike and then Levis to disclose their

supplier lists. The paper concludes by reflecting on

what these case studies tell us about how corpora-

tions interact with and respond to pressures generated

by private actors, on whether supplier transparency is

likely to improve supply chain labor practices, and

finally on whether supplier transparency should

become a norm of ethical business practices rather

than the exception it is presently.

The origins of factory disclosure

Factory disclosure has its origins in grassroots

movements of private, nonstate actors seeking to

address perceived failures by states to protect work-

ers. The story begins in the summer of 1997 at the

New York offices of the trade union UNITE

(Featherstone, 2002, p. 11). Student interns investi-

gating how universities source their branded apparel

questioned university administrators and quickly

learned that the universities did little to ensure that

their branded clothing was made under decent

working conditions. In fact, the universities usually

had no idea where the clothes were made. The in-

terns also reviewed the many corporate codes of

conduct that had surfaced during the early 1990s in

the apparel industry and noted that none required

factories to be identified, as one intern noted:

…we noticed that not a single company included a provision for public disclosure of factory locations or

independent monitoring reports. The conclusion was

obvious: if we were to hold the manufacturers of our

college merchandise accountable, we were going to

have to force them to open themselves to public

scrutiny. (Featherstone, 2002, p. 16)

The seeds of the factory disclosure movement had

been planted.

United Students Against Sweatshops

The interns’ investigation led to a wave of student

campaigns at universities such as North Carolina,

Duke, Michigan, Wisconsin, and California, as stu-

dents sought affirmations from administrators that

university branded clothing was not being made in

factories in which labor laws were violated. By early

1998, a significant grassroots movement of students

had emerged. That spring, students from over 30

schools converged on New York City, where they

formed a new NGO, USAS. These events coincided

with negotiations under the Apparel Industry Part-

nership (AIP), an initiative introduced by the Clin-

ton Administration in 1997 designed to deflect

public criticism of the apparel industry by creating a

model of private governance targeting labor abuses

in apparel factories both in the USA and abroad

(Gillen, 2000).

In 1998, with its credibility bloodied by the late

defection of its only two union participants, the AIP

announced the creation of the Fair Labor Associa-

tion (FLA). Thereafter, the USAS sought to estab-

lish itself as an alternative to the FLA model, which

it characterized as an industry-led smokescreen

enabling corporations to claim they were dealing

with abusive supply chain labor practices, without

any effective accountability or transparency. Few

apparel companies welcomed the arrival of USAS,

and the FLA and its supporters attempted to co-opt

the student movement and university administra-

tions into supporting the FLA model rather than

that being proposed by USAS (Featherstone, 2002,

p. 13).

An important concern of the apparel corporations

was USAS’s focus on disclosure and transparency. In

1998, voluntary public disclosure of the identity of

global supply chain factories was virtually unheard of

in the apparel industry. However, in January 1999,

after a student sit-in, Duke University administrators

promised to ensure that the identity of all factories

supplying Duke-branded apparel would be disclosed.

589The Transparent Supply Chain

This victory spawned similar campaigns at other US

colleges. In July 1999, buoyed with confidence from

these victories, the students decided to develop a

new organization to help manage the growing

database of global apparel factories, and to develop a

structure for monitoring and reporting on working

conditions in those factories that could challenge the

FLA model. 3

The new organization was named the

Workers’ Rights Consortium (WRC).

The approach of the WRC was distinct from the

FLA’s in a number of important ways. For one

thing, it did not include industry representation on

its governing board, thereby permitting it to claim

independence from the industry it sought to moni-

tor. The board consisted of representatives from

university administrations, unions, students, and

academics. The WRC did not accredit factories or

monitors, because its organizers did not believe that

occasional monitoring and sporadic investigations

could determine with any certainty what working

conditions were during any particular production

run. The WRC required schools to adopt a code of

conduct and to impose it on their supplier factories.

Workers or organizations could file complaints

alleging a breach of a code, and those complaints

would then be investigated by a WRC team, whose

report would be made public.

Schools that affiliated with the WRC were re-

quired to obtain from their suppliers a list of all of the

factories used in the production of the university

clothing and provide the list to the WRC, which

would then post a consolidated list of all factories on

its website in a searchable format. As a result, the

apparel companies that supplied schools affiliated

with the WRC found themselves faced with a new

conundrum: to publicly disclose their supplier fac-

tories, or risk losing their university apparel contracts.

Some companies did not initially respond favorably

to this demand, including Nike, which walked away

from lucrative contracts with Brown University and

Michigan University when those schools became

WRC members. Nevertheless, by the late 1990s,

support for factory disclosure was gaining momen-

tum within university administrations, as well as at

various stakeholder activist organizations; for exam-

ple, in 1999, an NGO called the National Labor

Committee (NLC), in coordination with a religious-

based human rights organization People of Faith

Network, initiated a campaign they called ‘‘People’s

Right to Know,’’ which called upon American

companies to publicly disclose their factory lists.

For those companies that relied heavily on the

university apparel market, the loss of business that

would be associated with walking away from WRC-

affiliated schools probably made the decision a rel-

atively easy one. At Gear for Sports, for example, the

collegiate market represented US $40 million in

annual sales, or about 20% of its total sales. 4

In

February 2000, it began publishing its factory data-

base on its website, making it the first company

supplying the collegiate market to do so, a point it

then emphasized on its corporate website as evi-

dence of its commitment to social responsibility.

Other companies were far less enthusiastic. The

collegiate market accounted for approximately 1% of

Nike’s revenues in 1999, and nearly 10% of its total

factory supplier list. However, after a period of resis-

tance, Nike decided that the cost of foregoing the

university market was too high, and in October 1999,

it reluctantly agreed to disclose its suppliers to its

university customers that demanded factory list dis-

closure. 5

Critics challenged Nike to go further, and to

disclose its entire factory list, but the company refused.

Its spokesperson argued that while it was prepared to

disclose this portion of it supplier list, there were im-

portant business reasons for resisting complete factory

disclosure: ‘‘Disclosing our addresses definitely does

give our competitors a slight advantage. But because of

the intellectual property involved, we believe that’s a

tradeoff we have to make’’ (Stroup, 1999).

