Nike CSR Corporate social responsibility can be defined as the “economic, legal, ethical, and discretionary expectations that society has of organisations at a given point in time” (Carroll and Buchholtz 2003, p. 36). The concept of corporate social responsibility means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. A traditional view of the corporation suggests that its primary, if not sole, responsibility is to its owners, or stockholders.
However, CSR requires organisations to adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, customers, the local community, local, state, and the government, environmental groups, and other special interest groups. Collectively, the various groups affected by the actions of an organisation are called “stakeholders. ” Nike started with a handshake between two visionary Oregonians – Bowerman and his University of Oregon runner Phil Knight.
Themselves and the people they hired evolved and grew the company that became Nike from a US based footwear distributor to a global marketer of athletic footwear, apparel and equipment that is unrivalled in the world. Along the way, Nike has established a strong Brand Portfolio with several subsidiaries including Cole Haan, Converse Inc. , Hurley International LLC, Nike Golf, and Umbro Ltd. Their world headquarters is located near Beaverton, Oregon, a suburb of Portland. So while the Pacific Northwest is the birthplace to Nike, today they operate in more than 160 countries around the globe.
Through their suppliers, shippers, retailers and other service providers, they directly or indirectly employ nearly one million people. That includes more than 30,000 Nike employees across six continents, each of whom makes their own contribution to fulfil the mission statement, “to bring inspiration and innovation to every athlete in the world. ” I have chosen Nike, from the sporting goods industry, as my company to evaluate their level of corporate social responsibility, strategies and policies.
My reason for this is that Nike has shown a huge change in the business ethics and corporate social responsibility over the last decade or so. From the beginning, Nike has used celebrity athletes to promote its products, and its advertising budget in 2002 ran over $900 million. Despite vast sales, Nike owns very few manufacturing facilities and describes itself as a marketing operation. Most of the shoes and apparel are contracted out to companies in the United States and abroad. The three main operations in America act as distribution centers.
Nike came in for criticism when reports surfaced about sweatshop working conditions in factories overseas. Employees were said to be overworked, underpaid, abused and denied the right to organise. Nike’s initial response to these allegations was to say that it was not responsible for the actions of its subcontractors. Since the boycott movement in the 1990’s, Nike has taken positive steps to raise the standards of employment used by its sub contractors. An example of how they did this was by banning petroleum based glues and inviting independent monitors to visit the facilities.
In 2007 Nike pledged to cut back on the level of overtime undertaken by workers at its factories, in an attempt to improve working conditions of up to 880,000 workers. This is a serious area of concern for Nike, which operates 130 factories in China, where many workers have been expected to work unpaid. They have also pledged new targets for reducing waste and carbon emissions. This is just a couple of measures Nike have practised and I will discuss a variety more throughout my essay.
Their goal is to carry on his legacy of innovative thinking, whether to develop products that help athletes of every level of ability reach their potential, or to create business opportunities that set Nike apart from the competition and provide value for our shareholders. I am now going to list and elaborate on all of Nikes’ CSR policies and schemes. The Nike Considered Index Breakdown: This index tool is provided for evaluating the carbon footprint of a product prior to commercialisation. This system examines solvent use, waste, materials and innovation for ootwear. Apparel products are evaluated on waste, materials, garment treatments and innovation. Products are assigned a “Considered” score using the Index framework based on Nike’s known footprint in these areas. Only products whose score significantly exceeds the corporate average can be designated as “Considered. ” The Index metrics are based on over a decade of collecting solid waste and solvent use data in footwear, and the examination of waste footprints in hundreds of apparel and footwear products across all sport categories.
They are also based on the evaluation of every commercial material used to manufacture Nike products using a life cycle approach. Reuse the shoe program: Since 1993, Nike have recycled over twenty million sports shoes and contributed to more than 250 sports surfaces for children to play on. They promote this program by using the slogan, “Worn out. Play on. ” Nike Environmentally preferred materials: Nike has developed a Material Analysis Tool (MAT) based on lifecycle thinking to quantitatively evaluate and rank our material choices, giving definition to Nike EPM’s.
