NIKE Corporate social responsibility - Essay Example

? CSR in Review Exploring corporate social responsibility challenges for companies in apparel industry in its supply chains around the world: the case of Nike Corporations By University of _________ Submitted to (Feb 2011) Here are the instructions:  1. 10 pages apa format  2. Please see attchement and reference the 8 sources you can use  3. Please write the paper around question 1 that begins," What are the challenges..etc"  4. Also use the book as a reference(ISBN 978-0-13-614326-0 or 0-13-614326-1) look on amazon  5. Just a research paper and nothing fancy. Please cite everything in paper though.  6. You have done great work in the past so this should be cake for you.  7. Feel free to express your own opinions in the document  Thanks   Also when reading short article, if you want to paraphrase is fine and include it in report. Just a reminder to always cite and reference everything just to be sure no matter what :) The instructor will be using Turnitin and Safeassign software to check for plagerism. Your work is original always but i just thought id throw it in there in case you have access to those systems. Just FYI, thanks!  What are the challenges regarding corporate social responsibility that companies in the apparel industry face in its supply chains around the world? Exploring corporate social responsibility challenges for companies in apparel industry in its supply chains around the world Introduction Corporate social responsibility (CSR) is widely discussed in boardrooms across the world. Of late there have been considerable changes in the corporate value system. This is largely due to both external and internal pressures from various actors and factors in the stakeholders such as government and regulators, consumers and customers, non-governmental organizations (NGO) and in some instances from within the organizations itself (Bhandarkar & Alvarez-Rivero, From supply chains to value chains: A spotlight on CSR, 2007). Today in the era of globalization, increasing number of companies are operating are going global. These Multinational corporations (MNCs) operate in multicultural, multi-ethnic and geographically distributed systems across the globe running supply chains that span from suppliers’ suppliers to distributors’ distributors. Quite a few of these actors and factors are already located in the developing world and more are being relocated. Many of these MNCs’ foreign affiliates and arm’s length suppliers thus are governed by different level of CSR procedures (Bhandarkar & Alvarez-Rivero, From supply chains to value chains: A spotlight on CSR, 2007). Context Today, consumers and employees along with pressure from a varied group of stakeholders are holding businesses to perform more on higher and broader social environmental standards than in the past. Besides, in today’s information spread and media stage, companies are not just adjudged by the behaviors of those associated, including sourcing facilities, licenses, agents, partners, and host governments” (Smith, Gare; Feldman, Dan; The World Bank Group, 2003, p. 1). In addition, business entities, in particular MNCs are not only “accountable under local law, but also to various norms and standards, promulgated by global agencies such as International Labor Organization (ILO), the Universal Declaration of Human Rights (UDHR), and corporate best practices” (Smith, Gare; Feldman, Dan; The World Bank Group, 2003, p. 1). Failure to comply these norms and standards not only can damage reputation of firms’ corporate practices, “but also may face protests, boycotts, attacks on corporate property, divestment campaigns, hostile shareholders resolutions and the enactment of sanction laws” (Smith, Gare; Feldman, Dan; The World Bank Group, 2003, p. 1). The apparel industry has already faced some of this music in the 1990’s with “many apparel and footwear firms discovered when they first confronted serious legal and reputational challenges in the 1990s related to allegations of labor abuses in foreign sourcing facilities” (Smith, Gare; Feldman, Dan; The World Bank Group, 2003, p. 1). On the other hand, there is little doubt that “success of brands is tied to whether the businesses are being conducted in a manner acceptable to those affected by it (Smith, Gare; Feldman, Dan; The World Bank Group, 2003). Corporate leaders now have recognized that to protect their brands and to respond to the increasing demand of social and environmental concerns, they have to adopt programs oriented towards social responsibility and sustainability across the value chain and across the globe. But these programs are encountered with challenges and high stakes from multiple fronts. As the Lifeworth Review of 2005 quotes, In 2005 Nike audited hundreds of factories in 2003 and 2004 and found cases of abusive treatment in more than a quarter of its South Asian plants. For instance, between 25% and 50% of the factories