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2014

CORPORATE SOCIAL
RESPONSIBILITY
Designing and Financial aspect of CSR at
NIKE

Kartik Singh (M/BFT/11/10)


Samapriya Banerjee (M/BFT/11/20)
Vipul Bhatia (M/BFT/11/30)
NIFT Mumbai
4/23/2014

About Nike
Nike Inc produces footwear,
clothing, equipment and
accessory 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 US
and 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 conditions 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.

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.

Girl Eect: Girleect.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

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 in
Cooperate Social Responsibility activities but 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 activities according 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
activities such 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 we
came to know that separate budget was being assigned to do the auditing of these

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 factories of 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 heated
debate, 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

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, and
overtime limits. In 1998, Nike introduced a program to replace its petroleumbased 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

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 woefully
incomplete 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 the
monitoring 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

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-thesefamous.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