Governance and Sustainability at NIKE CSR Case Analysis This case analysis related to corporate social responsibility (CSR). Analyze NIKE’s business model

Governance and Sustainability at NIKE CSR Case Analysis This case analysis related to corporate social responsibility (CSR). Analyze NIKE’s business model and competitive advantage and provide insights into challenges and opportunities for the sustainability of the company. Evaluate how corporate social responsibility strategies contribute to a company’s financial success. Case

Read the Case “Governance and Sustainability at NIKE (A)”. Then respond to the questions below:

Does NIKE’s dedication to corporate social responsibility contribute to its competitive advantage? How? Explain.
Which ethical standards (norms, principles, and Ideals) are at the basis of NIKE’s mission and its corporate social responsibility initiatives? Explain.
Who are NIKE’s stakeholders?For each stakeholder, identify their stakeholder relationship and why you assigned that relationship to that stakeholder.
Should Nike revisit its commitment to Road to Zero? Would you lower the water targets or find the resources elsewhere? What would you recommend if you were in Jones’s position? In Sprunk’s position?
How would you evaluate the steps senior leadership has taken to integrate corporate responsibility and sustainability into the business?

Requirements:

Around 1500 words, double space,

Analyse and discuss the impact of CSR initiatives to improve competitive advantage

-Does NIKE’s dedication to corporate social responsibility contribute to its competitive advantage? How? Explain.

Discuss the ethical standards at the basis of NIKE’s mission and its CSR initiatives.

-Which ethical standards (norms, principles, and Ideals) are at the basis of NIKE’s mission and its corporate social responsibility initiatives? Explain.

Identification of stakeholders

-Who are NIKE’s stakeholders, and why? Explain.

Analyse and discuss potential issues connected with CSR initiatives.

-What issues do you foresee coming from NIKE’s critics?

