CSR policies and practices at Nike

Chapter One: Project Introduction

Corporate Social Responsibility is fast becoming an integral part of the corporate world. It has been observed in recent times that the society’s expectations on businesses is slowly taking center stage and businesses are embracing various initiatives to comply with these expectations through Corporate Social Responsibility. This project adopts to study the activities of Nike which is the leading manufacturer and distributor of sport wear and equipment. This project seeks to unveil an answer to the question: does Nike comply with its Corporate Social Responsibility? Nike has faced adverse negative publicity in the past regarding some of its labor practices. This question needs to be objectively answered to enable us determine whether the adverse publicity has been truly reflecting on the philosophy and practice of Nike as a whole. To be able to fully answer this question, this paper will seek to create an understanding of Nike as an organization: its scope, vision, and an understanding of the business context in which it is operating. It will further delve into understanding of Corporate Social Responsibility as a whole: its meaning, importance, and influence of organizations’ practices and structure. The project will finally seek to review Nike’s Corporate Social Responsibility Policy, seek to identify its activities that are in line with this policy, and identify its unethical practices if any. For the purposes of this project, the letters CSR have been used in place of Corporate Social Responsibility.

Chapter Two: Corporate overview

2.1  Chapter Introduction

This section seeks to create a basic understanding of the company. This section seeks the answer to the question of what Nike is, what is their scale of operation, what is their business context, and whether this context has a bearing on its corporate social responsibility policy. These questions are crucial because an understanding of its scale of operation and environment helps understand its policy on social corporate responsibility.

2.2  Company profile

Nike is one of the world’s major distributors of sports wear and equipment with its operations spanning across the world’s six continents in about 160 countries (Nikebiz, 2011). It was founded in 1972 with the goal of using innovative thinking in product development focused on enabling athletes with various levels of ability to maximize their potential (Nikebiz, 2011). Nike maintains a strong research and development team and is constantly on the look out to create new products needed in the market. By so doing, Nike is able to create business opportunities that enable them create value for their shareholders. In 2010 fiscal year, Nike was able to turn over $ 19 billion in revenue with $ 2.5 billion being the contribution from their wholly-owned affiliates (Nikebiz, 2011). These affiliates are always reported as separate businesses and include Cole Han which mainly produces luxury wear; Nike Golf which distributes golf wear and equipment; Converse Inc which mainly produces footwear; Hurley International LLC which is known for its surf equipment; and Umbro Ltd which tends to focus mainly on soccer wear and equipment.

2.3  Business context

Nike’s operations cover more than over 160 countries in six continents.  Nike is faced with competition both on the global scale and at the country levels. Brands such as Reebok and Adidas also command a global presence. To keep ahead of the competition, Nike uses innovation as its tool of generating higher levels of satisfaction for their target customers. The presence of these and other competitors limits the ability of Nike to dictate prices and they therefore have had to resort to strategic outsourcing in a bid to keep their costs in check (Freeman, Velamuri, & Moriarty, 2006).). The population in the developed countries, especially the United States still forms the highest contributors to the company’s total revenue. This market segment tends to look at not only the suitability of the products, but also the extent to which the companies embrace their social responsibility. This includes their ethical code, their impact on the environment, and their treatment of employees among others. Where a company is perceived not to be socially responsible, it may have adverse effects on their sales volumes and fiscal performance. This is beside the cost of legal suits that may arise from time to time.

2.4  Chapter conclusion

Nike is arguably the leading distributor of sports wear and sports equipment in the word with its operations covering about 160 countries. It faces competition from other strong brands such as Adidas and Reebok. Nike serves a market that is highly sensitive to organization’s level of social responsibility and this fact has been the motivation for Nike to step up its effort to play its role in Corporate Social Responsibility

Chapter Three: Corporate Social Responsibility (CSR) and Nike’s company policy on CSR

3.1  Chapter Introduction

This chapter seeks a basic understanding on Corporate Social Responsibility. It answers the question what is CSR, how important is CSR to corporate, how it influences corporate practices, and what is Nike policy on CSR. These questions are important when trying to understand the general dynamics of CSR and why the company needs to embrace it for its survival. Knowledge of market trends in relation to Corporate Social Responsibility is crucial when trying to understand the policies and practices of individual organizations.

