realdealrunningshoes-finalfinal300609

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• Leading brands have begun to recognise that they have aresponsibility for the conditions throughout the supply

chain of their products, although there is still much roomfor improvement.

• Adidas, Reebok and, to a lesser extent, Puma have madeprogress in implementing their corporate policieseffectively on the ground. New Balance and Mizuno arestill lagging in key areas and achieved average scores.

• The workers may be paid the legal minimum wage, butthis does not mean they earn a living wage - a breakdown

of the retail price of a shoe shows 0.4% to contribute toworkers’ wages.

• 300,000 workers of Yue Yuen, a subsidiary of the ChineseTaipei-based Pou Chen Group, produce one in every sixsport shoes sold globally or 190 million pairs a year.

Running costs

Background

Most international sportswear brands outsource the

manufacture of their running shoes to countries where wagesare low, working conditions can be poor and labour rights arenot respected. The majority of leading brands now accept thatthey must take responsibility for their full supply chain, ensurethat factories in producer countries adhere to minimumstandards and have developed policies in this regard.

How do some of the leading international running shoe brands score when itcomes to people and the planet?

Visit www.consumersinternational.org/TheRealDeal

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Some of the factories visited as part of this research areoperated by Yue Yuen, a subsidiary of the Chinese Taipei-based Pou Chen Group. Yue Yeun has grown to becomethe world’s largest footwear manufacturer and its 300,000workers produce one in every six sport shoes sold globallyor 190 million pairs a year.

Despite the fact that Yue Yen generates annual sales in the$billions, research conducted by the Play Fair 2008campaign found that workers were paid very low wagesand their rights were routinely violated. Their complaintsincluded:

• forced and excessive overtime

• harsh disciplinary practices and verbal abuse

• sexual harassment

• poor health and safety standards, and

• trade union repression.1

Southeast China is currently the nexus of the globalrunning shoe manufacturing industry, although manyleading brands are increasingly moving production to otherAsian countries such as Vietnam and Indonesia, as well asEastern Europe, to take advantage of lower labour costsand more lax environmental regulations.

A recent joint study by 11 consumer organisations lookedat the factories involved in both supplying components forand assembling some of the most popular global runningshoes. They investigated the conditions endured byworkers in these factories, as well as the environmentalimpact of both the shoes and their production.

Ten major global footwear companies were invited totake part in the research. Adidas, Reebok, Puma, NewBalance and Mizuno agreed, granting access to variousfactories in China.

Nike, Asics, Brooks, Saucony and

Karhu refused to be involved

in this study.

Image by Tim Patterson under Creative Commons Licence



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Issues

PeopleFootwear products are highly labour-intensive and there aremany factors to consider. What follows is a brief summary of just some of the issues relating to the labour rights of factoryworkers.

Living wage

Although workers may well be paid the legal minimumwage, this does not necessarily mean they earn a livingwage. A living wage should enable workers and their

dependents to meet their basic needs, including food,shelter, transport, clothes, healthcare, education, as well asallowing for modest discretionary spending.

The graph shows a breakdown of the retail price of a shoe -0.4% of which is workers’ wages. This demonstrates, as isthe case with other garment production, that raising wagesfor workers will have a negligible effect on the price to theconsumer (assuming all other factors remain the same).

Adidas and Puma both refuse to commit to a living wage fortheir workers.3

OvertimeWorkers can also be forced to work unreasonable overtime ifthe factory is under pressure to meet large orders from bigbrands within short timescales during peak seasons. Missingtargets can result in brands ending their relationships withsuppliers, which leaves many factory managers reluctant todecline orders, no matter how unreasonable the terms.

Health and safety

Health and safety at the work place is another importantissue. For example, glues and other chemicals used atdifferent stages in the production process can emit VolatileOrganic Compounds (VOCs). At high levels of concentration

VOCs can cause respiratory problems, headaches, dizzinessand visual disorders.4 If released into the environment theycan cause air pollution, contaminate the soil and contributeto global warming.

Unions

In order to be able to effectively negotiate improvements intheir working conditions, it is vital that workers have theright to freedom of association and to bargain collectively.Workers in China can face severe obstacles in this regard, asfactory management often refuse to recognise or negotiatewith unions, and union organisers can face harassment anddismissal. Chinese Law is also very weak in this area and,

despite the implementation of new legislation in 2008, tradeunionism is still highly government-controlled and workersengaged in organising activities are routinely imprisoned.5

Other problems

There are many other problems faced by workers involved inthe manufacturing of running shoes both in China and othercountries in the region. These include:

• physical and verbal abuse

• sexual harassment

• discrimination

• forced labour, and• oppressive wage deductions.

Governments can be reluctant to strengthen workerprotection or even to enforce existing legislation for fear ofdriving business elsewhere.

Graph on the price structure of a €100 shoe2

The typical worker in a Chinese assembly

factory is female, mid-twenties and has been

a factory employee for two or three years.

