«Corporate Social Responsibility Issues Faced by Nike, Inc.» - Great Essay Sample

Corporation Background and History

The paper provides analysis of corporate social responsibility (CSR) issues faced by Nike, Inc. The company has its origin back to the year 1964 when it was founded by Phillip Knight and Bill Bowerman under the name ‘Blue Ribbon Sports’. Now it is a large multinational corporation with headquarters in Oregon that is listed on the New York Stock Exchange (Nike, Inc., 2015). The company’s main business relates to the creation of sports designs, manufacturing a wide range of sportswear and equipment, and selling them across the whole world. Besides, it is positioned as number one in the global sale of athletic footwear and apparel. The most developed brand names of the group are NIKE, Converse, Jordan, and Hurley. The company operates mostly via wholly-owned independent contractors situated in a number of countries, such as Mexico and China. Manufacturing facilities of the corporation comprise 150 footwear plants and 430 apparel factories situated in more than 50 countries and employing over 56 thousand people (Nike, Inc., 2015).

Description of CSR Issue

In late 1990s the company has experienced serious criticism and negative public perception due to the revealed critical violations of human rights on the Nike’s factories. Wilsey & Lichtig described four cases of detected violence that included: the use of child labor on Pakistani plant, dangerous working conditions in China, closure of plants in Bangladesh (without prior notification of employees), and extremely low level of wages in Indonesia. Besides, Nike was accused of being irresponsible for environmental issues as well as for investing in the development of local communities. Failure to establish adequate labor practices led to the notable problems with the group’s internal and external stakeholders that would prefer abstaining from any deals with such economic agent.

Organizational Stakeholder Impact

As the result of occurred public negative perception, the company had to change its labor practices considerably. So, Nike has established the code of ethics and labor related policies. Besides, the group had to approve higher wages paid in Asian markets and thoughtfully revise working conditions on its subsidiaries. Still, restructuring has led to a number of employees’ lay-offs occurred due to the changes in business practices and increased hiring standards.

Economic Stakeholder Impact

Impact on economic stakeholders involves reaction of the company’s customers and suppliers as well as creditors and distributors. Following the reveal of unethical labor practices, Nike has lost a significant portion of its partners performing marketing and advertising services for the corporation. Along with a number of distributors and customers, they were not ready to get associated with such a company, as former Nike, Inc. Besides, competitors effectively used public indignation towards Nike in order to ‘bite off’ part of its market share.

Societal Stakeholder Impact

Social response on the actions of Nike, Inc. was rather expectable. Governments had to deal with a number of strikes and protests in a line of counties as well as in the home country of the group – the USA. Such actions enhanced people’s attention to the group’s labor policies. Along with that, significant number of customers, especially in the USA and other developed nations, averted from buying any types of corporation’s manufactured products. This resulted from negative advertising of such goods in the general public’s sight. Buying sportswear of Nike was equalized to sponsoring a slaveholder.

CSR Filter Failure

Modern theory of globalization and going international highly emphasizes the importance of preliminary research of the market. Analysis of Nike’s actions makes it obvious that its management considered study of local markets as negligible. The company neither conducted a pre-entry research nor maintained further monitoring of local labor legislation, culture, and general economic practices in the countries, where it had manufacturing facilities. At the same time, the global management also failed to effectively communicate the mother company’s vision, mission, and philosophy to the top managers of group’s subsidiaries. Proper and timely involvement of affiliates’ executives in the group’s general strategy as well as their training on the mother company’s labor policies could have significantly improved the situation before a public scandal burst out.

Current Status of Corporation

In an attempt to solve the problems occurred from its labor policies’ scandal, Nike has elaborated and implemented rather strict Code of Conduct (ICMR, 2002). This document has significantly impacted the company’s ethical practices regarding hiring, working conditions, and dismissal procedures. Moreover, since 2005 the group annually discloses information on its contractors. Its latest financial report contains the whole list of incorporated subsidiaries, their countries of registration as well as very detailed description of its geographical operating segments, including their revenues by product line, earnings before interest and taxes, assets, and any important changes during the reported period (Nike, Inc., 2015). Also, the company’s report includes a thorough analysis of risks related to public perception, overseas business activities, and reputation among customers and distributors of the group.