3.2  Introduction to CSR

Corporate Social Responsibility involves the organization’s commitment to ethical behavior and to the improvement of the quality of life to their workforce, local community, and the whole society (Szekely and Knirsch, 2005). It involves the realignment of company policies to comply with the expectations of stakeholders. These stakeholders may include employees, regulators, special interest groups, suppliers, and the whole society.  Issues commonly in question may include the provision of adequate wages to employees where at the very least the minimum wage is paid; provision of clean and healthy working environment; company efforts to minimize waste and negative impact to the environment; and participation in social responsibility programs aimed at improving the welfare of the society (Freeman, Velamuri, & Moriarty, 2006). Corporate Social Responsibility is voluntary and normally exceeds the regulatory requirements by the governments in which the companies operate.

3.3  Importance of CSR to organizations

To justify the commitment of organizations, it is important to look into what these organizations stand to gain by embracing CSR. CSR is increasingly turning out as a tool of survival in the turbulent competitive global business environment. Recent research shows that consumers are increasingly sensitive about the level of social responsibility embraced by the organizations they buy their goods from. The companies that are seen to contribute more to the welfare of the society tend to gain more support from the consumers who generally prefer to buy their products. CSR hence leads to higher revenues in many cases (Szekely and Knirsch, 2005). The question of attraction and retention of competent and highly innovative employees also comes in when determining the importance of CSR. Employees are generally known to prefer working for companies that are highly regarded in the society and whose practices at par with stakeholder expectations (Stanford Graduate School of Business, 1998). With good CSR, organizations can attract quality employees that will push innovation and productivity higher leading to improved bottom lines. Employee motivation also soars when they realize that the organization cares about their welfare and that of the society in which they live (Stanford Graduate School of Business, 1998).

Organizations with good CSR practices are also able to raise the capital needed for new ventures with relative ease as the investors tend to trust them more easily. CSR therefore proves important by improving chances of expansion to the organizations. Perhaps the most compelling reason why many companies engage in CSR is the likely backlash that could be allocated to them by failing to embrace the CSR. Special interest groups and activists have in recent times stepped up their investigation of business practices in a bid to ensure business comply with a certain minimum in good corporate practices especially as pertains to the environment and employee welfare. Companies that are found wanting would often be subjected to adverse negative publicity that could potentially drive them under. This is because of initiatives such as boycott campaigns against such companies and a general negative feeling towards the company’s products by the consumers.

3.4  The influence of CSR on corporate practices

Having recognized the importance of CSR corporate organizations are faced with the challenge of realigning their philosophies and practices to suit good CSR practices. The structures for most companies have also been realigned to ensure the success of their CSR programs. Most organizations have formed executive level teams that function across departments to design and implement CSR initiatives (Boston College Center for Corporate Citizenship, 2010). In 2008, about 18% of companies surveyed had such teams. This number went up in 2010 to 31% (Boston College Center for Corporate Citizenship, 2010). Many more companies have established an office, mostly at executive level to attend to matters of CSR. About 27% of companies surveyed had such a position and the number had risen to 44% in 2010 (Boston College Center for Corporate Citizenship, 2010). Emphasis on CSR has also been able to influence the production processes of organizations with an aim to reduce the amount of waste that would otherwise impact negatively on the environment. Introduction of recycling plants to reuse company wastes is one famous example. The implications on the emphasis on employee safety and welfare also have a bearing on the company’s investment on safety equipment and in most cases, a significantly higher wage expense (Freeman, Velamuri, & Moriarty, 2006).

3.5  Chapter Conclusion

With the increasing sensitivity of consumers to organizations’ social responsibility ratings, organizations have been motivated to invest more into good CSR practices. Consumers are known to be generally more supportive of companies with good CSR practices. More and more companies are therefore paying more attention to articulation of their CSR policies and accordingly changing company structure and practices to suit such policies.

Chapter Four: Company practices as compared to its CSR policy

4.1              Chapter Introduction

This chapter delves deeper into the philosophy observed by Nike and seeks to establish the level of consistency between their claims and their practices. It seeks to answer the questions: what is Nike’s CSR policy, and do the actions and practices of Nike conform to good CSR and its CSR policy? These questions are important in order to analyze what level of priority Nike accords to CSR. The chapter will also shed light on various ethical issues that have portrayed Nike negatively in the public front and how they dealt with the challenges.  

