The material that follows has been provided by Christian Aid
| Contents | Author's Note | Publisher's Note | Summary |
|---|
Sports shoes have exploded onto the UK consumer market over the past 15 years. Partly for fitness, partly for fashion, most people now own a pair. But the companies that market the bulk of these shoes - Adidas, Hi-Tec, Nike, Puma and Reebok - do not actually make them.
Instead they subcontract production to developing countries. Despite the intense rivalry between brands in the UK, visit a Thai or Chinese factory and you will see the rival brands rolling off parallel conveyor belts.
Making these sports shoes does benefit developing countries. It brings money and jobs, and some skills are shared. But Christian Aid's research in the factories indicates that wages and conditions often leave a lot to be desired.
Christian Aid has calculated that the wages of Third World workers make up a tiny fraction of the cost of a pair of sports shoes. Billions are spent instead on marketing and product endorsement, in selling the image to consumers in the UK and around the world.
This report looks at the corporate conduct behind the advertising hype. It asks how seriously companies take their responsibility for the hundreds of thousands of workers - mainly young women - who produce sports shoes.
Christian Aid is asking these companies to adopt, implement and audit a model code of practice. It is also asking them to pay higher wages to their workers.
It is time for consumers and producers to be given a fair run for their money.
Nike boss Phil Knight's 1994 salary was 929,113. On current wages, a young woman in China churning out his shoes would have to work nine hours a day, six days a week for 15 centuries to match that.
Advertisements exhort consumers not to `let our fears stand in the way of our hopes', not to `sit quietly when we want to scream' but to `Risk it. Demand a raise'. In factories in Thailand workers are sacked for asking for better conditions or higher pay.
Liverpool football club are rumoured to have lined up a 25 million deal for 11 men to turn out in Reebok kit. The same money would more than double the wages of the 40,000 young - mostly women - workers who make Reeboks in China and the Philippines.
Selling sports shoes is big business, with a worldwide market worth billions. Because footwear production is labour-intensive, most now happens in the Third World where wages are lower. Shoe manufacturing is a key sector in developing countries. Not only does it generate jobs and earn money, but it is also a stepping-stone to building a manufacturing base.
Who profits from this global market? When you lace up a pair of trainers you are buying into an image. This report looks beyond the image to the reality endured by the workers producing the top brands.
It focuses on the five UK market leaders (Adidas, Hi-Tec, Nike, Puma and Reebok) and contains case studies of sports shoe production in three Asian countries (China, Thailand and the Philippines) in which Christian Aid works. In 1994 these three countries exported 27 million worth of sports shoes to the UK with a retail value well in excess of half a billion pounds. Hundreds of thousands of young women are employed in the industry in these countries, and a number of Christian Aid-supported organisations in Asia have been concerned about their wages and working conditions.
After phenomenal growth in the 1980s, the market has been stagnant for the past few years. The market leaders are: Reebok, Nike, Hi-Tec, Adidas and Puma. Reebok has the highest sales by value, while Hi-Tec claims to sell the most in volume.
The British sports-footwear industry has disappeared. Almost all our sports shoes are now imported, mostly from Asia.
Import figures for training shoes to UK (in thousands of pounds), showing shifts in the location of production in Asia.
| Jan-Dec 1990 | Jan-Dec 1992 | Jan-Dec 1994 | |
| South Korea | 58,896 | 29,675 | 10,970 |
|---|---|---|---|
| Thailand | 6,376 | 6,315 | 8,109 |
| Indonesia | 17,436 | 18,358 | 28,067 |
| Philippines | 8,454 | 6,268 | 10,033 |
| China | 307 | 463 | 8,865 |
| Vietnam | - | - | 6,966 |
Leading sports shoe companies today contract out the production of the vast majority of their shoes to manufacturers in the Third World, particularly Asia. Nike has a workforce of only 8,000 employees. The 75,000 people who make their trainers are employed by subcontractors, mainly in Asia.
The production of the average sports shoe may involve more than 200 different processes, and is highly labour-intensive. For almost 20 years, leading sports shoe manufacturers have hopped through Asia, contracting out production to factories in countries where labour costs are cheapest. Raw materials and factory sites are often comparatively cheap in these countries, and the higher cost of shipping and transport is offset by low production costs.
In the 1970s Nike started producing sports shoes in Taiwan and South Korea. It was soon joined by other leading companies such as Adidas, Reebok and LA Gear, making the South Korean city of Pusan `the sneaker capital of the world'. By the mid-1980s, 85 per cent of Reebok's sourcing took place in South Korea.
The area was attractive to major companies for a number of reasons - labour costs were low, there were good international transport links and labour organisations were suppressed.
