Nike Inc.’s Corporate Social Responsibility Project

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Table of Contents

Introduction
Nike, Inc.
Transparency
Social Responsibility
Environmental Responsibility
Conclusion
References

Introduction

Corporate social responsibility is a voluntary activity conducted by organizations in an attempt to achieve sustainability. A good corporate social responsibility program is consistent with the company’s activities and provides economic benefits in the form of improved brand reputation, enhanced productivity, and, by extension, profitability. However, not all companies that incorporate CSR activities are able to produce a consistent program.

In addition, on some occasions, businesses deliberately devise misleading strategies in order to win the affection of stakeholders without committing to the goals stated in their CSR reports. The following paper aims at analyzing the CSR program of Nike, a publicly traded sportswear company, in order to determine the transparency and effectiveness of social and environmental responsibilities stated in their report.

Nike, Inc.

Nike is currently one of the most recognizable and successful brands in the world (O’Reilly, 2014). The company produces a wide variety of sports apparel, equipment, and sport-related merchandise. Nevertheless, it is most widely known for its footwear. Founded in 1964 as Blue Ribbon Sports, it gradually became the leader in sports footwear due to superior characteristics of their products and excellent marketing (O’Reilly, 2014).

By the late seventies, the company’s status as a leader in the market was recognized by numerous professional athletes. As a result of the popularity of its goods, the company went with the initial public offering in 1980 and became the leader supplier of professional footwear starting from 1982 (O’Reilly, 2014). Throughout its existence, the company maintained a high level of innovation, constantly producing shoes that encompassed the latest technological achievements, made use of the hi-end materials, and excelled in an appeal to customers.

In order to facilitate growth, Nike made several acquisitions of other footwear companies, the most notable of which is that of Converse, a brand responsible for the iconic Chuck Taylor All-Stars sneakers (O’Reilly, 2014). Currently, it is commonly believed that Nike remains a leader in the market of footwear, and while it is hard to establish the exact market share, some analysts suggest that the company is far ahead of its closest competitors, Adidas and Under Armor (Roberts & Kasudia, 2015).

Criticism

Starting from the early nineties, Nike became heavily involved in a major scandal concerning its overseas labor policies. By that time, the company became a massive multinational corporation and depended heavily on economies of scale in order to retain competitive advantage. The preferred business strategy made use of cheap labor force overseas, with investing heavily into extensive and well-developed marketing campaigns (Johnson, 2012).

In 1992, largely in response to the article revealing inadequate working conditions in Nike’s Indonesian factories, a series of protests was organized at Barcelona Olympics, bringing the issue to the attention of the entire world. Starting from that point, Nike fell under close scrutiny by numerous activist groups and independent investigators. In order to repair its reputation, the company launched an encompassing corporate social responsibility program, which has been expanding since then. It should be noted that despite their best efforts, the success of their CSR program was uneven and often produced counterproductive results.

Transparency

An important component of CSR program is the effort made by the company to disclose its performance in reaching the identified social and environmental goals. In this context, Nike was able to demonstrate its eagerness to mend its damaged reputation by becoming one of the first publicly traded companies to publish a data related to it CSR program (Newell, 2015).

The initial publication of 2005 contained a complete list of the company’s international contract factories and details on the working conditions in many of them, including the health and safety conditions, wages, and policies that ensured consistent improvements of workers’ quality of life. Since then, the report included the information on environment-related supply chain improvements, recycling initiatives, water savings, waste reduction, and renewable energy integration (Nike, 2016).

Workplace Conditions

In order to address the most apparent issue associated with the brand, the initial focus was put on labor conditions in the factories around the world. A department was established within the company that aimed at improving the working conditions and quality of life of Nike’s employees in the countries outside the U.S. The effort made by the company could be observed in numerous areas of corporate activity.

For instance, the Code of Conduct that contained the standards for factories involved in the production was revised to ensure uniformity and adequate conditions for workers. According to Nike’s latest report, the Code is an integral component of the company’s sourcing strategy (Nike, 2016). In other words, the compliance with the Code determines whether the company would continue to engage in sourcing activities with any given factory or supplier. In order to ensure the compliance with the contracted entities, the management sought the assistance of auditing organizations that conducted regular checks of compliance with the requirements.

It is worth acknowledging that early in the course of CSR implementation the results were inconsistent with the claims made in the report. An independent inquiry revealed that despite the reported efforts and significant financial backing, as many as 80 percent of the factories overseas demonstrated their inability to comply with the conditions described in the Code. In addition, the report published by Nike in 2006 mentioned that of the forty-two factories that underwent the audit, only seven were given the best rating while major violations were detected in thirteen of them (Johnson, 2012).

Workforce Diversification

Another aspect of the social responsibility program stated in the report is the orientation towards diversity in hiring strategies. According to the report, Nike intends to promote talent and creativity unhindered by the color of the skin or gender (Nike, 2016). This direction has been arguably pursued more successfully. According to the published diversity statistics of the company employees, the ethnic minorities comprise the majority of Nike’s workforce in the United States (Frauenheim, 2016).

The white population comprises 48 percent of the total employees within the company, followed by blacks (21%), Hispanic (18%), and Asian (7%) (Frauenheim, 2016). Another notable achievement is the percentage of women in the workforce, which, according to the report, is 48 percent on the global scale (Frauenheim, 2016). Admittedly, the report presents data selectively, omitting several important aspects. Some experts voiced their concerns regarding the absence of the information that would allow estimating the professional growth characteristic for minorities versus that of the white population as well as the employee retention rates disaggregated by ethnicity (Frauenheim, 2016).