4.2              Nike’s Policy on CSR

Nike was a subject of heated criticisms in the 1990s because of its Asian labor practices. The negative publicity from these criticisms was a threat to its market leadership and they countered this by trying to refine their CSR policy. They established an executive level multifunctional team with the responsibility to drive compliance with CSR and environmental standards (Nike Inc, 2009). As a result, Nike was able to refine its production processes to cut waste and reduce environmental degradation.  Their attention was also drawn to the workers and their responsibility to these workers. They therefore designed a supplier’s code of conduct for all their suppliers in order to ensure the values they hold dear including provision of healthy working environments are adhered to. Nike has embraced a CSR policy that it observes and tries to impress on their suppliers as well to observe.

Nike has a well defined code of ethics which it ensures is internalized and practiced by their employees and have been advocating that the ethics benchmarks be observed by their suppliers as well (Nike Inc, 2009). Nike’s efforts to reduce waste to conserve the environment saw them win the Gigaton Award which is an award given to organizations to recognize their efforts in reducing carbon emission and making a difference in climate change. In a nutshell, Nike strives to ensure sustainable production that causes least negative impact on the environment while ensuring the well being and safety of their employees. Nike also embraces social responsibility and engages in community giving in order to improve the welfare of the communities around them. Nike has a global workforce of about 100 employees who are fully dedicated to fueling innovation and transition of company policies and practices to be in line with their Corporate Social Responsibility goals (CSR International, 2010).

4.3              Company practices consistent with their CSR Policy

4.3.1        Environmental conservation

Nike has been on the forefront in innovating products whose does not adversely affect the environment. An example of such an innovation is the Environmental Apparel Design Tool which is a software based tool that enables the organization to create products while keeping environmental degradation to a minimum (CSR Newswire, 2010). This tool was used in create the 2010 world cup jerseys using recycled polyester hence using up a significant portion of plastic bottles that would have ended up as garbage.  The used bottles were obtained from Taiwan and Japan. Nike has made this discovery even more valuable through its decision to outsource it to other apparel manufacturers hence creating an even greater impact on environmental conservation. Nike also launched a Zoom MVP Trash Talk in 2009 (CSR Newswire, 2010). This is a hoop shoe made using scrap materials. The shoe packaging is also fully made from recycled fiber. The upper part is made of leather and synthetic leather waste. The outsole a type of rubber that reduces toxics, while the laces comprise recycled polyester. The development of this shoe underscores the commitment of Nike to environmental conservation.  Nike is also known to carry out its business while endeavoring to minimize the amount of energy used in its factories and in the contracted factories.

In 2008, Nike developed an energy efficiency program with the goal of reducing the energy consumption levels (CSR Newswire, 2010). The efficiency program would be used across its contracted factories to identify ways in which the energy consumption can be reduced and conservation efforts implemented. Nike has also been at the forefront in controlling the amount of their worn out products that end up as landfill. In 2001, Nike launched a program dubbed ‘collect a shoe’ in partnership with various boys clubs across America. The boys would go out in the neighborhood and collect all worn out Nike shoes and in return, Nike would reward them by building for them a basketball court. This initiative further underscores Nike’s commitment to sustainable environmental conservation.  

4.3.2        Workers welfare programs

Nike has also been able to demonstrate its concern for the welfare of their workers, both present and past. A case in point is the recent partnership between Nike and CGT (the Central General de Trabajadores de Honduras) where they agreed to support the workers who had been affected by the closure of Hugger and Vision Tex factories which are contracted by Nike. Nike made a contribution of $ 1.5 million to a workers’ relief fund to be administered to the workers (CSR Newswire, 2010). In addition, Nike undertook to prioritize hiring these former workers in their other ventures as well as taking them through vocational training programs. Nike also undertook to cover their health insurance costs for one year or until they found new employment opportunities elsewhere. The provision of healthy working environments coupled with the good treatment accorded the employees has made Nike feature as among the best companies to work for as exhibited in a survey by Fortune magazine. Nike moved 31 positions from its 2006 ranking to be at position 69 in 2007. Its culture and work place facilities were the two most significant factors that lead to its improved ranking (Fortune, 2008)

4.3.3        Awareness Programs

Nike has also taken the lead in global awareness campaigns in such areas as fighting cancer. Nike entered into a partnership with LIVESTRONG to promote the distribution of their products in order to scale up the fight against cancer (CSR Newswire, 2010). Nike has also created Nike LIVESTRONG collection which consisting various footwear and apparel where users would be able to show their solidarity with the fight against cancer.  Nike has also been participating in awareness programs that are aimed at highlighting the importance of physical education in schools and other institutions. Physical inactivity is known to be one of the main factors that lead to obesity, which in turn poses various health risks to the youth. By participating in these initiatives, Nike makes its contribution towards creation of an active and healthy society. These initiatives were also aimed at training the physical education teachers to enable them offer effective physical education lessons to the students.