Nike soon decided to change its working strategy still further. Rather than owning its own factories, it subcontracted the manufacturing to foreign-owned factories - a practice later adopted by other leading sports shoe manufacturers.
By the late 1980s labour unrest, industrialisation, the resultant increase in wages and a loss of workplace control by Korea's authoritarian government had prompted the main sports shoe manufacturers to start looking at cheaper production sites (especially China, Indonesia and Thailand) and shutting down production in Taiwan and South Korea. One third of South Korean production disappeared in less than three years.
Reebok now gets only nine per cent of its sports shoes from South Korea, and stopped producing in Taiwan last year. The rest of its shoes are produced in Indonesia (28%), China (29%), Thailand (14%), the Philippines (10%), Vietnam and India.
While Taiwan and South Korea are no longer the major production sites, many of the factories across Asia in which the main sports shoe companies are now producing have been set up by, and are run by, Taiwanese or South Koreans. Steve Brown, managing director of Reebok International in Indonesia and India, has estimated that 90 per cent of production is controlled or owned by either Taiwanese or South Koreans who have set up `contract factories' in China, Indonesia and elsewhere.
And still the companies move, seeking out sources of cheap labour and potential new markets. Nike and Reebok are now looking at Vietnam and India, and Nike is also exploring possibilities in North Korea and Cambodia.
| Estimated wages in footwear factories in selected countries, 1994 | |
|---|---|
| Country | Basic hourly wage |
| UK | 5.00 |
| Thailand | 0.46 |
| Philippines | 0.37 |
| China | 0.23 |
The sports shoe companies have mostly become design, distribution and marketing companies. Nike boss Phil Knight, explains: `There is no value in making things any more. The value is added by careful research, by innovation and by marketing'.
Enormous attention and hype are devoted to product innovation. Teams are dedicated to researching, designing and testing a continuous stream of new concepts. Puma offers us `dual-density Motion Control System' or `Trinomic Anti-shock System'; Adidas give us `tubular technology'; Reebok proffers the futuristic `Hexalite', `Graphlite' and `Dynamax'; Nike favours `Kelvar, the material they use for bulletproof vests'.
It is not, however, all techno-fetishism. These companies are selling more than a product to do sports in. They are selling a leisure item, a fashion accessory, a lifestyle choice. Reebok estimates that half the shoes it sells are for `leisure only' with only 11 per cent for `sport only'. Branding is crucial: the Nike `swoosh', the three stripes of Adidas, the Hi-Tec `harpoon'.
The aim is to sell a global brand through marketing that appeals to local tastes. According to Richard Donahue, Nike Vice Chairman: `The commitment is to be a global company - one management, one theme, one value, one ethic around the world.'
These companies spend huge amounts on advertising. According to a European Nike marketing manager, the profile they are aiming for is `American, young, high-tech, devoting a lot of attention to research and development.' The message is often very male, very competitive, very hard-edged. The sports shoes allow: a `deadly effect' (Reebok); a `devastating touch' (Adidas); to do `some serious damage to your opponent' (Nike). In recent years the companies have also developed a more caring approach in order to capture the growing women's market. Nike's approach to women has moved from asking them `While you're at it, why don't you stop eating like a pig?' to the much softer `it's not the shape you are, it's the shape you're in that matters'.
According to Advertising Age Reebok spent $110 million on advertising in 1994, while Nike spent a massive $280 million. The same magazine reports that Adidas will spend $210 million on marketing in 1995.
The British figures for total ad spending are difficult to obtain. We do know that the five major companies will spend well over 10 million this year just buying advertising space.
The other major promotional strategy is endorsement deals. The companies compete to pay top sports personalities millions to wear their clothes and endorse them. Nike sponsors competitive, controversial, anti-establishment figures such as John McEnroe, Eric Cantona, Ian Wright, Andre Agassi and Tonya Harding. Nike boss Phil Knight stresses that the company wants `want someone whom the public will love or hate'.
This March Andre Agassi signed a clothing contract with Nike reputed to be worth 70 million. Pete Sampras is allegedly earning 4 million a year and Jim Courier 3 million from the same company. Adidas recently paid 2 million to Paul Gascoigne to wear its boots. Michael Jordan reputedly earns $18-20 million a year from Nike.
It is difficult to find out the total sponsorship spends. Dusty Kidd, Director of Marketing and Communications for Nike Asia, suggested that Nike's budget for funding athletes may be as high as five to seven per cent of the company's total revenues (which for the year ending 1994 was $3.8 billion). It may be estimated that the company spends $250 - $280 million dollars a year on athlete endorsement.
But while enormous sums are spent on marketing these products, what does it cost to make them?