Solutions and Actions for improvement

-What improvements and actions do you suggest can be made on NIKE’s business model? Governance and Sustainability at Nike (A)
Nike is not here to create a new world order. We are not here to eliminate poverty and famine or
lead the war against violence and crime. Our critics say that the world is going to hell in a Nike
sports bag. Then, again, our critics, for the most part, aren’t athletes.
— Nike Annual Report, 1997
I believe that any company doing business today has two simple options: embrace sustainability as a
core part of your growth strategy, or eventually stop growing.
— Nike Annual Report, 2011
Hannah Jones and Eric Sprunk had little time to spare. With the next meeting of the Nike
board’s corporate responsibility committee just weeks away, they had taken over a corner
conference room in the John McEnroe building at Nike’s world headquarters in Beaverton,
Oregon, to review the preliminary sustainability goals for 2015–2020 that they had presented to
the committee at its previous meeting in February 2012. The two members of Nike’s 12-person
executive team quickly focused in on the proposed target for eliminating toxic discharges from
the supply chain. Although their presentation had been based on extensive work done over the
previous year, further research and analysis after the February meeting revealed that reaching
the target—zero discharge of hazardous chemicals by 2020—would be more difficult and costly
than previously estimated, since it would require innovations in chemistry, systemic changes
throughout the supply chain, and collaboration across the industry. Finding the necessary
resources and people to develop scalable solutions would be challenging, particularly within the
proposed time frame.
The conversation was intense. Jones, Nike’s vice president of sustainable business and
innovation, brought to the table more than 16 years of experience on the front lines of the
corporate responsibility debate, close to 14 of them at Nike. Sprunk, a college basketball player,
former accountant, and nearly 20-year veteran of Nike, was responsible for all Nike brand
products worldwide as vice president of merchandising and product. Since 2009, the two had
served as executive representatives to the board’s corporate responsibility (CR) committee. They
and their teams had worked closely together in designing Nike’s sustainability goal-setting
process as well as the preliminary goals themselves. Together they would have to find a solution
to present to Nike CEO Mark Parker and, with his buy- in, to the board CR committee at its next
meeting in mid-April. As Sprunk explained, “Hannah and I are asked to propose the goals jointly.
Not Hannah alone. And not Eric alone. Mark will be comfortable if he looks at Hannah and me
across the table and says, ‘Are you two in agreement and are you comfortable?’ and we say, ‘Yes,
we are.’”
Company Background
With over $20 billion in revenues for FY 2011, Nike, Inc. was the world’s largest athletic
footwear and apparel company and owner of one of the world’s best-known brands. The Nike
swoosh adorned the gear of athletes around the globe, weekend warriors and Olympians alike.
LeBron James won his first NBA championship, with the Miami Heat, in Nikes; Manny Pacquiao
was the first boxer to win world titles, in eight different weight divisions, in Nikes; and the U.S.
Olympic team was heading to London for the 2012 Summer Olympics in high-tech Nike uniforms.
Nike served even the youngest of athletes-to-be, offering an infant/toddler version of its iconic
Air Force 1 shoe and three- packs of Jordan onesies for newborns. In addition to the Nike brand
business, which accounted for some 87% of sales, Nike, Inc. included affiliates such as shoe and
apparel maker Converse, action sports brand Hurley, Jordan Brand premium athletic products,
and Nike Golf. (See Exhibit 1 for Nike, Inc. financials 2001–2011. See Exhibit 2 for revenues by
region and product type.)
The athletic footwear and apparel industries were both fiercely competitive. Globally, Nike
ranked first or second in market share in most major product categories. In its core athletic
footwear segment, Nike’s share ranged from 25% in Asia to 44% in the U.S. Its closest competitor
in this segment, with 21% globally, was adidas Group; smaller rivals included Puma, Fila, New
Balance, and Asics. Competitors in the more broadly defined athletic and leisure category also
included VF Corp., with brands such as The North Face, Vans, and Nautica; Columbia Sportswear;
Under Armour; and Skechers. In emerging markets, Nike was facing a bevy of ambitious rivals
such as Li Ning in China and Olympikus in Brazil.1 (See Exhibit 3 for competitors’ market shares.)
Origins and Growth
Nike traced its origins to 1964 when Oregon track coach Bill Bowerman and runner Phil
Knight founded Blue Ribbon Sports to import and sell Onitsuka Tiger running shoes
manufactured in Japan, then a low-cost labor market. Knight, who had earned a degree in
accounting from the University of Oregon before getting his MBA at Stanford, worked as a
certified public accountant while getting the business off the ground. Selling shoes from the trunk
of Knight’s Plymouth Valiant at local track meets, Knight and Bowerman worked closely with
their athlete customers and experimented with improvements, such as the wedge heel, to
enhance runners’ experiences. As revenues grew, the relationship with Onitsuka deteriorated
and eventually ended. Meanwhile, Bowerman and Knight began developing their own shoe, and
the first running shoe bearing the Nike name arrived in time for the 1972 Olympic trials. Eight
years later, with revenues of $270 million, Nike went public with a listing on the Nasdaq and a
dual-class share structure under which Knight, as chairman and CEO, owned 42% of the
company—all in Class A stock, which was not publicly traded—and elected the majority of the
board.2 In October 1990 Nike moved its listing to the New York Stock Exchange (NYSE) and the
Pacific Stock Exchange. (See Exhibit 4 for major shareholders and Exhibit 5 for stock price.)
Knight stepped down as CEO in 2004 but remained a strong presence on the board as
chairman and 15% owner in 2012. “One of the great things about having Phil in the room is that
we’re in touch with our entrepreneurial past,” commented CFO Don Blair, who had joined Nike in
1999 after a 15- year career in finance at PepsiCo. “His view of what the board contributes, and
what he looks for from the board, is really colored by that experience.” Knight saw the board’s
