No more sweatshops! Nike is a true leader in Sustainability & Corporate Social Responsibility #CSR

 

INTRODUCTION

In the corporate world today, few terms are more discussed than sustainability and corporate social responsibility.  In the case study, “Governance and Sustainability at Nike (A),” there is an outline of how Nike has moved from a company with a very poor sustainability image to one who is “playing offense” (Pain, Hsieh, Adamson 2013, 3) in their aggressive sustainability.  Led by their founder Phil Knight, Nike has actively turned their image of “Nike sweatshop workers” to a leading sustainability corporation.  The Nike Case Study is a Decision Case (as a part of the four types of cases: Problem; Decision; Evaluations; and Rules) involving international business issues.  

The main problem of the case is it would be impossible for Nike to reach their goal of zero discharge of hazardous chemicals globally and across all brands by 2020 without significant innovation.  Significant innovation would cost a great deal of time, talent, finances, and other resources where a major trade-off would have to take place.  At the conclusion of the case, the decision was whether to pass along the cost of the innovation to the customer or dialing back their target for water use.  Since the focus of a corporation is to make a profit for the shareholders, the managers needed to consider the shareholders’ fair return on their investment.  Greenpeace began putting enormous pressure on Nike to condense their timetable of zero discharge of toxic chemicals.  It began to cause great pressure and consternation in how Nike was going to accomplish their sustainability goals and when.

Starting from Founder Phil Knight, Nike has embraced sustainability and Corporate Social Responsibility (CSR) with a passion.  They are engaging in a comprehensive effort to steer the organization’s culture beginning with the supply chain. Initially stung by reports of exploitative labor practices at its offshore suppliers in the 1990s, Nike has systematically reoriented its approach to every element of its business.  Nike has been proactive in forming partnerships with their competitors; Adidas, Puma, H&M, C&A, Li Ning, and G-Star to establish a goal of reaching zero discharge of hazardous chemicals (ZDHC) across the companies’ entire supply chains by 2020 (Holden 2012, 7). Many site this partnership as a model for other industries, as it becomes clear that cooperation—with competitors as well as suppliers and customers—will be a vital element in a successful sustainability program.

Nike believes they are able to meet their goal in the near future because of their sustainability innovations.  Nike’s unique program called “Considered Index” is an evaluation system for footwear and apparel that enables the product-creation teams to easily compare materials and make informed, sustainable choices during the design phase (Epstein, Buhovac 2010, 42). The environmental strategy represents the standard sustainability effort of most organizations but Nike is going the extra mile (Holden 2012, 7).

What is Corporate Social Responsibility (CSR)?  CSR refers to “consideration of, and response to, issues beyond the narrow economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks” (Davis 1973, 312).  The issues of CSR are now given major attention due to social and media pressure upon large companies like Nike.  Peng believes CSR is one of the best ways to integrate “corporate issues of international trade, investment, strategy, supply chain, and human resources” (Peng 2014, 554).  It is a balance for the corporation to meet their core responsibility of safeguarding the shareholder interests (making them a profit) and solving the social issues of the world (Peng 2014, 555).  The issue of integrating these interests and responsibilities is a vital role for the manager.  Peng advocates a triple bottom line of having three main priorities: economic, social, and environmental (Peng 2014, 557).  Nike is clearly doing this.  Smart stakeholders with a global sustainability passion are wise in seeking to create win/win opportunities for firms to make a profit, fulfill their CSR, and provide a positive media marketing image for the firm (Campbell 2007, 958).

Nike has experienced a number of win/win situations as they have focused on environmental impacts at the same time closing the loop in manufacturing that minimizes waste by using outputs as inputs.  Focusing on closing loop materials and manufacturing; and revenue sources decoupled from scarce resources has been very profitable and win/win (Pain, Hsieh, Adamson 2013,10).

The big picture issue for a stakeholder with a desire for global sustainability is having the ability “to meet the needs of the present without compromising the ability of the future generations to meet their needs” (Bansal 2005, 197).   A free market firm receiving pressure from primary and secondary stakeholders will seek to accommodate the demands of the stakeholders as well as win their market-share.  Nike has been able to meet these demands and they are on track to achieve their revenue target of $28-30 billion.

