Governance and Sustainability at Nike

Nike is the most famous athletic footwear and apparel company in the world (Paine, Hsieh & Adamsons, 2016).

The company has successfully expanded its business all over the world. According to statistical data available, it occupies around 40% of the market share in the footwear industry and around 10% of the market share in the apparel industry globally (Paine, Hsieh & Adamsons, 2016). Nike is successful today because it has driven innovation and sustainable business practices at every level including product, brand, operation, retail, events, and communication (Paine, Hsieh & Adamsons, 2016). In the earliest days, Nike was just like the other big organizations that sought to simply maximize their profits as much as possible by seeking cheap labor costs across many Asian countries such as China, Indonesia, and Malaysia (Paine, Hsieh & Adamsons, 2016). In the late 90s, Nike realized that the intensely poor working conditions found in the outsourced production plants they were using to manufacture their product went against the concept of sustainability of the company.

Thus, Nike decided to create a corporate responsibility department that could address this kind of issue to help the company achieve sustainable growth (Paine, Hsieh & Adamsons, 2016). Nike’s dedication to corporate social responsibility required persistence and incurred an extra expense for the company. However, it has contributed to its competitive advantage in many ways such as strengthening its brand image, improving brand recognition, and eventually boosting profits for the company as seen by its current market standing and its overall structure as a company.

Some ethical standards became the core of Nike’s mission and commitment to corporate social responsibility initiatives, helping it to be successful and competitive.

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Nike created a series of standards which include improving working conditions by monitoring workers’ logged hours, eliminating child labor by raising the minimum age requirement, and fulfilling workers’ safety needs by improving the overall working environment. In addition, Nike inspired their workers by expanding its education program and increasing its loan program (Paine, Hsieh & Adamsons, 2016). Nike not only inspired their workers but even inspired the whole world by educating a larger community about corporate social responsibility (Paine, Hsieh & Adamsons, 2016). Based on Nike’s mission, innovation is another way to make the company sustainable. Nike constantly uses the idea of innovation to design its products such as shoes, where it seeks to create well-known, functional, and comfortable footwear that is easy to match. Moreover, Nike also drives innovation in corporate social responsibility. To keep workers safe on the job, Nike has invented a new glue that can protect its workers from otherwise toxic chemicals. As workers on the assembly line must work with the glue for long hours, a safer and less-toxic glue will have far-reaching, positive impacts on the health and overall safety of the workers. Nike decided to be innovative to deal with this problem and became a leader in industry safety by using a new and safe glue without any toxicity instead of simply relying on personal protective equipment for workers (Paine, Hsieh & Adamsons, 2016). This use of nontoxic materials is another way Nike has become sustainable. These safety standards that Nike has been following form the basis of its mission of corporate social responsibility and add to the overall success of the company.

Nike’s stakeholders contribute to its productivity and profitability, making it a truly competitive company. According to Business Dictionary (“stakeholder”, 2018), stakeholders can be considered as a person, a group, an organization, or whoever has an interest and relationship with an organization and can be affected by the organization’s behaviors and policies. Thus, Nike’s stakeholders include employees, executive members, contacts, factories, CR groups (SB&I), shareholders, and so on. All of Nike’s stakeholders have a direct connection with the company. For instance, both executive members and employees can be identified as internal stakeholders. To be more specific, executive members are in charge of developing business strategies that lead the company to meet its goal and mission. Employees are for helping executive members to execute strategies for the company. While Nike’s business is directly operated by its internal stakeholders, Nike’s business also can be affected by other external stakeholders such as contacts factories, CR groups, and shareholders (Paine, Hsieh & Adamsons, 2016). For example, Nike established some standards to address issues with one of its stakeholders, its contact factories, to prevent some problems including forcing employees to work overtime, child labor, and poor working conditions (Paine, Hsieh & Adamsons, 2016). This stakeholder could have hurt Nike, but instead became a positive force after implementing the changes dictated by Nike. Another important stakeholder is the CR Group. The CR group consists of 130 people who focus on “forward-looking activities” such as planning, driving improved sustainability performance, and encouraging innovation (Paine, Hsieh & Adamsons, 2016). The CR group has close connections with the company as it can direct the company to develop its business model sustainably. Lastly, although shareholders don’t provide direct contributions to the company, shareholders can be an influence to determine the stock price of the company as they hold the stocks of the company and can decide whether to sell or keep their stock. Stakeholders play a very important role in an organization and Nike must maintain good communication with its stakeholders to become sustainable and remain profitable.

