Here’s what struck me in Fortune’s recent article on Nike titled, “Citizen Nike” that looks into labor conditions in Nike’s supply chain: despite real, serious efforts on Nike’s part, conditions in the factories that manufacture their shoes hasn’t improved significantly in the last decade.
Want proof? If you make it to the last page of the article, you’ll find a sobering quotation by Richard Locke, a professor at MIT’s Sloan School of Management, stating that:
Despite ‘significant efforts and investments by Nike…workplace conditions in almost 80% of its suppliers have either remained the same or worsened over time.
The article goes on to say that in Nike’s fiscal 2006 audit of its 42 factories, 7 got an ‘A’ (best) rating and 13 got D’s (worst rating) because of multiple transgressions.
(an aside here is how incredibly friendly Fortune is to companies in these sorts of profiles. If they wanted to write an article titled “Sweatshops Still Haunt Nike” or something similar, I’m sure they could have.)
This is incredibly sobering. Nike has taken CSR – specifically, improving conditions in their supply chain and lessening the environmental impact of their products – very seriously. They’ve appointed Hannah Jones, a well respected, senior person in the organization, to lead this effort and given her a team of 135 people around the world. Plus, she reports directly to CEO Marc Parker. Nike has taken a leadership role in disclosing who their suppliers, have been transparent about conditions in their supply chain, and they’ve been very public about their commitment to change. And in some areas (like the environmental impact and amount of waste in their products) they seem to have made some real strides (pun intended).
But on the question of Nike’s factories, things are either the same or have gotten worse.
My point is: if it’s this hard for Nike to move the dial on these issues, then it’s REALLY hard to make an impact as a “responsible corporate citizen.” Plus, the areas where Nike has made the most progress are those where there’s a strong business case (reducing $800M a year in material waste in shoe manufacturing), which gives me more hope for initiatives that have to do with efficiency and cost savings (read: green) and less hope for those that involve real tradeoffs (read: wage levels, healthcare, benefits, workers’ rights).
I’m incredibly glad that “corporate social responsibility” has gotten traction in recent years, but my personal experience resonates a lot more with what I read in this article about Nike (even with great intentions, commitment and resources, making real headway is hard and slow) than when I see advertisements proclaiming how a given company gives back and makes a difference.
In those cases, I’ll believe it when I see it.
The problem with CSR is that there are no guidelines nor regulations which determine the lowest common denominator as to what needs to be reported, etc. Given the international dimension of business, it is challenging for (in this case) Nike to overcome this divide as I am certain that “none of their competitors are doing it”. This is where Nike has missed the boat: it can differentiate themselves from their competitors by making running shoes which enhance the lives of workers, gives pride to the company, and heck, they can even charge a premium which I am sure consumers would buy into. Is this too much to ask for –from a CSR perspective?
On the point that there are “no guidelines nor regulations which determine the lowest common denominator as to what needs to be reported,” there are in fact a number of frameworks that have evolved over the last decade to address this issue, the most notable of which is the Global Reporting Initiative. There are also standards in specific areas, like supply chain compliance, etc.
I think the bigger issues are:
1. The existence of a standard doesn’t necessarily drive the right strategic decisions
2. As Nike proves, if making change is really hard, then it’s hard for everyone and the existence of a standard doesn’t address the root cause of the issue
“CSR” doesn’t work (pun intended!). It’s all, or nothing. You’re spot on Sasha: actions define priorities–not the inverse. On a separate (& positive) note, here’s an idea that does work, from the bottom up:
Perhaps a perfect opportunity for one of Acumen’s entrepreneurs?!?
And what about all those other XYZ coporations that make consumer goods in countries like China and the like. Bet they don’t pay their workers nearly enough….. Why can’t the wages increase?
Sasha, have you heard of Auret Van Heerden? His basic premise seems to be that big companies can bring labor practices and standards into line by pulling contracts from their subcontractors who fail to uphold standards. In the example, under the Fair Labor Association accreditation process, Nike would have fired those 13 suppliers who got ‘D’ ratings. (According to the FLA website, Nike is a participating member.)
Big companies are so powerful I can’t imagine them not being totally central to moving the needle on labor standards; certainly I see them as more powerful by far than modern governments, whose limited jurisdictions can’t cut across the global supply chain.
I’m a little lost as to why big companies seem reluctant to use their big stick of purchasing power to bring suppliers more in line.
Andrew, I’ve been out of this space (corporate citizenship/supply chain) for almost a decade, but what I’ve seen is (and the point I was trying to make in this post) is that it’s harder than it appears. Even when corporate will is there, enforcing standards is difficult; and finding credible replacement suppliers who can meet volume, quality and price targets AND who meet higher labor standards than traditional suppliers is even more difficult.
Again, I’m not in the thick of this space any more, and I agree that it’s hugely important and that big companies have a great amount of (often underutilized) power to make change. But it’s also hard (from what I’ve seen) to get this stuff right.
Sasha,
It’s time to update your view on this. I’d love you to write something about where you see Nike today, 2011. I might look into it myself. But since this is still such a popular post and CSR is considered yesterday’s management concept by so many people, I’d rather see you what you have to say.
Personally, I think CSR was just another reasonably good management principle or practice that has gotten reduced to an acronym and should not be universally defined although it is. Corporations have societal responsibilities. The question, the challenge and the opportunity is how do they manage them.
Hello. I have a question, it is generic but none the less I cannot find a clear answer.
What drives a transnational company such as Nike? Is it only money and exposure?
Thanks
Very good info. Lucky me I ran across your blog by accident (stumbleupon).
I’ve saved it for later!