Running Head: CORPORATE SOCIAL RESPONSIBILITY 1

Corporate Social Responsibility: Nike Inc.

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Professor’s Name

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Word Count: 2500

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Executive Summary

Nike Inc. is an American multinational corporation mainly located in Beaverton,

Oregon, in the Portland metropolitan area (Nike Company n.d.). Currently, Nike's corporate
social responsibility was focused on areas wherein they can have the most value and have
the greatest impact, such as community, labor, waste, water, energy, and climate, etc. (Nike
Company n.d.). However, Nike faces four issues in four different aspects: people,
environment, politics, and animals (Ethical Consumer Org., n.d.). Thoroughly are the four
theories and frameworks related to Nike CSR: six core characteristics of CSR, Carroll's
Pyramid, Stakeholder-Theory, and Three-Domain Model of CSR. The six core
characteristics of CSR was composed of voluntary activities, managing external factors,
stakeholder management, alignment of social and economic responsibilities, considering
practices and values, and extending CSR activities beyond philanthropy to instrumentality
(Aminu et al., 2015). Lastly are the recommendations to improve the CSR of Nike that can
be perceived in three areas: ecological responsibilities, social welfare, and recruitment and
retention of employees.
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1. Introduction

1.1. Background of Nike Inc.

Nike Inc. is an American multinational corporation mainly located in Beaverton,

Oregon, in the Portland metropolitan area (Nike Company n.d.). It is originally known as
Blue Ribbon Sports (BRS) and was founded on January 25, 1964, by a track athlete Phil
Knight and his coach Bill Bowerman (Nike Company n.d.). Additionally, Nike designed,
developed, and manufactured footwear apparel, accessories, equipment, and services in
worldwide marketing (Nike Company n.d.). Thus, they are the world's largest supplier of
athletic shoes and a major manufacturer of sports equipment. In 2020, Nike had a revenue
in excess of US$37.4 billion and employed 76,700 people worldwide (Nike Company n.d.).
Currently, Nike's corporate social responsibility was focused on areas wherein they can
have the most value and have the greatest impact, such as community, labor, waste, water,
energy, and climate, etc. (Nike Company n.d.).

1.2. CSR Issues to be Addressed

Despite its focus on the above areas, there is an issue that Nike is facing: people,
environment, politics, and animals (Ethical Consumer Org., n.d.). The first issue that needs
to be addressed is in the aspect of people, which can be perceived in one of the Washington
Post articles about its insufficient salary to its workers, that show no evidence of a living
wage (Ethical Consumer Org., n.d.). Second is its issue in the environmental aspect, which
can be seen in its cotton sourcing policy since it shows a lack of a clear approach to the use
of pesticides and herbicides (Ethical Consumer Org., n.d.). The third issue can be
distinguished in its political aspect since they are a dubious company in terms of political
activities and financial ethics. One of these is the highest paid of the five Executive officers
for around $13,968,022 to £11m, which consider being excessive payment according to
Ethical Consumer (Ethical Consumer Org., n.d.). Lastly is its issue in animal aspect since
the company’s retailed several products contained animal-based material, including wool,
leather, and feathers.
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2. Theories and Framework

It was followed by the four theories and frameworks related to CSR: six core
characteristics of CSR, Carroll's Pyramid, Stakeholder-Theory, and Three-Domain Model
of CSR.

2.1. Six core characteristics of Corporate Social Responsibility (CSR)

Thus, the six core characteristics of CSR featured different initiatives and processes:
voluntary activities, managing external factors, stakeholder management, alignment of
social and economic responsibilities, considering practices and values, and extending CSR
activities beyond philanthropy to instrumentality (Aminu et al., 2015).

2.1.1. Voluntary Activities

First, the voluntary activities of Nike can be seen in its investment in green
technologies to lessen the negative effect of their manufacturing on the local communities.
Its Flyknit technology precisely engineers every stitch of Nike shoe upper to deliver
maximum performance for athletes who used their shoes (Nike News 2016). This
technology brought about 60 percent less waste than traditional cut-and-sew methods,
which reduced nearly 3.5 million pounds of waste since 2012 (Nike News 2016).

2.1.2. Managing External Factors

Second, Nike's management of external factors can be observed in its brand
launched program, Supplier Climate Action (Pratap 2018). This program focused on using
products that are made from sustainable raw materials. Additionally, this program resulted
in developing ways on how to reduce carbon on their materials that made use of 100
percent renewable energy in the United States and Canada (Pratap 2018).