Nike attest that its products are priced on a 1-2-4 basis: `Nike, for example, buys a product from a factory for US$10...adds development, marketing, shipping and other costs, plus profits, and sells to the retailer at US$20, which in turn adds similar costs and profits and sells to the consumer at US$40.'
Nike also states that `the labor component of an Indonesian footwear product is typically 11 per cent'. Christian Aid has found 12 per cent to be an average figure for the FOB price of a sports shoe across the region. Following Nike's argument, if a pair of sports shoes is sold for 50 in the UK, one could calculate that the production-line labour cost involved would be around 1.50.
This is more generous than the averages which Christian Aid's in-factory research produced: 46 pence per pair in China, 1.08 per pair in the Philippines and 1.19 per pair in Thailand. This would give an average labour content for all shoes across the three countries of 90 pence.
Thailand has a population of 59 million, GNP per capita of $2,110 and an economy which has grown by more than 8 per cent a year since 1980. In 1994 147 million pairs of sports shoes were produced there. The country has one of the fastest growing economies in the world, but there is concern about the social and environmental effects of its rapid industrial development.
Adidas, Nike and Reebok all produce in Thailand. In 1993 Nike worked with eight Thai factories to manufacture deluxe models and produced more than seven million pairs of shoes. Reebok first used Thai factories in 1987, and now gets 14 per cent of its global output from Thailand (11 sub-contracting factories).
This year it was discovered that the Bangkok Rubber Company, the largest Reebok contractor in Thailand, was employing Burmese refugees and paying them only half the Thai national minimum wage. Reebok pressured the factory to change. When Bangkok Rubber refused, Reebok ordered them to discontinue manufacturing its shoes at the factory in question. Bangkok Rubber continues to manufacture Reeboks at other plants, but the refugees' wages remain unchanged.
Most of the footwear exporters receive investment promotion deals from the government. In 1994 68 sports shoes producers - accounting for almost 90 per cent of production capacity - were receiving export promotion benefits.
The major export market is the US, which currently takes about two-thirds of exports by value. The UK, Italy, France and Germany are the next most important markets.
Many companies began to move to Thailand in the mid to late 1980s as costs increased in South Korea and Taiwan. Salaries are about a quarter of those in Taiwan and South Korea.
The late 1980s saw an dramatic growth in sports shoe production. By 1993 they accounted for 63% of total export value of Thai footwear.
Although the total value of exports continues to grow, the rate of growth is now slowing. The industry is facing a number of difficulties: there is a shortage of factory capacity; around 70 per cent of the raw materials used in sports shoe manufacture are imported - mostly from Taiwan and South Korea; and wages are rising.
Labour costs are increasing because of rapid economic growth. China and Indonesia provide labour at a much lower cost. The production strategy must now be to move into the higher end of the market, producing high-quality products.
| Export value of Thai sports shoes | ||||
|---|---|---|---|---|
| Year | Amount (million pairs) | Expansion rate (%) | Value (million dollars*) | Expansion rate (%) |
| 1987 | 18.72 | 84.6 | 92.8 | 63.7 |
| 1988 | 29.32 | 56.6 | 173.1 | 86.6 |
| 1989 | 34.97 | 19.3 | 270.0 | 55.9 |
| 1990 | 48.36 | 38.3 | 423.1 | 56.7 |
| 1991 | 56.57 | 17.0 | 513.8 | 21.4 |
| 1992 | 67.0 | 18.4 | 590.7 | 15.0 |
| 1993 | n/a | n/a | 655.0 | 10.9 |
| 1994 | n/a | n/a | 716.3 ** | 9.3* |
The export price of sports shoes ranges from 8 to 13, depending on the style of shoe.
As in the rest of Asia, sports shoes are produced to order by subcontractors. Factories are owned by Taiwanese, Thais and South Koreans.
Christian Aid's researchers looked at five production sites, employing around 10,000 workers in total.
The age of production-line workers ranges from 17 to 30, the average age being 22. Eighty- five per cent are women. Nearly all are single - companies prefer single women so as to avoid maternity benefits. All work to send money back to their families, many of which are in the poor north east of the country.
In most respects the companies were found to comply with the minimum of national law. Four paid a basic daily wage of 145 Bhat (3.60) in accordance with the national legal minimum. One, where there is a strong and established trade union, paid 170 Bhat.
Most gave bonuses for punctuality and attendance. Some gave annual loyalty increments, while in others workers that had been employed for over ten years still received only the minimum wage.
Holiday and sick leave rules were mostly respected. But two did not comply with national maternity leave law. Where annual health inspection was undertaken, employees were often not told of the result.
