Corporate Social Responsibility of Nike - Case Study Example

Corporate Social Responsibility of Nike Executive Summary This reports seeks to explore different aspects of CSR in Nike. First, thepaper starts by looking at the various CSR concepts and theories. In doing so, analysis and explanation of the social responsibilities of Nike are brought forward. The main key concepts in this area include the six core characteristics of CSR as linked with Nike. Additionally, the various theories in relation to Nike are explored. The theories include instrumental, political, integrative and ethical theories. Further, the paper introduces the aspect of stakeholder management. The various stakeholder and their models used to prioritize them are used. One major model applied is the stakeholder mapping. The paper further explores the CSR strategy applicable to Nike. In looking at the CSR strategy, the manner in which Nike is to adopt the market based approach to develop a successful CSR strategy is explored through the use of the three domain model. Additionally, the role that Nike plays in building of ethical and CSR in marketplace is also explored through looking at the CSR campaigns and brands and also by using the competitive advantage. Finally, the paper gives recommendations of use of CSR in Nike. One of the recommendation is the best way for Nike to improve the recruitment and retention of the various talented employees. Additionally, the aspect of CSR and equality is examined with contribution of CSR to equality being appraised. Further, the aspect of CSR application in environmental responsibilities is also covered. Here the drivers and impact of the climate change are appraised and way forward given. Introduction Being one of the largest American Multinational, Nike mainly deals in the development and design of apparels as well as their sales and marketing. The products that Nike deals in include equipment, footwear, accessories and services. Headquartered near Beaverton, Oregon, Portland, Nike is a global leader in the supply of athletic shoes as well as other sports equipment and apparels (Feng, 2014). Given that it is a leading brand, Nike is committed to delivering the best to every athlete in terms of inspiration and innovation. With a clear and well-defined vision, Nike is able to provide for itself and the customers a sustainable environment from which they can thrive. It is an environment where the company and the various stakeholders are balanced (Porter & Kramer, 2006). In order to realize their overall productivity, they have integrated the sustainable practices and principles into their approaches and incorporated the corporate responsibility in the sustainable innovation and business mechanism that they have (Husted & Allen, 2006). The corporate social responsibility reports mostly the independent regulation of the corporate that is within a given business model. Through CSR businesses are able to ensure that there is monitoring and adherence of issues that have spirit of laws, the various international norms and the required ethical and moral standards (Classon & Dahlström, 2006). Therefore, through the corporate social responsibility, Nike believes that it has a mandate not only to boost its growth, image and innovation but also as a means of creating strong link with the operations of the company in terms of the brand, community loyalty and influence on the perception of the employees. Corporate Social Responsibility and the Six Core Characteristics The various main features that define CSR in a company or organization are considered to be the significant features that in one way or another are reproduced in the academic world in different definitions that are advanced (Polonsky & Jevons, 2009). First, there is the aspect of voluntary where through the CSR the companies go beyond their normal activities as prescribed by the law. Thus, the companies view their various responsibilities to be those that go beyond the legal minimum as prescribed by the law. Often, the development of the self-regulatory CSR initiatives in the industry are perceived to be a method of forestalling additional regulation by complying with the different moral norms in the society. Thus voluntarism in CSR goes beyond the legally defined accountability from the company (Classon & Dahlström, 2006). Nike has a number of volunteer programs and patner with organization like Volunteers of America Oregon and Hands On Portland. They have community involvement day where there are volunteers involved. The volunteers are located in approximately 41 locations in Multnomah and Washington Counties. For instance, Nike employees have devoted up to five hours of their time to assist the community in a day thus totaling to averagely 4,500 volunteer hours which then translates to more than $77,000 volunteer time. Additionally there is internalization or managing of externalities as a core characteristic. Usually, the externalities refer to both the positive and negative side impacts of certain behavior which ultimately are borne by other individuals though they are not taken into consideration the decision making process of the firm. Additionally, the effects are often ignored in the inclusion of market price for both the goods and services. One such example of an externality is pollution given that the cost associated with the action of the manufacturer is borne by the locals. Enforcing certain regulations makes the firms to ensure that there is internalization of the various externalities cost like fines imposed on actions like pollution though CSR gives a more representative approach to the management of externalities (Husted & Allen, 