2.1.3. Stakeholder Management

Third, stakeholder management can be perceived through Nike's support to the
demand of its consumers and communities with their products. It is along with maintaining
CSR programs that addressed the interests of its major stakeholders such as customers,
employees, government, and alike (Nike News 2016). Nike's stakeholder management was
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focused on maintaining the company's performance rather than the stock share that a
shareholder has taken part in.

2.1.4. Alignment of Social and Economic Responsibilities

Following are the fourth core characteristics of CSR, the alignment of social and
economic responsibilities that can be seen in its FY14/15 Sustainable Report. This report
details the strong progress of the company's environmental and social targets to set a vision
for a low-carbon for closed-loop future as part of the company's growth strategy (Nike
News 2016). This alignment has set Nike company to maximize its profitability.

2.1.5. Considering Practices and Values

Fifth is considering practices and values that can be observed in Nike's policies set
in 2013 (Sicat 2013). These policies addressed their problem about their exploitation of the
poor countries where its factories are located, especially in Indonesia. Hence, the new
policies showcase the company's value in human importance that promotes diversity for a
healthier workplace.

2.1.6. Extending CSR Activities Beyond Philanthropy to Instrumentality

Finally is the last core characteristic of CSR, extending CSR activities beyond
philanthropy to instrumentality. Currently, Nike has its foundation, named after the
company, Nike Foundation, that focused on helping individuals to discover their full
potential as a person (Devex n.d.). Additionally, it enables people to lift themselves from
poverty, especially adolescent girls, which Nike believed to be powerful makers of world
development.

2.2. Carroll’s Pyramid

Afterward is Carroll's Pyramid that suggests that the company must fulfill
responsibility at four levels: economic, legal, ethical, and philanthropic (Carroll 2016).
First, economic responsibility depicts the obligation of the company to be profitable in a
way that producing goods and services at a fair price. However, Nike had the highest
median price of popular sneaker brands worldwide in 2017, costing around 80 U.S. dollars
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per pair (Sabanoglu 2020). Second is the legal responsibility that obliged the company to
always follow the law. According to Wade (2021), Nike is paying significant U.S. federal,
state, and local direct and indirect taxes every year, with more than $9.1 in U.S. taxes since
2016. Third, ethical responsibility guided companies to act upon various principles and
values according to the standards in a given context. Thus, Nike had made a few positive
changes to its environmental practices; hence there is still a way to go before it can truly be
called a sustainable brand (Robertson 2020). Lastly is the philanthropic responsibility
depicts the voluntary responsibilities of a company to give back to society. Currently, Nike
helped more than 16.5 million kids globally through its 'Made to Play' commitment (Pratap
2018).

2.3. Stakeholder-Theory
Subsequently is the Stakeholder-Theory that accounts for internal and external
stakeholders that impacted the business, such as customers, society, employees,
communities, suppliers, and alike (Lumen Learning n.d.). Thus, Nike had a stakeholder
group of communities that significantly influenced the company's corporate social
responsibility standing. First, it's customers who buy more of a product that positively
impacts society (Kissinger 2017). It is followed by the company's allocation of 1.5 percent
of its pre-tax income to support community development initiatives and so on (Kissinger
2017).

2.4. Three-Domain Model of CSR

Similarly is the three-domain model of CSR, which is composed of three
responsibility areas: economic, legal, and ethical, which are deeply associated with
Carroll's pyramid (Schwartz & Carroll 2003). In relation to the above economic
responsibility, consumers are willing to pay high prices for Nike's signature models of
shoes which were associated with high-profile athletes that will lead to high revenue for the
company (Sabanoglu 2020). Second, in accordance with the above legal responsibility,
Nike's tax obligations in the U.S. are based on several factors, including the investment
made in the U.S. and the changes made in the tax law (Wade 2021). Lastly is the ethical
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responsibility, wherein Nike's environmental rating is 'It's a Start' (Robertson 2020) in

relation to the above area.

3. CSR Strategies of Nike Inc.

Furthermore are Nike's four CSR strategic approaches to fulfill its community
responsibilities: commitment to reducing carbon footprint, innovative manufacturing, a new
palette of sustainable materials, and diversification of the workplace (Pratap 2018).

3.1. Commitment in Reducing Carbon Footprint

First, Nike's commitment to reducing carbon footprint can be seen by the company's
investment in innovative products and operations that illustrate its concern for the
environment. Since 2008, the company's contract footwear manufacturers have cut energy
use per unit by around 50 percent, which generates half the emissions to make Nike shoes
eight years ago (Pratap 2018). Moreover, the company aims to use 100 percent renewable
energy in its owned and operated facilities (Pratap 2018).