Industry slowly comes on board

By the turn of the century, many apparel compa-

nies had their first taste of public factory disclosure

as a direct result of the USAS movement. Some

companies saw a marketing opportunity in this

transparency, and began to advertise their new

transparency as evidence of their commitment to

respectable labor practices. Factory disclosure had

begun a slow ascent as a new badge of honor within

the apparel industry. Corporations were taking

possession of the idea and were using it as evidence

that they ‘‘had nothing to hide’’ from the public.

Even Phil Knight, CEO of Nike, who had initially

been at the forefront of corporate resistance to the

USAS approach and factory disclosure, bragged in

590 David J. Doorey

2000 that Nike’s agreement to disclose the factories

supplying its university customers was evidence of its

renewed commitment to improving labor practices

in its supplier factories. 6

In a 2003 opinion piece in the British Guardian

newspaper, the founder and former CEO of The

Body Shop argued that factory disclosure was a

crucial ‘‘first step’’ toward eradicating labor abuses

around the world:

Corporations continue to hide the factories they use

around the world to make the goods we purchase.

Wal-Mart, for example, uses 4400 factories in one

Chinese province alone. As a first step, we need full

public disclosure of all factory names and locations.

Such transparency will make it much harder to hide

abuses. (Roddick, 2003)

The USAW/WRC model created a controlled

experiment for participating companies by allowing

them to disclose a segment of their factories in a

context in which many of their competitors were

doing likewise. To their pleasant surprise, little harm

seemed to come from this exercise in transparency.

Understanding Nike’s decision to disclose

its factory list

The context just described helps explain the unlikely

events of 2005. In April, Nike surprised the business

community by suddenly releasing its global factory

database, at that time, amounting to nearly 750

factories worldwide. Some of Nike’s major com-

petitors followed soon afterward with their own

factory disclosure lists, including Levis in October

2005, and then Timberland, Puma, Adidas, and

Reebok. This section describes the process and

events that led Nike to take the lead on factory

disclosure after it had so strongly resisted the idea less

than a decade earlier.

In a speech to the National Press Club in the

spring of 1998, Phil Knight conceded that ‘‘the Nike

product has become synonymous with slave wages,

forced overtime, and arbitrary abuse’’ (Cushman,

1998). He was using the speech to introduce new

initiatives that Nike hoped would stall the onslaught

of negative publicity the company had endured over

the previous decade for the working conditions in its

global supplier factories. Knight told the audience

that consumers do ‘‘not want to buy products made

in abusive conditions.’’ Those words reflected an

important transformation at Nike that occurred

during the 1990s. Nike’s business model has always

been based on global outsourcing to low-cost

jurisdictions. It has used its own production facilities

at various times in its history, but this is the excep-

tion to the general rule that Nike is principally a

design and marketing company. Production is out-

sourced to hundreds of contractor factories dispersed

globally.

For decades, Nike asserted that it had no

responsibility for working conditions in its suppliers’

factories. John Woodman, a senior Nike employee,

expressed this sentiment in 1991, when he told a

reporter that it was ‘‘not within our scope to

investigate’’ conditions of work in contractor fac-

tories (Barnet and Cavanagh, 1994; Katz, 1994).

This was a common attitude at the time, not only at

Nike, but within industry generally. However,

during the 1990s, the interests of various private

actors – labor activists, unions, human rights and

religious NGOs, academics, and investigative jour-

nalists – converged on the subject of factory condi-

tions within the supply chains of global corporations.

Nike, perhaps more so than any other company at

the outset of this movement, became the target of

these campaigns.

Media images of children sewing Nike soccer balls

and running shoes juxtaposed against the millions of

dollars Nike paid sports celebrities to market their

products proved an effective formula for a new

generation of social activists who exploited the

Internet in a global anti-Nike campaign (Murphy

and Mathew, 2001). Nike’s traditional line denying

responsibility for conditions in contractor factories

quickly proved untenable to a growing number of

skeptical shoppers, a point that Nike executives had

realized by the early 1990s. Nike’s Vice President of

Labor Compliance during that time reflected on the

company’s early reactions to the corporate cam-

paigns as follows:

Nike made a real mistake. I think we reacted nega-

tively to the criticism. We said, wait a minute, we’ve

got the best corporate values in the world, so why

aren’t you yelling at the other folks. That was a stupid

thing to do and didn’t get us anywhere. If anything it

591The Transparent Supply Chain

raised the volume louder. (Murphy and Mathew,

2001, p. 7)

Nike executives had begun to perceive the persistent

reports of abusive labor conditions in their supplier

factories as a threat to their brand image. A new

strategy was needed to deflect the growing criticism.

The Nike code of conduct

Nike initially treated the growing public criticism as

a public relations problem. In 1991, the company

hired Dusty Kidd, a journalist, to be its new PR

Director. One of Kidd’s first tasks was to prepare a

new supplier code of conduct. Nike’s code of con-

duct was released in 1992 and was modeled loosely

on Levis’ code (discussed below), which had been

released earlier that year. The Nike code described a

set of labor standards that Nike would expect its

contractors to apply. This marked a shift in Nike’s

position by acknowledging that Nike shared respon-

sibility for working conditions in its supplier factors. 7

However, the code did not describe how compli-

ance would be monitored, nor did it include any

commitment by Nike to disclose which factories it

used or information about the results of monitoring.

The code was initially implemented by the pro-

duction departments within the different business

units (apparel, footwear). However, the production

personnel were neither labor experts nor especially

focused on the code’s implementation (Murphy and

Mathew, 2001, p. 7). The code was distributed to

factory owners, with an instruction to sign the

document, comply with it, post it in the factory, and

report to Nike on compliance biannually. Nike did

not initially monitor compliance in any systematic

way, and the introduction of the code did not

diminish the level of scrutiny and criticism being

leveled at Nike by the many activists and journalists

interested in supply chain labor practices.

