In its approach to social responsibility, Nike groups initiatives into six separate categories: reducing waste, cutting energy, slashing water use, rejecting toxins, supporting communities, and empowering workers.1 Each of these initiatives carries three types of goals: an aim, a target, and commitments. The aim consists of the overall vision of that segment, while the target identifies tangible short term goals needed to achieve the aim. The commitments further delineate goals related to the overall mission that are less quantifiable.2 The company utilizes these three types of goals when implementing and assessing any social or environmental policy.3 I will begin by describing Nike’s objectives related to social issues, and then proceed to an overview of its environmental policies.
Working conditions overseas. The biggest PR disaster Nike suffered occurred in the 1990’s resulting from issues surrounding the treatment of its outsourced manufacturers. Allegations at the time included poor factory working conditions as well as commonplace harassment and abuse.4 Recently, Nike revised its policy to encourage contract factories to implement changes for the benefit of workers.5 By the end of FY20, it hopes to prioritize sourcing in factories that have eliminated excessive overtime.6 Additionally, Nike is working with the Fair Labor Association and other leading brands to develop metrics to measure issues related to fair labor and responsible sourcing.7 Nike is one of 16 companies whose labor compliance program is accredited by the FLA, which indicates the presence of systems and procedures required for successful labor standards compliance.
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8 Community efforts. According to company sources, Nike’s approach to community development departs from traditional giving and philanthropy, and instead seeks to deliver impact at scale.9 The company strives to meet an annual target to invest at least 1.5% of pre-tax income in the international communities in which it operates.10 Its long term commitments include building and expanding international access to sport and equipping and empowering adolescent girls in the developing world.11 In addition, Nike pledges to match donations made by its employees to disaster relief efforts.
12 Environmental Policy Sustainable practice. While in the past, Nike mostly treated sustainability as a risk management issue, its perspective over the past 15 has undergone a major transformation, and it now views sustainability as an opportunity for innovation.13 This approach consists of a long-term vision to deliver profitable growth decoupled from constrained natural resources,14 as well as reduce its carbon footprint by eliminating waste15 and toxins16 throughout the supply chain. The company has recently formed a number of new business units and sub-units to aid this transition process, in addition launching Nike Better World in FY2011, an online platform to engage consumers in the organization’s sustainability efforts.
17 Some recent innovations include 2010 World Cup jerseys made from recycled plastic bottles18, as well a new manufacturing process to reduce waste in shoe production19. Collaboration with outside parties. Nike collaborates with suppliers and outside organizations to promote system transformation and develop lasting solutions for a more eco-friendly world. In 2011, it joined other leading apparel and footwear brands, retailers, manufacturers, NGOs, academics and the U.S. Environmental Protection Agency to launch the Sustainable Apparel Coalition.20 Nike has shared its tools with them to help create an industry-wide index for measuring and evaluating product sustainability21. In addition, Nike co-founded GreenXchange, a web-based marketplace for open innovation with other businesses, which is set up to allow organizations to collaborate and share intellectual property with each other.22 Lastly, in 2011 Nike worked alongside with other footwear and apparel companies to create a roadmap for achieving the goal of zero discharge of hazardous chemicals by material vendors and contract manufacturers by the year 2020.23 Evaluation
Commitment to Social Policy The extent of a company’s commitment to CSR can be measured by evaluating where its primary efforts are focused. If a company only focuses on CSR programs which will improve short-term profit, but lacks CSR initiatives which may cut into short-term earnings, that is a sign of a lack of true commitment to a CSR program. If CSR were divided into two categories, social policy and environmental policy, then a company can usually count on goals related to the environment to align with financial goals. In other words, making a process more environmentally friendly will likely be more cost-effective as well. Responsible social policy, on the other hand, usually has the opposite effect.
For example, raising wages and improving working conditions reduces short-term earnings. A lack of emphasis on issues that hurt the short-term bottom line demonstrates a lack of sincerity and commitment to CSR. Although Nike has made considerable improvements to the working conditions in its overseas factories, its social efforts as a whole still lack the emphasis the company places on environmental policy. Efforts to become more eco-friendly are sure to benefit Nike’s bottom line, but its efforts to improve the conditions and communities of its outsourced manufacturers will certainly cut into its short-term earnings.
