CSR at NIKE

8/10/2019 CSR at NIKE

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CORPORATE SOCIALRESPONSIBILITYDesigning and Financial aspect of CSR at

NIKE

2014

Kartik Singh (M/BFT/11/10)Samapriya Banerjee (M/BFT/11/20)

Vipul Bhatia (M/BFT/11/30)

NIFT Mumbai

4/23/2014


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About Nike

Nike Inc produces footwear,

clothing, equipment andaccessory products for the

sports and athletic market. It

is the largest seller of such

garments in the world. It

sells to approximately

19,000 retail accounts in the

US, and then in

approximately 140 countries

around the world. Just about

all of its products are

manufactured by

independent contractors

with footwear products in

particular being

manufactured in developing

countries. The company

manufactures in India,

China, Taiwan, Korea, and

Mexico as well as in the USand in Italy.

Nike has become one of the global companies targeted by a broad range of

campaigning NGOs and journalists as a symbolic representation of the business in

society. In Nikes case, the issues are those of human rights and conditio ns for

workers in factories in developing countries. In the face of constant accusations,

Nike has developed a considered response, supported by corporate website

reporting. It now has a well developed focus for its corporate responsibility on

improving conditions in contracted factories, aiming for carbon neutrality, and making

sports available to young people across the world. The criticism continues, however.


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Nike CSR Activities (A Brief)

Around The Globe Activities:

In India:

o Collaboration with Magic Bus:Nike has partnered with Magic Bus to

build awareness and develop life skills of children through sports.

o Girl Eect:Girleffect.org is managed by the Nike Foundation. One of

the activities is the Safer Cities project which has empowered over

1,000 girls to overcome the fear of violence


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o AIDS Campaign: General support for legal and policy advocacy on

HIV/AIDS and related matters in India

o Nike also under takes several small CSR drives/activities regularly in

different working Circles like plantation drives etc

Nikes Financial Aspect of CSR

We contacted indiacsr.in which is one of the biggest sites which reports CSR

activities in India through which we got the contact of one of the managers who

handles the Nikes northern region activities in India.

Although we were not able to get the exact figures we got considerable amount of

information. We were told Nike allocates at least 5% of its sales profit inCooperate Social Responsibility activitiesbut this is as suggested by headquarter

of Nike in Beaverton in US.

This allocation of budget is not a compulsion until specified d by the country laws.

Hence in India there is still not a law forcing the companies to spend money on

certain CRS activities hence they dont have a proper guideline for CSR spending in

India.

Although according to the CSR clause passed at the end of 2013, now the

companies have to spend 2% in CSR activitiesaccording to a specified formula

based on the net worth/turnover/profits of the company. Hence now Nike India is

planning a certain program to make sure this happens.

We also came to know that Nikes India currently holds 15% market share in

India in sports sector after Reebok and Adidas and has about a business of

525 crores in India and a good turnover. So the budget allocation for this

financial year would be around one to ten crores but this depends on a lot of

factors.

Previously Nike has invested a lot of money in various CSR activities in India a

few of which has been mentioned previously. The budget assigned previously were

dependent on different circles of Nike in India and the profit margins they were

making usually one to two percent was already being spend on the CSR

activitiessuch as plantation drives across various areas etc by Nike as it was told to

us by the manager.

He also drew our attention that Nike was spending also a good amount of money

in improving its manufacturing practices for which it was critisized a few years ealier.

It is on a mission to revamp its supply chain and forcing Fair Trade practices on its

suppliers. Since in India Nike has around 2600 manufacturing setup. Hence wecame to know that separate budget was being assigned to do the auditing of these


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manufacturing units. Nike spent around ten million globally to improve its

supply chain.

Although Nike its showing its trying to improve its supply chain it remains

one of the biggest challenges for Nike to implement, so now well focus on this

problem and will recommend changes for the same.

Nikes Biggest Problem:

Nike is working in every field of sustainability from producing recycled shoes

to reducing CO2 emission they and dedicated R&D teams continuously

working on this so it very difficult for us to recommend improvement for Nike

in such area. Hence we would e focusing on the one of the most major CSR

related problem faced by Nike that is:

The lousy state of workers in the factoriesof those contracted to manufacture for

Nike.

The Global Alliance report on the factories in Indonesia gave the following

workforce profile: 58% of them are young adults between 20 and 24 years old,

and 83% are women.

Nearly half of these workers have completed senior high school.

Few have work-related skills when they arrive at the factory.

95% of the workers in the nine participating factories have received pay or

wage increases in the last year, consistent with government minimum wage

increases, and with small exceptions the bases wages in these factories are

above the regions minimum wage although critics would observe that

doesnt add up to a great deal.

