Why did Nike fail to address corporate social responsibility earlier?

As a way to compete against dominant German competitors, Puma and Adidas, Nike
resorted to low-cost production strategy. Because it is new in the market and it has not
established any competitive advantage, the company decided to cut down costs
to reduce prices for their goods.

By moving its operations overseas and through outsourcing, Nike has successfully minimized
its production and manufacturing costs. There are about 550,000 workers employed in
700 Nike factories in 50 countries. Majority of these factories are found in Asian countries
because they offer cheaper labor cost. Because of this, Nike has faced accusations including
deficiencies in health and safety conditions, extremely low wages, child labor, widespread
harassment, and indiscriminate hiring and firing practices. The cheap labor and Nikes
indifference in improving its employees physical working conditions made it possible for
Nike to spend a great deal of money on its design and marketing. Nike also did not fail to
pay executive salaries and to maintain large profits while still keeping the cost of the shoes
affordable to middle class.

Corporate Social Responsibility (CSR) is the voluntary activities undertaken by a company

to operate in an economic, social and environmentally sustainable manner. It means that
the company should have a commitment to develop policies that will integrate responsible
practices into its business operations.
Nike failed to address corporate social responsibility earlier due to its lack of international
oversight of its operations. According to Nike, it is difficult to track and regulate working
conditions and wages in its Asian factories because these factories have further
subcontracted out the work. It is also evident that labor laws in Asian countries like China,
Pakistan, Indonesia, Vietnam and Bangladesh are not strictly implemented. Since child labor,
hostile work environments, extremely low wages, excessive work hours and other unethical
actions were common practices, Nike overlooked this issue. There was no development of
monitoring programs and the management clearly lacks supervision in its Asian factories.
This emphasizes the disconnection of the top management from its factories.

Also, the management of Nike specifically maintained that their responsibility extend only on
earning adequate returns for their shareholders. Although it generated enough returns for its
shareholders, it failed to address working conditions which is an important factor in
corporate social responsibility.

Evaluate Nikes response to societal and consumer concerns about its contract
manufacturing.
According to critics, the response of Nike to the allegations about labor and human right
violations in third world countries is more of a damage-control tactic rather than a sincere
attempt at labor reform. Because there were public protests against Nike, boycotts and
picketing of Nike stores, decrease in Nikes revenues and stock prices, the company
launched a large public relations campaign to fight the damaging allegations against Nike.
This campaign involves individual consumer retailers and large university contracts. The
focus of the campaign is on the students as majority of them form a core segment of Nikes
market.
Nike used its resources to visit college campuses to discuss and explain its manufacturing
policies to the students and university administrations. Numerous press conference took
place and several letters stressing Nikes commitment to corporate responsibility were sent.
Nike even facilitated tours to its Indonesian and Vietnamese factories for three weeks to
show the improvements in the work conditions of their factories.
But because of its desperate measures of campaign to defend its corporate reputation, Nike
faced legal lawsuits which recognizes Nikes violation of Californias unfair competition and
advertising laws.
Ethical behavior attitude is important in a company. Nike failed to establish standards for
business conduct and failed to nourish its employees values, resulting to employees
behaving in a manner inconsistent with the companys mission and goals. To address this,
Nike drafted its own code of conduct. It also improved labor standards in each of its factories
and implemented a code of conduct for all of its suppliers. Nike worked with Global Alliance
to sought help in reviewing its factories and joined Apparel Industry Partnership to
participate in the drafting of an industry-wide code of conduct. Nike transformed itself to a
leading model of corporate transparency. The company believes that transparency to its
consumers could help improve its reputation and corporate image and that transparency
would work as a motivator for contract factories.
What are the challenges facing Nike in the future?
Although Nike has made improvements in the working conditions of its factories by
establishing a code of conduct for its supplier contractors and has transformed itself to a
leading model of corporate transparency, Nike failed to take into account the lax
implementation of labor laws. Some of its contract factories were still employing unethical
practices such as underage workers, unpaid salaries for employees, and falsified documents
for worker permits.
The challenge of global change has become apparent and the corporate social responsibility
should be expanded by Nike to eliminate the issue of Sweatshop labor practices by Nike.
Because Nikes business model incorporates heavy outsourcing of its production to factories
overseas, oversight in its factories cannot be avoided. Therefore it should improve its audit
tools and its diligent and active supervision in its factories.
Because of the nature of the textile industry, Nike also faces numerous challenges and
potentially critical problems such as water deficits, climate change, pollution of land, air, and
waterways; and large fossil fuel and raw material consumption. To address this, Nike should
develop more innovative and sustainable products in the future which would be
environmentally friendly.