Each material is assigned a numeric value that feeds into a sustainability score for our products. The MAT framework is a set of 19 environmental impact questions, in four categories that are weighted as follows: Issue| Weighting| Impact Metric| Chemistry| 40%| Risk (hazard and exposure potential) A number of toxicology endpoints are considered including:Carcinogens Acute Hazards Chronic Hazards Endocrine Disruptors / Teratogens | Energy Intensity / CO2| 25%| MJ / Kg of Material Energy Source Kg CO2 / kg of Material | Physical Waste| 20%| Recycled Inputs
Manufacturing Waste Disposition Consumer End of Life Disposition | Water Intensity| 15%| >, =, < 100 Liters / kg of Material | Sustainable materials: Expanding the use of environmentally preferred materials as new technologies become commercially viable will allow Nike to integrate these materials into the products. These materials have added environmental benefits that do not compromise the quality and performance of Nike products. This allows for leverage on purchase volumes with suppliers, making environmentally preferred material options more cost effective.
Nike focus on engaging men and boys in achieving gender equality: The Nike Foundation joined more than 450 cross-sector leaders in this unique symposium to explore research and best practices by programs that challenge rigid gender norms and engage men and boys in reducing violence against women and girls, promoting sexual and reproductive health, HIV/AIDS prevention and treatment, and fatherhood and care giving. One of the most fundamental impacts Nike can have is to improve working conditions in their global supply chain and the industry as a whole.
The three main product lines of Nike’s brand – footwear, apparel and equipment – are made by 565 contract factories that employ more than 800,000 workers in 46 countries around the world. Being the market leader, it is critical for them to stay competitive in terms of employee wage and manufacturing costs, however in terms of brand image and rapport it is crucial for Nike to act ethically. This is no doubt a difficult area for Nike and causes a lot of concern in the present day.
Nike is very transparent when it comes to corporate responsibility as they show their reports on their website. A quote from their website states, “Reporting provides information about Nike’s corporate responsibility performance and strategy. Corporate responsibility must evolve from being seen as an unwanted cost to being recognized as an intrinsic part of a healthy business model, an investment that creates competitive advantage and helps a company achieve profitable, sustainable growth. Nike’s long-term corporate responsibility goals are broadly embedded into our business. ”
As I researched through the various practical models such as the AA1000 and GRI reporting I found elements that I can relate to Nike. Firstly, as I researched www. accountability. org, I found a business aid AA1000 Stakeholder Engagement Standard. It discusses how securing the right to be heard for people who are affected by or can affect an organisation’s activities and obliging the organisation to respond to these concerns, makes organisations perform better. It increases their knowledge, their legitimacy, and the values that are affirmed or created by the dialogue enhance their reputation nd moral stature. Nike as a company and market leader in my opinion does this very well. Their website shows a substantial amount of information that stakeholders would want to know. On the site you can access all their CR reports online which show that they are satisfied with their business ethics and this can only benefit their brand image and strengthens their position a market leader. It also shows that Nike sees reporting as an important means of sharing information about its commitments, successes and targets regarding corporate responsibility.
The website states,” We prepare information, taking account of our business impacts and the desires of stakeholders, to provide an open, clear picture about our aims and progress in incorporating responsible practice into our operations. ” In addition to this, Nike also has an article on innovation and sustainability which shows, along with the other material mentioned that Nike does hold CSR in high regards, especially the informing of its’ shareholders. Crowthers Stages of Maturity for CSR
Stage of Development| Dominant feature| Typical activity| Examples| 1| Window Dressing| Redesigning corporate reporting| Changed wording and sections to reflect CSR language| 2| Cost containment| Re-engineering business processes| Energy efficiency programmes| 3| Stakeholder engagement| Balanced scorecard development| Customer/employee satisfaction surveys| 4| Measurement and reporting| Sophisticated tailored measures| CSR reports| 5| Sustainability| Defining sustainability:Re-engineering processes| Sustainability reporting| 6| Transparency| Concern for the supply chain: requiring CSR from suppliers| Human rights enforcement e. . child labour| 7| Accountability| Reconfiguration of the value chain| Relocating high value added activity in developing countries| Crowthers stage of maturity for CSR is another model that I feel I can analysis Nike upon. This model shows how companies develop their corporate responsibility strategies as well as being able to rate themselves in their development process form one to seven. In terms of stage one; Nike has certainly achieved this through dedicating their CSR strategies on their websites for all stakeholders to see. For stage two Nike have began to use ecycled materials such as recycled polyester in many of products in the All Conditions Gear outdoor line as well as various active apparel items. Expanding the use of environmentally preferred materials as new technologies become commercially viable will allow integration of these materials into their products. These materials have added environmental benefits that do not compromise the aesthetic, quality and performance that consumers expect from Nike products. Stage 3 of Crowthers model deals with stakeholder engagement. Nike has expressed interest in the importance of suitable factories working conditions for employees overseas.