Improvements to information flow and monitoring

Beginning in 1996, Nike implemented a series of

organizational changes designed to enable head of-

fice officials to better monitor sources of risk asso-

ciated with their suppliers’ labor practices. That year,

Nike introduced a new labor practices department,

which assumed the function of implementing and

monitoring the code. Afterward, additional steps

were taken incrementally to improve the company’s

institutional knowledge of its suppliers and their

labor practices. Those steps included the following:

• The SHAPE internal monitoring system was introduced in 1997. This basic audit was in-

tended to provide Nike with an initial assess-

ment of whether a proposed new factory

was at least in the ballpark in terms of satis-

fying the code. While the SHAPE audit was

therefore not a strong indication of whether

the code was actually being complied with,

it introduced a formalized system in which

Nike personnel were required to open a

SHAPE file for each supplier factory.

• In 1998, Nike created a corporate responsi- bility and compliance division (CRD). CRD

housed several departments, including com-

pliance and the oddly named ‘‘considered,’’

which was intended to facilitate the integration

of corporate responsibility issues throughout

the business by bringing together sustainability

and compliance people working within the

various Nike product groups.

• Four field managers housed within CRD were assigned to Nike’s regions: the Ameri-

cas, South Asia (Thailand, Indonesia, Bangla-

desh, India, Sri Lanka, and Malaysia), North

Asia (China, Vietnam, Cambodia, Taiwan,

and Korea), and EMEA (Europe, Middle

East, and Africa). These managers were made

responsible for monitoring day-to-day over-

sight of factory compliance with labor laws

and the Nike code, as well local stakeholder

engagements. Over time, staff were assigned

to the field offices to assist in these functions.

By 2006, there were about 50 field staff,

whose job it was to visit the supplier facto-

ries and conduct code audits.

• In the early 2000s, Nike developed a global factory database to help Nike’s head office

track its global supply chain and to enable

head office access to the various audits being

conducted in the field, which were now

entered into the database by field staff on a

regular basis.

592 David J. Doorey

• In 2002, having now staffed field offices with CRD auditors, Nike brought the audit-

ing and monitoring function back in house

after a highly criticized experiment with

external auditing firms Ernst & Young and

Price Waterhouse Cooper. The methodolo-

gies and competence of these firms had been

the subject of sustained and scathing criticism

by academics and the NGO community

(Murphy and Mathew, 2001, p. 6; O’Rou-

rke, 1997, 2002).

• In 2003, Nike introduced a multistep factory compliance model named the ‘‘new source

approval process.’’ In addition to the SHAPE

audit that all new factories required, approxi-

mately 25–33% of Nike factories would

now also undergo a more comprehensive

‘‘M-audit.’’ Factories flagged as high risk in

previous audits or as a result of a particular

incident were targeted for these audits. Fac-

tories that failed either a SHAPE or M-audit

inspection were either not approved or were

permitted an opportunity to implement a

master action plan, which set out what the

factory needed to do to be accepted as a

Nike contractor.

External engagement and transparency

The moves described above generated a growing

confidence at Nike that the organization had a much

better grasp of prevailing working conditions at their

global suppliers than in the past. Nike executives

were also gaining confidence with external engage-

ment and controlled transparency. Nike’s participa-

tion in the 1997–1998 AIP process and its

subsequent involvement with the FLA forced its

people to engage in ongoing dialog with external

stakeholders and NGOs, something Nike had not

actively pursued in the past. Its reluctant agreement

to disclose approximately 10% of its global supplier

list through the WRC process had given Nike a taste

of transparency, with no discernible negative effects.

This very subtle shift toward transparency and

external engagement carried over into the new

millennium. In July 2000, Nike became one of the

first corporations to support the United Nation’s

Global Compact, an initiative that asks companies to

report on their efforts to ensure compliance in their

factories with a set of core labor standards. That same

summer, Nike introduced an initiative called

‘‘Transparency 101,’’ through which it announced it

would begin posting on its website the results of

audits of some of its factories (without identifying

the particular factories). Vada Manager, Nike’s

Director of Global Issues at that time, explained:

We needed a defense against investigations into our

factories from outside forces. It’s a way to pre-empt

nongovernmental organizations and the media from

playing ‘gotcha.’ For us, that level of transparency was

necessary and appropriate to send the message that we

have nothing to hide. (Van Yoder, 2001)

In November 2000, Nike joined CERES, an envi-

ronmental sustainability NGO that encourages

companies to engage external stakeholders on envi-

ronmental issues and to publicly report, using the

Global Reporting Initiative, on environmental issues.

The following year, Nike introduced a corporate

responsibility committee on its executive board that

was assigned the role of overseeing the company’s

social performance in areas such as labor, the envi-

ronment, and charitable endeavors. Its first CSR

report was also published in 2001. It included

information by country, including the number of

factories used, the number of employees, average

wages, and other work-related information. Slowly

and cautiously, Nike was beginning to move toward

greater transparency.

Then, in a move that would ultimately push Nike

toward full factory disclosure, a panel of external ex-

perts was invited to review a draft of its 2004 corporate

responsibility report. The group, known formally as

the Nike report review committee (‘‘review com-

mittee’’), included Neil Kearney, the General Secre-

tary of the International Textile, Garment, and

Leather Workers Federation and one of Nike’s

harshest critics. The review committee was asked to

read drafts of the Nike CR 2004 report, and then

present Nike with a list of suggestions and recom-

mendations. Neil Kearney made the case that Nike

would not receive the credit it craved from the NGO

community unless it released the names and addresses

of its entire factory database. The review committee’s

recommendations, including factory disclosure, were

presented to Nike executives in the early months of

2005. The executives sent it back to the corporate

593The Transparent Supply Chain

responsibility division with instructions to consider a

‘‘landscape analysis,’’ an assessment of the potential

costs and benefits of full factory disclosure.

The perceived risks were easy enough to identify.

There were concerns within the business side that

factory disclosure would facilitate a wave of NGO

activism and media coverage targeting Nike supplier

factories for investigation, and that unions would

target the factories for organizing campaigns. There

was also a concern within some parts of the orga-

nization that competitors could use the information

to the disadvantage of Nike, perhaps by moving into

the Nike factories and thereby eroding the factory’s

capacity to supply for Nike, or by gaining early

access to new designs or technologies. However, the

situation was also considerably different than it was

just a decade earlier. Nike now had some experience

with factory disclosure without any of those fears

being realized. Nike executives also had more con-

fidence in their monitoring abilities than in years past

due to the changes they had made, as discussed

above. There was also a belief, at least among the

corporate responsibility people at Nike, that the

defensive strategy that had Nike battling media re-

ports and NGOs investigations one campaign at a

time in isolation from other brands was not a realistic

strategy going forward, particularly in apparel.

