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Nike's CSR Challenge

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Suzanne Loh

on 23 August 2013

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Transcript of Nike's CSR Challenge

Nike's CSR Challenge
Summary- Nike's CSR Challenge
In 2005 Nike started disclosing their CSR activities after a couple of years of silence due to legal concerns.
After several audits Nike reported that a large percentage of their overseas factories have their employees working in terrible environments for low pay and in unsanitary health conditions.
1.This statement suggests that those companies who invest their sources on “above-standard compliance” will be outperformed by those companies who are less concerned about compliance.
Question 1: Discuss the challenges regarding corporate social responsibility that companies in the apparel industry face in their supply chain around the world.

1. Lack of Support
Suppliers lacks support from buyers and retailers. Furthermore, suppliers have to bear all of the CSR implementation costs and sometimes it will be too costly for SMEs.
In developing countries, apparel manufacturers lack trained personal, information on CSR implementation and benefits and insufficient infrastructures for initiating CSR.

Due to tight deadlines, management’s time and attention is necessarily focused on achieving timely and efficient production outcomes and often neglect CSR.
Question 2. Discuss the meaning and implications of the statement by a Nike representative that “consumers are not rewarding us for investments in improved social performance in supply chains.”
2. Therefore, companies who concerns about compliance have to either reduce their profit margin or lose in market share if they charge extra for improved social performance.
3. In the case of Nike, this implies that the company is not willing to reduce its profit margin, as well as lose market share due to an extra charge Nike impose to customer.

In respond to this, the company make a change in systemic change.

In this context, company is expected to create an ethical system which not only benefits business but also benefit social group outside the companies, such as citizens living near factory. Social responsibility itself can be done through training program to create more employment to social groups, creating awareness of health and safety, campaign on green production, and donation to the needy. Example: MFA
In regard to Nike’s case, the company had managed to create a sustainable system which benefit every side of parties by adopting open-system because Nike believes that profitability is not supposed to be seen as an end, but rather a signal to the society that Nike is succeeding its mission of providing something people want. Previously, when Nike used closed-system approach, company might not be able to create sustainable environment, since the system itself is isolated to external elements, and only relied on internal structure, since the company doesn’t believe that external elements could also affect the future of company, and hence affect the internal elements too.
Question 3: What does it mean to have an industry open-system approach to social responsibility? What parties are involved? Who are the stakeholders?
Open-system approach refers to a system that's not only concerning with internal part of companies-such as employees, manager, material, equipment and production, and labors, but also all elements, which includes environment-such as competitor, suppliers, distributors and governmental regulator, as well as citizenship and its internal elements.
Furthermore, open system serves as a model of business activity, in which the company realise that input is derived from external environment and output are placed into the same environment.

In regard to social responsibility, a company is enabled to take part of social improvement since the company consider its external environment.
What parties are involved?
Basically, everyone is involved in this case, ranging from government, to company, and even customers/buyers, since they generate profits to the company, and have a strong impact on the future of one company. Government too takes place here, a company must fulfill compliance and require company to be ethical.

Who are the stakeholder
Again everyone,
1. investor – company expected to work under interest of investors, so it determines the future of company
2. Lender- could refer to financial sources when purchasing raw material, and expanding market, example can be bank,
3. Employee- because performance of one company is determined by how well the performance of an employees,
4. Consumer – have a strong drive, because investor have interest on consumer, and they could act as profit generating parties, also determine the future of company, refers to public
5. NGO- take part to evaluate, criticize, and even award a company based on company’s performance, they could affect public perception on a particular company- bad or good company
6. Debtors – refers to other merchandise, or clients
7. Suppliers – supply raw material, must have good relationship. Because good product comes from good material too
8. Government – legal party that a company must comply with.

Question 4: What is meant by "leadership beyond borders"?
This refers to people who could foresee across borders created by others, such as the borders of their job, and reach across such border to engage other in dialogue and action to address systemic problem. This could refer to transcending leadership. The transcendenting leader is concerned for his or her followers and through motivation, empowers them. The transcendental leader would be reflective, values centered, global in perspective and a facilitator of dialog. Transcendent leadership provides a revolutionary frame of viewing human interaction in organizational settings.This leadership is unique,
Real life example could be Gandhi and Monnet, who have given hopes whose life and personality were enhanced in the process. This kind of leader is only few in existence
Transcendent leadership offers us a metaphor to help Nike move more closely to a world where human talents and energies will be maximized for the betterment of all – personally, organizationally, and globally (Gardiner, 2006).
Question 6: Research of Nike's CSR actions since this time frame and why it has earned the reputation as one of the world's foremost organisations in sustainability.
When the company adopted open-system approach, Nike had believed that the future of the company will be dependent on every element – internal and external. They believe that good society will bring good profitability and , thus, it would contribute to sustainability. Nike managed to create a green life cycle, where Nike had managed to eliminate waste in production and harmful substances, and ensure that all their products are recyclable and re-usable (refer to award).
Nike also contributes to country’s economy as Nike involved in MFA, in which nike steps in to stimulate the economy of developing countries through textile industry. Nike is also active in promoting green campaign through its production, labour right and contribute in FLA (Fair Labour Association). Nike too establish Nike Foundation to help those in needy
For example, 25% and 50% of the factories in the South Asian region restrict access to toilets and drinking water during the working day. The same percentage of factories denies workers at least one day off in seven. More than half of Nike’s factories employees’ works more than 60 hours per week and in up to 25% of these factories workers refusing overtime were punished.
Therefore, Nike adopted a new strategy and approach to correct these problems. They attempted to take responsibility to effect positive systematic changes in working condition’s with several branches of their industry. Nike plans to reshape the way customers, and management style that is leaders beyond borders meaning leaders reach out to more than just their professional role and engage people on shared goals. They knew they had to reach to wider issue to make the huge difference.
7. How can you improve company’s CSR in the future?
A continuous effort to eliminate PVC (Polyvinyl chloride) in its products for example, the “Reuse a Shoe’ programme which, since its inception, has enabled some 13 million pairs of athletic shoes to be recycled.
Other than that, is working with organic cotton farmers to create a larger market for their cotton such as Nike’s use of organic cotton has been climbing each year since 1997, and it has a goal of 3% organic cotton use in every unit of the company by 2010.
Lastly is to reduce emissions at factories worldwide and encouraging the adoption of environmental management systems in each plant.

