Introduction
Nike is one of the leaders in the sports footwear and apparel market, operating globally. The company was incorporated in 1967, and since then, it remains one of the largest producers of sports footwear and apparel (Nike, 2020). The manufacturer’s mission is to assist athletes in realizing their potential (Nike, 2019). The organization pays much attention to design and innovation, so new materials and manufacturing techniques are constantly introduced. The company is supplied by manufacturing facilities located in 12 countries with major partners in China, Indonesia, and Vietnam (Nike, 2020). Chinese factories supply approximately 50% of the total Nike Brand footwear, while factories in Indonesia and Vietnam provide 24% and 22% respectively (Nike, 2020).
Apparel factories (329 facilities) supplying Nike are situated in 38 countries. The major partners as per the volumes of produced apparel are located in Vietnam (28%), China (23%), and Cambodia (12%) (Nike, 2020). The organization declares its commitment to major ethical standards accepted in the industry, as well as its corporate ethical principles and codes.
Ethical Guidelines in the Footwear and Apparel Industry
Overview of Standards and Principles
The modern business world is characterized by a considerable focus on corporate social responsibility (CSR), as companies are expected to behave ethically in their pursuit of profit. In order to avoid potential issues and litigations, firms develop codes of conduct based on their national and international laws and standards (Arán-Ais et al., 2020). Public opinion also plays an important role in shaping customers’ purchase behaviors as people are willing to buy from responsible businesses. As far as the footwear industry is concerned, the existing standards are closely related to the principles highlighted in the OECD Guidelines for Multinational Enterprises of 2011.
The Organization for Economic Co-operation and Development (OECD) is an international entity, that helps companies to develop effective business operations consistent with the highest international standards (OECD, 2011). The OECD provided its guidelines for the footwear and garment industry in 2017 (OECD, 2017). The primary areas of concern include governance, employee health and safety, working conditions, equity, human rights, and environmental impact.
These domains have been central to corporate social responsibility effort for decades. Moktadir et al. (2018) note that CSR efforts aim at balancing the goals related to economic, social, and environmental aspects. For instance, companies are encouraged to constantly improve their employees’ working conditions and safety standards. Innovation and continuous development are seen as the ways to achieve this objective (OECD, 2017). In addition to compliance with quite clear and strict standards, organizations are motivated to go beyond the limits and become pioneers in the CSR field, especially when it comes to the social domain.
As far as environmental aspects are concerned, firms are encouraged to work on the reduction of emissions and waste and improvement of resource management practices. When it comes to the apparel and footwear industry, the central focus is on waste management as the fashion industry is associated with a substantial negative impact on the environment in this area (OECD, 2017). Tons of used items and packaging end up in huge landfills, which is specifically devastating in developing countries where recycling is in its infancy.
Examples in Which Major Guidelines Were Tested
It is noteworthy that the standards sometimes fail to lead to positive outcomes, and major crises take place. The Rana Plaza disaster can be seen as one of the illustrations of such failures (Russell, 2017). In 2013, after the detection of considerable cracks in the building’s walls, the first floor of the four-storied factory was abandoned. However, the managers of other factories that occupied other spaces did not relocate their workers, which led to a disaster that killed over one thousand people.
Major global apparel brands, such as Benetton and Cato Fashions among others, had partners whose factories were located in that building. At the same time, according to the general policies of the 2011 OECD Guidelines for Multinational Enterprises, multinationals should encourage their partners to promote safety and proper working conditions for workers (OECD, 2011). Although it is stated that the responsibility is not shifted from the supplier to the multinational company, the latter is still expected to take all possible steps to improve suppliers’ operations and working conditions. As a response to the disaster, the OECD introduced changes to the existing standards for the apparel and footwear industries.
At that, numerous success stories and improvements have also been in place due to the existing guidelines. For example, Nike incentivizes its partners to improve their sustainable practices and pays much attention to its environmental footprint (Burton, n.d.). One of the remarkable results is the fact that almost 100% of manufacturing wastes are recycled. Adidas has managed to reduce by 50% its use of chemicals, as well as energy when dying fabric (Burton, n.d.). Puma provides training to its partners’ employees aimed at improving governance. All these efforts contribute to promoting major ethical guidelines worldwide as global players want to develop a favorable public image and have quite a significant influence on their partners.
Nike’s Ethical Conduct
When analyzing Nike’s ethical conduct, it is possible to apply the triple bottom line theory. According to this theory, a successful company can generate profit if it pays equal attention to three aspects, including profit, people, and the planet (Shen et al., 2017). The theory holds that if one of the elements is ignored, a firm is unlikely to remain competitive in the modern world. Displaying responsible behavior in the economic, environmental, and social spheres enables the organization to minimize risks and develop a favorable image, making its products and services more attractive to consumers. Nike seems to follow this theoretical framework as far as its ethical conduct is concerned.