Apparel accounted for roughly one-third of

Nike’s business, but comprised the vast majority

(579 in 2001) of its 750 supplier factories [compared

with equipment (89 factories) and footwear (68)

divisions]. On the apparel side, Nike is often only

one of many brands in a factory, and in many

instances it is not even the factory’s major customer.

This limits Nike’s ability to pressure labor compli-

ance issues and to track what is happening in the

factories at any given time (Locke et al., 2006,

p. 11). By 2005, Nike corporate responsibility execu-

tives were talking a lot about the need for industry

‘‘collaboration’’ to monitor and address labor practice

issues in the apparel industry.

They knew that compliance officers from the

many companies in the industry had been speaking

with one another informally for years about condi-

tions in shared factories. Moreover, because of the

phasing out of the Multi-Fibre Agreement in 2005,

the company anticipated that apparel would begin to

consolidate in the way that footwear had, toward

fewer factories and longer-term relationships. In that

environment, there would be even less secrecy about

which companies were using which factories than

there was already. Thus, as the Nike CR executives

prepared their landscape analysis of the risks and

benefits of full factory disclosure, ‘‘collaboration’’

became a key theme on the benefits side of the

ledger, as a Nike executive explained:

If you’re on average 10 to 15 percent in an apparel

factory, 10 or 15 percent of that factory’s volume, it’s

pretty hard to make change on your own. So if we

really were serious about making change we were

going to have to team up with other brands in a

concerted way. So I would say the collaboration

strategy came first, and flowing from the collaboration

strategy was [the idea that] its going to be hard to

collaborate if we don’t know where we are, and that

sort of drove transparency.

In the end, the arguments in favor of full factory

disclosure were perceived by the Nike leadership to

offset lingering concerns that the disclosure would

harm the company.

The factory list was released in April 2005 and

included all factories producing Nike-branded items,

but not Nike subsidiaries. This amounted to

approximately 90% of Nike’s supplier factories. In its

announcement, the company emphasized the need

for industry collaboration:

Our industry is at a crossroads. Individual companies,

Nike included, now realize there are limits to what we

can achieve independently. By being open with this

list, and by providing the depth and breath of infor-

mation in our CR report, we hope it will encourage

others to join collaborative efforts.

In 2011, the Nike factory disclosure webpage simi-

larly explains that ‘‘disclosing our factory base

encourages transparency and collaboration’’ (Nikebiz,

2011).

Understanding Levis’ decision to disclose

its global factory list

The story of Levis’ decision to disclose their global

supply chain begins with its 1975 code of interna-

tional business principles, which included a com-

mitment to ‘‘operating well above the minimum

legal standard such that [the company’s] conduct is

594 David J. Doorey

and intentions are above question’’ and to ‘‘a single

global philosophy of fair treatment of employees that

is also consistent with local laws and practices.’’ The

promise to comply with local laws was a common

feature of 1970s’ corporate codes, but Levis’ code

purported to go one step further by indicating that

compliance with laws was in addition to its promise

to treat workers ‘‘fairly,’’ and ‘‘well above the

minimum legal standard.’’

These sorts of lofty statements on social responsi-

bility were consistent with the image of a good

‘‘corporate citizen’’ that the company had long cul-

tivated (Preece et al., 1995; Schoenberger, 2000).

However, its reputation for good deeds did not shield

Levis from criticism when it began outsourcing its

American production to foreign contractors in great

quantities beginning in the late 1980s. In 1990, Levis

shut down a factory in Texas and shifted production to

a contractor in Costa Rica, leading to the layoff of

over 1000 employees in San Antonio. This move

sparked a campaign against Levis by the laid-off

employees, who were mostly women of Mexican

origin. This event damaged Levis reputation as a good

corporate citizen, as explained by Schoenberger:

Some of these disgruntled former employees formed a

militant labor group named Fuerza Unida and were

still fighting back a decade later. The group launched

a strident protest campaign with lawsuits, hunger

strikes, demonstrations, and appeals for a boycott of

Levi’s products. Leader Irene Reynes wanted that

the scorned…workers would become Levis’ ‘‘worst nightmare’’. Reynes and the other leaders journeyed

from Texas to Levi Plaza…and chained themselves to the front doors of corporate headquarters to draw

attention to their cause… [To] Levi’s executives spy- ing down from the dark-tinted windows of their

handsomely brown-paneled office buildings at Levi

Plaza, the scene had to have been painful to watch.

Proud and aloof, Levi Strauss had very little experience

being publicly vilified. (Schoenberger, 2000, p. 49)

However, the protest did not stop Levis from con-

tracting out its production to overseas contractors,

many in developing countries. Between 1991 and

1992, the percentage of Levis’ products made by

contractors jumped from 35% to 54% (Schoenber-

ger, 2000, p. 56).

The decision to move most of its production off-

shore meant that Levis was surrendering considerable

control over the working conditions under which its

products were manufactured. For a company that

had branded itself as a ‘‘good’’ employer, this marked

a new business direction. One of Levis’ responses

was to revisit its global code of conduct and to up-

date it for a new era in which the supply chain was

considerably more global and a new global activist

movement had gained considerable momentum

and expertise in linking foreign labor practice

abuses to specific corporate brands in market-based

campaigns.

In March 1992, Levis released its business partner

terms of engagement and guidelines for country

selection (guidelines) (Compa and Hinchliffe-

Darricarrere, 1995, p. 676). With the guidelines,

Levis once again positioned itself as a leader in

corporate responsibility by becoming the first mul-

tinational apparel company to confirm in writing its

responsibility for labor practices in factories owned

or controlled by its contractors throughout the

world. The guidelines included two parts, one

applying to the selection of countries and the

other setting standards expected of contractors. It

addressed child labor, prison and forced labor, wages

and benefits, discrimination, and disciplinary prac-

tices, and included a ‘‘right of free association,’’ a

system of internal monitoring and unannounced

audits, a tiered approach to resolution of problems,

and the possibility for cancelation of orders for

noncompliance.