As late as 1997, Nike had a reactive response but has moved to a defensive response and now an offensive accommodative response.  Present day is focused upon companies being wise and having a proactive response to environmental pressures (Peng 2014, 562-563).  Bottom-line priorities, image making, competition, state regulations, NGO pressure, and vision of the CEO like Nike’s Mark Parker (and leaders like Hannah Jones and Eric Sprunk at Nike) all play a major role in the company’s participation in their industry’s CSR (Campbell 2007, 958).  Nike’s efforts are not just for a warm feeling.  By striving to reduce environmental damage and encourage healthier living, Nike hopes to drive new business growth—through building deeper connections with consumers (especially Millennials) and communities and marking its brand as a frontrunner in sustainability (Holden 2012, 8-9). 

Peng believes (Peng 2014, 556) there are three set of global drivers related to sustainability in the 21st century.  1) Rising levels of poverty, population, and inequity.  2) Assertive Non-Governmental Organizations (NGO) around the world. 3) Irreversible effects industry has had upon the environment such as global warming, air and water pollution, social erosion, deforestation, and overfishing.  These complex big picture issues force managers to prioritize sustainability.  These global drivers have forced companies to ask the most basic question of why does a firm exist?  Easy answer has always been “to make money” or as Milton Friedman put it, “the business of business is business” (Peng 2014, 557).  At Nike, tradeoffs of sustainability are only in the short term. For example, using environmentally preferred materials may increase some manufacturing costs, but, by reducing waste, the company decreases costs and increases revenues.    

CONCLUSION

The Nike Case Study is clearly a decision case.  The decision options are does Nike buckle under pressure from Greenpeace regarding their sustainability timeline or do they abide by a realistic one on their own schedule?  It is recommended they get ahead of Greenpeace and compare themselves to how far ahead they are to their competitors.  They are no longer the apathetic “Nike sweatshop operators” but a leading corporation in CSR.  They can now use their improved reputation, earned cache, and push back.  Not having Greenpeace condense their timeline is important for Nike to accomplish their own goals on their timeline with their innovation considerations.  Increasing the price of their products and speeding up the timeline of innovation, does not appear to be a wise alternative.

Nike can still call their efforts Road to Zero but abide by their strategic plan, not Greenpeace’s.  They can gain a competitive advantage by obtaining a wholesale acquisition of the DyeCoo Textile Systems.   Set up more foundations to support healthcare and job relocation for the most recent crisis will grow their reputation.  Pushing back on Greenpeace’s demands and not be held hostage to their pressure is vital.  Nike is a leader in sustainability and having an organization such as Greenpeace interfere with their leadership model is not in keeping with their consistent CSR.

WORKS CITED:

Bansal, Pratima. “Evolving Sustainably: A Longitudinal Study Of Corporate Sustainable Development.” Strategic Management Journal 26.3 (2005): 197-218.  Business Source Complete. Web. 28 June 2015.  http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=15&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104

Campbell, John L. “Why Would Corporations Behave In Socially Responsible Ways? An Institutional Theory Of Corporate Social Responsibility.” Academy Of Management Review 32.3 (2007): 946-967. Business Source Complete. Web. 28 June 2015.  http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=32&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104

Davis, Keith. “The Case For And Against Business Assumption Of Social Responsibilities.” Academy Of Management Journal 16.2 (1973): 312-322. Business Source Complete. Web. 28 June 2015.  http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=2&sid=5d7f0cbf-06fc-4062-86ee-2bfdcf19fdbf%40sessionmgr115&hid=104

Epstein, Marc J., Adriana Rejc Buhovac, and Kristi Yuthas. “Implementing Sustainability: THE ROLE OF LEADERSHIP AND ORGANIZATIONAL CULTURE.”Strategic Finance 91.10 (2010): 41-47. Business Source Complete. Web. 12 July 2015.

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Epstein, Marc J., and Adriana Rejc Buhovac. “A New Day For Sustainability. (Cover Story).” Strategic Finance 96.7 (2014): 25-33. Business Source Complete. Web. 12 July 2015. http://eds.b.ebscohost.com/eds/pdfviewer/pdfviewer?vid=11&sid=37eb7db0-ec90-42fb-bfe7-8ab161c8baaa%40sessionmgr115&hid=121

Hahn Tobias, et al. “Cognitive Frames In Corporate Sustainability: Managerial Sensemaking With Paradoxical And Business Case Frames.” Academy Of Management Review 4015.(2015): 18-42. Business Source Complete. Web. 12 July 2015.

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Holden, Greg. “The State Of Sustainability.” Research Technology Management 55.6 (2012): 7-9. Business Source Complete. Web. 12 July 2015.

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Peng, Mike.  “Managing Corporate Social Responsibility Globally.” Global Business, 2014.  pp553-577.

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