Analysis of Nike’s CSR Obligations
The concept of corporate social responsibility (CSR) has been gaining ground over the past two decades. This trend has been associated with a change in consumer behavior in favor of organizations involved in CSR initiatives. According to Carroll (2016), CSR refers to a self-regulating business model or a form of self-regulation where a company engages in activities that are not only socially accountable but also ensures active compliance to the laws, and adheres to ethical standards. Some of principles that govern CSR in organizations include enacting safety, environment and health policies, having a charter on social contribution, quality policy, supplier sustainability guidance, policies against conflict minerals, sustainable natural resources policy, and human rights policies. As much as it is voluntary for firms to be socially responsible, organizations have embraced it both as a marketing strategy and a way of genuinely contributing towards sustainable business practices (bbb). It is upon this understanding, that this paper reviews and discusses how Nike views its CSR obligations. In addition, it discusses how third parties assess Nikes commitment to its CSR obligations, while the last section presents recommendations on enhancing CSR programs.
Nike’s Definition of its CSR Obligations
Nike Inc. is a multinational corporation specialized in designing, manufacturing, marketing, and selling of apparel, footwear, equipment, and accessories. The company was founded in the USA, thus headquartered in Oregon, Portland. In the first quarter of 2020, Nike reported revenues of $37.4 billion (Pratap, 2020). The brand is valued at $32 billion thus one of the most valuable sports brands. Today, Nike is the market leader and most popular apparel and sports brand in the world. However, it has had a turbulent past filled with claims of unethical practices and controversies. According to Newell (2015) Nike was a villain in the 1990s as it attracted negative publicity from consumers who protested outside the company’s stores over the company’s involvement in sweatshop, low wages, and child labor practices. The negative news stories on the brand attracted public ire and subsequent boycott of Nike’s products. However, after the CEO made a public speech detailing the firm’s commitment to change and embrace sustainability and CSR, the company has positively transitioned (Imran, 2017). Going by the many awards bagged by Nike, it is currently one of the most socially accountable clothing brand.
Since the 1990s, Nike has been focusing on reducing its environmental impact while also investing in initiatives that give back to the society. The company has achieved great strides in CSR by prioritizing sustainable innovations. This attitude is reflected in the increased expenditure on research and development projects. As a result, Nike produces a range of products from sustainable raw materials. According to the company’s website, the firms CSR initiatives are committed to reducing the carbon footprint of its value chain and supply chain (Nike, 2020). In addition, it invests in innovative manufacturing, valuing the human voice, developing new products using sustainable materials, sustainable sourcing of its raw materials, inventing close-loop products, using renewable energy to power its operations, promoting workplace diversity through inclusion of different cultures and ethnicities to catalyze innovation, and investing in the communities where it operates.
More than ever before, Nike is intensely concerned with the environmental impact of its operations. The company therefore monitors and reports on its carbon footprint. This is a show of commitment by Nike given that sustainability and CSR reports are voluntary and not many firms in the clothing and apparel industry generates such reports (Newell, 2015). However, Nike ensures it generates reports to show its progress towards a zero carbon footprint. As much as it is impossible to achieve a zero carbon footprint and a negative environment impact in the clothing industry, Nike has further invested in efficient operations to reduce its environmental impact. The firm sets ambitious CSR and sustainability targets and follows through by reporting to the public. For instance, its current goal is to power its operations with 100% of renewable energy by 2025.
While making these strides, Nike ensures that it values the voice of its workers. The company has improved the working conditions of its workers by encouraging workplace engagement and participation. The company has an inclusive workforce and an ethical culture that encourages the involvement of its workforce in community based-initiatives. This goal is achieved by having community volunteers and ambassadors. Apart from involving themselves in discretionary duties in the communities, the company and the employees finance charities. For instance in 2015, Nike offered 48,000 hours of volunteering and $6.2 million donations to charities and public institutions including schools (Pratap, 2020). In 2018, the company allocated $79.4 million to supporting communities while the employees contributed $7.5 million to charities globally. The company also helped 16.5 million children through the Made to Play initiative.
