Case study about a exam

  • Category:
    Management
  • Document type:
    Case Study
  • Level:
    High School
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    3
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    1652

Nike Considered: Getting Traction on Sustainability

Summary of the case

Nike engaged in CSR, as it believed it had a moral duty and obligation as a corporate citizen to protect the environment and attend to stakeholder needs sustainably. For instance, it reduced greenhouse gas emission in its air systems. However, Nike’s contract factories were systematically subjecting employees to poor working conditions, such as unfair pay, physical and verbal abuse, forced overtime, exposure to occupational hazards, such as toxic chemicals and sexual harassment. Nike’s internal systems were also found to be encouraging unethical behaviours among the suppliers. For instance, the bonuses for the procurement teams were set by quality, price, as well as the speed of delivering orders. This encouraged them to disregard suppliers’ code compliance. Nike was blamed for allowing its subcontractors in Asia to engage in child labour.

What are the key issues of the case?

Nike suffered reputational damage, which has undermined its CSR strategies. Nike’s contract factories in Asia were systematically subjecting employees to poor working conditions, such as unfair pay, physical and verbal abuse, forced overtime, exposure to occupational hazards, such as toxic chemicals and sexual harassment. This caused a public backlash. Nike’s internal systems were also found to be encouraging unethical behaviours among the suppliers.

What management issue is identifiable in the case study?

The identifiable management issue is corporate social responsibility (CSR). Within the context of Nike’s management structure, CSR should be viewed as a form of management practice that encourages transparency within a company, as well as fosters ethical relationship with its entire stakeholders. In CSR, the corporate goals are consistent with the sustainable development of the larger society, protection of environmental resources, respect for diversity and reduction of social problems (Ganescu 92-3).

Essentially, CSR refers to a business practice that involves initiatives intended to benefit the society. It covers a wide range of strategies, such as providing a fraction of the company’s proceeds to implementing sustainable business processes (Mujtaba & Cavico 59).

In essence, it is through CSR that Nike attempted to integrate environmental and social strategies in its business processes, as well as interact with the stakeholders voluntarily. For instance, during the early 1990s, Nike introduced CSR programmes that would see the replacement of the greenhouse gas SF6 in its Nike Air system with the environmental friendly climate-neutral nitrogen. The programme also led to the creation of water-based cements, which replaced toxic solvents, such as volatile organic compounds (VOCs). Towards 2000, the company also introduced a company-wide training programme focused on product sustainability, as well as introduced sustainability metrics. In 2005, the company’s footwear design team invented more sustainable shoes that were dubbed “Considered.”

In your assessment, have Nike’s CSR strategies been successful?

To a greater extent, Nike’s CSR strategies were successful. Nike made deliberate efforts to address its labour relations issues strategically. For instance, the company conceived corporate responsibility tasks under the office of a new VP position in 1998, and started investigating into the basis of its suppliers’ failure to comply with its Code of Conduct. Nike had adopted several CSR strategies: Nike introduced CSR programmes as replacement of the greenhouse gas SF6 in its Nike Air system with the environmental friendly climate-neutral nitrogen. The company also introduced a company-wide training programme focused on product sustainability, as well as introduced sustainability metrics. In 2005, the company’s footwear design team designed sustainable shoes called “Considered” (Henderson et al. 1). However, it is Nike’s suppliers and contract factories, which should be blamed for their unethical behaviours. Nike’s contract factories were systematically subjecting employees to poor working conditions, such as unfair pay, physical and verbal abuse, forced overtime, exposure to occupational hazards, such as toxic chemicals and sexual harassment.

Within the context of Nike, what is the rationale for engaging in CSR activities?

Companies engage in CSR, as they believe it is their moral duty and obligation to act as a corporate citizen. As can be established, Nike engaged in CSR initiatives as it believed it had a moral duty and obligation to act as a corporate citizen to protect the environment and attend to stakeholder needs sustainably. This is one of the primary reasons Nike focused on community and environmental stewardship in the hope that this would be the best thing for the company in the end. For instance, in late 2004, Hannah Jones observed that Nike had to be strategic while responding to its environmental impacts.

Companies also engage in CSR activities to build their reputation in order to appeal to stakeholder. Indeed, Nike engaged in CSR to restore its reputation, considering how unproductive the company had initially reacted to allegations of abuse while contracting supplier factories in Asia.

Companies also engage in CSR activities as a means of compliance with industry standards and regulations. Based on the evidence provided in the case study, it is clear that Nike’s corporate social responsibility strategies emanated from its corporate goals of ensuring value-added consumption, adhering to the regulatory demands for quality and shareholders and investors’ expectations of quality.

Identify a relevant theory that can be used to analyse Nike’s CSR initiatives.