In explaining the guidelines, the company empha-

sized the risks associated with sourcing from abusive

foreign employers:

As we expand our sourcing base to more diverse

cultures and countries, we must take special care in

selecting business partners and countries whose prac-

tices are not incompatible with our values. Otherwise,

sourcing decisions could end up damaging the image

of our brands and threatening our commercial success.

In the early days of the guidelines, the company

terminated contracts with more than 30 contractors

in countries including Burma, Saipan, Honduras,

Uruguay, and the Philippines for noncompliance

(Compa and Hinchliffe-Darricarrere, 1995, p. 678).

Early reviews by NGOs of Levis’ behavior under the

guidelines were generally favorable. It received

accolades from many in the NGO community when

595The Transparent Supply Chain

in 1993 it announced dramatically that it would no

longer source from China due to concerns about

human rights abuses, becoming the first American

apparel company to adopt a ‘‘no China’’ position on

the basis of human rights practices (Gull and

Zukerman, 1993).

However, when the company later reversed that

position, it was thrust back into the storm of cor-

porate campaigns targeting labor practices. In a

newspaper editorial in 1998, the NGO Global Ex-

change challenged Levis to be a leader in China, and

to start by: ‘‘disclosing which subcontractor factories

it will work with and what the wages and human

rights conditions are in those factories,’’ because

‘‘disclosure [was] critical to lifting the veil of secrecy

under which many U.S. companies operate in

China’’ (Benjamin, 1998). However, Levis did not

disclose its global factory database until October

2005. What happened at Levis to cause its executives

to make this information public?

The move to factory disclosure

As with Nike, Levis’ decision to disclose its factory

list is best understood as the culmination of a series of

incremental steps that created managerial confidence

that the risks of factory disclosure were outweighed

by the benefits of going transparent. When Levis

introduced its guidelines in 1992, it was sourcing

from about 700 factories worldwide. There was no

separate department created to manage the guide-

lines. Responsibility for overseeing the guidelines

fell initially to corporate affairs, but it was the

sourcing and quality control people in the actual

regions where the factories were located that were

expected to introduce their contractors to the

guidelines and to monitor compliance issues.

These people were not labor experts, and the

company did not start hiring full-time internal

monitors until the mid-1990s. Nor did it initially

retain outside auditing firms to monitor compliance

with the guidelines. While the guidelines repre-

sented an important symbolic commitment to labor

rights, there was very little internal infrastructure in

place to ensure its effective implementation. The

company sent teams of internal auditors to conduct

annual audits of the factories. It announced that

the first round of audits found 95% of its supplier

factories to be in compliance with the guidelines or

in need of relatively minor improvements

(Schoenberger, 2000, p. 64). Contracts with 5% of

factories were canceled for noncompliance.

Prior to 1993, Levis did not maintain a global

factory database. No one at the San Francisco head

office knew for sure how many factories were being

used or where those factories were located. Sourcing

issues were decentralized, delegated to the various

regional offices. However, in 1993, as the company

accumulated reports from the first wave of audits

under the guidelines, a decision was made to create a

single, central global database listing every supplier

factory. The database was built up over time, with

audit results being inputed as they were completed.

This process was aided considerably when, in

approximately 1995, Levis hired full-time regional

managers for Europe, the Americas, and Asia, who

were assigned the task of managing labor compliance

issues and keeping the database current. Thereafter,

throughout the mid to late 1990s, Levis hired teams

of internal factory assessors, who also were posted at

the various regional offices. By 2006, there were

approximately 20 Levis employees working full time

doing factory assessments, plus additional assessors

who were not Levis employees but who were

approved by the company after completing a mon-

itoring program taught by Levis officials.

The Levis assessors and the regional managers

were situated in the code of conduct department

(CCD), which was established in 2000. The three

regional managers were required to report to the

Vice President of CCD, who in turn reported to the

Senior Vice President of Global Sourcing. In this

way, the CCD was integrated into the business

operations. Auditors were required to complete a

detailed form that measures a factory’s compliance

with the guidelines as a precondition for adding the

factory as a supplier. All audit reports were to be

entered into the factory database, enabling officials at

head office to access available information about

labor practices in each factory.

Independent monitoring and reporting

A persistent complaint from NGOs leveled against

Levis was its persistent refusal to permit independent

monitoring and its lack of public transparency about

596 David J. Doorey

audit results; for example, in 1995 and 1996, a NGO

called Development and Peace (DP) investigated

factories supplying Levis products in Honduras and

the Philippines and found various violations of the

guidelines (Schoenberger, 2000, p. 71). DP collected

and forwarded over 100,000 signed postcards to

Levis asking the company to permit independent

monitoring of the factories. DP received a dismissive

response from the President of Levis Canada, who

asserted that Levis’ own employees are in the best

position to monitor compliance with the guidelines

(Schoenberger, 2000, p. 72). In May 1998, the

Dutch-based NGO Clean Clothes Campaign

(CCC) released a lengthy and detailed report into

alleged working conditions at factories supplying

Levis products. The CCC advised Levis that, if it

wished to promote an image as a leader in the CSR

movement, it should take the next step and permit

independent monitoring and public reporting of the

results of those audits (Clean Clothes Campaign,

1998).

However, throughout most of the 1990s, Levis

refused to open up its supplier factories to outside

scrutiny. In contrast to Nike, Levis did not ini-

tially participate in the development of the FLA,

which was widely expected to result in a system that

required some form of independent monitoring.

Schoenberger suggested that Levis’ refusal to par-

ticipate was due to its ‘‘fundamental aversion to

transparency’’ (Schoenberger, 2000, p. 221). The

FLA model did in fact require independent moni-

toring, but of only a very small percentage of sup-

plier factories, and while participating companies

were required to disclose their factory list to the

FLA, there were strict requirements that this infor-

mation not be disclosed publicly or to other partic-

ipating companies.