For instance, the recent scandal related to corporate governance and operations shows that Nike is committed to high ethical standards. In the situation when an executive discloses a potential conflict of interest involving her close relatives, the company acted in a responsible manner (Butler-Young, 2021). The executive resigned, and the corresponding investigation has been implemented.
The footwear and apparel manufacturer is engaged in several projects aimed at addressing environmental and social issues, such as the UN Climate Change and Fashion Industry for Climate Action, Ellen MacArthur Foundation, and Sustainable Apparel Coalition, among others (Burton, n.d.). Nike utilizes the Materials Sustainability Index (MSI) and Footwear Sustainability Index and Apparel Sustainability Index (ASI), which has a positive effect on its overall ethical conduct, as well as operations and economic gains.
Nevertheless, in some instances, Nike’s conduct can hardly be seen as responsible. For instance, it is reported that the organization is lobbying the U. S. Congress to weaken the Uyghur Forced Labor Prevention Act (Swanson, 2020). This legislation will ban the import of products from the Xinjiang region (China) which is notorious for the use of forced labor. In that region, Muslims are detained and forced to work in inhumane conditions with low or no payment, which is impossible to tolerate in the contemporary world (Swanson, 2020).
The company’s representatives stress that they do not lobby but try to contribute to the development of an effective action that would ensure best business practices and proper governance in developing countries (Swanson, 2020). However, such news suggests that Nike fails to follow the triple bottom line approach properly, which may have adverse effects on its sustainable development.
Assessing Nike’s Conduct Based on the Corporate Governance Code and Proposal for Improvement
The examples mentioned above, as well as the overall operations of the company, show that Nike is committed to the highest standards of SCR, although some non-compliance occurs occasionally. According to the major principles of the U. S. Corporate Governance Code, organizations have to ensure their compliance with major acts regulating business practices. This legislation to follow includes the Securities Act of 1933, the Securities Exchange Act of 1994, and the Sarbanes Oxley Act of 2002. Firms should also develop their governance codes based on the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
These acts include clear guidelines for businesses to establish responsible practices that can help them in achieving their economic goals and sustainable development. Companies are expected to ensure the transparency and integrity of their practices.
These principles are followed quite well as far as Nike is concerned. The organization publishes its major reports (financial and ethical conduct reports) where all major goals and achievements are highlighted. It also reacts when a conflict of interest or other ethical issues emerge, and these reactions are rather effective. The situation involving the executive and her son’s startup associated with footwear sales shows that the corporation tries to remain transparent and committed to the declared values (Butler-Young, 2021). At that, the business should be more transparent when it comes to its lobbying practices as the public has doubts concerning the exact influence of Nike. The organization should provide more details regarding its propositions to improve the legislation related to forced labor.
Nike’s CSR Report Analysis
Nike’s CSR Report and GRI Guidelines
Nike provides its corporate social responsibility report each year. This report is referred to as Impact Report and contains comprehensive data concerning the company’s operations and strategies (Nike, 2019). Importantly, all spheres are properly highlighted, including governance, reporting, labor law, relationships with partners and customers, as well as communities, environmental sustainability, interactions with authorities and institutions, and so on (“Sustainability accounting standards board,” 2019).
Equal attention is paid to all spheres, and the corporation ensures its compliance with the existing laws and standards (including GRI standards). Zero corruption and discrimination policies are highlighted in the report and followed by Nike’s employees and the organization’s partners. Importantly, the firm reports about its regular audits performed by third-party organizations. This approach is common and enhances companies’ transparency, which is one of the central requirements promoted in terms of GRI guidelines.
Nike’s CSR Policy Based on the Three Ps
It is noteworthy that the organization under consideration utilizes the three Ps approach and addresses the issues in such domains as people, planet, and profit. The company pays specific attention to equality and has reached quite considerable progress in this respect. For example, pay equity is maintained for women, and the VP-level of female representation is up to 39% on the global level (Nike, 2019).
The firm also invested $81 million in communities, allocating funds into diverse initiatives aimed at improving people’s standards of living, health, education, and so on. Nike employees volunteered 147K hours, and the corporation’s partners trained children as community coaches, which displays the organization’s commitment to contributing to the development of communities.
Importantly, the organization increases people’s empowerment in diverse ways, trying to make all voices heard. For example, in 2019, 73% of Nike’s workforce participated in the All-Employee Engagement and Pulse Survey held annually and shared their views and attitudes regarding their work experiences. It was found that the majority of employees “were optimistic” about working for Nike and would recommend the organization as “a great place to work” (Nike, 2019, p. 14). The organization has Career Central, which is an online portal where all employees can access diverse tools, resources, and instruments for career development. In 2019, 2,300 Nike managers completed leadership courses, and 7,500 employees attended career laboratories.