On the other hand, the report contains important information on employee salaries disaggregated by gender. Due to the commitment to gender equity, the female’s salaries are adjusted using the allocated resources. It should also be noted that Nike remains among the few companies that strive towards transparency in diversity statistics and payment gaps. The company also emphasized the advantages of the pursued strategy, claiming that diversification of workforce stimulates creativity and promotes innovation.

Public Health

Finally, the plan mentions the goal of sports activities promotion among the younger population. According to the CSR report, Nike has partnered with many schools in the U.S. and collaborated with educational institutions in China to promote innovation among teachers through training (Nike, 2016). Low physical activity is a serious problem in the U.S. since it is associated with numerous health issues, excessive weight and obesity being the most recognized one.

Admittedly, due to the scope of the issue and the multitude of factors involved, quantifying the productivity of Nike’s effort is difficult. Nevertheless, indirect evidence exists of the program’s success. Most notably the Alliance for a Healthier Generation initiative awarded Nike with a Corporate Hero Award in 2016. According to the CEO of the Alliance, the company committed $50 million to the initiative, which provided more than ten million children with opportunities to engage in sports (Alliance for a Healthier Generation, 2016).

It is worth noting that the organization did not provide concrete data on Nike’s contribution, so there is no possibility to quantify their contribution. Nevertheless, it can be considered an indirect evidence of the company’s commitment to the goals stated in their report.

Considering the information above, we can conclude that despite the uneven performance early in the course of events, the social side of the corporate social responsibility program yields favorable results.

Environmental Responsibility

Once the most apparent gaps in social responsibility were addressed, Nike expanded its CSR program to cover several environmental issues, including waste and water usage reduction, production cycle enhancements, and renewable energy integration.

Reduced Water Use

Water usage for industrial needs is one of the most serious environmental issues in the developing countries, especially considering the lack of infrastructure and the natural shortages in some areas. Nike, whose production cycle requires significant water usage, stated the reduction in water use for industrial purposes among its environmental responsibility program objectives (Nike, 2016). In order to do that, Nike partnered with a Dutch company DyeCoo Textile Systems (Newell, 2015).

The partnership resulted in the adoption of the innovative carbon-based process which allows excluding water from the dyeing process entirely. Such move allowed Nike to save more than 20 million liters of water in 2015 (Nike, 2016).

Interestingly, it also resulted in measurable production cycle enhancements. Specifically, the exclusion of water from the production process also removed the necessity to dry the processed materials, decreasing the amount of energy used for the process by 60 percent (Nike, 2016). The procedure also became 40% faster. Most importantly, however, the new technology provided the possibility to maintain the access to water and the necessary level of sanitation, which, in turn, minimized the impact of the production on the health and well-being of the population (Newell, 2015). In other words, Nike’s environmental program had an indirect effect on its social impact and, by extension, has the potential to improve productivity and profitability.

Waste Reduction

Nike’s CSR report contains several objectives that target the issue of waste. Some of these involve manufacturing process optimization and innovative technology while other directly address the problem by running designated initiatives. The most prominent examples of the former are Nike Vapor and Flyknit. The Flyknit is the name for an approach to the production of shoes that allows the manufacturers to nearly eliminate cutting and sewing traditionally used in shoe-making.

According to the report, the implementation of Flyknit resulted in a reduction of waste by 3.5 million pounds in three years (Nike, 2016). Nike Vapor, a football kit made of woven nylon, is produced from the used plastic bottles (Nike, n.d.). This technology allows Nike to clear landfills of the bottles, thus reducing the amount of waste. At this point, it should be mentioned that the efficiency of Nike Vapor as an environmental initiative is questionable.

Football kits are relatively limited in production compared to Nike’s other products, and the use of plastic bottles is known to be a significant logistical challenge, requiring resources for transportation and recycling. As a rule, the combined effect of the spent resources negates the modest environmental benefits of such initiatives (Elmore, 2016). The fact that the company does not provide quantifiable results that would confirm the efficiency of the program is consistent with the described suggestion. Thus, the use of plastic bottles as a part of CSR program resembles greenwashing more than a feasible technology.

Production Cycle Optimization

Aside from the Flyknit technology described above, Nike facilitated several other improvements in their production cycle. Most notably, the company has reduced its energy consumption by half in less than a decade (Nike, 2016). Further optimization is possible as a result of a partnership with MIT Climate CoLab, an organization that provides support to businesses in renewable energy implementation. As such, Nike intends to switch to renewable energy by 2025 (Nike, 2015).

Currently, little progress is made in the identified direction, with only two facilities reported to use renewable energy sources and no detailed data provided on the extent to which the technology substitutes the traditional energy sources. However, considering the complexity of the objective, the barriers associated with the technology, and the fact that partnership was initiated in 2015, it would be reasonable to characterize the results as sufficient.

Conclusion

Corporate social responsibility program has many benefits that range from improvements in a public image to long-term sustainability enhancement. Unfortunately, the popularity of the concept has led to the situation where businesses use it as a marketing move without actually committing to the idea behind the stated claims. As can be seen from the information above, this was the case with Nike early after the implementation of the CSR program on workplace conditions improvement.

Despite significant resource allocation, the company has failed to address most of the issues, and earliest reports indicated severe gaps between the requirements to the conditions and the situations in most factories. Nevertheless, over time the company managed to excel in most of the areas outlined in the program and managed to obtain a leading position in some areas of social responsibility, such as the ethnic and gender diversification of the workforce.

In addition, Nike remains the leader in terms of CSR transparency. Admittedly, some areas analyzed in the paper show a degree of inconsistency, such as the lack of quantifiable results on some of the initiatives, slow implementation of renewable technology, and controversial practice of framing the use of recycled plastic bottles as a viable environmental technology without substantiating the results. Nevertheless, Nike’s overall CSR performance can be characterized as satisfactory. Therefore, it would be reasonable to conclude that their CSR program is effective.