Q.

1 For each of the dimensions of Corporate Citizenship Management Framework 

      (Exhibit 6), identify key strengths and weaknesses for New Balance.

New Balance has a four-fold Corporate Citizenship Management Framework that comprises
of:
1. Overall Governance: Values, Mission, Principles and Policies:
The company always was committed to the well-being of its employees and the
community where they operated in, even before CSR started garnering all the current
hype. Employees were proud of what the company was doing and took it as their
personal achievement. The company’s vision was reflected in the strong values, pride
and commitment that the employees had. Responsible Leadership Steering Committee
formed under the mission of RL, included the core areas of CSR like charitable
giving, environmental sustainability, compliance, and product life cycle. Adding to
this, the company showed great social responsibility in the domestic manufacturing
area, in the economic slowdown of 2007-2009.

However, this vertical was facing some difficulties too. The concept of Responsible
Leadership was not effectively understood by the different levels of the company.
Instead of identifying it as an umbrella initiative, it was seen as philosophy and
philanthropy. The executives saw CSR as a cost rather than a leadership strategy that
will drive New Balance forward.

Even inside this under-understood platform of RL (which covered many key aspects
of CSR) some core ideas where left out. These ideas included transparency and
accountability, and employee support and domestic manufacturing, reducing the
potential of managers to identify risks and opportunities.

This lack of accountability led to lack of clear leadership in CSR. Because of this, the
footwear and apparel division differed vastly in their CSR initiatives. In footwear, the
suppliers and manufacturers were closely monitored to exercise a good amount of
control, while the apparel division lacked this.

We can see here that even though the CSR Values, Mission, Principles and Policies
were ideated well, they lacked in their implementation. This can be ironed out to bring
forth a very effective and efficient CSR program.

2. Products and services:

The company had a truly global reach with its 46.2 million pairs of sneakers sold
around the world. This was a great resource to increase profits and also effect
excellent CSR. They also stressed on reducing their carbon food print and level of
toxicity associated with each product. All of their footwear were manufactured from
environmentally sustainable materials, using an “eco score card”. They had eco-
friendly stores despite any directive from the management, and used rail instead of
trucks for delivery. Hence, their entire supply chain was in line with their CSR policy.

However, this area was also underutilized, much like their corporate governance. The
vastly different environment that the apparel and footwear industry faced led to
footwear division facing a smooth ride while apparel division was facing stress from
many environments. This led to different CSR standards in the same products from a
 single brand. Also, in both the divisions, a mechanism to figure out the life cycle
impact of products was absent. Because of increasing waste, there was a global call
for stewardship for manufacturers to take back their products at the end of their useful
life.

These products lacked in the research department too as education was required to
“push design teams toward using environmentally preferred products and
manufacturing.” They needed to research to find eco-friendly products that offered the
best performance. Even though they chose rail over road to safeguard the
environment, this was neither measured nor communicated.

3. Operations:
The integration of CSR in operations area of New Balance was one of their core
strengths; an area which the other players can look up to. This had many positives like
reduced costs, increased productivity and improved worker safety and morale. It even
helped them achieve European Union REACH regulation compliance. Partnership
with Henkel helped the company reduce its waste and double its productivity. This
also had many positive environmental impacts like a huge reduction in the emission
of VOCs.

They also had many other good initiatives in the operations department like
enforcement of a maximum 60-hour workweek for Chinese suppliers, which
increased productivity by 35%. They even made this public to promote the culture
among competitors. They achieved the status of “small quantity hazardous waste
generator” and reduced the costs for disposal, worker training and insurance. They
improved productivity, reduced absenteeism, lowered insurance cost and increased
morale of their associates through a new job coaching program. They switched to
green cleaners that saved $240,000, apart from additional benefits of improved
worker health, safety and morale. They replaced lightings, servers and improved
processes to cut costs by $340,000 in 2008 alone. This helped them achieve a 30%
share of renewable energy, well under the GHG emissions regulation. They produced
in the US itself and safeguarded their employees even in the 2007-2009 recession.

Even in such a well-established operations division, the lack of coherence in corporate

governance caused problems. Lack of clarity between the footwear and apparel
divisions, exposed the apparel division to significant risks, diluting the New Balance
brand. Such a gap also existed between the domestic operations and the supplier
facilities overseas. They even thought about closing some of its overseas factories to
safeguard the domestic employees. They also employed contractual labour in their
overseas factories, contrary to the domestic scenario. These problems also could be
solved by a proper CSR employing structure.

4. Community Support
New Balance promoted philanthropy and employee volunteering (amounting to 3,847
hours) in the communities in which it operated. They were important factors in
employee retention and job satisfaction as they made the employees feel highly
empowered. Volunteering helped improve public relations, branding and reputation,
employee team and skill building, recruitment and sales. New Balance Foundation
donated $6. 49 million to charity to conduct programs such as Susan Komen breast
cancer initiative.
 Here also, the excellent Community involvement was marred by its non-alignment
with the business strategy as it was mainly US-centered and improperly
communicated. This led to employees feeling that the brand was not recognized for all
the work it has done. The community support strategy was also poorly focused and
non-relevant themes were introduced.