Health and safety standards were erratic. Protective clothing was not always supplied and in some cases its use was not enforced. In one company - housed in a five-storey building - the fire escape route was blocked because it is used as a storage space.
The average production-line worker produces 4.3 pairs of shoes a day. The average production-line labour cost per pair is around 1.19.
Discrimination and victimisation is widespread. This ranges from firing of workers who try to organise trade unions to not giving work to leaders of unions.
Although workers rely on overtime to supplement their wages and the companies do pay the correct overtime rate, the workers have no choice about whether or not to do it.
Two factories operated a policy of employing workers for nearly 120 days, then laying them off in order to save money on fringe benefits and to stop workers becoming permanent.
In general conditions are tolerable. But the factory owners are by no means model employers: conditions, rights and wages are very similar to those in comparable sectors. Wipaphan Korkeatkachorn of the Christian Aid-funded Thai Development Support Committee, argues: `It wouldn't cost much to raise wages in Thailand's sports shoe factories to a decent level. It wouldn't even add the price of a new pair of laces to what you pay for sneakers in your shops in Britain.'
The large scale subcontracting of the sports shoe manufacture for export started in the late 1970s, with Puma among the first to subcontract to a Korean company in the Philippines in 1977. The first Reeboks were produced there in 1986. In 1993 Reebok's production in the Philippines soared to 4.9 million pairs of shoes from a mere 770,000 in 1990. Today the company obtains 10 per cent of its global production from the Philippines.
Adidas, Puma, Hi-Tec and Reebok still manufacture here. Nike has moved out of the country completely. Exports have levelled off in recent years as production moves to cheaper sites in other parts of South East Asia.
The production companies are mainly located in the export processing zones, where they receive a considerable range of benefits from the government. As in other subcontracting countries, the vast majority of raw materials are imported - from South Korea, Taiwan and Hong Kong.
| Philippine Exports 1991-94 (FOB US$ 000) | ||||
|---|---|---|---|---|
| 91 | 92 | 93 | 94 | |
| Total | 8,839,514 | 9,824,314 | 11,374,805 | 13,482,896 |
| Footwear | 141,068 | 143,949 | 168,363 | 210,262 |
| Sports shoes | 104,156 | 110,673 | 118,096 | 113,704 |
The major export market is the United States, with Germany, the UK and France following.
Because of the range of shoes exported, it is difficult to calculate prices. In 1993 Reebok produced 4.9 million pairs of shoes worth US$ 50.5 million, giving an average cost of US$ 10.3 a pair. More recent estimates show Reebok shoes costing between $10 (6.30) and $18 (11.30) FOB, depending on the model. An average pair probably costs just under 9 to produce.
Average production-line labour costs per pair of sports-shoes is estimated to be about 14 per cent of FOB price - around 1.20.
Research was undertaken by the Manila-based Philippines Resource Centre, a Christian Aid partner organisation. The Centre focused on nine manufacturers who employ more than 10,000 people to produce sports shoes on their factory floors. These factories have a combined capacity to produce around 30,000 pairs of shoes a working day - around 8 million pairs a year. All nine sites are in export processing zones.
Note: BEPZ - Bataan Export Processing Zone; CEPZ - Cavite Export Processing Zone; Subic - Subic Special Export Processing Zone.
The manufacturers prefer to hire single workers aged 18-25. Sixty-three per cent of the factory workers are female. Across the companies a production line worker would make around three pairs of finished shoes a day.
The daily minimum wage outside Metro Manila is P127 a day (around 3). None of the companies was known to pay workers beyond the minimum wage. Many used `casuals' who are paid less. They start at P85-95 a day for one year, after which they receive the minimum wage if they are made regular workers.
Regular workers have a number of benefits. They are entitled to `13th-month' pay, a bonus given in December and equal to one month's salary. They get five days leave after serving one year and are entitled to social security. Workers at a number of factories complained that the companies were either not contributing their part of the social security payments or were late in remitting them.
Some factories have unions, and organisation is not really prohibited. Some workers have not mustered the courage to organise one. Some export processing zones have a no-strike policy.
As in Thailand, workers cannot refuse to do overtime, especially when the factories are rushing orders. Workers in one factory (Olongapo) were working from 7am to 8pm to meet orders.
Equally, if there is little work, workers cannot refuse forced leave without pay.
It is estimated that almost 50 per cent of the workers in the Bataan factories are `casuals'. They only have three or six-month contracts after which they are laid off. This `perpetual casualisation' means that employers avoid paying benefits.
Ronet Santos of the Philippines Resource Centre feels: `Companies like Reebok and Puma, with their slick adverts and celebrity endorsements, are running away with all the prizes. It's time they did something for the women in their shoe factories who are still on the starting blocks in terms of pay and conditions.'
