Corporate Social and Environmental Responsibility at Nike Company - Case Study Example

Nike Company Name: Tutor: Course: Date: 1. Introduction There is increasing debate regarding firms and their wider role in society. Many discussions have generally focused on the role of business in society and the nature of a firm’s social responsibilities (Galbreath, 2009, p. 109). Along this line, there is general consensus among many authors that there is need for companies to undertake activities that might be regarded as socially responsible (Moir, 2001, p. 16). For instance, Cannon (1992) [cited by Moir (2001, p. 16)] argues that the primary role of business is to produce goods and services that society wants and needs; but there is an interdependence between business and society in the need for a stable environment as well as an educated workforce. In respect of this background information, this paper looks at the issues pertaining to firms and the society/environments in which they operate, with Nike as an example. 2. Corporate social and environmental responsibility Corporate social responsibility (CSR) is defined as a dedication to improve community welfare through discretionary business practices and contributions of corporate resources (Kotler, & Lee, 2005, p. 3). Community welfare also has to do with the environment and this is captured in the definition of CSR as suggested by (Barth & Wolff, 2009, p. 5), that CSR is a concept whereby firms incorporate social and environmental issues in their business activities as well as in their dealings with their stakeholders based on their own discretion. Hence, being socially and environmentally responsible implies not only fulfilling legal requirements, but also going beyond compliance. 2.1 The importance of integration of social and environmental issues into company It is necessary to integrate social and environmental issues into a company’s activities because increasingly, customers want to purchase products from firms they trust, employees want to work for organisations they respect, suppliers want to do business with companies they can rely on, and investment firms want to support firms they perceive to be socially responsible (Werther & Chandlerp, 2010, p.19). Generally, firms should invest in CSR issues so that they can be perceived to be sensitive to their employees, the marketplace, environment, community, ethics and human rights (Moir, 2001, p. 17) – which ultimately affect their brand image. For instance, companies must show their commitment to dealing with issues such as environmental degradation, global warming, and so forth, and be involved in philanthropic activities in areas of need in the society. But even as they do so, companies need to strategically select areas of focus that fit their corporate values; for example by selecting initiatives that augment specific business goals, choosing issues that pertain to core products as well as core markets, and supporting issues that offer opportunities to meet new objectives (Sheikh & Beise-Zee, 2011, p. 28). 3. CSR at Nike At Nike, corporate responsibility is perceived as “a catalyst for growth and innovation” (Nike website). To achieve this, the company aims to create sustainable products and business models, and nurture talent through sport. The company’s CSR strategy has gone beyond corporate responsibility as it aims to achieve what it calls “Sustainable Business and Innovation.” The CSR strategy of Nike is also in line with the company’s vision: to help the company and consumers prosper in a sustainable economy where people, profit and the environment are in equilibrium. The company thus integrates principles and practices of sustainability into everything it does; including designing, developing sustainable materials, weighing various options for processes, and campaigning for change in the industry. In order to measure progress in these areas, the company sets long-term targets and reports on its performance (Nike website). 3.1 Social and environmental issues of Nike Despite the perceived success of Nike, the company has not escaped criticism over its approach to social and environmental issues. Conditions of workers in Nike’s various manufacturing locations have been a subject of debate in the past. It was claimed that many of the workers were subjected to poor work conditions, coupled with harassment and abuse. In Indonesia for instance, it was reported that 30.2 percent of the employees had personally experienced, and 56.8 percent had observed, verbal abuse. Some workers also reported having received some unwelcome sexual comments, while others reported to have been physically abused (Mallenbaker.net). There were also concerns about health and safety issues, as UN ambassador Andrew Young who visited one of Nike’s suppliers on a tour sponsored by Nike compiled a report that did not mention the serious safety and health issues at the plant. Hence, questions were also raised regarding the company’s commitment to issues on labour and environmental standards (Locke & Siteman, not dated, p. 14). Nike though responded by putting in place a Code of Conduct to regulate its dealings with suppliers. In the Code the company seeks to work with contractors who are committed to best practices and continuous improvement in areas such as employing management practices that value the rights of all employees, including the rights to collective bargaining and free association; minimising the impact on the environment; providing a safe and healthy workplace; and promoting health and welfare of all employees (Hartman, Arnold & Wokutch, 2003, p. 146). 