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Corporate social responsibility (CSR) is an integral component of modern business practices. According to Thompson et al., CSR does not only benefit the public but also boosts organizational reputation (268). Business sustainability depends on the capacity of a company to institute and run effective CSR programs. Thompson et al. maintain that organizations require having rules and procedures, “which integrate social, environmental, ethical, human rights, and consumer concerns into business operations and core strategy” (269).
Nike is among the organizations that value CSR. The company uses CSR to maximize the creation of standard values for business, shareholders, owners, employees, and stakeholders. Moreover, participation in CSR helps Nike to improve the life of society. Nike has incorporated CSR into its governance and sustainability strategy. The move has contributed to improved competitiveness.
Significance of Corporate Social Responsibility
Nike’s commitment to CSR contributes to its competitive advantage in many ways. The company operates in an industry that requires a lot of water. Moreover, its production processes release a high volume of contaminated wastewater, which could have adverse effects on the environment. Nike acknowledged that it was difficult to continue to rely on production processes that consumed a lot of water. The resolve to establish production processes that could conserve water and reduce environmental pollution led to the company coming up with a closed-loop manufacturing system dubbed Considered Design. The system has numerous benefits for the company.
According to Paine et al., it has helped Nike to establish processes that are waste-efficient (8). Paine et al. hold, “With the Considered materials sustainability indexes, designers could quickly and easily evaluate the environmental impact of prospective designs” (8). The move has enabled the company to develop innovative shoe designs that are in high demand in the market. Indeed, Nike’s shoes are regarded as not only trendy but also of high quality.
In 2008, Nike initiated Project Rewire aimed at streamlining working conditions in contract factories. The factories housed workers in inadequate facilities and forced them to work for excessive hours under poor conditions. Nike sought to make sure that contract factories respected and observed the established sourcing and production standards. Project Rewire enabled Nike to restructure its operations.
The reorganization allowed the company to interact with customers, thus developing products that met their needs. According to Paine et al., dedication to CSR enables Nike to innovate quickly and anticipate and exploit future growth in new markets (8). Moreover, Project Rewire has allowed the company to cut down on operations costs by reducing workforce. Engagement in CSR has enabled Nike to consolidate its supply chain, boosting organizational efficiency.
The company has come up with what it terms as “category offense”, which has helped Nike to divide the target market based on sports categories. Today, Nike targets basketball players, athletes, and football players among others. The move has brought the company closer to the target customers and enhanced their relationships.
Numerous ethical standards form the foundation of Nike’s mission and drive the company’s CSR initiatives. They include the desire to innovate, evolve, eternalize the basics, and do the right thing. The company operates under the ideal that consumers take precedence in decision-making. Nike believes that everyone can be an athlete. It underscores the reason the firm manufactures varieties of sports products for different consumer groups.
Nike appreciates the significance of innovation in sustainability. The demand for organizations to be environmental-conscious has prompted Nike to engage in innovative programs aimed at enhancing profitability and global reputation. The aspiration for innovation forced Nike to restructure operations to establish what it refers to as “Sustainable Business and Innovation” (SB&I). The objective was to come up with novel capabilities that would enable the company to innovate and be environmentally-conscious. The ideal of “playing offense” is dear to Nike as it enables the corporation to remain competitive. According to Paine et al., the urge to “play offense” influences Nike’s CSR (9).
The company has established an SB&I lab that enables it to research on the contemporary technologies, which can augment sustainability. Moreover, the lab helps the company to search for potential alliances that can help to drive sustainability value. The overall goal is to come up with innovative procedures that can improve Nike’s competitive edge and promote environmental conservation.
Nike believes in doing the right thing no matter how difficult or expensive it might appear. The company regards itself as conscientious, espousing the stakeholders’ vision of CSR. Nike encourages employees to factor in sustainability in all innovation programs. It invites the management to consider all sustainability areas in decision-making. The move helps to make sure that the company does not engage in activities, which might inhibit sustainability. The company involves sustainability rating agencies, consumers, and other stakeholders in decision-making to ensure that it does the right thing.
Stakeholders refer to groups or individuals that are affected by an organization’s activities. Nike engages in CSR to address the needs of diverse stakeholders. The company is a multinational business with many stakeholders who have significant impacts on its performance. Nike’s CSR projects target mainly the major stakeholders. They include customers, employees, communities, interests groups, and governments.
