Corporate Social Responsibility

Assignment No- 2
CSR case study of Nike.

Submitted ByKshitij Lau Kandarp Singh Neha Devi Shruti Agarwal Soham Malik Department- DFT-VI . 3/13/2014

Nike the company

Nike Inc produces footwear, clothing, equipment and accessory products for the sports and athletic market. It is the largest seller of such garments in the world. It sells to approximately 19,000 retail accounts in the US, and then in approximately 140 countries around the world. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. The company manufactures in China, Taiwan, Korea, Mexico as well as in the US and in Italy.

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. 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 Nikes 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 conditions 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.

Problem faced Nike has become one of those global companies targeted by a broad range of campaigning NGOs and journalists as a symbolic representation of the business in society. In Nikes case, the issues are those of human rights and conditions for workers in factories in developing countries. In the face of constant accusations, Nike has developed a considered response, supported by corporate website reporting. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories, aiming for carbon neutrality, and making sports available to young people across the world. The criticism continues, however. A major challenges that still faces Nike is the monitoring of labour conditions in the factories operated by its many overseas suppliers. The company has been commended for its openness in admitting to unacceptable practices, and its challenge now is to eliminate them.

Solutions Provided 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. Nike also contributes to countrys 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. 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 Nikes 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. Key social and environmental issues that could affect companys long term success The majority of Nikes 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 companys 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 Americas 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.

Questions and answers 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, managements time and attention is necessaril y 3

focused on achieving timely and efficient production outcomes and often neglect CSR. 2. Working Condition Extra working hours are also required to meet demands, which result in overtime and poor working conditions in developing countries. 3. Transparency Sub-contractors tends not to be transparent, which result abusive treatment in developing countries. Question 2. Discuss the meaning and implications of the statement by a Nike representative that consumers are not rewarding us for investments in improv ed social performance in supply chains. 1. This statement suggests that those companies who invest their sources on abovestandard compliance will be outperformed by those companies who are less concerned about compliance. 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. 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. 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 Nikes case, the company had managed to create a sustainable system which benefits 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 doesnt believe that external elements could also affect the future of company, and hence affect the internal elements too.

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 ? 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 companys 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 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, its everyones 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.

Reference List: Adidas Group (2013). Our Sustainability Strategy. Retrieved from http://www.adidasgroup.com/en/sustainability/Our_Programme/Our_sustainability_strategy/default.asp 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.

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