Critically assess the ethics, governance and sustainability of Nike

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1 Nike’s Ethics and Sustainability Student’s Name Institution Course Date

2 Nike’s Ethics and Sustainability As the world continues to experience several social issues so do businesses. Issues such as pollution, equality and justice, workplace health and safety, and espionage are pushing companies to become increasingly conscious of their ethical practices and sustainability. A financially successful firm is no longer the only thing that matters to stakeholders; they desire a corporation that consistently makes prudent decisions (Grim & Berkowitz, 2020). The implementation of ethics and governance procedures is crucial for the organization to comprehend and address the sustainability risks associated with its operations, as well as effectively manage these risks. This approach enhances a company's financial standing while upholding its genuineness and credibility to investors and operating as a responsible corporate entity. Large and multinational companies like Nike are often in at sensitive position to make the right decisions when it comes to ethics and sustainability governance (Lucchini & Moisello, 2019; Ben-David et al., 2021). This essay will assess the ethics, governance, and sustainability of Nike. Specifically, this paper will explore ethical and sustainable practices the company has implemented issues eliciting these practices, and ways sustainable leadership can be developed further at Nike. Having a long history and being a leading sports apparel company, Nike has established various practices that indicates that it is committed to ethical and sustainable governance. These practices are part of Nike’s Corporate Social Responsibility (CSR). One of the practices that shows that Nike is committed to ethical and sustainable governance is supporting and improving employee welfare. Employees are the immediate and one of the most important stakeholders of the company. Trade unions anticipate that Nike will adhere to equitable labor policies throughout all of its subsidiary companies. This expectation highlights the company's motivation to engage with businesses that adhere to labor rules. In the previous five years, Nike has created and executed the Engagement and Wellbeing (EWB) Survey to assess the degree of involvement and the encounters of industrial workers (Bernardis, 2019). The company recognizes that an engaged workforce is crucial for expansion and long-term viability. Nike aims to enable suppliers to actively involve and appreciate their employees, as it understands that strong employee engagement results in a more effective, adaptable, and dedicated workforce, ultimately yielding favorable outcomes for both the worker and the business as a whole. Research has demonstrated that having a highly involved staff can significantly impact key company concerns, including remuneration, extra working hours, and the working environment (Hermanto & Srimulyani, 2022). Engaged workers not only experience a greater sense of physical and mental security, but they also demonstrate a higher propensity to actively and positively contribute to their work. Apart from fair remuneration, Nike also protects and improves employee welfare by Nike also improves employee welfare by creating favorable workplace conditions. This practice developed out of

3 criticism that Nike provides horrible working conditions and uses child labor in developing countries. Starting with the 1970s, Nike has faced allegations of employing forced labor to manufacture its sneakers and sportswear. Nevertheless, the matter gained significant attention in 1991 when activist Jeff Ballinger released a report that extensively documented the inadequate pay and unfavorable working conditions in Nike's Indonesian facilities (Brino, 2019). Following this accusation, the company started improving working conditions in its overseas facilities through the two decades that followed. However, in 2017, Nike regressed significantly, when the International Labor Rights Forum revealed that the firm had fallen short on its dedication to the Worker Rights Consortium (WRC) (Ban, 2020). This action effectively impeded the ability of labor rights specialists to autonomously oversee Nike's supplier factories. Nike's CSR also highlights the commitment to diversity in hiring. Nike's report states that the company aims to foster talent and creativity without any restrictions based on race or gender (Nike, 2023) and this course of action has generated greater success since the company's official diversity data reveal that ethnic minorities make up the majority of its workforce in the US. Among the company's total workforce, 48% are white, 21% are black, 18% are Hispanic, and 7% are Asian (Nike, 2023). One other noteworthy accomplishment is the proportion of women in the workforce, which stands at 48% globally, according to the research (McCleish, 2022). Another area that reflects Nike’s ethical and sustainable governance is environmental responsibility. This practice is elicited by the issue of pollution and resource wastage. Pollution is now one of the grave issues businesses must deal with as they have contributed to it to some degree. Human pollution, especially those caused in magnitude by large companies is linked to climate change and plastic problems in oceans (Ben-David et al., 2021). As part of its environmental responsibility, Nike has demonstrated an effort to reduce solid waste in its production and supply chain. This new innovative technology is called Nike Flyknit, which is a highly adaptable and lightweight textile produced with 60% less waste compared to conventional footwear, owing to meticulous engineering (Novello, 2020) Every Flyknit shoe upper incorporates a maximum of seven repurposed PET bottles. These efforts target new innovative technologies to minimize the need for raw materials and recycling. Nike welcomes used footwear and clothing from all athletic gear brands, which customers may conveniently deposit at any affiliated Nike retail location (Jiang, 2019; Ben-David et al., 2021). The items are subsequently categorized into groups for either recycling or donation, with certain things being designated for recycling and others being thoroughly cleaned and given away. Moreover, since consumers and other environmental conservationists are increasingly advocating for reducing or eliminating carbon emissions, companies are also following in this direction. Nike's commitment to sustainability extends to various aspects of the company. This includes implementing