As it turned out, therefore, the FLA was not very

threatening, and many of Levis’ competitors had

signed up, including Nike, Reebok, Phillips Van

Heusen, and Liz Claiborne. Levis had explained its

refusal to participate on the basis that it perceived no

benefit, since its internal monitoring system and its

guidelines were working fine. However, in 1999,

Levis joined the FLA, thereby agreeing to open up

its factories to outside inspectors for the first time,

albeit in a very limited way. It also joined the Brit-

ish-based multistakeholder Ethical Trading Initiative

(ETI) that same year. By endorsing the FLA and the

ETI, Levis signaled a subtle shift toward a greater

willingness to engage external actors in a dialog

about supply chain labor practices (Ethical Trading

Initiative, 2004).

This shift was evident too in Levis’ decision in

1998 to permit several NGOs to participate in a pilot

project involving an assessment of its guidelines and

monitoring processes at a factory in the Dominican

Republic. The NGOs were permitted to interview

the workers, and they found that, while the workers

were generally treated decently and in accordance

with the guidelines and labor laws, few were aware

of the guidelines or their legal employment rights

(Schoenberger, 2000, p. 217). Levis made this report

public, including a comment by one NGO that

Levis’ monitoring model should be accompanied by

‘‘independent monitoring.’’

A Levis’ executive explained that the movement

toward greater transparency was evolutionary and

gradual:

In the mid-1990s, there was a real resistance for a lot of

companies to even having a code of conduct, to even

adopting standards. And I would say in the past

10 years…everything has changed to the point that where if you don’t have a code of conduct, people are

asking why? I think that there was also resistance to

independent monitoring, there was a mind-set, or a

perception in the industry: ‘‘Hey, we’re doing this, we

know how, what do we have to learn from anyone

else?’’ And I think over the years, we and everyone

else in the industry that does this work, we are learning

as we go, because it hasn’t been done before. So

there’s…just an evolution back in the mid 1990s, that…there’s a broader external set of stakeholders here that can actually help us in doing this work…. I don’t think it was any big ‘‘ah-ha’’ moment. I think it

was just a combination of factors that eventually

moved companies or caused companies to evolve their

thinking in this area, to be more dynamic, to be more

open to external engagements.

The decision to disclose the factory list

Despite the growing sentiment in favor of trans-

parency, the notion of voluntarily disclosing the

entire factory database was not one being seriously

considered at Levis prior to Nike’s move to disclose

their factory list in the spring of 2005. There con-

tinued to be concerns that this information would

597The Transparent Supply Chain

make Levis susceptible to negative campaigning and

would provide a valuable business benefit to Levis’

competitors. However, the Nike announcement was

a stimulus for serious discussion about factory dis-

closure at Levis.

The idea of following Nike’s lead was considered

at the CCD management meeting in the summer of

2005, when the benefits and risks of factory disclo-

sure were debated. One of the perceived benefits of

factory disclosure was that it would enable greater

collaboration between brands to reduce duplication

of monitoring. Duplication of monitoring in the

apparel industry detracts considerably from the

important task of trying to plan a strategy to address

problems, as explained by a Levis executive:

… we all began to realize, guess what, we’re in shared factories, we’re all sending monitors there, suppliers

are getting visited by a monitor every two or three

weeks. There’s more time being spent receiving these

monitors and showing them around than actually

making the improvements in the factory…. As an industry, at best, we are spending 20 percent of our

resources on creating the change that we need to be

sustainable going forward…[and]…probably 80 per- cent of our time on monitoring.

Within the CCD, there was growing sentiment that

it was best to ‘‘empower’’ the field staff, who were

out in the factories, to move forward with the dis-

cussions they were already having informally with

auditors and monitors representing other apparel

companies about how to work on joint remediation

plans and how to reduce duplication of audits.

Factory disclosure was perceived as a way to facilitate

this process.

Factory disclosure was presented as an idea to

managers from sourcing and to some of the suppliers

and licensees, as well as other senior company offi-

cials. There was some initial resistance within

sourcing, and from some exclusive licensees who did

not want to be included on the list. However, most

suppliers were pleased to be included on the list,

because the fact that they had satisfied Levis’

guidelines assessment process was perceived as a

positive marketing tool. One supplier called Levis

complaining that it had not been included on the

original circulated list. By early fall, 2005, Levis had

decided to disclose its global factory list. The list

already existed on the factory database, and after

some checking for accuracy of names and addresses,

the factory list was released in October 2005 on the

company’s website.

Analysis and conclusions

This paper opened by noting the theory advanced by

factory disclosure advocates that transparency could

provoke positive changes in the ways that companies

manage their supply chain labor practices. The idea

was that factory disclosure produces a business risk

that companies will seek to minimize by taking steps

to reduce the probability of being associated with

‘‘sweatshop’’ labor practices. The case studies of

Nike and Levis recounted here contribute to this

discussion. In a way, we are theorizing backwards.

Rather than examine how companies respond to

mandatory factory disclosure, these case studies

examined what steps two companies took to bring

themselves to a point where officials felt comfortable

enough with their situation to voluntarily disclose

their suppliers.

One lesson we can take from these case studies is

that transparency is indeed less frightening when

some care has been put into one’s figure, to borrow

again from the Louis Loss quote that opened the

paper. By 2005, Nike and Levis felt confident en-

ough in the systems they had implemented that they

perceived the risk associated with factory disclosure

to be outweighed by the potential benefits of being

among the first to market with transparency. Recall

that both companies adopted vendor codes of con-

duct very early relative to many of their competitors.

Both created dedicated labor compliance depart-

ments and assigned a senior executive to run them.

Then staff were added, many assigned to satellite

offices in key global locations nearer to supplier

factories. New information systems were developed

to enable better tracking of information about labor

practices, including a global supplier database acces-

sible by senior officials in the head offices of the

corporations. Both companies introduced code

monitoring systems, using at various times internal

and external auditors, and those systems evolved

over time as the companies gained experience

through trial and error.

Obviously, these organizational developments do

not ensure that the labor practices in the factories

598 David J. Doorey

supplying Nike and Levis are always in compliance

with the companies’ codes (Locke et al., 2006).