3.2. Innovative Manufacturing

Second, Nike's innovative manufacturing can be observed in its technology like
Flyknit and Pegasus (Pratap 2018). This two help the company to maximize its efficiency
in its supply chain and manufacturing units. Additionally, the company is working with
fewer, better contract factories committed to transforming businesses beyond the
foundation of innovative manufacturing. In recent times, Nike has reached a performance
rating that demonstrates its commitment to improving its manufacturing (Pratap 2018).

3.3. New Palette of Sustainable Materials

It was followed by the third CSR strategy of Nike, the development of a new
palette of sustainable materials (Pratap 2018). The company's designers have already
assembled a palette of 29 high-performance materials collected from waste to generate it in
a production and supply chain (Pratap 2018). The cycle of the new palette starts from
transforming old shoes and manufacturing scarp into high-performance Nike footwear and
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apparel (Pratap 2018). Today, Nike grind materials constitute 71 percent of the company's
products, from apparel trims to soccer kits to Flyknit yarns (Pratap 2018).

3.4. Diversification of Workplace

Finally is the last CSR strategy of Nike Inc., the diversification of workplace that
can be recognized in their employee welfare. The company invests in community-based
initiatives that allow its employees to be Nike community ambassadors and volunteers.
From 2014 to 2015, Nike employees donated  $6.2 million in cash to schools and charities
of their choice (Pratap 2018). In addition, Nike has also reaching kids in various parts of the
world, including China, to make them physically active from their young age (Pratap 2018).

4. Recommendations
Consequently, the recommendations for corporate social responsibility (CSR) of
Nike can be perceived in three areas: ecological responsibilities, social welfare, and
recruitment and retention of employees.

4.1. Ecological Responsibilities

First, ecological responsibilities are the company's duty in ensuring that its operations
are extremely committed to the sustainability and protection of the environment (Welford
2019). As I mentioned above, Nike's CSR strategies, such as commitment to reducing
footprint and a new palette of sustainable materials, considered the said responsibilities. In
order to improve this, the company must be focused on three certain areas: low-carbon
materials, decarbonizing supply chain, and 100 percent renewable electricity and fleet
electrification. First, Nike must use more low-carbon materials through environmentally
preferred materials to 50 percent of their key materials, which will reduce 0.5 million tons
of greenhouse gas emissions. Second, Nike must have to decarbonize their supply chain by
bending the curve of greenhouse gas emissions from its key supplier's operations. It is to
have a flatining at 2020 levels or below despite the anticipated business growth through
alternative fuels, renewable energy, and energy efficiency. Lastly, Nike must adopt 100
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percent renewables electricity and fleet electrification by driving a 70 percent absolute

reduction of greenhouse gas emissions across their owned and operated facilities.
4.2. Social Welfare
Second, social welfare areas are provided by the government and private
organizations to help the company's manpower and human resources. Nike can create
beneficial programs for the people, which can have huge effects on their welfare and
development. Thus, the company can follow three ways to maximize social welfare:
constrained social welfare maximization, enlightened social welfare maximization, and
simple profit maximization (Smith, 2018). First, the constrained social welfare
maximization will enable Nike to give its authorities directions to increase their social
welfare while not sacrificing the acceptable range of profit. Second, enlightened social
welfare maximization will help Nike develop and offer advanced products and services
which can help to improve the lives of its consumers. The companies who are the best are
the ones to produce the best products that provide the best services and products to create a
change for the consumers and society. Lastly is the simple social welfare maximization that
can give great importance to social welfare and little for the profit of Nike company. All in
all, the above three ways of maximizing social welfare will enable stakeholders to engage
more in their CSR and sustainability programs.