2006). An example is the case of Nike where they have invested in clean form of technology to prevent pollution occurrence. In most instances, the CSR activities deals with externalities like the management of human rights violation among the workers. For instance, Nike checks on its production plan and ensures that there is reduced levels of toxic emissions. Also, there is the multiple stakeholder orientation as a core characteristic where through CSR the interests and impacts are assessed among different stakeholders and shareholders (Polonsky & Jevons, 2009). Usually, most firms have responsibility to the shareholders but given that these firms are known to impact on different individuals, then the aspect of stakeholders sets in. Therefore, the corporates have a role to play to its stakeholders (Porter & Kramer, 2006).The other core characteristic entails the alignment of social and economic responsibilities. Thus, the corporate must ensure that it delicately balances the art of achieving profitability and at the same time resolving conflicts. Even though there are differences that have been witnessed the key thing is that there is need of having enlightened self-interest that allows for proper integration of both the social and economic responsibilities. Further, there is the characteristic of practices and values. Different companies have different practices within their businesses and strategies which deal with the social issues as well as philosophy or certain sets of values that underpins the practices. However, the main aspect that has not been properly defined is the value dimension part of it (Feng, 2014). Lastly, there is the beyond philanthropy characteristic. In most of the corporates, CSR is mainly about the philanthropy however most scholars tend to allude that CSR goes beyond the normal philanthropy and the various projects that they execute in the community but concerns also the manner in which the whole firm operations impact on the society. Therefore, CSR should be devised in a manner that it forms part of the day-to-day business operationsinstead of being left just to be a discretionary activity. Therefore, in the CSR practitioner world, there has been an attempt to make the business firms have CSR established in the epicenter of their businesses as opposed to them just being bolted on. Nike indeed has gone beyond the normal philanthropic activities where they make certain contributions like them contributing approximately 3% of the pre-tax profits every year. There are also grants, cash and charities that Nike gives to different non-profit organizations and community business partners. For instance the fiscal year ended May 31, 2014 accounted for $37.1 million contributions from the company. Stakeholder management Nike holds their stakeholder high and ensures that their stakeholders both internally and externally. Nike spends a great amount of their resources both financially and in terms of time in order to fulfill their ethical duty and get to high standards of their responsibility to the stakeholders. Therefore, the commitment of Nike has indeed made it a good corporate citizen making it to be named 10thBest Corporate Citizen by Corporate Responsibility Magazine in 2011. Going through the motto of Nike, it is one that was established on a handshake thus this is signifying that the company is to be built on trust, teamwork, honesty and mutual respect with it partners. A look at the code of conduct, the commitment of Nike to its stakeholders is evident. Nike states that they encourage respect of the rights of all individuals including their employees. They respect and encourage the art of collective bargaining and free association. Further, their commitment on their surrounding is evident where they say that by all means they seek to minimize environmental impacts through provision of safe and healthy work environment as well as promote the health of and the well-being of the employees. Nike in their view perceives all the stakeholders as part of their success and sustainability in business. () defines a stakeholder as a member of a group who is integral to the existence of a company through the support that they give. Thus, a stakeholder can be viewed as a group with vested interest in the operations of a firm. In their code of conduct, there are different stakeholders who are mentioned and they include the management, employees and the environment. Thus, through the three, Nike’s operations continue worldwide. Both the community and the environment forms the external stakeholders that are important to Nike. One of the goals of Nike is to ensure minimal impact on the environment. Nike is part and parcel of Climate Savers an alliance that they are in with the World Wildlife Fund as well as other corporations as they show their solidarity on the action on climate change. Additionally, the company is committed to support a future of new energy at the local levels and global levels. Nike has received a number of accolades and recognition in climate change with one such being the World Wildlife Fund in 2007 that was given in 2007 for the reduction of the annual carbon emissions below the levels that it had in 1998. The commitment of the company is evident at both the local and global levels. Nike at its center shows a passion for sport and a huge role sport plays in life owing to the brands that it promotes. Through sport, Nike has been able to challenge the community bottlenecks like racism and further has used its corporate platform to build teamwork, leadership and resolve conflicts through enhancing of the life skills. Nike thus, seeks to impact the world through sports as it understands