China has a population of 1.2 billion, GNP per capita of $4.90 and an economy growing at around 10 per cent a year since 1980. Economic liberalisation has not been matched by political or social freedoms.
China is easily the world's biggest footwear manufacturer and exporter, and looks set to take an even bigger share of the global market. Abundant labour, low production costs and incentives to foreign investors have made it very attractive for export manufacturing.
Adidas, Hi-Tec, Nike, Puma and Reebok all manufacture there. The first Reeboks were produced in 1987 and today the company obtains 29 per cent of its worldwide production needs from more than a dozen factories in China.
The main export markets are the US and the EU. China currently exports around 10 million worth of sports shoes a year to the UK.
China has experienced very rapid growth over recent years. Much of it is concentrated in the Pearl River Delta, a region which produces a quarter of the world's footwear. Most of the sports shoe factories are set up with Hong Kong and Taiwanese investment.
Research was undertaken in 1994 and 1995 by Christian Aid partner-organisation AMRC. It focused on production sites in Shenzen, Zhuhai, Zhongshan and Donguan. Among those surveyed were production sites owned by Yue Yuen Industrial (Holdings Ltd) which manufactures for Reebok, Nike, LA Gear, Adidas, Converse and many more. It has two plants in Zhongshan producing Reebok, Adidas and LA Gear, two in Zhuhai - producing Reebok - and four in Donguan producing Nike amongst others.
It is difficult and even dangerous for workers to give interviews. A woman worker in a factory producing for Reebok alleged that a unit leader had been fired as an example to workers not to talk to outsiders. Added to this is the difficulty of double-checking against company and official records. The findings of this research are therefore slightly less comprehensive than for the other two countries.
Ninety per cent of the production workers are women, usually from the northern provinces of Hunan, Hubei and Sichuan. Ages range from 18 to 22. AMRC believes that workers above 25 are usually regarded as too old and sent back to their provinces.
Most workers work by piece-rate and earn around 40 a month including overtime and bonuses. One worker interviewed - a trainee in the stitching department - said she normally worked for 12 hours a day but received only 30 a month. Many workers said their wages were cut if they were late or sick or did not meet production targets.
The workers do receive other benefits such as dormitories to sleep in, and some companies provide facilities such as sports grounds, video showings and day excursions free to staff. One manager estimated that non-wage labour costs per worker are around RMB 200 (15) a month.
Average production per worker estimated across three factories for which Christian Aid has figures was 1,300 pairs of shoes a year, or 4.5 a day. Assuming we take a wage of RMB 500 and non-wage labour costs of RMB 200 a month, the total production line labour costs per pair are just under 50 pence.
Not surprisingly, conditions in China were worse than in Thailand and the Philippines. The main problems identified were:
Chinese labour law states that the normal working day should be eight hours. Overtime should not exceed three hours per day or 36 hours per month. Most factories require workers to work longer than this, particularly when there are big orders. A nurse at one of the factory medical centres said `The major problem of people sent here is long working hours. Workers - especially those who don't have breakfast - often faint, particularly in the morning when the work is more stressful. The heat and humidity make it worse.'
Workers do not have a choice about doing overtime. A major reason cited for the length of basic working hours is the quota system.
Piece-rate workers complain that they have to fulfil a full production quota before they can get off the production line. Quotas are set very high and are difficult to meet, so some workers have to work overtime without pay. Some workers complained that the quota is set to a higher level whenever they reach it. This system gives a new meaning to the Nike slogan `There is no finishing line'.
Shoe making involves dangerous chemicals and operations. Most workers are migrants from the poorer areas of China. They are often ignorant of the risks they face and because many only work for a couple of years, they may not gain shared experience of the longer- term dangers involved. Supervisors in two factories said that workers had been provided with protective equipment but preferred not to wear it.
Industrial fires are a major problem in this part of China. Hundreds of workers have died over the past few years. Last year Yue Yuen, a Reebok supplier, was exposed by AMRC for housing hundreds of workers in a fire-trap. The young women were sleeping above garment and electronics factories in dormitories where the windows were barred, and were locked in every night. Reebok inspectors had visited the factory a few months before, but missed the fire-trap dormitories. Yue Yuen has since built a model dormitory, to avoid a threat by Reebok that the contract would be severed unless facilities were improved. Fire safety could be vastly improved in other factories and dormitories.
Lack of free trade unions is a national political problem in China. Workers in these factories can raise complaints and demands individually to management. In most cases they are too scared.