The relative lack of emphasis on social initiatives raises question marks regarding how sincere Nike really is about becoming a more responsible corporation. For its efforts to be taken seriously, Nike must place equal weight on both social and environmental initiatives, regardless of whether it hurts or benefits short-term earnings. The company will find that ultimately, long run financial success will follow an unwavering commitment to being a socially responsible organization.
Necessity for different types of goals. Every business initiative must include both short-term and long-term goals. Short-term quantifiable goals are needed for both the company and external stakeholders to track progress and tangibly measure performance. However, quantifiable goals don’t tell the whole story, and a company must also form long-term goals to serve as a backdrop and provide direction for the short term goals. Without an overarching vision, short-term goals lack direction, clarity, and meaning. On the other hand, with only long-term goals, it is difficult to tangibly measure progress. Thus, a company must establish both a long term vision as well as short term quantifiable goals in order to be successful at any type of business initiative. Goal establishment and management. Each of Nike’s CSR categories includes both short-term and long-term goals.
24 This structure allows the company to easily manage both types of goals; to track both general progress as well as evaluate whether short-term targets are accurate representations of the overall vision. In general, Nike’s short-term quantifiable goals seem to accurately indicate long-term CSR objectives, and its structure will allow the company to continually evaluate whether they are using appropriate measures. I do, however, have recommendations on managing Nike’s goal structure which I will touch on in the next section of this paper. Interdependence and Collaboration
The benefits of sharing innovation. Generally speaking, there are two different types of innovations an organization can pursue. With one type, a company gains a competitive advantage by keeping a technology or innovation to itself and restricting access to outside parties, perhaps by securing a patent. The second type, on the other hand, yields a higher benefit when the innovation is shared and made available to all parties. The internet, for instance, would be a useless method of communication if only a small number of users were able to access it. In reality, the internet’s value increases as the number of users grows. Innovation as it relates to sustainability falls into this second category; individual parties reap increased benefits as the innovation becomes available to more and more users, and it is therefore appropriate for Nike to share such innovations with as many users as possible. Reliance on outside parties.
Nike’s business model involves a long supply-chain25, and the success of its CSR initiatives is therefore heavily dependent on the cooperation of external parties; on those both directly and indirectly connected to its supply chain. A simple example illustrates this point. Say Nike wanted to reduce fuel emissions that resulted from product transportation. This objective is much more difficult to achieve if the party actually transporting the product does not share the same environmental concern. On the other hand, when the supply chain as a whole is geared toward sustainability, it is much easier for Nike to make its own processes more eco-friendly. Attitude towards collaboration.
By collaborating with other companies, Nike has demonstrated that it recognizes both realities described above: the company’s dependence on external parties as well the mutual benefit of sharing ideas. Their perspective is also evident from the company website: “No single company can eliminate toxic chemicals from vast supply chains, nor improve living conditions of workers in low-income communities, nor eliminate waste from consumption. We need step change in collaboration to drive collective understanding of the systemic issues we face and agreement on the solutions”.26 With this attitude, Nike’s CSR efforts will bring innovations to scale and create lasting improvements to the global community.
Leadership Taking a Proactive Approach. There is no doubt that the more recent developments to Nike’s CSR program originally came about as knee-jerk reactions to the PR nightmare that occurred in the 1990’s concerning its outsourced production factories. However, for the company to be truly successful at CSR, this reactive approach much be transformed into a proactive one. By taking the same attitude with which it approaches product innovation and applying it to CSR, the company can dictate a universal standard of social responsibility. Just like Nike does not wait to see what sort of products customers demand, but rather innovates and creates the demand, it can just as well set a trend of ethical responsibility and perpetuate a socially-aware society. As the leader of its industry with the power to influence public opinion, Nike has the responsibility to set a high ethical bar and become leader in this area. Program Recommendation.