The company relates to the stakeholders in different ways. They include transactional, developmental, and accountable interactions. Nike’s CSR gives employees high priority because they affect its revenues. Customers purchase the company’s products that range from apparel, shoes, to sports equipment. The relationship between Nike and its customers is transactional. The interaction entails mainly selling products to the customers. Nike invests in research and development to ensure that it supplies quality products to clients.
The relationship between Nike and communities is developmental. Customers prefer purchasing products and services that add value to the community. The primary concern of this cluster of stakeholders is support for development. Nike has a foundation that helps to meet the interests of communities. The Nike Foundation runs programs aimed at benefiting the underprivileged in society. The company has other CSR projects that promote healthy living.
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For instance, it donates apparel, sports shoes, and equipment to schools to encourage students to engage in physical activities. The relationship between Nike and employees is developmental. The company appreciates the role of employees in organizational performance. Nike endeavors to meet the interests of employees, which include career growth, fair remuneration, and a sense of purpose. The company runs CSR projects that focus on talent management, employee development, and team building.
Nike recognizes governments as main stakeholders that influence its success. The relationship between the company and governments is accountable. The governments regulate Nike’s operations in different markets. The company is expected to comply with specific regulatory and legal guidelines. It is also supposed to abide by the established taxation policies. Various interests groups affect Nike’s operations. They include trade unions and environmentalists.
The relationship between Nike and these interest groups is accountable. Trade unions expect Nike to observe fair labor practices across all its subsidiaries. It underlines the reason the company is keen to contract factories that comply with labor laws. On the other hand, environmentalists expect Nike to manufacture and distribute its products in ways that do not pollute the environment. Nike’s sustainability strategy focuses on environmental conservation.
Issues from Nike’s Critics
The calls for Nike to enhance working conditions in contract factories and guarantee sustainability are bound to result in numerous challenges. The company has embarked on an innovative program aimed at minimizing waste and warranting environmental conservation. Introduction of innovative procedures has helped the company to scale down its workforce. Nike is regarded as a major employer across the globe. Embracing innovation has affected the company’s reputation as a principal employer. Critics may view the move to scale down workforce as a ploy by the company to increase revenue.
Thus, in the future, Nike will be categorized among the “firing machines” like Netflix. Nike has done a lot to guarantee healthy working conditions in contract factories. The company has ceased dealing with contract factories that exploit workers. Even though the move has helped to boost organizational efficiency and reputation, Nike is likely to run short of raw materials in the future due to a limited number of suppliers. Such a situation will have grim impacts on the company’s performance. Nike shares information regarding its contract factories. Hence, critics know the plants that deal with Nike. The company is bound to be at odds with activists in the future. Critics will have an easy time visiting the factories to investigate non-compliance with the established sustainability policies.
Nike’s Business Model
Nike’s business model comprises a mixture of artistic shoe design and cost-effective production by contract factories. The factories are in low-wage nations as a measure to reduce production costs. The company has a research and development center that works in liaison with athletes to develop innovative prototypes. The prototypes are sent to production factories spread across Asia. Nike has invested in the sports industry and has numerous retail outlets across the globe. It has partnered with Apple to develop gadgets that monitor a person’s activities. Nike has invested least in diversification. The company requires enhancing its financial risks by venturing into other industries. For instance, Nike should invest in premium products and accessories.
Nike leverages CSR to boost competitiveness and guarantee sustainability. The need for sustainability has led to the company investing in research and development. In return, Nike has heightened innovation, which has helped to minimize operations costs. Nike encourages contract factories to improve working conditions for employees. The urge to innovate, evolve and master fundamentals are some of the norms that drive Nike’s CSR.
The company operates on the ideal that customers take priority at all times. It also encourages employees to always do right despite the cost. Nike’s stakeholders include customers, governments, interest groups, and employees. The company shares information regarding its contract factories with the public. Such information may result in the business being at odds with activists.
Paine, Lynn, et al. Governance and Sustainability at Nike (A). 2016. Web.
Thompson, Arthur, et al. Crafting and Executing Strategy: The Quest for Competitive Advantage Concepts and Cases. 20th ed., McGraw-Hill Education, 2016.