8. What are the key social and environmental issues that could affect company’s long term success?
The majority of Nike’s manufacturing takes place in developing countries, where its suppliers employ more than 500,000 workers. For a large multinational company with so many interests abroad, it is not always easy to be transparent. However, Nike has launched its ‘Transparency 101’ program, which is designed to ensure that the public is aware of everything the company is doing. Transparency 101 is monitoring factories in each country where Nike operates and ensuring that the practices in each are in line with its code of conduct.
The company’s success in these areas since it endorsed the principles has been recognized by various groups. For example, Fortune Magazine ranked Nike number one in the apparel industry on its annual list of “America’s Most Admired Companies’. Similarly, the Far Eastern Economic Review has ranked Nike among its top-ten best multinational corporations in Asia for corporate leadership and issue-specific leadership.
9. What are other competitors doing on CSR and how are they benefiting from this approach?
- Integrating environmental thinking and acting into their daily operations and developing smarter solutions – this is what Adidas want their environmental strategy to achieve
- Workers in their suppliers’ factories play a central role in their programme. It was concern for their welfare and rights that led Adidas to write their Workplace Standards and to establish a compliance management system covering all brands of the adidas Group
- They seek feedback from internal and external stakeholders by carefully listening, responding and engaging with them. They do not operate in isolation.
- They strive to create a working environment that promotes team spirit, passion, engagement and achievement. Because they believe that their success are crucial to success.
- Next, is by getting involved in in aid or community programmes. As a multinational enterprise, the Adidas Group is represented in many countries around the world and its business operations impact people’s lives in those communities.
- Benefits they get from by engaging in CSR activities are increase in customers, greater support from the government and communities they operate in and their employees will be more motivated and less pressure from pressure groups such as environmental protection agencies and other NGO’s.
3. Transparency
Sub-contractors tends not to be transparent, which result abusive treatment in developing countries.
2. Working Condition
Extra working hours are also required to meet demands, which result in overtime and poor working conditions in developing countries.

Do you think that workers that restrict access to toilets and drinking water during working hours is more efficient and help to minimise labor costs?
a) True b) False
2. Why global companies chosen Vietnam as location to outsource their production?
a) Low labour cost
b) Market for end product
c) Skilled workers
d) Strategic location for export
e) All of the above

3. What is the benefit of CSR that can be gain by companies?
a) Higher level of profit
b) Improved company/brand image
c) Increased cost of production
d) All of the above

4. What increases the popularity of CSR?
a) Advertising purpose
b) Globalization
c) International trade
Reference List:
Adidas Group (2013). Our Sustainability Strategy. Retrieved from http://www.adidas-group.com/en/sustainability/Our_Programme/Our_sustainability_strategy/default.aspx

International Institute for Sustainable Development, (2013). Nike. Retrieved from http://www.iisd.org/business/viewcasestudy.aspx?id=81

Megha, G. (2012). Corporate Social Responsibility in the Global Apparel Industry: An Exploration of Indian Manufacturers' Perceptions. Retrieved from http://libres.uncg.edu/ir/uncg/f/Gupta_uncg_0154D_11000.pdf

N. a. (n.d.). Nike's CSR Challenge, The Global Manager's Environment.
Question 5: Is it possible to have "a compatibility of profits with people and planet"? Whose responsibility is it to achieve that state?
No! That is an idea of socialism/communism and it does not work.
Basically, it’s everyone’s responsibility to care for each other and everything. It is a culture based on cooperation not competition with not just humans, but also everything that lives and flows on the planet including other animals and resources. Everyone and everything takes part. This is also a socialist ideal ecosystem, but it must mix with other ideals or it will fall short. Some people will work hard toward the needs of others and the planet. While others will exploit. So it must be mixed with areas of competition in order to maintain a balance of cooperation with competition.
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