However, provided the new systems work as in-

tended, we can expect that problematic labor prac-

tices in the supply chain are far more likely to come

to the attention of the companies’ management

officials than was the case until the early 1990s, when

neither Nike nor Levis monitored their suppliers’

labor practices in any systematic way. This is positive

news, since a company cannot begin to address the

worst kinds of labor practices in their supply chains

without having a reasonably clear grasp of what

those conditions are. The sorts of organizational

changes implemented by Nike and Levis are likely to

facilitate organizational learning about supply chain

working conditions, and this can only be a positive

development.

Therefore, the efforts of the many private actors

to create more transparent supply chains are well

spent if they can provoke companies to introduce

the sorts of tracking and monitoring systems we

witnessed at Nike and Levis. The story of factory

disclosure is in large measure a story about the

interactions of corporations and private antagonists

pushing a cause. We can safely surmise that it is only

because of the efforts of USAS and other activists

that followed in their wake that the issue of factory

disclosure made it onto the corporate agenda at all.

Similarly, it was the perceived risks posed by private

campaigns that criticized their supply chain labor

practices that provided the impetus for both corpo-

rations to introduce organizational changes designed

to allow for greater corporate oversight of those

practices.

However, the vast majority of corporations are

not nearly as welcoming to the idea of supplier

transparency as Nike and Levis. Many companies

have no idea which factories are supplying their

products because they contract out sourcing deci-

sions to intermediaries; for example, during the

consultations on a proposal for legislated factory

disclosure in Canada, a retail industry spokesperson

asserted that ‘‘tracking clothing factories is almost

impossible’’ for many Canadian apparel producers

and retailers (Canadian Broadcasting Corporation,

2002). Obviously companies that cannot track their

own suppliers can contribute nothing to the dis-

cussion of how workers are being treated. For them,

ignorance of labor practices is part of the business

model because it is cheaper and less cumbersome

than a model that requires them to track and mon-

itor their suppliers.

Other companies express concern about labor

practices in their supply chains and claim to have

invested considerably in monitoring and other ef-

forts to improve those practices. They produce

glossy CSR reports that show all sorts of statistics

about how contractors are or are not complying

with their codes of conduct. However, these com-

panies nevertheless resist factory disclosure on a

number of grounds; for example, Gap explained its

position on its CSR website. It claimed that it works

with ‘‘approximately 2000 factories’’ at any given

time, and the factories ‘‘constantly change,’’ and that

it believes that the identity of their supplier factories

‘‘is proprietary information’’:

We invest a lot of time, effort and money in identi-

fying factories that meet our product-quality and

vendor-compliance standards. We also invest a lot of

time in working with factories to continually improve

conditions. Any factory has limited production

capacity, and we are in a very competitive business.

We believe it would be unwise to provide a complete

list of approved factories for our competitors to use.

(Gap Inc., 2010)

This concern about competitors learning the identity

of their supplier factories and exploiting that

knowledge is the most common retort of corpora-

tions who resist factory disclosure. It assumes that,

without factory disclosure, competitors are unable to

acquire this information.

This is a controversial claim. In earlier times,

when most goods were domestically produced, the

notion that the mere identity of a production factory

had value would have seemed absurd; that infor-

mation was usually available in the phone book.

Global outsourcing led companies to assert that

supplier identity has immense economic value.

However, this argument loses steam with each new

company that discloses its factory list. If this infor-

mation is so valuable, why are leading apparel and

footwear companies prepared to give the informa-

tion away for free?

Labor activists have long asserted that, within

industry, there is far more available information

about which factories supply which corporations

than the corporate spokespeople let on. Proponents

599The Transparent Supply Chain

of factory disclosure argue that, without disclosure, it

is very difficult and expensive for private activists to

link factories to brands given their limited resources

and the vast size of global supply chains. Factory

disclosure empowers them by dramatically lowering

the cost of conducting their research and organizing

global research networks. However, several people

interviewed for this study, including corporate and

NGO representatives, indicated that, if a corporation

wanted to learn which factories a competitor was

using, it would usually be able to find out that

information without considerable difficulty.

For example, a Levis executive rejected the claim

that factory identity is proprietary and secret:

… it’s not really proprietary, because we share these suppliers with most of the other brands anyway. [In] all

of our localities, local NGOs know exactly where

Levi’s is, where GAP is, where Nike is…. [The] other piece of information you look at is there’s movement

in the industry… [P]eople within our sourcing orga- nization don’t stay forever, they go over to competi-

tors, and competitors’ people come over here. If our

competitors want to know where we’re sourcing, it’s

not that hard to find out because the suppliers talk.

The supplier will tell us who else is sourcing with

them. We ask them, and they tell us. There’s no

qualms about sharing that information.

Another former executive of an apparel and sports-

wear company conveyed a story about how he replied

to concerns expressed by executives within his own

company that disclosing their factory list would be too

risky from a business perspective by demonstrating

how he could compile a list of a competitor’s supplier

factories. He was able to compile the list by making

calls to his various sources in the industry.

An NGO representative indicated that even the

general information disclosed in many company-

specific and FLA auditing reports, which present

information based on countries or regions (rather

than at the factory level), is often enough for a

knowledgeable person in the industry to figure out

which factories are involved. Moreover, as the Levis

executive noted in the passage cited above, the

suppliers themselves regularly advertise the brands

they produce as a marketing tool to attract new

business. If a potential customer asks a supplier

whose products they presently or previously pro-

duced, they will usually be more than eager to an-

swer the question in order to demonstrate their

worthiness.

All of this casts considerable doubt on the argu-

ment that factory identity is a valuable source of

secret proprietary information. Nike and Levis

decided to disclose their factory lists because they

perceived the value of doing so to be greater than

any risk of transparency. The short-term value rested

in the perception that disclosure created. It made the

companies leaders in the field in terms of transpar-

ency, allowing them to boast that they had nothing

to hide. The longer-term benefit was the facilitation

of greater industry collaboration and information

sharing. Both companies contacted competitors after

they had disclosed their factory list and encouraged

them to review the list and identify shared factories

with the hope that further discussions could follow

about possible joint actions. Competitors also called

them to discuss concerns in shared factories.

