New Balance Corporate Social Responsibility - Case Study Example

New Balance Corporate Social Responsibility New Balance is in the business of manufacturing and marketing sports shoes for lastseveral decades. After acquiring brands such as Warrior, Brine, Dunham and many more, it has now become a global company. With total revenues of $1.61 billion posted in 2008, the company is the largest athletic footwear manufacturing company in the US. At least 25% production of the company comes from the US alone from its five different manufacturing locations across the US. The company has over 200 footwear suppliers spread in the different part of the world that include China, the UK, Indonesia, Vietnam, Japan, Mexico and Cambodia. The company has never engaged any celebrity to endorse its products. The companys productivity records are excellent as it has improved its productivity by 49 percent through waste reductions. Moreover, the company aims at improving productivity on an ongoing basis (Veleva, 2010). Manufacturing of all kinds of the footwear within the US is on decline – the main reason is the low-wage cost at some of the emerging economies such as China. It is important to note that footwear manufacturing, in spite of significant technological advances, involves considerable amount of manual handling. As a result of this, the footwear industry in the US in general and New Balance in particular faces huge environmental and social challenges. A strong Corporate Social Responsibility (CSR) policy needs to be in place to not only enhance all stakeholders trust and confidence in the company but also spearhead its growth by integrating the core business strategy with its CSR strategy. New Balances Mission statement explicitly takes into account the importance of CSR policy in its growth: "Demonstrating responsible leadership, we build global brands that athletes are proud to wear, associates are proud to create and communities are proud to host" (Veleva, 2010 p1). Key Strengths/Weaknesses of New Balance McElhaney (2009) argues, "CSR has become standard operating procedure for todays companies” (30). Accordingly, on this count, New Balance demonstrates several strengths and weaknesses with regard to four important aspects such as overall governance, products and services, operational efficiencies, and the activities that relate to community development. The company employs the Corporate Citizenship Management Framework to explore how it did on these four important aspects. 1. Overall Governance Values, integrity and long history are the aspects that strengthen overall governance of the company. People feel proud while working at New Balance because management provides due importance and listen them carefully. People at senior management in the company believe to having a strong support for CSR. The companys mission statement and values strongly support CSR functions. However, the difficult part is that very few of them really understand the current responsible leadership (RL) goals and priorities. Ironically, many believe that CSR is a cost to the company instead of a business strategy for growth (Veleva, 2010). Pohle and Hittner (2008) argue that transparency is a key factor, in order to make CSR strategies effective (11) and the company has failed to address transparency and accountability issues including domestic manufacturing. Managers are not precisely aware about associated business risks and opportunities due to this lack of understanding. Surprisingly, the companys commitment to avoid layoffs during the tough time of 2007-2009 was not adequately captured in its RL framework. While this provides a clear edge to the company over its competitors, the company has not made any significant efforts to turn it into their favor. 2. Products and Services New Balance has used environmentally-friendly materials in its footwear manufacturing. They have focused on sustainable design approach while developing new footwear. They evaluate their all new products through "eco score card" besides employing evaluation criteria such as functionality and cost-effectiveness. New Balance is the first company to completely discard polyvinyl chloride (PVC) in footwear manufacturing. PVC being not an environmentally-friendly material, users worldwide prefer not to use it. Even certain retailers such as Wal-Mart have stopped selling products that involve PVC. From this view point, New Balance has right approach in deciding and selecting its product materials. Elite consumers extend due consideration while selecting any product for their use. The 070 shoe made by the company is a first ever green footwear produced by the company (Veleva, 2010). 3. Operations The company has been able to reduce the time taken to produce a pair of shoes from eight days to merely three hours bodes well for the company. The company has been able to improve energy efficiency across its installation over the years. Not only that but also the company has been to replace at least 30 percent of traditional sources of energy with renewable energy sources in its installations. At the same time, the company has not made its suppliers list public that raises serious concerns whether its suppliers meet the environmental regulatory guidelines and overall emission levels. Work-related injuries were reduced significantly increasing productivity and lowering insurance costs and worker absenteeism during 2008. This also increased morale of workers and associates (Veleva, 2010). New Balances weakness lies in not having a system that can assess the life-cycle impacts of products. The company uses rail in place of trucks to transport its products and help reduce carbon footprint but the company has not made any efforts to measure and convey it to masses. Not much of the research is done to explore new materials that are environment-friendly as well as durable (Veleva, 2010). 