Nike’s relationship to the environment also plays a critical role in how the company is perceived and how it will be viewed by customers and stakeholders alike, but its “Road to Zero” campaign needs more work. SB&I team has been working on the company’s social and environmental impact (Paine, Hsieh & Adamsons, 2016). The team decided to work on wastewater discharge during the production after both water and manufacturing experts reviewed the use of water in Nikes’ production process (Paine, Hsieh & Adamsons, 2016). Nike committed to producing zero discharge of toxic chemicals for the entire process of production, also called the “Road to Zero” initiative internally (Paine, Hsieh & Adamsons, 2016). However, Nike hadn’t developed any specific plan for this commitment even though the company had previously put a lot of effort into it (Paine, Hsieh & Adamsons, 2016). The commitment to zero discharge of hazardous chemicals seems to be a very difficult challenge, but it has been a potential threat to the sustainability of the company due to the difficulty in enacting such a promise (Paine, Hsieh & Adamsons, 2016). From my perspective, I think it may be a good idea to be more realistic and lower its expectations regarding commitment. I agree with Sprunk and Jones’s position from “Road to Zero” to “Road to Less” as the goal to “Zero” has exceeded the capability of the company and many have realized that it would be costly and time-consuming for the company (Paine, Hsieh & Adamsons, 2016). Thus, I think the company should lower its goal and focus on a series of short-term objectives made to ultimately fulfill the company’s ultimate goal rather than failing to keep an overambitious promise. In a meantime, the company also continues to innovate as well as look for other alternate resources that produce less impact on the environment. I believe persistence is the needed spirit that enables the company to win a long-term battle such as this and that Nike can and will achieve this goal and become more competitive than ever regarding environmental responsibility based on its current initiatives.

Overall, Nike’s senior leadership has taken good steps to integrate corporate responsibility with sustainability in its business. From this case, I have learned that a successful company not only needs to have good products but that it is also crucial to take steps to integrate corporate social responsibility and sustainability into its business to be as competitive as possible. Nike produced all of its products by outsourcing factories to Asia where these production plants provided cheaper production costs (Paine, Hsieh & Adamsons, 2016). However, by outsourcing these factories, poor working conditions for their workers and frequent, forced overtime threatened its commitment to social responsibility (Paine, Hsieh & Adamsons, 2016). As a result, Nike realized that such poor conditions in its outsourced factories would become a potential problem that could affect its brand image and business, and Nike took its first steps to integrate corporate social responsibility and sustainability by making a change to its outsourced factories. By doing this, Nike earned a positive brand image from society by helping its workers improve working conditions. Also, Nike provided education to its workers to improve their education level and contribute to its sustainability (Paine, Hsieh & Adamsons, 2016).

The second step it took was to create a board-level corporate social responsibility committee focusing on product recycling, water use in the supply chain, and toxicity in the production process (Paine, Hsieh & Adamsons, 2016). By taking the second step, the company was able to influence other organizations engaged in corporate social responsibility. In addition, Nike was able to share the cost and engage in mutual inspection with other organizations to speed up the process of manufacturer improvement (Paine, Hsieh & Adamsons, 2016). Lastly, Nike took the third step which was to build new capabilities in terms of expanding the scale of the department and recruiting experts to create models to integrate sustainability (Paine, Hsieh & Adamsons, 2016). In this step, Nike was more focused on long-term developments as it intended to create a system that can be used to “minimize waste by using outputs as inputs” (Paine, Hsieh & Adamsons, 2016). In my evaluation, I think the senior leadership had made strategic moves that enabled the company to successfully integrate corporate social responsibility and sustainability into the business. By maintaining a strong commitment to social and environmental sustainability and maintaining good relationships with stakeholders, Nike has created a business model that will continue to help it grow and be a global market leader.

Reference

1. Paine. L, Hsieh. N, Adamsons. L. (2016, September 30). Governance and Sustainability at Nike (A)
2. Stakeholder. (2018). Retrieved from http://www.businessdictionary.com/definition/stakeholder.html