in the region restrict access to toilets and drinking water during the workday. The same percentage denies workers at least one day off in seven (The Lifeworth Review of 2005, 2005). .This is just the tip of the iceberg; pertains to only one firm, Nike and in one country, Vietnam. Many more firms have been reporting about the challenges they face in implementing CSR standards, necessitating a comprehensive study on the challenges faced by the firms. This essay discusses the question, “What are the challenges regarding corporate social responsibility that companies in the apparel industry face in its supply chains around the world?” The author believes that this essay will be a step in the direction and will contribute towards enhancing existing knowledge in the subject. Arrangement of Sections The essay is divided into five sections. After this section, in the second section, the tone of the discussion is set by including a brief examination on the definitions and concepts associated with corporate social responsibility. It also discusses the advantages and disadvantage of CSR. Subsequently, in the next section, the codes of conduct of CSR in the apparel industry are discussed. In the third section, barriers to implementation of CSR codes of conduct encountered and the challenges faced by the industries particularly in the apparel industry are discussed. Finally, based on these deliberations, conclusions are drawn and recommendations are made. Definition, Purposes and Benefits CSR defined The World Bank defines Corporate Social Responsibility (CSR) as “the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve quality of life, in ways that are both good for business and good for development” (Petkoski, Djordjija; Twose, Nigel; The World Bank Group, 2003, p. 1). The European Commission's definition of CSR is also consistent with that of the World Bank’, which states, "CSR as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission, 2011). Moral and Economic Purposes The purposes for pursuing CSR can be attributed to two factors (1) moral and economic purposes. Michael Porter lists seven moral purposes why business should pursue CSR. Porter (2008) argues that using these principles, businesses can have greater impact on social good than any other institution or philanthropic organization. The moral purposes include: 1. The most important thing a corporation can do for society is to contribute to a prosperous economy 2. Only business can create wealth; other institutions in society are principally involved in redistributing wealth or investing it to meet human needs 3. Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all. Business has no need to be defensive about its role in society 4. Business has the tools, capabilities, and resources to make a far greater positive impact on social issues than most other institutions 5. Business is more transparent and more accountable than most foundations and NGOs 6. Each company can and should identify the particular set of societal problems that it is best equipped to help resolve, and from which it can gain the greatest competitive benefit 7. Addressing social issues through shared value strategies will lead to self-sustaining solutions (Porter, 2008). Economic purposes The economic purposes of pursuing CSR may range from hard core financial benefits to soft benefits such as positive public image, retaining staff, enhancing employee morale, higher productivity, and reduction in costs and increase in profitability, positive engagement with government (Porter, 2008). Earlier Bhandarkar and Alvarez-Rivero (2007) have stated that “CSR has relevance to many facets of a corporation’s operations” (Bhandarkar & Alvarez-Rivero, 2007, p. 387). The European Commission Expert Group Resources on CSR, SMEs and Regional Competitiveness (2006) stated that CSR could be a considerable investment especially for SMEs in developing countries, yet the investment is worth as it can bring in long term competitiveness (Bhandarkar & Alvarez-Rivero, 2007). Citing several benefits of CSR on business the authors argued that CSR “strong CSR policies can help to recruit the right people for the job, keep attrition rates low by promoting a “feel good” quotient, improve corporate image, prepare for future regulation, empower “soft” laws (Vogel, 2005, p.162), appease green customers, and convince institutional investors that the corporation is following sustainable practices that positively impact the bottom line” (Bhandarkar & Alvarez-Rivero, 2007). However, the fact that firms throughout the world continue to adopt CSR programs is in itself a testimony of the benefits it brings to businesses. Codes of Conduct in CSR and Compliance The World Bank Group (2003) which advices developing country governments on policy roles and instruments in their report on Corporate Social Responsibility Practice entitled “Company Codes of Conduct and International Standards: An Analytical Comparison; Par I