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4 circular solutions, such as encouraging customers to take better care of their products to prolong their lifespan, promoting the recycling of used items, offering refurbished returned shoes at affordable prices as a sustainable and accessible option, and repurposing materials from vintage and dead stock products. Nike has set various targets that demonstrate that it is committed to reducing carbon emissions and consequently moving towards Zero-net emissions. For example, According to Almiya et al. (2020), Nike aims to reduce greenhouse gas (GHG) emissions by 50% from environmentally preferred materials (polyester, cotton, leather, and rubber) by 50% and by 70% from its operated production facilities. Regarding this target, Nike has managed to reduce emissions by 39% for environmentally preferred materials by 64% in its operated facilities (Almiya et al., 2020; Novello, 2020). Additionally, being a manufacturing company, Nike consumes significant quantities of water, especially in developing countries, consequently making water scarce for communities surrounding its production plants. The company has thus recognized this issue and has established measures that ensure it use minimum water. Nike collaborated with DyeCoo Textile Systems, a Dutch business, to accomplish to reduce water used for industrial purposes as part of Corporate Social Responsibility (Eren et al., 2020). Nike, known for its extensive water consumption during production, has included the reduction of water usage for industrial purposes as one of its targets in its environmental responsibility program. The collaboration led to the implementation of a cutting-edge carbon-based technique that eliminates the need for water in the dying process. Nike's decision resulted in conservation of almost 20 million liters of water in 2015 (Nike, 2022). From the assessment above, it is clear that Nike must do more to ensure it stays committed to sustainability and be considered as such. Sustainability leadership is leadership is essential for Nike to achieve this endeavor and like many multinational companies, the company must demonstrate it in all aspects of business operations. Seventy-four percent of investors pull their money out of companies that don't do well in sustainability (Church et al., 2019). As a result, businesses now require a different kind of leadership that prioritizes the long-term sustainability of planet earth. Leaders from all disciplines must work together to transform organizational culture, establish long-term solutions, and exercise creativity to address serious environmental concerns connected to pollution, climate change, and many others (Eren et al., 2020; Lucchini & Moisello, 2019). Therefore, to encourage sustainable leadership in different industries, high-level managers must develop and gain new abilities and expertise. Several principles of sustainable leadership can help Nike further its course for sustainable commitment. The first principle that Nike leaders can adopt is making sustainability part of the brand. To establish a sustainable firm, it is insufficient to merely set sustainability objectives; it is imperative to guarantee that Nike's brand embodies these principles. The company leaders should integrate