that inclusion of the youth in the sport help them to fully participate in both the social and economic opportunities that are presented to them. As part of appreciating the various stakeholders, Nike held the Homeless World Cup in Melbourne Australia. Further Nike is working with African communities to fight the HIV/AIDS menace. This has made Nike to be voted the coolest brand in South Africa as it played a role in ensuring that individuals know their HIV status and even practice safe sex. The commitment and appreciation of Nike towards the external stakeholders is even seen when they come up with a slogan, “Life is not a game, wear condom”. Equally, the internal stakeholders are important to Nike in the same manner as the external stakeholders. The most important stakeholders to Nike are the employees. There is no single product model, no single manager, or even a celebrity that Nike values like the unique and creative way in which their employees work together. This is further addressed in the codes of ethics of Nike with the safety and health of the employees being prominent. Further, Nike has staffs approximately 100 who are charged with the inspection of the various factories and grade them in order to improve the labor standards. Additionally, Nike allows for the inspection by Fair Labor Association which has ultimately helped in addressing issues that arose like sweatshops. Theories Instrumental Theories In this theory, lots of emphasis and concentration is on the CSR as a strategic tool in order to realize economic progress. Those who support this theory often sees maximization of profits as one of the significant tasks of the company. This is no more as the aspect of productivity and profit maximization is achieved in the case of Nike. The theory acknowledges the interests of shareholders though it does not the interests of the other stakeholders into account. Hence the theory is like a representation of shareholder theory. In Nike, every other facet of this theory is applicable with Nike having as part of its goals to maximize the value of shareholder, put in place the different strategies to realize competitive advantage and even the cause related marketing. Some of the strategies that Nike has put in place to realize competitive advantage are innovation and maintenance of a brand quality. The Political Theories This theories seek to establish the tie between business and society. Usually concerns the business in terms of power and position and the various responsibilities towards the society. Usually there are three main approaches which Nike have had in place to fulfill this theories. The approaches that Nike indeed uses are corporate citizenship, constitutionalism and integrative social contract. Nike acts responsibly within the legal requirements and often has the license to operate. Integrative Theories According to these theories, the existence of corporations largely depend on the society and therefore every corporation must incorporate the social demands of a society in their operations so that they are aligned with the social values. According to the code of conduct of Nike, the company respects the societies where it operates. For instance as part of the South African society, Nike came up with a campaign against HIV/AIDS. Therefore, in line with this theory, it is evident that Nike has responded to one of the social demands and therefore achieved legitimacy, as well as the prestige when voted as the “coolest brand” in South Africa. The Ethical Theories According to this theories, the basis of the arguments is the right thing to do. That is, the morality in the society so as to achieve the general good in the society. Usually, a lot of focus is put on the different requirements ethically which help strengthen the kind of link that exist between companies and the community. Thus through the stakeholder approach, the company is able to define all the persons who are affected by the business so that they get to achieve a win-win situation. The win-win scenario is achieved by value creation to the stakeholders. Usually, Nike is able to identify the interests of the stakeholders in every AGM as they dialogue as well as through meetings. Stakeholder Mapping In stakeholder mapping, a keen interest is given on how each of the stakeholder of the organization influences the organization and how likely it will also do so. Also in mapping, the ability of a given group is looked at to see if it is able to influence the decision making process of Nike. Therefore stakeholders are grouped in certain matrix in accordance to the degree or level of interest as well as the power they hold. The individuals or groups with high power are regarded as the key players and the organization must pay attention to them to ensure that they are fulfilled. Low Power High Low Level of InterestHigh Local Community (Minimal Effort) Suppliers (Keep Informed) Shareholders (Keep Satisfied) Customers (Key Players) In determination of who is placed where, there are four main categories where the stakeholders are placed. The groups include the local community who are deemed as having little power and also fairly less interest levels in the activities of Nike. They might want to be kept abreast with the activities of Nike but Nike seemingly finds the other people worthwhile in the stakeholder map. The other group comprises of those with little power though have higher levels of interest. They include the suppliers and staff as they are keen on the information from the company in terms of the company activities like redundancies that might result in job losses and change of suppliers. Their less power is seen as Nike can easily