Ethical and Corporate Social Responsibility - Nike Inc - Case Study Example

CASE STUDY ASSIGNMENT: ETHICAL AND CORPORATE SOCIAL RESPONSIBILITY ISSUES AT NIKE Name Course Tutor Date Introduction Nike Inc. is one of the largest dealer in athletic wear and apparel all over the world. The company was established in the year 1968 (Nike, 2015). The company’s headquarters are located at Beaverton in Oregon. Nike’s products are sold to nearly over 180 countries worldwide with the company recording a large market share across the years. The major business of the organization is to design, develop and market globally its high quality footwear, equipment, accessory products and apparel (Nike, 2015). The company is famous being the largest seller in the sportswear market. Most of the products of the company are produced outside the USA most of which is done through subcontracting to independent in countries such as China, Vietnam, Indonesia and Thailand as well as other countries totalling to 34 countries (Nike, 2015). This paper looks at the ethical and corporate social responsibility issues that faced Nike Inc. and the methods that was used to solve them. Impacts of sweat shop on Nike International business There are many impacts that firms associated with ethical and CSR issues do face. For the case of Nike Inc., the first impact was negative publicity (Laasch & Conaway, 2014). The issue of sweatshops attracted the attention of nearly the whole world being that there were two parties; proponents and opponents or critics of sweatshops. At this particular moment when the truth really came out concerning the squalid working conditions, harsh management and lack of respect to the employees making most of the consumers regarded Nike Inc. as an unethical company (Laasch & Conaway, 2014). Consequently, most of the consumers shunned the goods of the company. The corporate reputation of Nike was dotted with most of the human right activist protesting and further making the reputation of the company sink. The second effect of the sweatshop issue was high turnover of the employees (Laasch & Conaway, 2014). Despite the company being boastful of employing many employees from across the world, most of the employees left the company for fear that the conditions could not change any time soon (Ferrell, Fraedrich, & Ferrell, 2011). Thirdly, the company lost its sales track being that most of the consumers feared being associated with a company that had a poor reputation. Most of the parents did not purchase the products of the company to their kids for imminent fear that they were unethically produced (Ferrell, Fraedrich, & Ferrell, 2011). This as a result ended up ruining the goodwill of the stakeholders of the company including the trust of the investors, employees and customers. Consequently, the sales volume of the company shrunk, with most of its funds being lost through unending legal battles (Laasch & Conaway, 2014). The fourth effect of the sweatshop issue as aforementioned, was legal battles that saw the company spend much money in running all the legal battles that arose from the issue (Laasch & Conaway, 2014). Addressing the Sweatshop issue by Nike The actions taken by Nike were valid and effective as well in the long run (Connor, 2010). Nike just like any other international corporation that was faced with ethical and CSR issues had to come up with an action plan that would save it from the aforementioned impacts (Connor, 2010). First off, following the loss of sales, high turnover and negative reputation, Nike altered its ethical decision making that reshaped the reputation of the brand on its stakeholders and the community in general (Nisen, 2013). By the year 1998, Nike became a member of Fair Labour Association that was established under the assistance of the Whitehouse, Department of Labor and the apparel industry to protect the working conditions in all the companies that were contracted by the US companies (Ethical Consumer, 2007; Nisen, 2013). FLA came up with a code of ethics or conduct that stipulated the minimum age of the employees in the factories and required that the minimum wage being paid by the contracted companies rhymed with the nation’s set minimum wage (Bloomberg, 2004; Nisen, 2013). The code also limits the number of hours worked in a week to 60 hours (Nisen, 2013). Nike adopted the code of conduct and have been fighting to endorse it through a variety of means including through NGOs so as to sound more credible amongst its former critics (Bloomberg, 2004). The company has also resorted to reporting its sustainability or corporate social responsibility practices that is publically accessible from its official website (Nike, 2015). Still on the issue of reporting, the company shares information about its sustainability commitments and the methods that are planned to ensure that the commitment is achieved (Connor, 2010; Nisen, 2013). The company has been able to address the environmental footprints it has had been blamed for in the past (Nike, 2015). The company has resorted to reducing waste through creation and reuse of toxic products that are reusable (Bloomberg, 2004). The company has also been able to have high commitment levels especially through making it clear to the stakeholders on its processes and the extent of its ethical practices thus giving the bigger picture (Connor, 2010; Nike, 2015). This is a strong move because through doing so the company has been recognized as an ethical company by most of the consumer protection agencies (Ethical Consumer, 2007). Besides being a member to the FLA, Nike also ensured that all the companies were audited for the work conditions in compliance with the OSHA standards of clean air in the plants (Bloomberg, 2004). After the audit, the