In general wages and conditions were found to be above average for the footwear sector, but Wong Wai Ling of AMRC felt that `There is a yawning gap between the "socially responsible" image being marketed by Reebok and Nike and the reality of their operations in China.'
Christian Aid believes that the right to organise is a fundamental right which generates important benefits for workers and the wider community.
A Nike advertisement advises: `You know when you need a break. And you know when it's time to take care of yourself, for yourself. Because you know it's never too late to have a life.' The young women who make sports shoes for the UK market like doing overtime because it means they can send money to their families. But they should not be compelled.
Shoe making is a dirty and sometimes dangerous business. Conditions in these factories are certainly better than those found in some other parts of the shoe-making industry. But there are problems: protective equipment is not always available; its use is not always properly supervised and enforced; workers are often ignorant of the dangers they might face.
Although most workers (except casuals) are paid the minimum and receive fringe benefits, this does not mean they receive a good wage. The minimum wage is set very low in many countries. They receive only a tiny portion of the final selling price of the product.
Specific cases were also raised of:
There are three main lines of response from the companies:
`Nike impacts the lives of its subcontracted workers twice: as a client of their employer and as a participant in their country's economy. And in both roles, Nike's presence is a positive one.' According to a senior Nike employee `I don't think the girls in our factories are treated badly. The wages may be small, but it's better than having no job'. The alternative, it was suggested, would be `harvesting coconut meat in the tropical sun'.
Adidas explains: `Today these products are manufactured by a large number of sub-contractors and licensees across the world, which most of the time do not have legal or financial ties with the Adidas Group. The absence of these ties limits the possibilities of intervention within these subcontracting companies.'
Nike replies: `Well I think you should be asking that question of the United Nations...I don't think it's something you can lay at a shoe company and say "You must accept responsibility for improving the social and living conditions of all employees".'
Reebok, for instance, states: `With large businesses you have the opportunity to change the way you operate and truly have an effect. As large companies you have the muscle to do it.'
Nike gives concrete instances the action it has taken: `Nike expatriates investigated when they noticed a high number of workers being paid a training wage in Nike's Indonesian factories....When the factories were questioned, there was a significant drop in the number of those employees.'
Hi-Tec favours the first approach, Adidas the second and Reebok the third. Nike tends to use all three arguments simultaneously.
So how do they rate on the ethical scale? Christian Aid wrote to all five companies asking a series of questions: Do you manufacture overseas? If so, why? Where do you produce? Do you have a set of rules that producers in developing countries must follow? Do you check up on your factories overseas?
Reebok was the only one to answer the specific questions. The other companies sent general promotional packs.
The Adidas pack focused on the history and quality of the products. Developing countries are only mentioned once - as a source of cheap labour.
Hi-Tec sent a student information pack. Developing countries are mentioned, but only in terms of the need to ensure `quality and delivery reliability'.
Nike has a code of conduct for its subcontractors, dealing with such issues as minimum wages, child labour, health and safety, non-discrimination and the non-use of forced labour. Unlike Reebok however, it does not include anything on the right to associate. Nike adopts a `Who are we to say?' response to criticism, suggesting that the company does not own the factories in question, nor does it dictate wages and labour law in them. `We don't pay anybody at the factories and we don't set policy within the factories: it is their business to run,' David Taylor told an interviewer from the company paper.
It simultaneously argues that Nike extends an opportunity to developing countries and their workers to get on the first rung of the economic ladder. And also that its provisions for better working conditions are successful and are promoted aggressively.
US groups have accused Nike of trying to market its way around criticisms rather than dealing with the problem.
Puma did not reply. Christian Aid believes that the company may have a code of conduct.
Reebok replied in detail, setting out its credentials and concern for conditions in developing countries. The company appears to be addressing these issues seriously.
Reebok's Human Rights Philosophy states: `The company adheres to the belief that financial and social concerns are two sides of the same coin. Our long-term financial health and standing in the corporate community is linked to our sense of social responsibility. We demand that of ourselves; our consumers that of us; and ultimately, our world requires that of us.'
Reebok boss Paul Fireman has talked of the need for large companies such as Reebok to respond to the society in which they operate, and is keen to promote Reebok's role as an advocate for international human rights. In 1988 the first annual Reebok Human Rights Award was presented, established to recognise individuals under 30 who have acted against human rights abuses. `Our hope is to bring to the market the missing consciousness, the indignation that can once and for all make it simply unacceptable to mistreat human beings. We want to ignite people's outrage.'
In 1992 Reebok adopted a formal worldwide code of conduct - the Reebok Human Rights Production Standards - concerning the treatment of workers employed by third parties with whom Reebok work. This sets out a number of standards, no overtime without appropriate compensation, fair wage levels, freedom of association and a safe and healthy work environment. On paper the code looks good, although there are - as we have seen - problems with enforcement.