4.3.4        Empowerment programs

Nike has recently entered into a partnership with Doernbecher hospital with the goal of empowering their young patients where Nike staff members are paired with the young patients to train them in design (CSR Newswire, 2010). The resultant collections generate revenues which are then used to finance the hospital. These funds help treat uninsured patients, buy better medical equipment, and support advanced pediatric research.  Young patients involved range between 11 and 14 years old and the program is estimated to have generated about $ 2 million for the hospital so far. Nike has also through the Nike foundation been instrumental in empowering adolescent girls in Liberia in collaboration with the World Bank (CSR Newswire, 2010). The partnership sought to provide training that would equip these girls with the technical skills necessary for their economic empowerment. The contribution of Nike to the society in Liberia would be expected to be magnified once the girls become economically productive and gain the ability to support their families.

The Nike Foundation has also entered into partnership with the Novo foundation in an effort to boost the economies in the developing world through the empowerment of the adolescent girls. Nike has already contributed over $ 100 million for this initiative (CSR Newswire, 2010). This initiative was also aimed at saving girls from vicious poverty cycles that would see girls forced into early marriages and with no economic means to support themselves. Nike also involved themselves promotion of innovation in schools especially in public schools. This is as evidenced through the creation in 2007 of a Nike School Innovation Fund. This was created to help schools provide quality education to students hence making them grow into responsible and productive members of the society.

4.3.5        Community development through Sport

Nike has in many occasions created opportunities for development of sport in various communities. A case example is Nike’s launch of the N7 collection which was launched in a bid to promote sport development in the Native American communities. Parts of the profits from the sale of the kits are channeled to a fund (N7 fund) which supports youth sports in these communities. Nike has also been establishing growth opportunities for women and youth as evidenced by their introduction of a community store in New Orleans where they established an annual grant program (Nike Inc, 2009). This program aims at supporting community based programs that engage developing sport opportunities for women and the youth. The development of these initiatives has the twin effect of sharpening the athletes’ skills and diverting the vibrant youth into constructive sporting activities.  Nike has also, through Jordan Brand, been involved in motivating teachers in public schools to offer more dedicated education to the economically disadvantaged students who are the main population in those schools. The award recognizes teachers that offer dedication and show absolute commitment to their students’ education. This initiative should be hailed as the sincere commitment of teachers is crucial in ensuring students are well equipped to be of greater service to the society as a whole. Nike also funded various nonprofit organizations within different American communities to a tune of $ 100,000 in 2005 to enable them promote youth activity in a bid to improve their physical health (CSR Newswire, 2010).

4.3.6        Community Support

Through its partnership with the United Nations High Commission for Refugees UNHCR, Nike ably participated in a campaign that was created to raise awareness and resources for Refugees. These resources would be used to provide education and sports opportunities for the refugees. Sports are hailed as an effective way of alleviating the trauma and stress that many refugees face after losing their homes. They also crucial in developing life skills and leadership skills for young refugees. By participating in this program, Nike demonstrated their concern for the general welfare of the society. Initiatives such as donation of funds to facilitate training of child athletes have also seen Nike’s CSR taken a step higher. In 2007, Nike donated $ 175,000 to create a special Olympic games that would offer youth with intellectual disabilities knowhow of certain sports and enable them exposure to an Olympic experience (Nike Inc, 2009). This event was a one-day clinic and entailed skills development and sports competitions. It also entailed various activities for the families of youth with disabilities.

Nike has also been at the forefront in establishing a physical education program for preschool children with a program called Head start. This program was aimed at encouraging children to embrace physical activities at an early age and has been hailed as one of America’s most successful educational program for early childhood. This came one year after Nike had launched an after school sports program where school going children could engage in various sporting activities after school. These activities would be conducted at various recreational facilities and boys and girls clubs. The importance of physical exercise in a person’s general health cannot be overemphasized and it is for the good of society that Nike has been able to articulate its position and exerted itself in the promotion of these ideals.  Nike has also been a good donor in a bid to alleviate human suffering especially due to the occurrence of various natural calamities. In 2004, Nike donated $ 1 million to be channeled to South East Asia and Eastern Africa through various nonprofit organizations already present in those areas (CSR Newswire, 2010). These donations were aimed at alleviating suffering suffered through earthquakes and resultant tsunamis in the respective regions.

