Case Study

PROGRAMME Bachelor of Commerce in Accounting

MODULE Introduction to Business Ethics
YEAR Two (2)
INTAKE January 2023 Semester 2
Marks 30
Read the case study below and answer ALL the questions that follow

Nike Inc
Nike is the world’s largest supplier and manufacturer of athletic shoes, apparel and sports equipment. The company claims
to be dedicated to promoting the safety, health and well-being of people and the environment. But how much do its
practices live up to its alleged principles?
Is Nike ethical?
We looked at several ethical issues including human rights, worker's rights, supply chain management, pollution and toxics,
habitats and resources, environmental reporting, use of controversial technologies, political activities, anti-social finance
and animal rights. Our research highlights allegations of forced labour in the Nike supply chain, gender discrimination
towards female athletes and parents, and failure to ensure all employees receive a living wage. What’s more, the company
is spending high amounts of money on political lobbying each year – that’s not to mention the extortionate wage packets
received by company executives. Below we outline some of these issues.
People
In February 2020 the Washington Post reported that a large Nike supplier factory, Qingdao Taekwang Shoes Co., had been
employing Uighurs from the Xinjiang region of China. The article referenced a report which said Uighurs in the Taekwang
factory were working “under conditions that strongly suggest forced labour”. A second Washington Post article published in
March states "Nike said it was reviewing its suppliers’ hiring practices in China, after The Washington Post and an
Australian think tank reported that members of the Uighur Muslim minority were making shoes for the American brand in
conditions that suggested they were coerced.” Nike also received the worst rating in the 2019 Tailored Wages UK report,
published by The Clean Clothes Campaign in June 2019. The report stated: "The brand can show no evidence of a Living
Wage being paid to any workers". Nike also came under fire when Olympic runner and champion Alysia Montaño, who was
sponsored by Nike, spoke out about how the company said it would pause her contract and stop paying her if she had a
baby. This triggered public outcry and a congressional inquiry. Nike later announced a new maternity policy for all
sponsored athletes, which guaranteed pay and bonuses for 18 months around pregnancy.
Environment
Nike received Ethical Consumer’s worst rating for its cotton sourcing policy, because it lacks a clear approach to use of
pesticides and herbicides. Cotton accounts for 12.34% of all insecticide sales and 3.94% of herbicide sales, even though
cotton covers only 2.78% of global arable land. Nike used some organic cotton and Better Cotton Initiative (BCI) certified
cotton, but this wasn’t 100%. Companies that have the environment in mind should have a clear statement committing to
the use of 100% sustainable cotton. Nike also uses leather as a substantial part of its business. The leather industry uses a
cocktail of harmful chemicals to preserve leather. Tannery effluent also contains large amounts of other pollutants which can
pollute the land, air and water supply, making it a highly polluting industry. Nike referred to using Leather Working Group
(LWG) certified leather in its Impact Report 2019, but no clear information was provided about what percentage was certified
100% LWG gold standard. LWG Gold is the only standard Ethical Consumer considers positive.
Politics
Nike is a dubious company in terms of financial ethics and political activities. In 2019 Nike’s highest paid Executive Officer
received an astonishing $13,968,022 – around £11m. Five named Executive Officers received over £1m in total
compensation in the same year, which Ethical Consumer considers to be excessive pay. The company also has
subsidiaries in jurisdictions considered by Ethical Consumer to be tax havens, including in Bermuda, Delaware,
Netherlands, Taiwan, Hong Kong and Singapore. At least 21 of these were considered to be a high-risk company type (such
as a holding company) for likely use of tax avoidance strategies. According to Opensecrets.org, in 2019 the company had
spent $1,180,000 on lobbying and in the 2020 election cycle made $511,737 in political donations to both Republican and
Democrat parties. What’s more, in 2019 32 out of 38 Nike Inc lobbyists were said to have previously held government jobs.
Nike is also involved in lobbying. In February 2020 Nike was listed as a member of the US Council for International
Business (USCIB). Ethical Consumer regarded USCIB to be a corporate lobby group which lobbied for free trade at the
expense of the environment, animal welfare, human rights or health protection.
Animals
Nike lost a whole mark under Ethical Consumer’s animal rights category, because it retailed several products containing
animal-based materials, including leather, wool and down/feathers. Nike lost marks for not having a clear policy against
mulesing. Merino sheep are specifically bred to have wrinkled skin, which yields more wool. Flies lay eggs in the folds of
skin, and maggots can eat the sheep alive. To prevent this condition Australian ranchers perform 'mulesing' which involves
carving large strips of skin and flesh from the backs of unanesthetized lambs’ legs and around their tails. The company
stated “Nike supports the use of wool fiber that is sourced and certified from non–mulesed sheep and will consolidate its
wool sourcing accordingly, as rapidly as supplies and pricing allow”. This was worded in such a way that it left open the
possibility of the company using wool from mulesed sheep.

QUESTION 1 [6 Marks]
Identify and list 3 unethical accusations against Nike as highlighted by research in this case study.

QUESTION 2 [6 Marks]
Give a brief explanation of the issues linking ethics to people factor in this Nike Inc case.

QUESTION 3 [8 Marks]
Provide a discussion of your own understanding regarding the ethical consumer at Nike Inc.

QUESTION 4 [10 Marks]

Drawing from your reading and understanding of the Nike Inc case above, discuss how animal welfare is a business ethics
issue.

END OF PAPER