purpose as helping the company and the management team by sharing experiences and expertise
and asking questions. Beginning in the late 1980s, Knight had sought to bring new thinking to the
then largely “friends and family” board by adding directors with a wide range of backgrounds—
from industry, finance, law, athletics, and academia. In 2012, nine of the twelve directors were
classified as independent, including six of the nine elected at the 2011 annual meeting by holders
of Class A shares and the three elected by holders of the publicly traded Class B shares. The board
committee structure included the three NYSE-required committees (audit, compensation, and
nominating and governance) plus three others—executive, finance, and corporate responsibility.
(See Exhibit 6 for board members.)
Business Model
From its earliest days, Nike’s business model combined innovative shoe design with lowcost manufacturing by independent contractors in low-wage countries. Inspired by Bowerman,
who had famously invented the “waffle sole” one morning by mixing up a batch of urethane and
cooking it on a waffle maker, the Nike team was determined to reimagine the running shoe for
better performance. Ever the coach, Bowerman constantly reminded everyone that the limits of
human performance were unknown. His “just do it” attitude became a defining element of the
young company’s culture. At Nike’s R&D center, set up in Exeter, New Hampshire, in 1978,
scientists and designers worked together with elite athletes to create and test innovative
prototypes. With a research budget roughly equivalent to its advertising budget in the early
1980s, Nike spent significantly more on research than most of its competitors. 3 Shoe production
was outsourced—initially to contractors in Japan, then to Korea and Taiwan in the 1970s, then to
China, Malaysia, and Indonesia in the 1980s, and so on as wages and costs rose in one source
country after another. In 2012, Nike, Inc.’s 500,000 different products were made at more than
900 contract factories employing over a million workers in some 45 countries. China accounted
for about a third of factories and workers. Employees of Nike itself numbered over 40,000,
including almost 7,000 in Beaverton.
In early 2012, Nike was on track to achieve its revenue target of $28 billion to $30 billion by
2015 through a strategy of expanding globally and getting closer to the customer. Organized by
geographic regions and categories of sport—action sports, running, basketball, football (soccer),
men’s training, women’s training, and sportswear—the company was investing heavily in China
and other emerging markets regions and seeking to grow its direct-to-consumer business across
all brands in both online and brick-and-mortar environments. As part of this effort, Nike was
investing some $500–$600 million to strengthen its retail presence and expected to have more
than 970 retail outlets globally by 2015, up from 515 in 2010.4 Plans for the continued expansion
of Nike’s digital business were no less important. A new division of digital sport had been
established in 2010 to build on the company’s success with Nike+, a line of offerings developed in
collaboration with Apple that allowed runners and other athletes to track and share their activity
using their iPods and iPhones. The core of Nike’s strategy for growth, however, lay in innovation.
As Parker wrote in his 2011 letter to shareholders, “The key for Nike, Inc. in any market is to
drive innovation at every level—brand, product, retail, operations, events, and communications.”
Parker was optimistic: “I started here as a designer in 1979 and I’ve never seen so much
opportunity to innovate as I do today. It’s just amazing. It’s exciting.”
Innovation and Sustainability
Parker had joined Nike as a footwear designer and product engineer in the Exeter R&D
center shortly after graduating from Penn State in 1977. A college runner, Parker had established
the product testing team and was the designer behind some of Nike’s most successful
innovations, including the Nike Air Max technology, which was credited with relaunching the
Nike brand in 1987 after several years of sluggish sales. By the time he was named CEO in 2006,
following a one-year stint by William Perez, who had been hired from the outside to replace Phil
Knight as CEO, Parker had held positions in design, research, engineering, marketing, and general
management at all levels of the organization, including five years (2001–2006) as copresident
(with Charlie Denson) of Nike brand. Nonetheless, Parker remained at heart very much a
designer who liked nothing better than spending time in Nike’s “innovation kitchen,” where
employees worked on secret new ideas.5
Parker and other members of the Nike, Inc. executive team (NET) were particularly bullish
on the potential for innovations borne of environmental and social concerns to drive future
growth and profitability. “What’s new in the last few years,” commented Blair using Nike sports
parlance, “is this ‘offensive’ [as in ‘playing offense rather than defense’] element of sustainability
and corporate responsibility that we see as a growth driver . . . We’re not just managing risk.
We’re putting down investments around long-term growth and innovation.” The leadership team
envisioned a day when every product would represent a closed-loop system that generated no
waste, and sustainability would be synonymous with performance. (See Exhibit 7 for NET
membership, calendar year 2012.)
The company’s new Flyknit running shoe, introduced in the run-up to the London Summer
Olympics and given star billing at a Nike “innovation summit” for media, retailers, and investors
in February 2012, was a physical embodiment of this vision. Inspired by the textile knitting
process and by runners’ desire for a lightweight shoe that combined the comfort of a sock with
the performance attributes of a running shoe, each shoe was made from strands of high-tech
yarn. Through Nike’s proprietary technology, desired attributes such as support, stretch, and
breathability could be engineered into the design at the thread level. Compared to traditional
methods for making shoe uppers used in performance running footwear, which involved the
meticulous cutting and sewing of layer upon layer of multiple materials and generated massive
amounts of waste, the production of Flyknit was virtually waste-free. Nike Flyknit was also
almost 20% lighter than the Nike Zoom Streak 3, worn by the top three marathoners at the 2011
World Championships. Like other members of the leadership team, Blair deemed Nike Flyknit “a