of II (Apparel, Footwear and Light Manufacturing, Agribusiness and Tourism) analyzed all the codes of conduct and summarized in two matrices devoted to, (1) human rights and labor rights issues and (2) environmental standards (Smith, Gare; Feldman, Dan; The World Bank Group, 2003). The codes in human rights and labor rights included such issues as (1) forced labor, (2) child labor, (3) wages and benefits, (4) hours of work, (5) discrimination, (6) harassment and abuse, (7) freedom of association and collective bargaining, and (8) health and safety issues. While the environmental codes included such aspects as (1) materials, (2) energy,(3) water, (4) emissions, (5) pollution control and hazardous substances, (6) waste management and (7) packaging and transport. According to the World Bank estimates, there may be 1000 codes in existence developed by individual multinational firms on a voluntary basis, depending upon the business needs of the firms. These codes complement to the national legislation and assist businesses in implementing standards beyond the locally enforced ones. Thus, ensuring effective compliance can have implications on national governance, and also have public good justification that extend beyond the firm or industry level (Smith, Gare; Feldman, Dan; The World Bank Group, 2003). However, as production networks increasingly become globalized, firms are progressively extending the radius of their CSR network to encompass their extended supply chain. UNCTAD in their 2001 cited the dimension of challenge from the fact that there were over 63,000 MNC with over 800,000 subsidiaries multiplied by millions of suppliers and distributors (UNCTAD, 2001; cited by Bhandarkar & Alvarez-Rivero, 2007, p. 388). Bhandarkar & Alvarez-Rivero (2007) add that for firms located in developing countries, the challenges are many and varied; for instance, one of the challenge is to use CSR to competitive advantage, while avoiding the risk that weak CSR practices exclude them from global supply chains. In the subsequent section a few of the challenges faced by the firms and barriers to implementation is discussed. Challenges in CSR Implementation1 Bhandarkar & Alvarez-Rivero (2007) cite several challenges in adopting CSR practices as a tool for sustainable business practices over extended supply chains as (1) generic challenges, (2) barriers for implementation. Generic challenges Numerous CSR codes and standards Bhandarkar & Alvarez-Rivero (2007) argue that chasing CSR goals is like chasing a moving target. One of the foremost challenges faced by supply chains is coping up with the numerous CSR codes and standards exist today, each developed according to the convenience of particular firms, with widely different scope and focus of CSR definitions, making it difficult to establish universal codes of conduct (Bhandarkar & Alvarez-Rivero, 2007). As a result, different stakeholders have different expectation of the outcome. Lack of comprehensive measuring indices Another important generic challenge is the lack of comprehensive global indices for measuring CSR implementation on environmental aspects and human rights and labor rights issues within and between industries. Moreover, for most companies measurement of CSR progress is based on the year on year assessment of progress in meeting intra –firm CSR targets, which are unique to each firm. When seen in the context of an extended supply chain, these isolated practices may invariably lead to duplication of efforts and cost escalation (Bhandarkar & Alvarez-Rivero, 2007). Operationalizing generic codes Of late, there are some efforts underway to address the issue of generating industry-wide CSR initiatives such as Global Compact. However, operationalizing these generic CSR codes to develop firm specific codes is by itself a challenge; the more the generic nature of the codes, the greater is the degree of difficulties faced (Bhandarkar & Alvarez-Rivero, 2007). Bhandarkar & Alvarez-Rivero (2007) state that efforts to achieve greater standardization is gaining ground as five EU countries have already issued national guidelines for quality assurance of sustainability or CSR reports to which the accountancy profession has already urged for an international standard. However, the consistency and rigor of such reports and standardization efforts need to be matched to the increased to match the requirement. Barriers to implementation Bhandarkar & Alvarez-Rivero (2007) have listed a few key firm-specific challenges such as (1) lack of compliance due to insufficient understanding of business benefits; (2) second-hand corporate commitments; (3) inefficiencies and confusion due to conflicting buyers requirements; (4) free-riders and fist mover disadvantages; (5) mixed messages to suppliers; (6) weak evidence of CSR impact on consumer behavior; (7) inadequate CSR reporting; (8) tension between developing and developed countries perception about CSR; and (9) government capacity