Nike has around 700 contract factories, within which around 20% of the workers are

creating Nike products. Conditions for these workers have been a source of heateddebate, with allegations made by campaigns of poor conditions, with commonplace

harassment and abuse. Nike has sought to respond to these allegations by putting

into place a code of conduct for all of its suppliers, and working with the Global

Alliance to review around 21 of these factories, and to pick up and respond to issues.

In Indonesia, the following was reported: 30.2% of the workers had personally

experienced, and 56.8% had observed, verbal abuse. An average of 7.8% of

workers reported receiving unwelcome sexual comments, and 3.3% reported being

physically abused. In addition, sexual trade practices in recruitment and promotion

were reported by at least two workers in each of two different factories, although a


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subsequent investigation was unable to confirm this. 73.4% of workers are satisfied

with their relationship with direct line supervisors, 67.8% are satisfied with

management.

Far and away, the main concerns expressed by workers relate to their physical

working environment.

A further report has been produced relating to a site in Mexico, which has

experienced serious problems leading to labour disputes. In both cases, Nike

responded to the audit reports with a detailed remediation plan.

Designing Of CSR at Nike

Recommendation for what Nike should do to solve this problem:

Nike should look to monitor working conditions in factories that produce their

products even more strictly. For example:

During the 1990s, Nike installed a code of conduct for their factories. This

code is called SHAPE: Safety, Health, Attitude, People, and

Environment. They spend about 10 million dollars a year to follow the code,

adhering to regulations for fire safety, air quality, minimum wage, andovertime limits. In 1998, Nike introduced a program to replace its petroleum-

based solvents with less dangerous water-based solvents. A year later, an

independent expert stated that Nike had, "substituted less harmful chemicals

in its production, installed local exhaust ventilation systems, and trained key

personnel on occupational health and safety issues." The study was

conducted in a factory in Vietnam.

Nike should develop a program to deal with claims of unfair practices. Nike

claims to have hired a staff of 97 people to randomly inspect several hundred

of their factories each year, but these officials need to be well trained and

claims must be documented.

Nike created a non-governmental organization called the Global Alliance for

Workers and Communities that became aligned with several other groups

including the International Youth Foundation. The organization releases

reports about the corporation and its plans to improve current conditions. The

Global Alliance received backlash in 2001 when a report about the Nike

Inc. did not include recent events such as strikes, worker terminations, and


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the lack of collective bargaining in their Indonesian factories. Thus such

matters should be looked into.

These monitoring processes might be rigorous, but they are often woefullyincomplete are filled with loopholes. Nike must make a more foolproof system

and try to update their list of allowed contractors and subcontractors as often

as possible to make sure that no overtime is enforced on workers or no illegal

subcontracting is done.

Monitoring has become the most popular method of enforcing regulations in

Nike factories. After studying the results of the audits, this system has been

found to be not as effective as authorities expected. When studying themonitoring process, it is important to look at how the monitoring is done, who

takes part in it, and the purpose of the check. The person conducting the visit

must go in without a bias towards wanting or not wanting to find any flaws in

the factory. Inspectors associated with the company have been found to hide

errors and those with non-governmental associations or other interest groups

have exaggerated findings. In order to have a fair monitoring process the

inspector must be unbiased in either direction. Factories can also vary in their

level of performance. The monitoring process must be carried out at each

individual unit in order to gain an understanding of the factory system as a

whole.

Greater involvement of higher-level Nike employees such as those working for

the corporate system is seen as a possible solution to labour issues.

At the design level, the intricacy of patterns on Nike products should be

controlled in order to prevent factory workers from being unable to complete

the merchandise. By diffusing benefits to the factory workers from a powerful

position, Nike should be able to create a better working environment in

production.

Conclusion

Thus we can say that Nike being one of the biggest companies in the world and also

one of the most sustainable ones when compared to others, if could improve its


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labour practices it might become the one of the leading companies to bring about a

great change in this world and become CSR leaders in the world.

References:

http://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-

famous.html

http://www.indiacsr.in/en/?page_id=1775

http://nikeinc.com/pages/responsibility

http://www.nikeresponsibility.com/report/

http://www.mallenbaker.net/csr/CSRfiles/nike.html
http://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-famous.htmlhttp://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-famous.htmlhttp://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-famous.htmlhttp://www.indiacsr.in/en/?page_id=1775http://nikeinc.com/pages/responsibilityhttp://www.nikeresponsibility.com/report/http://www.mallenbaker.net/csr/CSRfiles/nike.htmlhttp://www.mallenbaker.net/csr/CSRfiles/nike.htmlhttp://www.nikeresponsibility.com/report/http://nikeinc.com/pages/responsibilityhttp://www.indiacsr.in/en/?page_id=1775http://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-famous.htmlhttp://allfamousthings.blogspot.in/2013/04/how-much-it-cost-to-design-these-famous.html

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CSR at NIKE