home run on all fronts—visually iconic, high performance, and very little waste.” What’s more,
the technology had potential to revolutionize the footwear production process and, indeed, to
transform Nike’s entire business model, given the possible implications for labor costs and
capital deployment.
With a long-term vision of “decoupling profitable growth from scarce resources,” Nike was
banking heavily on innovation in consumer-facing areas such as digital sport. But even in less
visible areas such as auditing and monitoring compliance in contract factories, Parker saw
opportunities not just for incremental improvement but for game-changing innovation that could
drive sustainable growth. “[By] actually changing the way factories work, how they incentivize
workers, how they build skills . . . we think we can transform how the product is made and how
our business model works,” he commented. Parker’s vision extended well beyond the confines of
Nike: “What we’ve realized is that we are a successful brand that can create change. And we can
do that in a way that not only improves athletic performance and creates products that are more
sustainable, but that also contributes to a better world . . . One of the things I want to leave as a
legacy in my role at Nike is to make sure that we’re innovating in every aspect of our business,
where it really matters, where we use our brand strength and success to create positive change
on a larger scale.” In this spirit, Nike was seeking to hardwire sustainability principles into
innovation and decision making throughout the organization.
The Origins of Corporate Responsibility at Nike
The leadership team dated Nike’s sustainability journey to the 1990s when a groundswell of
criticism over labor practices at contract factories making Nike products threatened the
company’s brand with its core consumers, particularly college students. Nike’s critics alleged that
workers in the contract factories were subjected to inhumane treatment and grossly underpaid.
At first, Nike responded defensively, arguing that it was not responsible for the actions of its
suppliers and that wages and working conditions should be seen in the context of the
manufacturing countries, not measured against U.S. standards. Internally, executives at the time
thought the critics were just radical activists and troublemakers who didn’t understand how
good the contract factories really were.
In 1998, however, Nike’s approach shifted. In January, the company hired Maria Eitel from
Microsoft as Nike’s first vice president of corporate responsibility. Eitel set about consolidating
the community affairs department, environmental action team, and labor practices team to
create a new corporate responsibility department, and began work on a strategic framework to
address the issues facing the company. That same year, in a speech to the National Press Club,
Knight acknowledged that “the Nike name has become synonymous with slave wages, forced
overtime, and arbitrary abuse” and vowed to change that equation. He affirmed Nike’s
commitment to improving working conditions at its contract factories and announced initiatives
to expand independent monitoring; raise minimum age requirements; strengthen environmental,
health, and safety standards; expand worker education programs; increase support of Nike’s
micro-enterprise loan program for workers; and build understanding of corporate responsibility
in the larger community.
On assuming her new position, Eitel had taken the unprecedented step of sitting down with
the head of Global Exchange, one of Nike’s most outspoken critics. Widely praised internally as a
charismatic communicator, Eitel introduced a section on corporate responsibility into Nike’s
annual report to shareholders and, along with the environmental action team, played a key role
in the company’s decision to phase out PVC (polyvinyl chloride). Shortly after Eitel arrived, she
hired Jones, her former colleague, for the new Brussels-based role of director of community and
government affairs for Europe, the Middle East, and Africa. Jones, who had started her career at
Britain’s BBC working on social action campaigns, took up the post just as Nike announced its
new policy to eliminate PVC—and just in time to receive a call from Europe’s chemical
employees’ union threatening to burn shoes in front of her home for destroying workers’ jobs.
As Eitel forged Nike’s approach to corporate responsibility, she frequently turned to Nike
board member Jill Ker Conway for counsel. Conway, a former president of Smith College and a
historian of women’s participation in the paid workforce, had been recruited to the board in
1987 for her expertise on women’s issues and understanding of student perspectives. A selfdescribed “jock from way back and ardent feminist,” she agreed to join the board, in large part
due to her interest in promoting physical fitness for girls and women. At the time, recalled
Conway, Nike’s revenues were under $1 billion and the board, still in start-up mode, was racing
to keep up with the company’s rapid growth. The board had never before included a woman, let
alone an Australian-born, East Coast academic. As criticisms of Nike heated up in the mid-1990s,
Knight sought Conway’s counsel on dealing with student protests. At one annual shareholders’
meeting, he called on her, without warning, to preside when activists took to the floor. In the face
of growing criticism, Conway offered to visit some of Nike’s contract factories in Southeast Asia
in connection with a trip to her native Australia. With Knight’s blessing, she embarked on what
became an extensive series of visits where she spoke, through interpreters, with factory owners,
managers, and workers on the front lines.
In the factories she visited, Conway was struck by the poor communication between
managers, many from Korea and Taiwan, and workers, mostly young women who did not share
their supervisors’ language. To learn what these young women were experiencing, she proposed
a project to survey them in their own languages. Tapping into her network of feminist
organizations and university faculty around the world, Conway and Eitel brokered a partnership
with the International Youth Foundation to help create a nonprofit organization that would
conduct some 67,000 face-to- face interviews. Based on findings from the project, one of Nike’s
first NGO collaborations, the corporate responsibility group set up training programs for factory
supervisors, sought protections for workers’ health, and offered workers classes in financial
literacy. After mu…
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