building (Bhandarkar & Alvarez-Rivero, 2007, pp. 403-405). Challenges faced by the apparel industry Linfei and Qingliang (2009) state that the apparel industry is deeply entrenched in the global production network (GPN), which often faces dual pressures both from social and economic front (Linfei & Qingliang, 2009). Hence, most challenges and barriers discussed in the previous section are also faced by the apparel industry. Some of the challenges faced by firms in the apparel industry are discussed in the succeeding paragraphs. Lack of finance One of the chief challenges for implementation of CSR codes effectively is due to lack of finance. In the apparel industry, many suppliers operate on shoestring budget with wafer-thin margins surviving on a hand-to-mouth basis. Their business horizons are short-term and struggling to cope up with competition as low barriers to entry in labor intensive industries lead to overcapacity in the supply chain. Adopting different CSR codes for different clients involve high costs and are wearisome. Inadequate perceived outcome of investment Vogel (2005) argued that even though some partners in an extended supply chain in the apparel industry may appreciate the opportunity for improved market access due to CSR, yet since most of them being sellers of intermediate or generic final goods, they don’t feel much threatened to their reputation due to non-compliance. These players do not see “CSR compliance as a visible attribute associated with their own brand” (Vogel, 2005; cited by Bhandarkar & Alvarez-Rivero, 2007, p.400). Monitoring challenges Monitoring progress of CSR in supply chains in the apparel industry is a formidable challenge especially when the supply chain is stretched across the globe. One of the reasons being that the all the players in the supply chain are not at the same tiers in the process. Each of these players have different capabilities, motivations and incentives to implement the CSR program dictated by an MNC, making the supply chain to be highly complex. As Pande, Raman and Srivatsan (2006) stated it, Management aside, the issue becomes complex due to the pressure from multiple stakeholders requiring the corporation to be more responsible through the lifecycle of the product. The pressure from some quarters is to ensure a sustainable product lifecycle, from environmental and social impacts arising from material extraction and manufacturing, to product use and disposal. (Bhandarkar & Alvarez-Rivero, 2007, p. 401). This presents a challenging task necessitating additional investments in CSR to be made by the MNC. For instance, to monitor suppliers from around the world requires effectively requires considerable financial and human resources commitment. The differential response pressures and competitive reasoning develops fissures in the extended supply chain. As a result, in the long term relations with the small players deteriorate; ultimately breakdown of the chain ((Pande, Raman, and Srivatsan, 2006; cited by (Bhandarkar & Alvarez-Rivero, 2007, p. 401). Bhandarkar & Alvarez-Rivero (2007) cite the challenges faced by Carrefour, the second largest retailer in the world to remove child labor from its supply chain. In 2000, The company had to enlist help of 116 human rights organisations from across the world monitor the progress of its CSR objective – to contribute to the gradual and total elimination of child labor while respecting cultural diversity (Carrefour, www.carrefour.com; CSR Europe, www.csreurope.org; cited by Bhandarkar & Alvarez-Rivero, 2007, p. 400). In 2005 Nike Corporations faced similar challenges while adopting CSR codes across its extended supply chain. According to (The Lifeworth Review of 2005, Vietnam is an important production centre of Nike Corporation, where it engaged more than 50,000 workers on private subcontract basis to produce shoes. In its 2003-2004 audit of hundereds of factories, it discovered that the workers were given abusive treatments ranging from lack of access to toilets and drinking water during the workday to denyal of atleast one day off in a week. Work hours often were more than 60 hours per week and the workers were punished who refused overtime. To top up, wages were up to 25 percent below the legal minimum wages (The Lifeworth Review of 2005, 2005). This revelation, triggered a shift in strategy in Nike – “how to solve problems for themselves, to how to create systemic change in the industry”. The key challenge was not only one of strategy, but also of leadership” (The Lifeworth Review of 2005, 2005). Ownership and incomplete implementation of CSR in supply chains Bhandarkar & Alvarez-Rivero (2007) brought out ownerhsip and implementation of CSR in supply chains as yet another key challenge in the implementation of CSR codes in apparel industry. The authors cite several situations which may triggure failure of CSR initiatives in the long run. Firstly, when owners, managers and supervisors throughout