In addition Nike is sharing select contract factory auditing tools. These tools help provide further transparency and insight into the manner in which Nike contract factories are evaluated for compliance with company standards. From this information it shows that Nike has covered stage 3extensively. Stage four has also been covered through Nike having all their CSR reports from 2004 on their website. Sustainability reporting for stage 5 again Nike has on the website www. nikebiz. com. In the United Kingdom, Nike has been a lead member of the United Kingdom’s Sustainable Clothing Action Plan (SCAP).
Through SCAP, they partner with the U. K. government to improve the environmental and social impacts of the clothing supply chain. SCAP was launched in February 2009 at Estethica, London Fashion Week’s sustainable fashion show. Main areas of focus for the action plan are the reuse, recycling, and development and use of sustainable fibres. Sustainability is crucial to Nikes future success and in their sustainability report it says,” We anticipate a future that seeks out and rewards new models of consumption and growth, separated from material consumption.
It’s a transition from build, buy and bury – the common business model today – to a future of sustainable business models for consumption and growth. ” However, their main competitor in the sporting goods industry, Adidas, made it for the sixth time in a row into the ranking of the Global 100 Most Sustainable Corporations in the World. The Global 100 is a selected group of companies taken from a pool of some 1,800 international companies which provides investors and other stakeholders with a unique evaluation tool.
Launched in 2005, the annual Global 100 is announced each year at the World Economic Forum in Davos, Switzerland. Nike does not display this achievment, so im presuming that they have not made into the rankings, suggesting that Adidas are more sustainable. Due to the fact that all Nike’s CSR information is on their website, it’s clear that they are very transparent. Nike states in one of their policies that they will not to use leather in its products produced from cattle raised in the Amazon Biome as defined by IBGE (Brazil’s National Institute of Geography and Statistics. Another area where Nike shows their transparency is by allowing monitoring of all its factories. The European Union’s European Commission has launched a voluntary online register for interest representatives (groups and bodies who seek to influence policy formulation and decision-making processes of EU institutions). Nike has been a member of this from 2008 and has been strongly committed to transparency in government advocacy for many years.
Although Nike, in my opinion have been successful so far in Crowthers model but when it comes to accountability it is a different matter. To a certain extent Nike are accountable as they provide a level of exposure on their website and are stakeholder friendly, but accountability does not stop there. Nike have 565 contract factories in 46 countries mainly in southeast Asia to reap the benefits of lower wage rates and excess to raw material suppliers. They are not, at the moment, looking to relocate to assist in developing companies.
Besides all these initiatives in the area of fair labour practices that Nike introduced, the public awareness on the issue of social accountability that was resulted due to the earlier campaigns, which started in early 1990s, could not put to a halt. So I would rate Nike to be at the stage 6/7 of Crowthers model because they have shown transparency as I have discussed but I feel there is always more from a business of this size to give. For example instead of claiming that there abroad employees are getting legal, minimum wage they should be stating exactly how much they are getting.
Therefore showing that they have nothing to hide and are accountable for there actions. According to Carroll, “corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. To be socially responsible means that profitability and obedience to the law are foremost conditions when discussing the firm’s ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent” Caroll’s model, the CSR pyramid deals with the four main aspect of CSR; Philanthropic, Ethical,
Legal and Economic responsibilities. I am now going to discuss how Nike’s social responsibility can be related to these key areas. The Pyramid of Corporate Social Responsibility (Carroll,1991. ) In respect to the philanthropic section of Carroll’s pyramid I can discuss a number of ways in which Nike have been a respectable corporate citizen. In 2009, Nike teamed up with RED to come together and fight HIV/AIDS in Africa by delivering funds to support programs that offer education and medication on the ground, and have used the power of sport to engage youth around the world, in the fight against AIDS in Africa.