company ensured that the best companies were listed making it the first one in the industry to take such an action (Ethical Consumer, 2007). The list of companies ranked them according to the labour practices and other associated issues (Nisen, 2013). This increased its reputation as an ethical company further bringing back the company to its fame (Nisen, 2013). The company also came up with a department that inspected the factories affiliated to it annually and grades them according to labour standards and then work with various managements to improve the conditions in the workplace and ensure that all the employees are well catered for in terms of safety and health (Nisen, 2013). The company also ensured that unlike the previous years, all its contractors were published so that in any case there was breach of the code of conduct necessary punitive measures would be taken and Nike would be held accountable (Bloomberg, 2004). The positive nature of this was that it managed to return normalcy in the operations of Nike worldwide with it coming with new brand reputation, raised revenue and better compensation mechanisms as well as incentives for the employees. Nike also adopted the freedom of Association Protocol in Indonesia in the year 2011 (Oxfam Australia, 2014). The protocol was negotiated through brands, national unions and suppliers in Indonesia setting pace for the guidelines to ensure that the workers can engage in negotiations over work conditions (Oxfam Australia, 2014). Nike also responded to the environmental standards and poor labour conditions claims through advertisements that restored the reputation of its products in the global market (Oxfam Australia, 2014). The company also ensured that the workers in the countries where it contracts its production were engaged through better pay and given access to small loans (Bloomberg, 2004). Additionally, the company has also continued to ensure that the countries benefit from philanthropy hand-outs that are meant to enrich education programmes in such countries as Indonesia (Ferrell, Fraedrich, & Ferrell, 2011). The company has also been an active participant and sponsor of various sports in the USA as well as funding schools and university through sport equipment (Bloomberg, 2004). The company has also established a triple bottom line approach where it uses social responsibilities and environmental responsibilities as well in supplementing its economic bottom line (Laasch & Conaway, 2014). The company also reviewed its raw materials with most of the T-shirts being made of organic cotton. Additionally, the company also recycled plastic and reduced the usage of toxic glue in making its shoes (Laasch & Conaway, 2014). Nike has revamped its production through embracing sustainable innovation that ensures minimal environmental pollution (Connor, 2010). To maintain commitment of the employees, Nike has institutes a code of ethics for its employees (Connor, 2010). The company also ensures transparency in its supply chain lines through ensuring that the suppliers are ethical and comply with its internal standards (Connor, 2010). Additionally, the company also has a code leadership standards that guides the contracted companies in embracing the code of conduct to their advantage. Effectiveness of actions by Nike on the sweatshop issue The earlier days of Nike were not as clear as it is now. The firm lost its reputation, revenue and employee as well as customer trust. However, currently Nike ranks high as a company that has the best-known far and wide corporate social responsibility practice and an additional strong and positive corporate reputation. (Laasch & Conaway, 2014) Despite the issues in the 1990s when the company outsourced most of its production to reduce the cost of operations, the company has turned around its image emerging as one of the companies that nearly failed and restored its fame (Ferrell, Fraedrich, & Ferrell, 2011). The company has been ranked as the most innovative companies taking the lead of the top ten. This authentically mean that the company leveraged on its failure and through its instituted code of conduct reengineered its practices as well as revamping the organizational structure that enabled success (Ferrell, Fraedrich, & Ferrell, 2011). To establish the effectiveness of the aforementioned strategies it is essential to look at the view of the stakeholders in terms of their trust in the company (Laasch & Conaway, 2014). In this case trust and credibility of the stakeholders forms the base of such an assessment since they determine the extent to which a company attracts investments (Ethical Consumer, 2007). Stakeholders create goodwill on a company when there is effective communication of the success in social, economic, and environmental responsibilities (Laasch & Conaway, 2014). Nike has emerged as a company that upholds good and effective stakeholder communication through a variety of channels. The company has since then been able to earn the respect of its stakeholders from the employees, customers, suppliers and the government among others, through responsible business practices and marketing as well as communication strategies (Laasch & Conaway, 2014). The company joining FLA has been the centre stage of restoring the goodwill of the stakeholders. This has also further seen the company reduce the negative publicity that spurred the media years back (Ethical Consumer, 2007). The code of conduct gave the company a stronger edge over its competitors especially due to the fact that it complied with the Global Reporting Initiative standards that is globally recognized (Laasch & Conaway, 2014). Generally, there is no company that has been through a lot such as Nike that is now a leader in sustainability practices