the extended supply chain are not convinced about the benefits CSR is likely to bring to them. Secondly, half hearted implementation of CSR codes imposed by external pressures results in lack of ownership of the programs, which has already been witnessed in the apparel indutry (Bhandarkar & Alvarez-Rivero, 2007). Thirdly, conflicting priorities can too undermine CSR programs. For instance, Oxfam in his 2004 studies on “Clean Clothers Campaign, and Global Unions, Play Fair at the Olympics, March” observed that, even though, managers insisted for zero child and forced labor, they had to accord priority to fulfilling urgent orders to meet time, cost and quality requirments. As a result, CSR policies on excessive working hours, forced overtime, and harassement of works who attempt to form unions were grossly violated. In fact, this is a truth across the industry in the developing countries where cost and time pressures are intensely felt (Oxfam, 2004; cited by Bhandarkar & Alvarez-Rivero, 2007, p. 402). Conclusions & Recommendations Due to typical nature of the apparel industry, it often faces pressure from both social and economic front. Besides, it is deeply embroiled in the global production network (GPN) (Linfei & Qingliang, 2009) there by posing a significant challenge to the apparel industry for implantation of CSR codes across its supply chain. Coupled with low barriers to entry, and typical labor intensive business, firms especially in the developing countries struggle to cope up with completion and over capacity. Besides, with wafer-thin margins surviving on a hand-to-mouth basis, and a plethora of confusing and conflicting CSR codes thrust by MNCs make it even more difficult to implement. Further, on the face of lack of perceived benefit and consequent deterrence for noncompliance also make these small players to be lackadaisical in implementing the CSR initiatives. Moreover, numerous barriers to implementation of CSR codes in the extended supply chain exist. Some of include such as insufficient understanding of business benefits, half-hearted commitment by the Leader in the supply chain, inefficiencies and confusion caused by buyers and weak impact of CSR on consumer behavior, inadequate reporting and tension between developed and developing countries and lack of government capacity to implement and monitor CSR codes. However, the silver lining is that more and more MNCs and their extended supply chain, even governments are realizing the benefits of CSR. CSR does public good, besides bringing both financial and nonfinancial benefits to the partners in the supply chains. It must be pursued more vigorously, with more consistency and with more determination. The challenges though may be many. Recommendations The following recommendations are made to make CSR implementation more meaningful. 1. Widening CSR awareness 2. Provision of training and development assistance to small players 3. Standardization of CSR codes across the world 4. Developing effective monitoring indices 5. Developing positive feedback mechanism 6. Encouraging more research and development in CSR 7. Ensuring redistribution of benefits to the stakeholders. Bibliography Bhandarkar, M., & Alvarez-Rivero, T. (2007). From supply chains to value chains: A spotlight on CSR. In U. N. Department of Economic and Social Affair, Industrial Development for the 21st Century: Sustainable Development Perspectives (pp. 387-411). New York: United Nations. Deresky, H. (2008). International Management; Managing Across Borders and Cultures; Text and Cases (6th ed.). Prentice Hall. European Commission. (2011, February 18). Sustainable and responsible business: Corporate Social Responsibility (CSR) . Retrieved February 22, 2011, from ec.europa.eu: http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/index_en.htm Linfei, Z., & Qingliang, G. (2009). Corporate Social Responsibility in China Apparel Industry. Hangzhou, China: World Academy of Science, Engineering and Technology 51 2009. Petkoski, Djordjija; Twose, Nigel; The World Bank Group. (2003). Public Policy for Corporate Social Responsibility. The World Bank Institute; The World Bank; International Finance Corporation. Porter, M. E. (2008). Strategy and Society: Corporate Social Responsibility and the Competitive Advantage. Liverpool Summit – Transforming Technology (p. Power Point Presentation). Liverpool: Harvard Business School. Pruzan-Jorgensen, P. M., & Jorgensen, H. B. (2004). Public Sector Support for the Implementation of Corporate Social Responsibility (CSR) in Global Supply Chains. The World Bank Group. Smith, Gare; Feldman, Dan; The World Bank Group. (2003). Company Codes of Conduct and International Standards: An Analytical Comparison. Washington: The World Bank Group; Corporate Social Responsibility Practice. The Lifeworth Review of 2005. (2005). Nike says time to team up. Retrieved February 22, 2011, from www.lifeworth.com: http://www.lifeworth.com/2005review/q2.3.html Read More