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Nike's CSR Challenges

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ferry hotama

on 21 August 2013

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Transcript of Nike's CSR Challenges

Nike's CSR Challenges
Question 5. Is it possible to have “a compatibility of profits with people and planet”? Whose responsible is it to achieve that state?

“People, planet and profit” briefly describes the triple bottom lines and the goal of sustainability

People - fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business
Planet -  refers to sustainable environmental practices
Profit - the economic value gain by the organization from the sales


Summary
Headquarters at Oregon
Ranked 136th in Fortune 500 companies
One of the world’s largest suppliers of athletic shoes and apparel
Major manufacturer of sports equipment
As of 2012, employed more than 44,000 employees worldwide
Brand alone, valued at $10.7 Billion, making it the most valuable brand among sports business
Nike sponsors many high-profile athletes, and sports teams around the world, with the highly recognized trademarks of “Just Do It” and the “Swoosh” logo
Financial Report
Abusive treatment in factories of subsidiaries:
25-50% of factories:
restricted access to toilets/drinking water
7 days straight of work, no days off
paid below the legal minimum wage
60+ hrs/wk, consequences if OT was refused
Nike has invested more in improving conditions than many of its competitors

Widespread Problems in Asian Factories
Nike’s Response
May 2005. Hannah Jones, Nike VP of Corporate Responsibility claimed “consumers are not rewarding [Nike]” for investments in improved social performance in supply chains
Trying to raise labor standards and working conditions within industry
Work towards accountability of all
Involve other related organizations


Nike CSR challenge highlighted the difficulty of bringing changes to a non-centralized company and changing the frameworks of business
Challenge of reforming the way business is done
Leadership was traditionally seen as guiding employees towards goal of company
What is needed now, is to develop a more open form of leadership that calls for collaboration among mutually dependant parties, in order to solve systematic problems
Reshape the signals being given out by its supply chains group to itself and competitors
Maintain good societal relations to benefit both society and profitability of company
Henceforth, companies can operate in a sustainable and just way, which is also financially viable
Challenge of leadership beyond borders, to be able to see across borders of their jobs and reach across

Q1. 6 Challenges related to CSR
1. Lack of awareness and benefits of CSR
Many companies have little knowledge of CSR
In some cases, companies have greater understanding of CSR but lack of understanding on how to implement a CSR program
Ignorant of the benefits that can be gained from good CSR practice
2. Lack of Human Resources
Many companies claim to have lack of manpower to assign to CSR practices
In fact, many management systems are highly unproductive, inefficient and wasteful of human resources
3. Mixed Messages to Suppliers
Suppliers often find it difficult to determine company’s true priorities
Company demands to adhere to CSR policies, but at the same time, demand delivery on lower prices and shorter lead times

Cont.
4. Costs
Companies have to overcome challenge of tighter budgets from rising costs of materials, energy, wages
Delay budget for CSR initiatives
5. Over emphasis on inspection and cheating
Management and stakeholders have perception that the business will earn lesser profits when adhering to codes of conduct and regulations
Many companies are guilty of not complying with codes of conduct
6. Inefficiencies and confusion due to conflicting buyer requirements
Estimated 1,000 buyer codes existed as of 2003
Overlapping codes generate inefficiencies and confusion as suppliers become preoccupied with meeting different codes of conduct
Major concern for business owners due to competing codes of conduct from different customers, resulting in higher costs

Question 2
Discuss the meaning and implications of the statement by a Nike representative that “consumers are not rewarding us for investment in improved social performance in supply chains.”
What did Nike do?
Shifted focus of strategy
Worked with parties beyond their own company
Developed a consistent, defined and acceptable set of standards and practices in hopes of achieving interdependence

All business operating within the particular industry, including members of their respective supply chains.

The parties involved
Who are Nike’s Stakeholders?
Groups of people / groups/ parties who are affected by or who can affect te actions of business

Question 4: What is meant by leadership beyond borders?
Recently emerged concept in response to new skills required to deal with the ever-expanding complexities arising from the diversifying and increasingly interconnected world
Described as ‘people who can see across borders created by others, such as the borders of their job and reach such boarders to engage others in dialogue and action to address systemic problems
Question 3.
What does it mean to have an industry open-system approach to social responsibility? What parties are involved? Who are the stakeholders?
International social responsibility
Open-system approach:
“Business must balance their desire for profit against the needs and desires of the society within which they operate”
Industry-wide level
Nike's Role
Learned to operate with an expanded definition of self-interest that includes the greater good
Investing in what people care about
Drive change within the industry and with consumers
Nike’s experience has concluded that current societal outlines for business are not making compatibility of profits with people and planet a reality
Some also argued that it is an ideal of socialism/communism and it does not work
It is possible to have a compatibility of profits with people and planets by having a better structure and framework
It is the responsibility of everyone to achieve that state
Organizations whose leaders allow the compatibility of profit, people, and planet to co-exist are the ones that will flourish and succeed
Nike’s CSR activities:
Nike’s North Star - Collaborating with The Natural Step to develop long – term sustainability aim

Q6. Research Nike’s CSR actions since this time frame and why it has earned the reputation as one of the world’s foremost organizations in sustainability
North Star is grounded in addressing sustainability at the very core of Nike’s business, beginning with design and extend to across everything they do
Nike Considered Design
Creates performance innovation products that minimize environmental impact by reducing waste throughout the design and development process, using environmentally preferred materials and eliminating toxics
Nike School Innovation Fund (NSIF)
Nike are leveraging employees’ skills as well as company commitment through NSIF, to which complements and builds funding and support for public schools in backward communities
Lender
Investor
Government
Consumers
NGOs
Employees
Ethical Trading Initiative (ETI) conference in 2005
Explanation of the reason why premium brands are in a lonely leadership position
The statement requires context


Nike, a profit driven organization
What is social performance?
Social performance in Nike's supply chains
- making the goals and mission of Nike's supply chain to be put into practice in line
the normative societal values

E.g. Basic employment rights

Maximize profits by maximizing sales and minimizing costs.
Led to the incidents at the Asian factories
And…

Therefore
The statement meant:

- to maintain a standard of social performance directly is antithetical to the company's main goal and interest i.e. profits.

- Because…

2 Facts of the consumers
1. no consumers perceive added value in any product or brand because of the company's investment in social performance

2. when a company is seen to have neglected in investing in improving social performance, it often receives treatment from the consumer such as boycott. 

Implication
in reaction, to the consumer
to explore changes in a more systemic manner, where the changes are thorough throughout the supply chains
seeking good societal relations with the consumers
often merely about influencing the consumer's perception by the actions taken by Nike.
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