It is difficult to compare the companies. Because of their high international profiles and also because of protectionist sentiments in the USA, Reebok and Nike have received a lot more attention from journalists eager to pierce the corporate armour. Reebok appears to respond more quickly when confronted with a problem.
Christian Aid would like the sports shoe companies to take the following steps.
a Adopt a code of conduct (if they do not already have one);
Nike, Reebok (and probably Puma) have codes.
b Improve existing codes;
Christian Aid has developed a model code in negotiation with groups in the countries concerned. Reebok's code comes the closest.
Christian Aid believes that workers and their representatives should be involved in drawing up standards and in their verification. There should also be rolling improvements in standards: as employment and wider social conditions improve and new issues of concern emerge, the terms of the codes of practice should be expected to evolve, through the participation of all the stakeholders.
c Effectively implement the code;
Having a code is a public relations exercise if it is not enforced.
When a problem is identified, there should be positive involvement of the trading partners to resolve it. Christian Aid does not want companies to cease doing business, but to enter into dialogue to improve conditions. If this does not work, pressure should be applied. Withholding business should be a final resort.
d Develop mechanisms for independent monitoring and evaluation.
While senior staff within the purchasing companies should take responsibility for monitoring, wider training of staff and developing internal review procedures, there should be an independent body to check adherence. (Ernst and Young reviewing financial records is not good enough).
e Raise wages
Some companies have had problems making their subcontractors pay the minimum wage. Christian Aid believes that even the minimum wage is not high enough and that the companies can afford to pay at least 50 per cent more.
It can be argued that increasing wages will simply lead the companies to go to cheaper countries - repeating their Asian migration. It is essential, therefore, that the companies apply the same high standards to all producer countries.
`We seek always to be a leader in our quest to enhance people's lives through sports and fitness. That means at every opportunity - whether in the design, manufacturing and marketing of products; in the environment; in the areas of human rights and equal opportunity; or in our relationships in the communities in which we do business - we seek to do not only what is required, but what is expected of a leader'.
If these companies are to be leaders they need to go further than they do now in proactively improving conditions in developing countries. They can afford it. Billions are spent on advertising and promotion. Presumably this is to reinforce the brand image. Christian Aid wants that image - `Everyone up to speed. Everyone on the same squad'. - to include the workers in the developing countries. As a result we might see one advertisement fewer a week or a top sports personality may receive a few thousand pounds less. Is this such a big price to pay?
The potential benefits for the hundreds and thousands of people who produce sports shoes in developing countries are enormous.
The companies can change the rules of the game. The ball is in their court.
Adolf (Adi) Dassler created his first sports shoes in Herzogenaurach, Germany in 1920. At the historic 1936 Berlin Olympics, Jesse Owens' four gold medals were won wearing shoes produced by Dassler.
Adidas, the company whose name was derived from that of its founder, was set up in 1948 in West Germany with 48 employees. Today there are 10,000 people working for Adidas worldwide and its value was estimated earlier this year at up to DM2.5bn (1.1bn).
The firm was the first shoe manufacturer to adopt a logo - the now familiar three stripes, first used in 1949. Initially these stripes had a practical function: adding support and stability. But they were soon to become an integral part of Adidas's marketing image.
In 1990 Dassler's heirs sold the company to Bernard Tapie, the French politician and businessman. In 1993 it changed hands again as a group of investors headed by Mr Louis-Dreyfus - former chief executive of Saatchi and Saatchi - bought control for DM615m. Under the leadership of Louis-Dreyfus, much greater emphasis has been placed on marketing in order to allow Adidas to compete again with global market leaders, Nike and Reebok. Only 10 per cent of Adidas' yearly turnover of 46 million pairs of shoes are now made in Germany, and Adidas admits to producing in Asia because labour is cheap.
Adidas sales are expected to rise substantially in 1995, and pre-tax profits for the year are expected to be double the 1994 figure. Adidas sales totalled $2.13 billion in 1994, with the lion's share (61 per cent) in Europe.
A `truly British brand', Hi-Tec claims to be Britain's most popular sports shoe, selling over five million pairs annually in the UK. Excluding the US market (where Hi-Tec is among the top 20 sports shoe companies), Hi-Tec is the seventh-largest brand worldwide.
The company was set up in 1974 in Shoeburyness, Essex. Its original success was founded on the Hi-Tec Squash, its first shoe, which has now sold 9 million pairs worldwide.