4.4  Challenges faced by Nike while implementing their CSR Policy

Nike faces various challenges in its bid to live up to societal expectations. These challenges are mainly attributed to the practices that the subsidiaries that they contract to manufacture their products may engage in from time to time. For instance, heated debates have arisen in the past over allegations of unhealthy working conditions and abuse that these workers are subjected to in their workplace.  Allegations of sexual harassment have also been rife in some of the factories Nike works with (Mallenbaker, 2011). Control, or influence over the supply chain and by extension the values and practices of the contracted factories is crucial. Nike has been a victim of poor practices by a contracted factory in the past with the most memorable legal suit being the sweatshop labor case. This case stirred up outrage among American consumers and the resultant negative publicity proved to be a threat to Nike’s continued market leadership (Bourrie, 1998).

The company was blamed for forcing children to work under hazardous working environment and in so doing, violating their human rights. Nike’s lack of attention to the working conditions that the workers producing their products were being subjected to came to the fore with these allegations. It also emerged that workers in Vietnam were being forced to work extremely long hours due to the requirement to fulfill the high quotas set. It also emerged that out of these Vietnamese workers, a vast majority were suffering from respiratory problems (Hill, 2009). These workers would continue to be assigned to work stations with hazardous chemicals despite their heath issues. It also emerged that the workers were being paid a wage below the living wage. Even though certain governments may allow such low wages, the society expects the organizations to be able to pay wages that are at least equal to the living wage (Hill, 2009). Human rights activists were also up in arms when it emerged that the workers were being subjected to hazardous chemicals such as carcinogens.

Nike later formed and implemented a policy aimed at providing better ventilation and cutting overtime hours in a bid to correct this problem. It however remained with the burden of deep-seated negative feelings among a cross section of consumers. For instance, the negative publicity generated by the sweatshop case lead caused a local community in Canada to reject Nike’s donation of $ 50,000 meant for building a basketball court (Bourrie, 1998). This case inspired Nike to correct its safety weaknesses and pay more attention to the conditions which workers in the subcontracted factories are subjected to. Nike has since developed a suppliers code of conduct that outlines various values that they are expected to observe while in partnership with Nike. Where such standards cannot be agreed on, Nike has terminated its agreement with such organizations. For instance, in 2006, Nike terminated manufacturing of soccer balls by Pakistan manufacturer Saga Sports when they could not bring the latter into conformity with their labor standards.

4.5  Chapter Conclusion

Nike has an elaborate CSR policy which they have passed on to their staff members for internalization. They have also tried to ensure that their suppliers understand their values and have been pushing for the adoption of these values. Nike has been actively engaged in activities that would go beyond business regulations in a bid to meet societal obligations. They have engaged in various community development programs, environmental conservation as well as making various key donations in the society. They however have had a few challenges that have injured their image with respect to CSR obligations. These injurious situations have been remarkably resolved in a bid to demonstrate their commitment to meeting CSR obligations.  

Chapter Five: Project Conclusion

The project question as to whether Nike has been acting in compliance with their CSR policy can be answered from the findings of this project. Nike has endeavored to remain true to its CSR obligations and CSR policy. As observed in Chapter 4, Nike has in overall maintained its working environment to high standards to the extent that it would be listed being among the companies employees would prefer to work for in the United States. They have also made immense contributions to various community initiatives and have creatively innovated ways of fostering community development through sports. Another key achievement of Nike is the success with which they have reinvented their products to suit the societal expectations in regard to minimization of environmental hazards. Various breakthroughs in innovation have seen Nike emerge as an industry leader in environmental conservation through creation of products using recycled waste. However, Nike has come under sharp criticism on unethical practices regarding its labor practices. They however took corrective measures to bring their practices into compliance with ethical values and society’s expectations. From the foregoing, it is the finding of this project that Nike’s actions have been in compliance with their CSR policies. Incidences of non compliance have been few and isolated, and where detected, they were promptly resolved with to ensure full compliance with their CSR responsibilities. The outrage over Nike’s activities has therefore not been a full reflection of Nike’s philosophy and core practice.

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