obtain staff elsewhere on competitive basis and also suppliers can be got easily without much ado. Even though the stakeholders might have high level of interest they are placed in the low level interest section though with higher power. This is because the major things to their concerns are profits, increase in share price and dividends rather than the day to day news of the company. Their power is seen as they own part of the company and are able to vote and attend AGM. Lastly, the high level of interest coupled with high level of power are the customers given that the customers get the business going and with no customers the business cannot exist. Customers are concerned with the products that they are to buy and also show interest in the company. At all costs, Nike must keep their customers happy so that Nike remains competitive, innovative and a market leader. Strategic Approaches used currently in Fulfilling Community Responsibilities Three Domains of CSR The three domain model of CSR is mainly set up and used to make complementary description of CSR. According to Schwartz & Carroll (2003), the model is mainly made of three parts of the social responsibilities which incorporate economic, legal and ethical. According to the domains, economic responsibilities mean that business should be profitable through the overall production as required by the society. Nike is innovative and does all it takes to meet the demands in the apparel industry. On the other hand, legal responsibilities mean that business should operate and be profitable within the legal parameters. Lastly, ethical responsibilities mean that businesses should at all-time engage in activities beyond those that are seen to be legally bound and mandated (DeTienne & Lewis, 2005). A case in point is where Nike treats its employees in fair manner and avoids harm to both the environment and the community. Keenly focusing on Nike it therefore appears that most of the CSR-related activities noted to be taking place mainly focus on people, society or the environment (Schwartz & Carroll, 2003). Therefore, most of these activities are within the ethical domain of the three domains model. Nonetheless it appears that the company emphasized the significance of CSR for economic gain hence it appears that before Nike implements their plan then economic benefits must be so obvious. It appears that emphasis is laid on productivity hence some economic benefits must be there that occurs beyond the ethical ones.Therefore according to Schwartz & Carroll (2003)it appears that CSR in Nike is mainly driven by economic and ethical concerns. Recommendations Nike must continue to enhance its CSR through a number of measures. First, they have to continuously carry out appraisal of their CSR levels and incorporate the CSR to be part of the vision, mission and values of Nike. Additionally, there is need to assign a leadership to the various CSR projects and initiatives as well as investing in a committee that allows for regular monitoring and auditing of the various CSR initiatives (Grayson & Hodges, 2004).There is need to educate the board members and employees on the significance of CSR for them, the organization and as well as the brand value of Nike. In carrying out evaluation of the risk strategies that need to be implemented there is need to include the various social factors and environmental considerations. There is also need of coming up with CSR reward schemes for the company so that individuals who excel in them are rewarded and their efforts recognized. This process ensures that the welfare of the employees are covered and they are also retained in the job market. In order to strongly position the company in the market, the management of Nike should emphasize on corporate marketing strategy by promoting the brand and the different sponsorship agreements. Nike should progressively incorporate environmental issues in its programs. The company should invest in latest technology to ensure that there is indeed minimal impact that its production has on the environment. Should ensure that all its strategies are properly aligned to meet the various needs of the environment that they operate in without any harm. With latest production technology, the company will realize a reduction in carbon emissions thus in the end taking an action on climate change. Conclusion Managing a company of great magnitude like Nike is very challenging given that the management has a duty to satisfy both the shareholders and stakeholders. In order for Nike to remain competitive enough it must be strategic in its undertakings and should have set objectives. Further, CSR plays a significant part and duty in the operations and management of Nike. In order to remain a major brand, Nike has to progressively invest in CSR projects. References Classon, J., & Dahlström, J. (2006). How can CSR affect company performance?: A qualitative study of CSR and its effects. DeTienne, K. B., & Lewis, L. W. (2005). The pragmatic and ethical barriers to corporate social responsibility disclosure: The Nike case. Journal of Business Ethics, 60(4), 359-376. Feng, B. (2014). Study on supply chain management strategies of sports goods company. Advances in Services Science and Services Information Technology (Set), 52, 49. Garriga, E., & Melé, D. (2013). Corporate social responsibility theories: Mapping the territory. In Citation Classics from the Journal of Business Ethics (pp. 69-96). Springer Netherlands. Grayson, D., & Hodges, A. (2004). Corporate social opportunity. Seven Steps to Make Corporate Social Responsibility Work for your Business, 3-15. Husted, B. 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