Migrant workers can make up to 99% of the

total workforce.

Raw materials€8.00

Workers’ wages

€0.40

Otherproduction

costs€1.60

Profit marginfactory

€2.00

Transportand taxes

€5.00 Product research &development (R&D)

€11.00

Advertising andsponsoring€8.50

Profit marginbrand€13.50

Retail margin€32.60

VAT(21% on all)€17.40

Image by Tim Patterson under Creative Commons Licence



PlanetA running shoe can easily be made up of as many as 50components, which are put together by hand in assemblyfactories. Assembly is the final stage in the productionprocess, but the materials used will often have beenproduced at various different sites. This means that much ofthe environmental impact associated with processing thesematerials is felt right down the supply chain.

For example, production waste in the form of metallic fabriccuttings and tissue fabric cuttings can contaminate thesurrounding environment if an effective environmentalmanagement system (EMS) is not in place.

A key component of any running shoe is the sole, whichitself consists of three distinct layers - the insole, midsole andoutsole. The insole is normally made of man-made ethylenevinyl acetate (EVA) foam. EVA foam is non-biodegradable.Designing a more environmentally friendly sole is a bigchallenge for the industry.

As Greenpeace highlighted in their ‘Slaughtering theAmazon’ report, the shoe industry’s appetite for leather is asignificant contributor to tropical deforestation.6 TheAmazon rainforest is being cleared at an alarming rate, oftenillegally, to make way for cattle ranchers in Brazil as theyscramble to satisfy the global demand for leather. Tree felling

and burning releases vast amounts of CO2 into the

atmosphere and contributes to climate change.

Corporate Social ResponsibilityManufacturing running shoes is highly labour intensive, and

involves complex supply chains. Social and environmentalcompliance programmes and auditing must be extendedbeyond assembly factories, to the factories that in turn

supply them.

Brands should ensure that their supply chain policies andcodes of conduct are well communicated to factorymanagers and workers and, most importantly, implementedin all the factories involved in the supplying of materials andassembly running shoes. For this to happen it is crucial thatinternational brands take responsibility for the conditionsthroughout these supply chains.

How the companies fared

PeopleFour of the brands investigated - Reebok, Puma, Adidas,New Balance - have shown some progress towardsimproving social conditions within the factories in theirsupply chain. Examples of good practice include:

• joining independent verification schemes through the FairLabour Association

• implementing complaint mechanisms for workers

• providing training for management and workers, and

• ensuring permanent compliance teams in factories for

regular internal audits.

All four brands are auditing a share of the suppliers ofcomponents to their assembly factories.

While collective bargaining agreements had been reachedbetween workers and management at certain factories,worker representation was found to be poorly organised andnot truly reflective of the composition of the workforce. Thepresence of a labour union was not necessarily an indicator

of mature industrial relations and effective employeerepresentation.

Awareness among workers was another issue - in some casesworkers denied being a member of a union, even thoughtheir pay slips showed that a monthly deduction was made

from their wages precisely for this reason.

No real sweatshop conditions were found in any of thefactories visited as part of this research. However, there is stillsignificant room for improvement in certain areas. Forexample, there is a significant lack of awareness amongworkers of social compliance programmes. These

programmes were often poorly managed. Adapted workconditions for juvenile workers (16 to 18 year olds) were also

notably absent.

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Image by reb under Creative Commons Licence



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Although there were a number of innovative practices forimproving health and safety standards found in some of thefactories visited, there was still much room for improvement

in general terms. For example, in one factory a significantnumber of workers were found to be suffering from hearingloss and abnormally high levels of anaemia. Workers are stilloften regularly exposed to harmful chemicals and dangerousmachinery, and the industry as a whole needs to address thisissue.

There was no evidence that any of the factories were payingworkers below the minimum legal wage. However, in somecases excessive deductions from wages were made, includingfees for water, electricity, meals and even the cleaning of thefactory floor, often over 75% of the minimum base wage.Excessive wage deductions essentially lead to forced labour,

where workers have to work overtime, or miss meals ifovertime is not available.

Other areas in need of improvement include, verbalharassment, discrimination and working hours.

PlanetAdidas and Reebok achieved the best results in these areas.Both brands have implemented environmental management,and health and safety systems, certified to ISO 14001 and

OSHA 18001 standards respectively.

Adidas, Reebok and New Balance have strong requirementsregarding the reduction of VOCs and solvents, use ofrecycled or sustainable materials, use of renewable energyand waste disposal.

Other examples of good practice include qualificationprogrammes and providing environmental training tofactories, environmental reporting at the factory level.Adidas, Reebok and New Balance also use more sustainablematerials, such as recyclable paper and cardboard in theirpackaging.

Companies should fully incorporate the principle of eco-design into their operations and ensure the environmentalimpact of running shoes are minimised throughout the

product life cycle, from inception to manufacture, from enduse to final disposal.7 This will require international brandsdedicating adequate research and development (R&D)resources to this end, and ensuring that appropriaterequirements are implemented throughout supply chains.