4.3. Recruitment and Retention of Employees

Lastly is the area of recruitment and retention of employees that can be achieved
through the use of three: the hiring of the most qualified human resource managers,
optimizing benefits, and recognizing employee's hard work. First, Nike must hire the most
qualified human resource managers to have a great selection of employees for the good
state of the company. Second, Nike must optimize their employee's benefits since one-size-
fits-all benefits programs will likely backfire the five generations in the workplace; thus,
this can improve employee engagement. Lastly, Nike must always recognize employee's
hard work by appreciating and thanking them. According to Paycor (2020), nearly nine in
ten senior managers said their organization is somewhat effective at showing appreciation
to their workers. Hence, people who routinely feel that their best work is ignored are twice
as likely to say they'll quit in the next year (Paycor 2020).
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5. Conclusion
Conclusively, Nike Inc.'s corporate social responsibility must be improved.
Relatively, the company has four issues that need to be addressed in its four aspects people,
environment, politics, and animals (Ethical Consumer Org., n.d.). Thus, there are four
theories and frameworks related to Nike CSR: six core characteristics of CSR, Carroll's
Pyramid, Stakeholder-Theory, and Three-Domain Model of CSR. CSR's six core
characteristics were voluntary activities, managing external factors, stakeholder
management, alignment of social and economic responsibilities, considering practices and
values, and extending CSR activities beyond philanthropy to instrumentality (Aminu et al.,
2015). Thoroughly are Nike's four CSR strategic approaches to fulfill its community
responsibilities: commitment to reducing carbon footprint, innovative manufacturing, a new
palette of sustainable materials, and diversification of the workplace (Pratap 2018). They
were followed by the recommendations to improve Nike's CSR that can be perceived in
three areas: ecological responsibilities, social welfare, and recruitment and retention of
employees.
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6. References

Aminu, A., et al., 2015. 'Corporate Social Responsibility: A Review on definitions, core

characteristics, and theoretical perspectives, Mediterranean Journal of Social Science,

6(4), pp. 83-95.

Carroll, A., 2016, ‘Carroll’s pyramid of CSR: taking another look', International Journal of

Corporate Social Responsibility, 1(3), https://doi.org/10.1186/s40991-016-0004-6.

Devex, n.d., ‘Nike, Inc.’, Devex Updates, viewed May 27 2021,

https://www.devex.com/organizations/the-nike-foundation-48806

Ethical Consumer Org., n.d., ‘Nike Inc’, Ethical Consumer Organization Updates, viewed

May 27 2021, https://www.ethicalconsumer.org/company-profile/nike-inc

Kissinger, D., 2017, ‘Nike Inc. Stakeholders: A CSR Analysis’, Panmure Institute, viewed

May 27 2021, http://panmore.com/nike-inc-stakeholders-csr-analysis#:~:text=The

%20stakeholder%20group%20of%20communities,a%20positive%20impact%20on

%20communities.&text=Nike%20allocates%201.5%25%20of%20its,Employees.

Nike Company, n..d, ‘Company Profile’, Nike Company Updates, viewed May 27 2021,

https://nikecompanyblog.wordpress.com/about-us/

Nike News, 2016, ‘Top Things to Know About Sustainable Innovation in Nike’, Nike News

Updates, viewed May 27 2021, https://news.nike.com/news/sustainable-innovation

Lumen Learning, n.d., ‘Business Stakeholders’, Lumen Learning Updates, viewed May 27

2021, https://courses.lumenlearning.com/boundless-management/chapter/business-

stakeholders/
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Paycor, 2020, ‘10 Tips for Great Employee Retention’, Paycor Updates, viewed May 27

2021, https://www.paycor.com/resource-center/articles/10-tips-for-great-employee-

retention/

Pratap, A., 2018, 'Nike CSR and sustainability, Notesmatic, viewed May 27 2021,

https://notesmatic.com/nike-csr-and-sustainability/

Robertson, L., 2020, ‘How Ethical is Nike?’, Good On You Eco., viewed May 27 2021,

https://goodonyou.eco/how-ethical-is-Nike/#:~:text=Though%20Nike%20has

%20made%20a,is%20'It's%20a%20Start'.

Sabanoglu, T., 2020, ‘Popular sneaker brands prices worldwide as of 2017’, Statista,

viewed May 27 2021, https://www.statista.com/statistics/828403/median-price-of-

popular-sneaker-brands-worldwide/

Schwartz, M., & Carroll, A., 2003., ‘Corporate Social Responsibility: A Three-Domain

Approach’, Business Ethics Quarterly,13(4), pp. 503-530.

Sat, G., 2013, 'Nike in Indonesia - employing more than a hundred thousand workers',

PhilStar Global, viewed May 27 2021, https://www.philstar.com/business

Smith, C., 2018, ‘Balancing Profit and Social Welfare: Ten Ways to Do It’, Knowledge

Instead Edu., viewed May 27 2021,

https://knowledge.insead.edu/responsibility/balancing-profit-and-social-welfare-ten-

ways-to-do-it-9421

Wade, R., 2021, ‘Nike says it’s paid over $9 billion in taxes since 2016’, PH News.

Welford, R., 2019, ‘Corporate Social Responsibility and Environmental Management’,

Wiley Online Library, Online ISSN:1535-3966