The company launched unconscious bias awareness training and contributed to the development of a trusting atmosphere where employees can share their concerns and report malpractice if necessary. Nike donated 9.8$ million through its Nike Foundation, Volunteer Rewards, and Employee Matching Gift, as well as provided approximately $200,000 to nonprofit organizations across the globe to assist in addressing various issues employees may encounter (Nike, 2019). These incentives and considerable investment in human potential suggest that Nike is compliant with the highest standards and committed to major ethical values.
As far as the environmental component of the sustainability-related effort is concerned, the organization follows the standards highlighted by GRI and OECD guidelines for the footwear and apparel industry. As mentioned above, 99.9% of footwear manufacturing waste is recycled and converted into energy, while approximately a third of Nike stores worldwide are LEED-certified (Nike, 2019). Two-thirds of Nike footwear is produced with the use of some recycled materials. The company has also diverted over 7.5 billion plastic bottles from landfills and waterways since 2010.
The corporation achieved its goal of reducing the utilization of pesticides when producing cotton which is necessary for footwear and apparel manufacturing. Nike reported the reduction of CO2 emissions by 25% per unit in its key operations in 2019 (Nike, 2019). The organization aims at reaching 100% renewable energy use in the future, and the undertaken steps suggest that the company is committed to this goal and is capable of reaching it. Water management is one of the central elements of Nike’s effort to decrease its environmental footprint. One of its numerous success stories is the 60% reduction of freshwater use at a Ramatex facility located in Suzhou, China (Nike, 2019).
As mentioned above, Nike interacts with its partners closely to improve their operations, making all facilities compliant with Nike’s major standards and guidelines. Assessing risks is an important element of the development of sustainable operations. The organization encourages its partners located in developing countries to assess risks, and 92% of facilities in this region completed risk-mitigation plans (Nike, 2019). Nike sets quite high standards and manages to follow them, as well as encourage its partners to do the same.
The profit domain of the three Ps model is also properly addressed by Nike. The company is a responsible actor in the industry and financial world. Through the publication of its reports and using third-party audits, the organization achieves a high level of transparency and integrity. The organization provides relevant financial details to its shareholders and other stakeholders, reporting losses or issues as well as achievements.
As mentioned above, the organization’s code of conduct is designed in strict accordance with the existing norms and standards (Nike, 2019). All corporation’s partners have to comply with Nike’s supplier code of conduct, which leads to a considerable improvement in their sustainability practices. One of the success stories related to governance is the collaboration between Nike and Aniger, a Brazilian firm, that resulted in a 63% reduction in turnover in the Brazilian partner’s plants.
Nike’s Strategy and Its CSR Policy
It is possible to note that Nike’s CSR policy can help the company to achieve its strategic goals. The organization’s mission is to help all athletes to reach their highest potential (Nike, 2019). The corporation’s purpose is to “unite the world through sport to help create a healthy planet, active communities, and an equal playing field for all” (Nike, 2019, p. 3). Nike is committed to accountability and transparency, which are the basic elements of its strategy. The organization aims at developing “creative and diverse global teams” that have a positive effect on their communities (Nike, 2019, p. 3). The focus on sustainable growth is a key priority for Nike and integral to its strategy.
The CSR policy is consistent with this strategy as the footwear and apparel manufacturer utilizes the three Ps approach, concentrating on people (active communities), planet (healthy planet), and profit (equal playing field for all). The initiatives the corporation launches aim at empowering individuals and communities and promoting their development.
Nike’s transparency helps in achieving its strategic goals and encouraging stakeholders to adhere to high ethical standards. Importantly, the organization uses sport as a platform for interacting with employees, partners, authorities, other organizations, and communities. Building sports facilities, volunteering as community coaches, and training people are effective methods to promote sports and the company’s products and services, as well as their commitment to ethical conduct.
Conclusion
To sum up, it is possible to note that Nike can be seen as an illustration of a responsible firm that contributes to the establishment of high ethical standards in the business world. The footwear and apparel manufacturer follows the standards accepted in the industry and overall business guidelines designed by international organizations. One of the most remarkable peculiarities of the corporation is its commitment to transparency. Although the corporation faces certain challenges and some cases of low compliance with ethical standards occasionally arise, Nike manages to address these issues effectively.
When the company’s employees are involved, the corresponding investigation and appropriate measures are undertaken. Moreover, when some problems appear in the industry (involving other players in the market), Nike is willing to respond and make the necessary changes to avoid similar issues in its or its partners’ facilities. The business sets quite high standards and ambitious goals, but it has already shown that it can reach the established objectives effectively. Hence, the CSR policy and its strategy can be instrumental in helping Nike to retain its leading position in the global business environment.
References
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