as the company is ranked now (Ethical Consumer, 2007). The effectiveness of the strategies can also be attested to the rise in the sales of Nike and its market share compared to its competitors in the apparel industry (Laasch & Conaway, 2014). The brand reputation of Nike has also improved marked by the high sales and the number of partnerships as well as sponsorships that the company is involved in (Ethical Consumer, 2007). Organizational and strategic changes Given an opportunity of Nike’s Stewardship as the manager, there are specific strategic as well as organizational changes that I will roll out. First off, I would ensure that the organizational culture is changed through engaging a good leadership that encourages engagement of the employees in decision making (Laasch & Conaway, 2014). When employees are engaged in decision making, they get the chance to express their grievances (Laasch & Conaway, 2014). The second step would be ensuring that all the employees receive training and development. The company being one that uses toxic products, it would be essential that the employees be trained on how to wear personal protective gear when at work. The managers will also receive training on how to be whistle blowers in matters that have the effect of negative publicity. Each employee whether in the contracted companies must have access to the code of conduct so that whenever there is breach necessary legal actions can be taken through stipulated channels. Under the new management the company will also have an impact assessment in order to assess all the potential hazards that are bound to affect the employees. Additionally, the employee will be given a chance to evaluate their work conditions and propose the necessary improvements that they want (Oxfam Australia, 2014). Still on the same, an inspection of the company and evaluation of the employees as well as the management will be mandatory in the company so as to remove the effects of poor leadership. The other strategy to save the company would be coming up with better compensation mechanism for the workers in the company. The compensation strategy of a company can be a breaking point for taming high turnover rates (Oxfam Australia, 2014). Therefore under my tenure, I would ensure that the employees have good compensation mechanisms that match the kind of work that they are doing rather than the living standards that re marked to change with time and economic conditions (Oxfam Australia, 2014). There will also be an open room for the employees to contribute on how they want the promotional process as well as the motivational processes to be driven. Following this will be a job evaluation to determine and analyse the best skills that are required for the position so as to tailor the best wage for the position. To do this there will be a needs assessment in order to determine the gaps that exist in company. This would mean establishing a strong and competent human resource department that deals with the issues of the employers. The trust of the employees marks the beginning of success. Therefore, under the new management it would be a good thing to allow the employees of the company to join trade unions. This will give the management team and the employees a fair ground for negotiations in matters relating to the work environments and compensation (Oxfam Australia, 2014). It would also be necessary to have a confidential complaint process for the employees. This would help curb the claims of the management mistreating the end line workers. This will also allow room for employees to receive the necessary protection when they report such issues that end up tainting the image of the company (Oxfam Australia, 2014). Conclusion Nike has struggled on its way up the ladder despite the ethical and CSR issues and challenges that affected it in the 1990s. The company has risen to its feet as is reflected on its brand reputation and the sales volumes. In this paper, some of the strategies used by the organization have been discussed in length. Additionally, the effectiveness of these same strategies have also been scrutinized. As can be seen in the successful nature of Nike, it is indeed true that the strategies were effective. Putting myself in the shoe of the manager of Nike, I have recommended a few strategy worth consideration for further solution to the ethical and CSR challenges that faced the organization. References Bloomberg. (2004, September 19). Online Extra: Nike's New Game Plan for Sweatshops - BusinessWeek. Retrieved from http://www.bloomberg.com/bw/stories/2004-09-19/online-extra-nikes-new-game-plan-for-sweatshops Connor, M. (2010, January 4). Nike: Corporate Responsibility at a “Tipping Point” | Business Ethics. Retrieved from http://business-ethics.com/2010/01/24/2154-nike-corporate-responsibility-at-a-tipping-point/ Ethical Consumer. (2007, January). Corporate Social Responsibility: more than greenwash? Retrieved from http://www.ethicalconsumer.org/commentanalysis/factsvgreenwash/corporatesocialresponsibility.aspx Ferrell, O. C., Fraedrich, J., & Ferrell, L. (2011). Business ethics: Ethical decision making and cases. Princeton, NJ: Recording for the Blind & Dyslexic. Laasch, O., & Conaway, R. N. (2014). Principles of responsible management: Global sustainability, responsibility, and ethics. Australia, South-Western: Cengage. Nike. (2015). About Nike - Sustainability. Retrieved from http://about.nike.com/pages/manufacturing Nisen, M. (2013, May 9). How Nike solved its sweatshop problem - Business Insider. Retrieved from http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5 Oxfam Australia. (2014). Nike | Oxfam Australia. Retrieved from https://www.oxfam.org.au/what-we-do/ethical-trading-and-business/workers-rights/nike/ Read More