Corporate Social Responsibility (CSR)policies

Once again Adidas and Reebok fared well in terms of theirpolicies, commitments and stated principles, though as they

both belong to the same company group this is unsurprising.Puma was also singled out as having adequately translatedits commitment to CSR into company-wide guidelines andhandbooks both for internal use and aimed at suppliers.

Examples of good practice in this area included detailedsupply chain policies that reflect the brand’s stated principlesand codes of conduct based on internationally recognisedstandards (such as those developed by the InternationalLabour Organisation).

Another positive development was the implementation ofenvironmental policies with clear targets and reportingrequirements, as well as stringent ‘restricted substance lists’imposed on the full supply chain. Marks were also awardedfor regular dialogue and cooperation with NGOs on theresponsible manufacturing and marketing of running shoes.

Improvements still need to be made in ensuring that thebrands’ global codes of conduct are implemented in supplierfactories as well as assembly factories.

Turn to page 6 for Table of results.

Image by Meredith Farmer under Creative Commons Licence

Image by Morguefile under Creative Commons Licence



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The research

About the researchThis project was an International Consumer Research andTesting (ICRT) joint test involving the following consumerorganisations:

• Test-Achats (Belgium)

• DECO-Proteste (Portugal)

• Fédération Romande Des Consommateurs (Switzerland)

• Organización de Consumidores y Usuarios (Spain)

• Altroconsumo (Italy),

• Forbrugerrådet (Denmark),

• Sveriges Konsumenter (Sweden)

• Kuluttajavirasto (Finland)

• Stiftung Warentest (Germany)

• Verein Fur Konsumentinformation (Austria), and

• Forbrukerrådet (Norway).

These organisations will also be publishing the results in theirmagazines in mid-2009.

In its entirety this project also looked at other issues at thecorporate level, including:

• voluntary initiatives aimed at company employees withfamilies (such as flexible working, home working)

• consumer information (information available on corporatewebsites, responding to customer queries), and

• transparency (level of engagement with this research,public reporting).

While recognising that there are many important ethicalissues of relevance to this sector, for the purposes of thisfeature Consumers International (CI) has focused on the

components of this research relating to company CSRpolicies and the situation on the ground regarding peopleand the environment at the factory level.

In total the researchers inspected nine factories situated inGuangdong and Fuijan provinces. They visited one assembly(tier 1) factory, and one sole manufacturing (tier 2) site,except in the case of Puma who refused to disclose thelocation of their sole factory. On-site interviews wereconducted with 15 workers on average. Visits wereannounced and took place under close observation by brandrepresentatives.

Information on company policies was obtained viaquestionnaires and/or compiled from publicly availablereports.

Image by Cliph under Creative Commons Licence



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Consumers International (CI) is the only independent global campaigning voice for consumers. With over 220 member organisations in 115countries, we are building a powerful international consumer movement to help protect and empower consumers everywhere.ConsumersInternational is a not-for-profit company limited by guarantee (Company number 4337865) and a registered charity (number 1122155)

Creative Commons Attribution Share-Alike 3.0 License, http://creativecommons.org/licences/by-sa/3.0

Brand Models Location of factory

ADIDAS AdiStar Salvation Guangdong, China

AdiStar RideDuramo Supernova Glide

REEBOK Premier Trinity KFS III Fuijan, China Premier Ultra KFS

PUMA Magnetist Guangdong, China Eutopia

NEW BALANCE 1224 Guangdong, China 1063

MIZUNO Wave Nirvana Fuijan, China

Wave Rider

S o c i a l A s p e c t s

E n v i r o n m e n t a l A s p e c t s

C o r p o r a t e P o l i c i e s

Factory level Brand level

Very good Good Average Weak Very weak

KEY

Table of results

The methodology used in this research followed ICRT’s CSR testing guidelines. Criteria and indicators were carefully selected andcomplex scoring systems employed to assess fulfilment and validation. Final results are presented using a 5-point rating scale.

References1 Play Fair 2008 Campaign, April 2008. Clearing the Hurdles

See http://www.playfair2008.org/docs/Clearing_the_Hurdles.pdf

2 Clean Clothes Campaign, 2004.

3 Oxfam Australia. See http://www.oxfam.org.au/campaigns/labour-rights/the-issue/

4 US Environmental Protection Agency. See http://www.epa.gov/iaq/voc.html#Health%20Effects

5 International Trade Union Confederation. See http://survey09.ituc-csi.org/survey.php?IDContinent=3&IDCountry=CHN&Lang=EN

6 Greenpeace UK, June 2009. Slaughtering the Amazon? See http://www.greenpeace.org.uk/blog/forests/slaughtering-amazon-20090529

7 Transatlantic Consumer Dialogue, June 2009. Resolution on Eco-design and Energy Efficiency of Products.See http://www.tacd.org/index2.php?option=com_docman&task=doc_view&gid=216&Itemid=40

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