Just did it: Nike strikes Pak. deal
Agreement ends months of soccer ball drought
BY CHRIS NELSON : Indus Business Journal - June 19, 2007
BEAVERTON, Ore. — Nike Inc. will resume production of hand-stitched leather soccer balls in Pakistan, six months after dropping its longtime supplier, Saga Sports Pvt. Ltd., amid concerns the company failed to comply with labor standards Nike requires of its vendors.
Nike signed a contract in late May with Silver Star Pvt. Ltd., a manufacturer of soccer apparel and equipment in Sialkot, an industrial city in the northern province of Punjab.
The deal calls for Silver Star to produce as many as 7 million soccer balls daily. Financial terms were not disclosed.
Nike — the world's largest designer, marketer and distributor of athletic equipment, apparel, footwear and accessories — selected Silver Star following a lengthy search that the Beaverton-based company says was designed to modernize and promote competition within the soccer ball sector, as well as improve working conditions at its suppliers' factories.
"Our decision to resume soccer ball production in Pakistan is the result of extensive work with stakeholders, based on a collective desire to help move the industry in a more competitive direction that strongly supports workers' rights," Mark Parker, Nike chief executive officer and president, said in a statement. "Silver Star has committed itself to realizing this vision. We hope this is the beginning of broader, positive systemic change for workers, and that the example Silver Star sets will help Pakistan's soccer ball industry create a new model of responsible, globally competitive manufacturing."
Nike expects to place its first order with Silver Star in August, with production beginning in the fall. Nike has reportedly set initial production at 5,000 balls per day, yet that figure could increase to as much as 15,000 balls per day if the Silver Star factory complies with Nike's product and labor standards.
Nike — the official supplier of soccer balls to the English Premier League — cut ties with Saga Sports, also located in Sialkot, last November after third-party monitors alerted the company that Saga was in violation of numerous standards on workers' rights set by Nike and several nongovernment organizations.
Nike said it terminated the contract "due to the factory's inaction on correcting significant labor compliance violations and a fundamental breach of trust with factory management." As a result, the company shifted its production base to China and suspended soccer-ball imports from Pakistan.
Nike was Saga's main client, comprising approximately 80 percent of the factory's business, according to Nike media relations director Alan Marks. He said the factory produced between 6 million and 8 million balls per year for the company. The loss of the Nike contract dealt a major blow to Saga — approximately 3,000 of its workers lost their jobs as a result.
Marks said the violations included unauthorized outsourcing of soccer-ball production to homes in the surrounding area.
"We took a very hard stance on this — we could not condone home-based production," he said from Nike headquarters. "It opens the door for child labor. Even if you only have adults doing the stitching, the work still can't be monitored to ensure the conditions are safe. Given the history of child labor in Pakistan, Nike felt that allowing home-based stitching to continue, then there was no guarantee that children weren't doing the work."
Sialkot is a city of approximately 3 million people located at the foot of the snow-covered peaks of Kashmir. It is one of Pakistan's major industrial centers and is well known for its production of sporting goods — notably, soccer balls. Sialkot factories produce approximately 80 percent of the world's hand-stitched soccer balls.
Nike's decision to pull its orders with Saga left the Sialkot and Pakistani economies reeling. Sialkot soccer balls generate $1 billion in retail sales annually, amounting to a loss of $33 million annually in guaranteed exports for Pakistan. At the time of the stoppage, Saga was supplying Nike with 15,000 to 25,000 balls daily. Depending on their quality, the balls fetched between $5 and $8 each for Pakistan.
Following its decision, Nike met with numerous governmental, nongovernmental and industry stakeholders in Pakistan to secure support for the affected workers and to jointly explore new approaches to soccer-ball manufacturing that could lead to improved working conditions and increased protection of workers' rights. Currently, Nike is working with the International Labour Organization, the World Federation of Sporting Goods Industry and Pakistani government officials.
As part of that process, Nike requested proposals from 20 vendors for manufacturing hand-stitched soccer balls in Pakistan; 13 Sialkot-based manufacturers responded to the request.
The group was narrowed to just four companies, which Nike and a handful of Pakistani organizations reviewed in-depth, before Nike awarded the contract to Silver Star. "It was a pretty exhaustive process that took quite a while," Marks said. "Silver Star emerged as the factory that seemed fully committed to complying with our labor standards."
The agreement requires that Silver Star workers have full rights to freedom of association and collective bargaining, as mandated by International Labour Organization conventions. The factory must also comply with Nike's labor compliance standards and with all requirements of the 1997 Atlanta Agreement and any identified successor agreements that establish labor and compliance standards in Pakistan's soccer-ball industry.
In February 1997, the Sialkot Chamber of Commerce and Industry signed an agreement in Atlanta with the International Labour Organization, the International Program on the Elimination of Child Labor and the United Nations Children's Fund to eliminate child labor in Sialkot's soccer ball industry. The Punjab government outlawed child labor and business leaders set up a social safety net for ex-child laborers, putting more than 10,000 of them through a program of education and technical training.
As part of the pledge, the soccer ball makers said they would promote and sponsor children and youth activities linking good health, sport and environment.