To establish Nike as a leader in promoting social awareness, I recommend implementing a program that would allow for Nike customers to connect personally with overseas manufacturers. For instance, when a customer purchases an item, they could be given information about an employee in East Asia who helped manufacture that product. Along with this information, the customer could be given the opportunity to correspond with this person and his or her family, as well as make a donation to his or her community. I also recommend that Nike pledge to match any such donations made by customers, as well as allow the customer to keep track of how their donation was used. A program like this from a corporation as powerful as Nike would go a long way toward increasing public awareness of international social issues. Goal Oversight.
Proper short-term targets. It is not always simple to select short-term goals which accurately represent a long-term vision. Additionally, accomplishing a short-term goal does not guarantee progress toward the ultimate objective, and Nike must therefore carefully evaluate whether immediate targets accurately represent what the company really wants to achieve. This is especially important when it comes to CSR objectives. To illustrate, say a company cuts down on material inputs by employing a new sophisticated manufacturing system, but that very system also releases toxic chemicals into the environment. Such a case may satisfy a short-term goal to reduce materials, but in the overall picture, it is not helping the company become more eco-friendly.
Therefore, Nike requires careful oversight to ensure that short-term goals are accurate indications of overall progress. Delegating Responsibility. The Corporate Responsibility Committee is one of several recently-formed business units in Nike’s corporate structure.27 I recommend that Nike endow this committee with the responsibility of monitoring the achievement of company goals related to CSR. This responsibility would include assessments to determine whether short-term targets are accurate representations of long-term objectives. Outside circumstances often change, rendering short-term targets irrelevant in relation to the company’s overall vision for its CSR initiatives. Targets must therefore be continually evaluated to ensure that they will bring the organization towards its long-term objectives. Without proper oversight, Nike runs the risk of overemphasizing short-term achievement at the expense of long-term success. Metrics to Ensure Fair Labor
Choosing appropriate metrics. Recently, Nike began working with the Fair Labor Association to create common metrics to measure issues related to fair labor and responsible sourcing.28 While this is certainly a positive step toward improving overseas working conditions, it may not be feasible to create fair labor measures that are standardized across international borders. For example, two workers could earn equal wages, but if they are in two different countries, the two wages will each carry different values in relation to each country’s economy. Therefore, I recommend evaluating working conditions in each country on an individual basis. If Nike wishes to standardize certain metrics, such standards should be limited to what can be equally applied to all countries, such as access to food, water, shelter, as well as absence of harassment or excessive overtime.
Metrics such as wage rates should evaluated on a country-specific basis, taking into account each country’s minimum wage, cost of living, and other relevant factors. Task forces. Additionally, I recommend distributing the responsibility of monitoring international working conditions throughout the Nike’s Corporate Responsibility Committee. The Committee should be divided into task forces, with each task force responsible for overseeing a different country. The members of the task force should become experts in the variables and nuances in each country that are relevant to assessing fair labor practices, such as minimum wage, cost of living, economic policy, and other social issues that pertain to that country. Familiarity with each country will allow for the most accurate assessments of that country’s working conditions. Overarching principles should be established to guide each task force’s efforts, but ultimately each task force will have autonomy over monitoring and reporting the working conditions of their assigned country.
CSR initiatives must be prioritized, with more pressing issues taking precedence over those which are less urgent. According to company sources, the materials stage of the value chain makes up about 60 percent of the lifecycle environmental impacts of a pair of Nike shoes.29 Because this stage accounts for such a large portion of the company’s carbon footprint, I would recommend that innovation and sustainability efforts focus primarily on this aspect of the value chain. Efforts directed at this high-impact area will go further than those aimed at improving segments which aren’t as problematic. Priorities need to be dealt with in a proper order, and lower-impact areas should be addressed once the more pressing issues are taken care of.
Maintaining a Healthy Balance Although Nike stands to improve its CSR initiatives in certain areas, such efforts should not come at the expense of long-term financial stability. When it comes to CSR, a corporation must walk a fine line between being socially responsible, and at the same time not over-extending itself. Nike has an obligation to support both broader society and the 38,000 people it employs30, and financial success is what allows it to fulfill these obligations. It therefore must find a healthy balance in order to both excel at CSR and ensure long-term financial stability. When CSR is done right, there is no contradiction between doing what’s right and doing what’s profitable, since in the long run, customers will gravitate towards a corporation that serves a model of moral excellence.
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