Q.2 Identify and elaborate some relevant areas for New Balance to focus on for developing a
CSR strategy that is integrated with the business strategy.

On analysing the strengths and weaknesses of the company, the major points identified can
be briefed as below
1. Governance issues: Lack of consistence is visible throughout the whole strategy
wherein the company has substantially failed in having a clear and coherent mandate.
The four areas that the RLSC had initially focussed such as charitable giving,
sustainability , compliance and product life cycle, was not inclusive enough so as to
form a holistic coverage. Major parameters such as transparency; accountability and
employment support should have been incorporated. Though the execution of the
CSR initiatives were top notch, close monitoring of the impacts made by those
initiatives were not done efficiently. Uniform policy implementation and prudent
institutional setup for the same were found to be lacking. To quote an example, there
was a lack of controls to check the compliance in material procurement and quality
suppliers in the apparel sector, whereas the footwear sector had that setup in place.
 2. Products and Services: This pillar of the CSR strategy also lacked an overall holistic
strategy and minimal communication through departments as well as hierarchies. The
study clearly shows that the Products and Services area is Clearly underutilised from a
CSR viewpoint; Faring to its major competitors there were lot more possibilities that
the company could have incorporated in order to satisfy its increasing ethical
consumer base
3. Community support: The company had a culture of philanthropy instilled in its
culture; The New Balance Foundation was an offshoot of such a policy. The
employee initiatives were also up to the mark where the majority of the employees
felt good about the way they were contributing to the community . Similar to the other
areas, Lack of coordination from the executive level and minimal communication
down the hierarchy were the major problems identified in this areas

The major takeaways from this are:

1. The company’s strengths can be attributed to the fact that New balance has strived to
keep CSR as an integral part of the company culture owing to the company owners
personal vision of responsible leadership.
2. Here appears to be an effective adoption and understanding of the importance of CSR
from the top management to the ground level employees. The initiatives that has been
rolled out till date demonstrate the benefits of CSR, to the company, the communities
in which it operates, and to the company’s stakeholders.
3. There are also certain weaknesses that needs urgent addresal. There is no
comprehensive oversight of CSR from the executive level, so there is no consistency
in goal or vision or mission, little opportunity to gain synergy from the disparate
initiatives, a lack of communication both internally and externally, and little or no
associated reporting and lack assessment systems or control checks

The major takeaways from the SWOT analysis of the company, show that, if certain major
pain points are focussed , New Balance can ensure a better CSR implementation.
Two major areas of focus should be:
 Revamping the RLSC and replacing it with Clear and effective leadership
 Putting in a framework for systematically identifying the CSR risks and opportunities

These are the suggestions that I propose:

1. Clear and effective leadership: Replacing the RLSC with an Executive committee
with the project managers as the foot soldiers would enhance the overall productivity
of the whole CSR Strategy. The role of the Executive committee would be to
determine a comprehensive blueprint that integrated the CSR strategy with the
business strategy.

The project manager will be responsible to look specifically into how social
responsibility impacts his existing projects. The desirability of a certain initiative
would solely depend on both its relation to the project as well as the likely impact on
the firm, the community, and society in general. Project managers can influence the
company toward socially responsible behaviour at the ground level in areas such as
human rights, employee rights, environmental protection, and supplier relations.
Various initiatives that involve partnerships with the local community can create long
lasting relationships of respect, goodwill, and mutual benefit. The Project manager
 will be responsible for the major steps which includes Introduction, Identification,
Positioning strategy development implementation and monitoring.

2. Incorporation of a systematic framework to analyse the risks and opportunities: Four

principles can be incorporated to ensure an effective monitoring system to analyse the
risk and opportunities of the company:

Principle 1 - Definition

This process will serve to deliver a positive contribution to one or more of the three pillars of
sustainable development (economic, environmental and social), once any potential negative
impacts to any of the identified pillars have been duly identified and mitigated. By virtue of
this holistic appraisal of sustainability issues, the company can constitute a direct response to
the challenges that is prevalent in the society .

Principle 2 – Frameworks

To promote the delivery of its CSR initiatives the company entities need adequate processes,
methodologies, and tools, to identify and monitor the positive impact of the activities,
projects, programmes, that they are planning to roll out.

Principle 3 – Transparency

This would incorporate forecasting of the Intended Impacts, Defining Methodologies for
assessment , delineating the KPIs and identifying the achieved impacts. Reporting tools
should also be put in place so as to improve on the activities that has been initiated.

Principle 4 – Assessment

The assessment should be based on the actual impacts that is achieved. Incorporating an
Impact Radar to analyse the effectiveness of the projects is one of the ways to identify the
risks and opportunities. The Impact Radar proposes impact categories that derive from the
core elements of sustainable development, to detect the impacts they might generate, positive
and negative, through their products and services.

Using these 4 principles, New Balance can bring in coherence into its CSR policies, that it
clearly lacks. This structure that the above principles bring in can implement the good
initiatives that the company has already taken in such a way that it becomes the excellent
CSR program that it deserves to be.