The relevant theory is Carroll’s “Pyramid of Corporate Social Responsibility, which proposes four layers of responsibilities that comprise a CSR concept (Amiram 2-8).

The first layer consists of economic responsibility. This layer seeks to maximise a company’s long-term financial position. In the case study, Nike did manage to increase its financial performance in order to fulfil the shareholders’ expectations. For instance, Nike pursued a strategy for global sourcing in the early 1990s, which had enabled the company to cut the cost of production.

case study about a exam

Figure 1: Carrol’s CSR Pyramid

The second layer consists of legal and institutional responsibility. This layer is made up of international and national layers that the company has to adhere to the national and international standards. It is clear that Nike failed to comply with international standards in Asia, particular on labour relations. For instance, it failed to adhere to the recommendations for international institutions, specifically the requirements of the “UN Secretary General’s Global Compact: Labour Standard, Human rights, the Environment” (Schwartz & Carrol 505-7). For instance, while Nike’s strategy for global sourcing in the early 1990s was relatively rewarding, it created considerable public relations challenges to the company. In particular, the company had suffered significant reputational damage for its labour practices abroad, particularly in its Asian subcontractors. The company’s labour practices were significant criticised, as there were allegations that its contract factories were systematically subjecting employees to poor working conditions, such as unfair pay, physical and verbal abuse, forced overtime, exposure to occupational hazards, such as toxic chemicals and sexual harassment.

The third layer is that of ethical responsibilities. It demands that a company has to treat stakeholders fairly and justly (Schwartz & Carrol 505-7). Nike’s internal systems were found to be encouraging unethical behaviours among the suppliers. For instance, the bonuses for the procurement teams were set by quality, price, as well as the speed of delivering orders. This encouraged them to disregard suppliers’ code compliance. Nike failed to behave ethically to achieve its ethical obligations of reducing damage to the environment. For instance, Nike was blamed for allowing its subcontractors in Asia to engage in child labour. It also exposed employees to poor working conditions, such as unfair pay, physical and verbal abuse, forced overtime, exposure to occupational hazards, such as toxic chemicals and sexual harassment. Rather than solve this issues, Nike had ultimately denied such claims, as it could not prevent Asian subcontractors from hiring children. Later in 1998, CEO Phil Knight proclaimed during National Press Club Speech that the company’s “products had become synonymous with forced overtime, slave wages, and arbitrary abuse” (Henderson et al. 1). By failing to behave ethically, the company only served to suffer significant reputational damage.

The fourth layer is that of philanthropic responsibility. It requires a company to act as a good corporate citizen by adding value to the society and ensuring societal well-being and better quality of human life (Amiram 2-8). For Nike, its values and responsibilities are demonstrated by its commitment to its Corporate Business Principles, which demands that it displays optimal standards of conduct to bring value to its shareholders and the general society.

What should Nike do to enhance its CSR initiatives?

In all, Nike’s corporate social responsibility should be rooted in its principles that bring about long-term value to its stakeholders, by ensuring long-term benefits to the society.

First, Nike should establish a Code of Conduct to govern its production supply chain, particularly factories in Asia, which it has contracted to manufacture its products. The code should consist of requirements that employees would be paid fairly and equitably, in addition to the idea that they would not be exposed to occupational hazards, such as hazardous chemicals at the workplace (Henderson et al. 1-2).

Similarly, Nike could consider launching a broad “stakeholder engagement” campaign to attend to the much publicised exploitive labour practices across its subcontracting firms in Asia. This would be in a response to the negative publicity and protests. These would eventually improve the company’s bottom line, as it would improve employee retention and productivity. Nike should at the same time launch a strategy to cut the negative environmental implications of its entire supply chain, including by sourcing of raw materials to manufacturing and shipping them (Henderson et al. 1-2).

Works Cited

Amiram, Gill. Corporate Governance as Social Responsibility: A Research Agenda. Berkeley Journal of International Law,26.452 (2008), 2-8

Ganescu, Marina. «Corporate social responsibility, a strategy to create and consolidate sustainable businesses.» Theoretical and Applied Economics, 29.11 (2012): 91-106

Henderson, Rebecca, Locke, Rirchard, Lyddy, Christoper, and Reavis, Cate. Nike Considered: Getting Traction on Sustainability.

Mujtaba, Bahaudin & Cavico, Frank. «Corporate Social Responsibility and Sustainability Model for Global Firms.» Journal of Leadership, Accountability and Ethics, 10.1 (2013): 58-75

Schwartz, Mark & Carrol, Archie. «Corporate Social Responsibility: A Three-Domain Approach.» Business Ethics Quarterly, 13.4 (2003): 503-530