4. Community Support Volunteering and philanthropy undertaken by the company are the two important factors for retaining employees. Volunteering helps enhance reputation, in building public relations and developing brand equity. The company works for the community in the matters related to obesity, and breast cancer. Employee job satisfaction survey also implies that 96 percent of employees feel good on providing community services. The company allows human rights monitoring agencies at its manufacturing locations to ensure that the company does not violate any human rights in its manufacturing processes (Veleva, 2010). While the company does give due importance and carries out several activities for community development where it operates, it has failed to make them public time to time. Even the company has not made its environmental achievements and social initiatives public. The company has made available very little information in public in spite of numerous initiatives that the company has taken for community development, its environmental performance and social initiatives. The point is that New Balance Foundation giving and other community involvement strategy has no alignment with the business strategy of the company. It is a feeling among the employees that the companys brand equity does not get due recognition in spite of lot has been done for community (Veleva, 2010). Analysis New Balance possesses not only good understanding of CSR activities but also exhibits strong commitment to CSR functions for last several years it that include employee volunteering, and community support wherever the company operates. However, the company lacks an effective leadership that can provide clear directions to RL functions. In absence of RL leadership, the company has not been able to identify CSR risks and opportunities that may affect the company severely. There is no strategy to integrate CSR with the core business and therefore, it is not possible to measure social and business value from several initiatives already taken by the company. No communication plan is in place to create awareness among employees and assess progress in RL functions so as to communicate achievements among all stakeholders. The company does not have restricted substance policy in place; however, the company does comply with Registration, Evaluation, Authorization, and Restriction of Chemical Substances (REACH) guidelines. The company aims at improving its eco score card in reference to its footwear products. The company does use all recycled content in manufacturing of its products to ease pressures on environment. The company can select some of the areas to focus where CSR strategy can be linked with business strategy. One of the foremost is the companys efforts to preserving US jobs even during difficult times of 2008-2009. While most of its rivals have gone offshore to manufacture and procure their supply, New Balance has focused on remaining within the US. This must be highlighted in large scale across all forums in the US to make aware to all stakeholders including the US consumers. This will help company to not only enhance its market share within the US but also create brand loyalty among its users. Importance of ‘Greening’ is well known across the world and the company has taken several steps that include using renewable energy sources and discarding materials that are not environmental friendly. This must be mentioned and highlighted extensively in its all publicity campaigns and packaging materials so as to make aware all stakeholders about it explicitly. Implementing CSR The company does not have a standalone CSR department to address CSR issues. Instead, it is a part of intellectual property department and that needs to be corrected (Exhibit 5). CSR activities are not managed by a senior level officer such as director-in-charge or a vice president so a senior level personnel needs to be recruited. Communication plan needs to be in place to educate employees and establish its importance across all levels for business success. All CSR activities must be done in a given timeframe and not in an unplanned manner. Exclusive CSR campaign budgets integrated with ongoing marketing activities can go a long way in fulfilling the business and CSR objectives. The measures of success are consumer and employee satisfaction levels that must be assessed at the end of each fiscal year (Veleva, 2010). Conclusion Though New Balance is a private company yet it has grown several folds through its CSR initiatives. The company has a good understanding of RL approach but it lacks clear focus to integrate CSR with its business strategy. Sustainability is crucial for business success and to achieve that CSR leadership can play a pivotal role. The company needs to have ‘a restricted substance policy’ in place. Consumers are now highly conscious and patronize products of only those companies that show clear RL initiatives. New Balance needs to be vocal and communicative internally and externally. The company needs to inform all employees that CSR is not a cost to the company but an integral activity in this world of globalization and all tasks and processes that the company undertakes must have a social acceptability. Finally, the company needs to have a full-fledged office with an experienced senior level professional at its helm to see that all CSR functions and activities are integrated with the business strategy fully. References McElhaney, K (2009). A Strategic Approach to Corporate Social Responsibility. Retrieved July 8, 2014 from http://responsiblebusiness.haas.berkeley.edu/documents/Strategic%20CSR%20%28Leader%20to%20Leader,%20McElhaney%29.pdf Pohle, G. & Hittner, J. (2008). Attaining Sustainable Growth through Corporate Social Responsibility. Retrieved July 8, 2014 from https://www-935.ibm.com/services/au/gbs/pdf/attaining_sustainable_growth_through_csr.pdf Veleva, V. (2010). New Balance: Developing an Integrated CSR Strategy. Ivey Management Services. Read More