These discussions spawned new collaborations

among competitors who share factories, according to

representatives of both companies. Informal meet-

ings have taken place among competitors to discuss

ways of sharing information and collaborating in

monitoring, training, and remediation. Representa-

tives of both Nike and Levis said they anticipated

these sorts of exchanges occurring more frequently

in the future as more companies came to accept that

there is greater business value in sharing information

about supplier factories with competitors than there

is in the increasingly futile attempt to keep this

information secret.

Collaboration has occurred in other ways as well.

With factory disclosure, the companies have har-

nessed the knowledge of the many private actors

who investigate working conditions around the

world. There has been more dialog than in the past

between the private actors and the corporate rep-

resentatives when issues are discovered in factories.

Representatives of both companies and NGOs

described examples of code violations being dis-

covered by private actors in factories supplying Nike

and Levis and the remediation discussions that fol-

lowed once those violations were pointed out to

corporate officials. The move toward a greater

willingness by Nike and Levis’ officials to engage in

dialog with labor activists about remediation of labor

practice problems has worked with factory disclosure

in useful ways. Fears about factory disclosure facilitating

600 David J. Doorey

a new wave of harmful negative campaigns have not

materialized, nor did representatives of either Nike

or Levis raise any concern that disclosure had led to

competitors rushing into their factories and taking

up capacity or stealing designs.

If factory disclosure could provoke more corpo-

rations to introduce measures for better tracking and

monitoring of supply chain labor practices, and

encourage greater collaboration around ways to ad-

dress root causes of poor labor conditions, then it

would be an extremely useful device. However, that

may be an overly optimistic vision of what we can

expect from broader adoption of transparent supply

chains. We cannot assume that other companies

would respond to mandatory factory disclosure by

adopting any of the useful measures that Nike and

Levis implemented leading up to their voluntary

factory disclosure. Many smaller organizations lack

the resources to develop dedicated labor compliance

departments on the scale of Levis and Nike. Com-

panies with brands that are less high profile, and

therefore less likely to be targeted by activists, would

be less motivated to invest in systems to reduce supply

chain labor practice risks. Ensuring that the factory

lists are accurate would be a persistent challenge, even

if companies did begin to publish them. Finally, we

need to acknowledge again that nothing in these case

studies confirms that working conditions have actu-

ally improved because of the steps taken by Nike and

Levis and factory disclosure. It may be that the entire

exercise has been a waste of time and resources.

However, that view would be unduly pessimistic.

Certainly, more research is needed to assess how the

information from factory disclosure is being used and

by whom, and more importantly, whether it has

influenced labor conditions. However, common

sense suggests that labor abuses are more likely to be

addressed if they are visible than if they remain

hidden. Companies that profit from ignoring the

working conditions under which their products are

made should be held accountable and pressured to

move in the direction of industry leaders who invest

resources in trying to put an end to illegal and

abusive labor practices. Factory disclosure would

help bring that accountability.

One lesson we can take from these cases studies

is that it may take time for companies to prepare

for factory list transparency. That is an argument

to justify a gradual move toward transparency.

However, the argument that supplier identity is a

source of great proprietary value is unpersuasive. At

present, there is sporadic, incomplete factory dis-

closure. Many companies that supply universities

disclose all or part of their supplier list as a condition

of the WRC. Nike, Levis, Adidas, Timberland,

Mountain Equipment Co-op, and a range of other

companies voluntarily disclose their suppliers. Some

of the suppliers of other corporations are known

through investigations and incidents that have dis-

closed the link between a factory and a brand.

In short, the idea of a completely secret supply

chain is already a myth. Companies that hide behind

that myth appear disingenuous, even if in fact they

do invest considerable resources in trying to improve

their supply chain labor practices. Their attempts to

defend supply chain secrecy undermine their legiti-

mate efforts to make positive change. Meanwhile, to

the extent that factory list transparency poses risks

and expenses for corporations, companies such as

Nike and Levis that adopted transparency first con-

tinue to assume greater risks and costs than their

competitors who wish to remain hidden from public

view. For that reason, mandatory factory disclosure

would be justified as a measure to level the playing

field and to help ensure that those corporations who

do the least to police their supply chain labor prac-

tices are not rewarded by their ability to remain

hidden in the shadows.

Notes

1 The most recent Nike list is available for 2009 here:

http://www.nikebiz.com/responsibility/documents/Fac

toryDisclosureList6.1.09.pdf. The most recent Levis list

is here: http://www.levistrauss.com/sites/default/files/

librarydocument/2010/4/LSCO_Supplier_List_April_2010.

pdf, Accessed May 10, 2011. 2

The Canadian government studied the possibility of

legislated factory disclosure several years ago on the ini-

tiative of a Canadian NGO called ETAG. See discus-

sion of this proposal and the government’s response in

Doorey (2005) and ETAG (2003). 3

The new FLA code required limited independent

monitoring of supplier factories, but required neither

public disclosure of factory lists nor disclosure of the

monitors’ reports. 4

Gear for Sports press release, October 27, 1999,

‘‘Collegiate Sportswear Manufacturer Gear For Sports

601The Transparent Supply Chain

To Disclose Factory List,’’ available online: http://www.

gearnosweat.com/, Accessed May 10, 2011. 5

Its opposition to the WRC did not diminish,

however, particularly that of its CEO, Phil Knight, who

expressed his opposition dramatically in 2000 by with-

drawing a large donation to the University of Oregon

when the school joined the WRC rather than the FLA.

See Phil Knight’s commentary, Oregon Daily Emerald,

24 April 2000, available online at: http://media.www.

dailyemerald.com/media/storage/paper859/news/2000/

04/24/News/Statement.From.Nike.Founder.And.Ceo.

Philip.H.Knight.Regarding.The.University.Of-1963996.

shtml, Accessed March 24, 2009. 6

Ibid. In his list of actions that Nike had taken to ad-

dress labor issues, he included: ‘‘Disclosed the U.S. and

global locations of the 45 factories that produce colle-

giate licensed apparel.’’ 7

The current Nike code of conduct is available on-

line at: http://www.nikebiz.com/responsibility/documents/

Nike_Code_of_Conduct.pdf, Accessed May 10, 2011.

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School of Human Resource Management,

York University,

Room 268 Atkinson Building, 4700 Keele Street,

Toronto, ON M3J 1P3, Canada

E-mail: [email protected]

603The Transparent Supply Chain

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