Strategic CSR

Threat of the company’s reputation loss forced its top management to change the whole strategy of the group. The current mission of the corporation includes community impact that states that Nike is “committed to building deeper community connections and spurring positive social change around the world” (Nike, Inc., 2015). So, the commitment to social responsibility as well as enhanced labor standards became part of its strategy. Besides, the corporation initiated conducting annual reviews of its subsidiaries by external auditors and made effort to strictly follow recommendations of audit reports and related management letter points. Internal audit service also facilitates the process of monitoring overseas markets and business practices.

Driving Forces of CSR

Current strategic decisions and past actions of Nike, Inc. responding to the public scandal in 1990s were heavily impacted by such driving forces of CSR as sustainability, media, and brands. The company implemented sustainability policy that reflects its social responsibility for environmental effects arising from manufacturing activities. Also, its reviewed labor practices and implementation of ethical Code of Conduct resulted from globalized media connections. Development of the Internet has made it much easier to transfer new information to the public and, thus, influence its perception of the company. Finally, brand is another driving force for Nike, Inc. as it possesses a line of brand names that might critically react on the deteriorated corporation’s reputation.

Conscious Capitalism

The corporation has created management structure strongly supporting sustainability growth and community responsibility. Its current policies emphasize the role of leadership in the corporation and managers’ commitment to the social and ethical values. Nike improves daily relationship with its customers and other stakeholders via its sustainability program. Besides, the group has established the Nike Foundation that cooperates with other international and American funds to support minorities and women rights and to decrease poverty in the world. Also, the company maintains the Nike Employee Grant Fund that provides cash resources for education and awards to its worldwide hired workers.

CSR Initiatives Currently and in the Future

Nike, Inc. is actively involved in a range of international and local programs that aim to enhance environmental sustainability and decrease destructive effects of manufacturing processes. In 1990s the corporation organized a special program on the collection of used shoes and polyester bottles, and since then it has recycled more than 28 million of collected footwear and over 2 billion of bottles into gears and new boots (Nike, Inc., 2015). Moreover, the company continuously involves other corporations in its sustainability programs and acts in cooperation with American governmental bodies and NASA to finance programs that might improve environment and create better world. So, today Nike demonstrates high level of social responsibility and cautiousness about global warming and other ecological and social problems.

Stakeholder Priority

Nike strongly prioritizes customers and their needs in all its policies and activities. This approach also impacts the group’s social responsibility actions. One can easily note central place of customer in Nike’s marketing and advertising activities as the company pays high attention to the relevant market research and adoption of its products to the existing demand and potential buyers’ expectations. At the same time, during the past decade, Nike substantially enhanced focus on its employees and management and changed internal policies and practices in order to facilitate communication processes and effective relationships inside the mother company and its subsidiaries.

Lessons Learned

Several important lessons were taken by top executives and owners of Nike, Inc. from the public scandal related to poor labor practices in 1990s. First of all, the company realized critical necessity to research markets not only in terms of marketing and advertising actions, but also with focus on the local culture, labor legislation, and public expectations. Secondly, it has experienced strong effects of such SCR driving forces, sustainability, and media. The corporation was forced to maintain a range of environmental and social programs and finance charity funds to improve its reputation among customers, suppliers, and distributors. Finally, the company has revised its strategic values and enhanced CSR filter policies aimed to eliminate possible adverse effects of negative public perception towards its behavior on the market. Along with improved working conditions and closer cooperation with subsidiaries via periodical audits, these actions turned the corporation back to the first place in its sector in terms of customers’ loyalty and relationships with other stakeholders.