The Hi-Tec name and logo were launched in 1982 in an attempt to establish a major new brand in the mid- price range market. The company's success, and the need for additional funds to finance an expansion into foreign markets, prompted Hi-Tec to go public in June 1988. In 1994 the company formed a partnership with a major Dutch firm, Vilenzo.
Hi-Tec subcontracts to factories in the Philippines, China, Indonesia, Korea, Vietnam and Romania.
The company has recently suffered because of discounting by other major brands.
Nike was established in 1964, and Nike inc was registered in 1968 in Beaverton, Oregon. The company was named after the Greek goddess of victory, and is known for its swoosh logo - a reference to the winged goddess - and its catch-phrase `Just Do It!'.
It was while studying at Stanford University in 1962 that Phil Knight, future founder of Nike Inc, first had the idea of importing running shoes from Japan, to challenge Germany's domination of the market.
In 1964, he and Bill Bowerman each contributed $500 to set up a company - Blue Ribbon Sports - which was the forerunner of Nike. By 1979 Nike Inc had achieved a 50 per cent market share in the US, boasting an annual turnover of US$149 million. In 1977 production in Taiwan and Korea began, and by 1980 negotiations for production in China had started.
In the mid-80s Nike's seemingly unassailable growth was severely hit by the company's failure to identify and react to the emerging women's aerobic market. But by 1990 Nike had regained from Reebok its position as the world sports market leader with a turnover of $2 billion. This was largely thanks to the introduction of the Air Jordan trainer, endorsed and promoted by the basketball player, Michael Jordan. Today the company retains the position of market leader, and Fortune magazine reports sales worth $3.79 billion and profits of $299 million in 1994.
As of November 1994, Nike's Asian footwear manufacturing was located in South Korea, Taiwan, Indonesia, China and Thailand.
Puma evolved from the same family firm as Adidas. The two Dassler brothers had been producing footwear since 1924. In 1948, after an argument, they decided to go their separate ways and set up their own companies. Rudolph Dassler founded Puma.
In 1991 a Swedish-based company, Aritmos, bought all Puma's ordinary shares. It is now the major shareholder. Later in 1991 Puma International was founded, and now acts as the central controlling base for a network of subsidiaries operating as independent profit centres.
Since 1993 Puma has not owned its own sports shoe production facilities. Most of its products are made in Asia, Slovakia, the Czech Republic, Lithuania and Italy. Its products come from over 70 manufacturing facilities and its offices are located in more than 80 countries.
Contracted athletes include Colin Jackson and Linford Christie.
This year Reebok celebrates the 100th anniversary of the `Foster' running shoe, Reebok's precursor, made by Joseph William Foster of Bolton. Foster, a keen runner with the Bolton Primrose Harriers, wanted a pair of spiked running shoes, and soon his makeshift design was being demanded by his fellow runners. By 1890 Foster had set up his own business in Bolton producing handmade running shoes. After his death in 1933, the business passed to his sons James and John and continued to expand until 1958, when two of his grandsons established a companion company called Reebok.
Today Reebok produces a wide range of athletic footwear distributed in 45 countries. The USA provides the company's largest market. But Reebok was virtually unknown there until 1979, when Paul Fireman - an American marketer of outdoor equipment - obtained a licence for north America. The Bolton plant was soon unable to keep up with orders from the USA, and production facilities were set up in Korea.
Reebok achieved resounding success in the mid-1980s. In 1985 Reebok International Limited and the US company merged, with Paul Fireman elected as President. Fireman transformed his company from a $1.5 million distributor in 1981 to a $1.4 billion market leader by 1987 - averaging a 155 per cent annual growth rate. He then took a five-year break from the day-to-day running of Reebok, during which the company's newly established market lead was wrested back by arch rival, Nike.
Nike's lead has remained, despite a forceful marketing response by Fireman since his return to full control in 1992. Fireman has used endorsements by top sports stars such as Shaquille O'Neal. Reebok achieved worldwide sales of $2.8 billion in 1994.
The authors would like to give special thanks to Jeff Ballinger and Peter Pennartz for all their help and advice and to Paul McCann for additional material. None of them bears any responsibility for the text. Paul Spray and Liz Orton made useful suggestions.
$ refers to US dollars unless otherwise stated.
Publisher's note: Christian Aid is the official relief and development agency of 40 British and Irish Churches and works where the need is greatest in more than 70 countries worldwide. It helps communities of all religions and none.
Christian Aid links directly with the poor through local organisations whose programmes aim to strengthen the poor towards self-sufficiency. It also seeks to address the root causes of poverty and spends up to 10 per cent of its income on development education and related campaigning at home.
Christian Aid, PO Box 100
London SE1 7RT UK
November 1995
�Copyright: Christian Aid 1995
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