3.2 The drivers for Nike to pursue From the above analysis, it is evident that Nike still needs to more to fulfil social and environmental expectations in line with its Code of Conduct. In view of this, Kotler and Lee (2005) note that Nike continues to strive to incorporate environmental responsibility throughout its functions and product life cycle. Environmental responsibility has become an added dimension of Nike’s product design innovation platform. This dedication is reflected in decisions regarding products and the company’s responses to increasing consumer demand for sustainable options as well Nike’s commitment to environmental sustainability. This is augmented by the company’s attention to safety and health issues, which are key drivers towards CSR. 3.3 How Nike manages its social and environmental issues Nike has focused on improving the conditions in its factories in line with its mission. The company prioritised monitoring by focusing on 20 percent of its critical contracted factories that account for about 80 percent its total production volume. To identify focus factories, Nike rates high-volume factories using a risk index that evaluates five primary factors designed to focus on the most susceptible employees. The factors considered in this regard include the country in which the factory is located, factory worker population, manufacturing processes, and management and environmental, safety and health compliance performance (Nike, 2009, p. 42). In 2009, Nike partnered with Maplecroft, a firm that specialises in global risk assessment in areas such as climate change, resource security, terrorism, pandemics and human rights. Maplecroft is expected to supplement Nike’s existing risk criteria focus factory by offering an additional geographic and specialised issues lens to the company’s current analysis. In addition, the relationship between the two firms is expected to deepen Nike’s understanding of present and future challenges in workforce and environmental, health and safety management (Nike, 2009, p. 42). Nike also has codes and policies that deal with environment, safety and health (Nike, 2004). Further, the company, in an effort to increase sustainability, released its Environmental Apparel Design Tool, which is intended to accelerate collaboration between companies, facilitate sustainable innovation and reduce the exploitation of natural resources like water and oil (Nike website). 3.4 Social and environmental commitments at Nike Nike has three major social and environmental targets: bringing about systemic changes for employees in the footwear, apparel and equipment industries; creating sustainable products and business models; and unleashing potential through sport (Nike, 2007, p. 13). Bringing about systemic changes for employees in the footwear, apparel and equipment industries The issues involved here include human resources, freedom of association, worker empowerment, collaboration and excessive overtime. The company focuses on having a tailored human resources management programme in contract services, implementing a freedom of association educational programme in contract factories, developing multibrand collaboration in contract services, and eliminating excessive overtime in contact factories. Creating sustainable products and business models Nike has strategies to deal with design issues, waste management, management of volatile organic compounds, and ensure that only environmentally preferred materials are used in equipment product. Nike is also committed to dealing with climate change issues as it has programmes for climate neutral facilities as well as carbon dioxide emission footprint. Unleashing potential through sport Nike invests more that $315 million into programmes worldwide to promote sport as well as its social image. 4. Implications and lessons for other organisations As it was mentioned at the outset, CSR activities have much to with an organisation’s welfare, the society and the environment. The Nike case clearly reinforces the fact that business only contributes wholly to society if it is efficient, profitable and socially responsible as noted by the former chairman of Marks & Spencer plc, Lord Sieff (Moir, 2001, p. 16). In deed, the case about Nike shows that organisations have to be careful as regards their social, economic and environmental policies. In addition, although not all commitments to social and environmental responsibilities are mandatory, organisations have to observe them as they impact the organisation and brand image. 5. Recommendations for Nike It is recommended that Nike invests in more socially and environmentally friendly programmes that will facilitate reuse and recycling of some of parts of its old products. This will present an opportunity for a better working environment since production of new materials in its factories will be minimised. 6. Conclusion CSR activities are inevitable for companies that aspire to become leaders in their respective industries. It has been noted that companies must contribute fully to the wellbeing of the society and be responsible for their actions by taking care of the environment. Nike, though successful, failed to take into consideration some of these issues and faced criticism for the same. However, the company’s current strategies show commitment to social and environmental responsibility, which is crucial to the success of any business. References Barth, R. & Wolff, F. 2009, Corporate social responsibility in Europe: Rhetoric and realities, Edward Elgar Publishing, London. Galbreath, J. 2009, “Building corporate social responsibility into strategy,” European Business Review, Vol. 21, No. 2, pp. 109-127. Hartman, L.P., Arnold, D. G. & Wokutch, R. E. 2003, Rising above sweatshops: innovative approaches to global labour challenges, Greenwood Publishing Group, New York. Kotler, P. & Lee, N. 2005, Corporate social responsibility: Doing the most good for your company and your cause, John Wiley and Sons, New York. Locke, R. M. & Siteman, A.J. not dated, “The Promise and Perils of Globalization: The Case of Nike,” available from http://mitsloan.mit.edu/50th/pdf/nikepaper.pdf (viewed 15 July 2011). Mallenbaker.net, “Nike,” http://www.mallenbaker.net/csr/CSRfiles/nike.html (viewed 15 July 2011). Moir, L. 2001, “What do we mean by corporate social responsibility?” Corporate Governance, Vol, 1. No. 2, pp. 16 – 22. Nike website, available from http://www.nikebiz.com/responsibility/ (viewed 15 July 2011). Nike, 2004, “Corporate Responsibility Report FY 07,” available from http://www.socialfunds.com/csr/reports/Nike_FY04_Corporate_Responsibility_Report.pdf (viewed 15 July 2011). 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