Another way in which Nike have supported the community is by donating money to the Bowerman Track Project. Bowerman (co founder) stepped down from the Nike board of directors in June 1999 after holding the post since 1968, over the past 10 years Nike have contributed two million dollars in grants to support the building and ongoing maintenance and refurbishment of running tracks in the United States. In terms of ethics, Nike have shared a variety of auditing tools to provide further transparency and insight into the manner in which Nike contract factories are evaluated for compliance with company standards.
Examples of these tools are SHAPE (Safety, Health, Attitude of Management, People and Environment) and ESH (Environment, Safety and Health). Nike, like every other company holds their legal responsibilities in the highest regard. Nike is responsible in this respect as they pay employees in all factories the legal wage as well as not employing anybody under the age of eighteen. In addition to this Nike operate a global free phone line for employees to report in confidence any suspected violations of the law or our code of ethics.
Any reported concerns around accounting, auditing or internal control are communicated to the Audit Committee of the Board. The fact that Nike are market leaders is because of their ability to make profits. Nike’s current assets have risen from $9. 6 dollars in August 2009 to $10. 5 billion in August 2010. In relation to Nike’s revenues, in August 2009 it was $4. 8 billion and in August 2010 it has risen to $5. 17 billion. Gross profit has also risen from $2. 3 billion in August 2009 to $2. 5 billion the following year. From these figure it is clear that Nike are still a profitable company. Nike’s main competitor in their market is Adidas.
In terms of CSR it was crucial that Nike treated employees in a fair manner and since their CSR improvements in 2000, Nike have saved themselves a large amount of valued customers. If Nike had not increased and established a level of corporate responsibility, the negative publicity, reports etc could have damaged Nike’s reputation and customers may have shifted their buying preferences to Adidas. If Nike had not done what they did there is a strong possibility that Adidas could be today’s market leader. “Competitive advantage is a special edge that allows an organisation to deal market and environmental forces better than its competitors. (Schermerhorn) With all companies, there is always a need for bench marking against competitors. An area of Adidas’ weakness could the very recent merge between Reebok and Adidas, especially in terms of CSR. The problem with the two companies merging is that they could be culturally different and this could lead to the ignoring of cultural differences instead of implementing them, which could lead to failure in the combination. This is due to top level managers not having intercultural knowledge from lack of training in this area.
The fact that the newly combined Adidas and Reebok will be dealing with management and infrastructure changes as well as learning a new corporate responsibility culture, Nike will be still going at full speed. Therefore developing their CSR policies, new innovative products and developments. Another area that I feel Nike is stronger on compared to their main competitor Adidas is the idea of stakeholder engagement. Nike in the 1990’s were renowned for their CSR opaqueness but now are reporting on CSR, auditing tools, sustainability measure and community projects demonstrating transparency and recognising a wider stakeholder audience.
Adidas on the other hand their reports are updated periodically and seem to be always referring back to their KPI’s. This narrows their stakeholder audience and weakens their CSR reports as a useful marketing tool. Updating their CSR reports rather than leaving all the reports online does not allow people to see how far the have developed in their CSR strategies or sustainability statements. To finalise my findings on Nike, they were poor on CSR in the 1990’s. It could be they felt that it restricts the free market goal of profit aximisation, dilutes the primary aim of the business or limits the ability to compete in the global market place. However CSR demonstrates a commitment to society’s values and contribute to society’s social, environmental, and economic goals through action. It also insulates the public from the negative impacts of company operations, products and services. Although the main aim of Nike is to make profits, CSR essentially is “doing the right thing” and Nike demonstrating this will enable them to make more money in the future.
From my research I have found that Nike is, in my opinion, still leading in this industry in all aspects whether it’s market share, policies on corporate responsibilities or giving back to the community and I hope I have expressed enough throughout my assignment.