It is basic practice for clothing and sports equipment firms to subcontract their manufacturing processes to low-cost suppliers in countries with low labor costs. This includes countries such as India, China, and Bangladesh among others. Most of these suppliers are Asian countries. Following the case of Rana Plaza Accident, Nike introduced a code of conduct agreement where all the suppliers are mandated to comply (Newell, 2015). The firm further makes regular audits of the suppliers to ensure that they adhere to the regulations and rules stipulated in the code of conduct. This strategy has ensured that Nike avoids using suppliers with questionable reputation. Another commendable practice embraced by Nike to strengthen its commitment to CSR is its membership with both LAUNCH and the Sustainable Apparel Coalition. These associations have been essential in the development of innovative materials that have high performance yet low environmental impact. Similarly, Nike uses reclaimed materials and sustainably sourced organic materials to manufacture its products. Additionally, Nike has introduced manufacturing processes that reuses wastes to produce new products. The designers have come up with 29 palettes of high performance materials made from wastes (Imran, 2017). The waste materials are used in making tennis courts, Nike shoes, and athletic tracks. To further reduce the wastage along its value chain, the company uses better cotton, environmentally friendly rubber, certified leather, and recycled polyester. These combined practiced lower Nikes environmental impact.
Third Parties Assessment of Nikes Commitment to its CSR Obligations
CSR initiatives by Nike have attracted both positive reviews and negative criticisms. Nike has been commended and awarded for being socially responsible. In 2006, the Sustainability Global Reporters Program ranked Nike among the top 10 industry leaders in social responsibility reporting and transparency (Riddle, 2013). The report was generated in conjunction with the United Nations Environment Program (UNEP) which ranks companies based on disclosure, corporate sustainability reporting, and transparency. Nike also received 3 awards in 2018 and 2 in 2019 for the Best Company Benefits and Perks and Best Company Compensation (Comparably, 2020). In 2018, it won the Best CEO award, and the Best CEO’s for Diversity, and Best Company Compensation.
Secondly, Nike has been ranked among the top performers in environmental conservation. In 2007, the company was accredited by the Clean Air-Cool Planet as one of the three companies out of a survey involving 56 others in effective environmental conservation and management. The Nike Grind Program has helped the company address environmental issues and thus, improving its environmental record. The company has also been praised for its Reuse-A-Shoe program which encourages frugal use of its old athletic shoes. The products can be reused directly or up-cycled to carpet running tracks, playgrounds and basketball courts. Nikes association with big brands further support their endorsement of the brand. In 2015, Nike entered an 8 year deal with NBA to produce its uniforms for the leagues. Apart from close ties with NBA and other sporting brands, Nike maintains close association with the University of Oregon which endorses its products as socially accountable.
In spite of these positive accolades, critics insist that Nike is not purely interested in CSR but rather using it to green wash consumers into purchasing its products. Such claims have surfaced after Nikes recent involvement in controversies such as the 2014 strike by Chinese factory workers over low pay (Jones, 2019). The Yue Yuen Industrial Holdings is sub-contracted by Nike to manufacture its shoes. In 2017 Paradise Papers documents which alleged that Nike contracted offshore companies to evade and avoid taxes. The company was criticized in 2020 on claims of mechanical doping after it marketed a shoe brand that purported to give athletes unfair advantage.
Conclusion and Recommendations for Nikes CSR Programs
This paper ascertains that Nike has a strong and unchallenged commitment to CSR and sustainability. The firm has made a complete transformation of its CSR by considering all the stakeholder groups including introducing a code of conduct for suppliers, diversity policies for employees, renewable energy, reusing of wastes, zero carbon emission goals and sustainability reporting. Nike has positively been endorsed and awarded for its efforts, however, isolated controversies have arose since the renewed interest in CSR. Guided by the analysis, Nike should consider the following two recommendations to improve its already prosperous CSR programs.
- First, Nike should feel encouraged to continue with its CSR initiatives and strive for 100% sustainability by 2025. Achieving 100% sustainability means using renewable energy sources, zero waste in manufacturing processes, sustainable sourcing of materials and considerably reducing carbon footprint while simultaneously optimizing profits for shareholders.
- Second, Nike should strive to be a leader in championing for climate change. The company has taken progressive steps towards environmental sustainability, however, it could become an advocate for better CSR practices and sustainable practices that reduce negative climate change across the textile industry.
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