It has been reported that as many as 1.8 million Uyghur people, a Muslim ethnic minority group in China, have been arbitrarily detained and forced to endure severe human rights abuses, including forced labor, torture, and political indoctrination in the Xinjiang Uyghur Autonomous Region (Uyghur Region) since 2017 by the Government of the People’s Republic of China. Reports indicate they have been subjected to forced labor at virtually all workplaces, including in the cotton supply chain. The Uyghur Region produces approximately 85% of China’s cotton, and Nike’s manufacturing data suggests that about 30% of its materials were from Chinese factories.

Traditional supply chain risk mitigation measures, such as worker interviews and third-party audits, are unreliable or not effective in this unique, high-risk, conflict affected context. International labor auditors that conduct site visits and audits have been threatened, had their offices raided and closed, or been forced to leave the region.

Companies may face legal, regulatory, and business continuity risk associated with China and the Uyghur Region. Global leaders understand the urgency of this issue and are acting on it. For example, the Uyghur Forced Labor Prevention Act (UFLPA), prohibiting importation to the United States of goods produced in the Uyghur Region, will enter into force in June 2022. The UFLPA covers goods produced with forced labor in China, not limited to the Uyghur Region, showing that this risk extends beyond the region. The U.S. State Department and other agencies issued the Xinjiang Supply Chain Business Advisory (“Business Advisory”) due to the severity and extent of forced labor and other human rights abuses, noting the risks to businesses that do not exit the region.

Nike’s long leadership in supply chain transparency is evidenced by its manufacturing map, robust policies, and industry collaboration. The company has acknowledged concerns regarding reports of forced labor in the Uyghur Region, stated it does not directly source from there and highlighted cotton traceability at the raw materials level as an area of focus. However, in this unique context, Nike’s efforts are inadequate. Its supply chain transparency covers primarily its “Tier 1” direct suppliers, and forced labor risks extend to raw material sourcing and manufacturing at further tiers. Sourcing and manufacturing cotton from China, not limited solely to the Uyghur Region, exposes Nike to legal and reputational risk. Nike has been named in a criminal complaint filed in the Netherlands in 2021 and various reports relating to the issue. Other companies have not only stopped sourcing from the Uyghur Region, but eliminated cotton from China throughout their supply chain to fulfill supply chain commitments prohibiting forced labor. Nike’s current actions leave shareholders concerned that cotton produced with forced labor may be in Nike’s products.

https://www.shu.ac.uk/helena-kennedy-centre-international-justice/research-and-projects/all-projects/laundered-cotton
https://www.rfa.org/english/news/uyghur/cotton-12152020155916.html; https://manufacturingmap.nikeinc.com/
https://www.cecc.gov/sites/chinacommission.house.gov/files/documents/CECC%20Staff%20Report%20March%202020%20-%20Global%20Supply%20Chains%2C%20Forced%20Labor%2C%20and%20the%20Xinjiang%20Uyghur%20Autonomous%20Region.pdf
https://www.business-humanrights.org/fr/derni%C3%A8res-actualit%C3%A9s/china-closes-us-labour-auditor-as-tensions-mount-over-forced-labour-allegations/
https://www.state.gov/wp-content/uploads/2021/07/Xinjiang-Business-Advisory-13July2021-1.pdf
https://purpose.nike.com/statement-on-xinjiang
https://www.scmp.com/news/china/article/3158093/nike-patagonia-ca-named-dutch-criminal-filing-chinese-forced-labour; https://acrobat.adobe.com/link/track?uri=urn:aaid:scds:US:e38ce54f-684d-4d55-8e62-ddc7ea20d9c9#pageNum=18; https://www.aspi.org.au/report/uyghurs-sale
https://enduyghurforcedlabour.org/fashion/; https://www.llbean.com/dept_resources/shared/L.L.Bean_Statement_on_Chinese_Cotton.pdf?nav=C3tbX-518056&qs=3080290_tv2R4u9rImY-IDPF4dKPdDwGVPlS_q_etw&cvosrc=Affiliate.linkshare.tv2R4u9rImY