Strategic CSR - Nike

The article in the url below presents a challenging issue for Nike in relation to its complex supply chain:

“This may be a watershed moment,'' Scott Nova, executive director of the Worker Rights Consortium, a group of 186 universities that monitors factories that make college-logo apparel, said. ''Up until now, major apparel brands have steadfastly refused to take any direct financial responsibility for the obligations to the workers in their contractors' factories. Now the most high-profile sports apparel firm has done just that.”

Nike’s response to the specific incident that sparked the campaign was generous:

“Facing pressure from universities and student groups, the apparel maker Nike announced on Monday that it would pay $1.54 million to help 1,800 workers in Honduras who lost their jobs when two subcontractors closed their factories. Nike agreed to the payment after several universities and a nationwide group, United Students Against Sweatshops, pressed it to pay some $2 million in severance that the two subcontractors had failed to pay.”

The ramifications for Nike of not paying were potentially harmful to its brand:

“The University of Wisconsin, Madison terminated its licensing agreement with Nike over the Honduran dispute, and Cornell warned that it would do the same unless Nike resolved the matter.”

Whether or not the firm should have paid, however, is open for debate. A quick test: By responding to pressure from student activists at universities and agreeing to compensate the employees of a different company (albeit, a supplier) for actions committed by that firm’s management, Nike is doing which of the following?

1. Wasting its money.

2. Writing a (relatively small) check to avoid a situation it cannot win and protect its brand (and licensing agreements).

3. Shrewdly placating an important stakeholder group who potentially represent the views of a sizable consumer segment.

4. Integrating CSR throughout its supply chain.

5. Acting ethically and morally.

I favor “All of the above.”

While Nike certainly should seek to sever ties with firms that are not acting responsibly and not willing to reform (and, if this is one in a string of transgressions, my view changes), it seems difficult to hold the firm responsible for compensating the employees of another firm for ethical transgressions committed by managers of that firm.

Apart from anything else, Nike’s payment sets a precedent that, potentially, holds a firm liable to a whole range of actions:

- What if a supplier pollutes the local river – should Nike pay to clean it up?

- What if a contractor’s sub-contractor treats its employees in a similar way – should Nike compensate them, too?

- What about if the rubber plantation owner that produces the rubber that eventually finds its way into a Nike sneaker only pays his/her employees a minimum wage, rather than a living wage – is it Nike’s responsibility to make up the difference?

If you agree or disagree, I would be interested to hear why.

For additional commentary on this article/issue, see Toby Webb’s blog entry at http://ethicalcorp.blogspot.com/2010/07/again-has-nike-provided-watershed.html:

“Nike deserves huge praise here. This is a company that is still (unfairly) synonymous, in the eyes of many, with sweatshops, yet has done as much as any company to tackle the issues head on. … Many other companies, and by that I mean 99.99% of the other firms in the sector, would have shut up shop and refused a compromise deal such as this.”

Take care
David

Bill Werther & David Chandler
Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)
© Sage Publications, 2011
http://www.sagepub.com/strategiccsr2e/

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Pressured, Nike to Help Workers In Honduras
By STEVEN GREENHOUSE
916 words
27 July 2010
The New York Times
Late Edition - Final
1
http://www.nytimes.com/2010/07/27/business/global/27nike.html