5 sustainability into the branding and marketing endeavors, and guarantee that customers are aware of the unwavering dedication to environmental accountability. Nike leaders can achieve enhance this principle of sustainable leadership by adopting the Triple Bottom Line framework (TBL). The idea of the triple bottom line is that businesses should give equal attention to social and environmental matters, along with the profits they make (Farooq et al., 2021). The TBL framework helps businesses focus on sustainability by considering more than just profits. This concept encourages companies to also think about social and environmental factors when evaluating the overall cost of their operations. The triple-bottom-line theory suggests that companies should give equal importance to social and environmental matters alongside financial matters. The idea of the triple bottom line is that companies should give equal attention to social and environmental matters, alongside their focus on making profits. The TBL framework helps businesses focus on sustainability by considering more than just profits. The framework encourages companies to also think about social and environmental concerns when evaluating the overall cost of their operations. The triple-bottom-line theory suggests that companies should give equal importance to social and environmental matters alongside financial matters. According to Church et al. (2019), reporting on environmental repercussions is where there is the most departure from only financial reporting. Sometimes, a company has to choose between a cheaper option or a solution that is better for the environment. A company can also decide to go with a less desirable option. For instance, choosing eco-friendly transportation might mean that the travel time will be longer compared to using airplanes. For example, as a manufacturing company, Nike can employ sustainability increase sustainability efforts by increasing the use of renewable energy sources, including wind and solar, and packaging with green materials like paper. Another sustainable leadership principle that can further Nike's sustainability efforts is flexibility and experimentation. Nike leaders should remain adaptable and conduct trials until they discover what is effective for the company. There is no universally applicable solution, so they should not hesitate to explore novel approaches. For instance, if Nike's goal is to decrease energy usage, leaders could explore various lighting options or go for energy-efficient appliances. Alternatively, if Nike's goal is to enhance recycling rates, they may experiment with various package formats or provide incentives to encourage recycling. Nike can apply the stakeholder model as a framework to experiment with various sustainable practices. The descriptive value of the stakeholder's model can provide Nike with a great lens through which these leaders can view the impact their business operations have on the environment (Bocken et al., 2019; Grim & Berkowitz, 2020). Through partnerships, surveys, and frequent consultations, Nike can interact with stakeholders to learn about what they expect and their concerns. This approach can assist in

6 creating policies that are in line with the interests of those involved. Nike can communicate with people who have an interest in their company by talking to them regularly, asking them questions through surveys, and working together with them to understand what they care about and what they want. This can assist in creating policies that are in line with the interests of those involved. Nike can work together with outside organizations like environmentalists, human rights supporters, or business groups to solve sustainability problems together (Novello, 2020). These partnerships allow for sharing knowledge, working together to solve problems, and creating initiatives that benefit both Nike and the stakeholders. In summary, Nike has made impressive progress in their efforts to be more ethical and sustainable. They have focused on taking care of their employees, promoting diversity in their hiring practices, and being responsible for the environment. The company is dedicated to working with businesses that follow fair labor policies. They also use innovative methods like Nike Flyknit technology and water conservation projects to show that they are trying to solve sustainability problems. However, the assessment also highlights areas where Nike has encountered difficulties, especially in monitoring supplier factories and achieving carbon emission reduction goals. To strengthen its position as a leader in sustainability, Nike should follow sustainable leadership principles. This means incorporating sustainability into its brand, using the Triple Bottom Line framework, and encouraging flexibility and experimentation. As more and more people are looking for sustainable practices, Nike needs to fulfill their obligations but go beyond expectations. This means they need to show that they are committed to being around for a long time, being a responsible company, and taking care of the planet.

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7 References Almiya, M. S., Kee, D. M. H., Haron, M. Z. B., Nasharudin, M. I. B., Nasruddin, M. M. B. M., & Johari, M. E. W. B. M. (2020). Consumption of Plastic and Sustainability Efforts of Nike towards Green Environment. International Journal of Applied Business and International Management (IJABIM) , 5 (1), 60-73. https://doi.org/10.32535/ijabim.v5i1.768 Ban, Z. (2020). Open for change but closed for transformation: A communicative analysis of managerial corporate social responsibility discourse on the issue of labor. Organization , 27 (6), 900-923. https://doi.org/10.1177/1350508419867209 Ben-David, I., Jang, Y., Kleimeier, S., & Viehs, M. (2021). Exporting pollution: where do multinational firms emit CO2? Economic Policy , 36 (107), 377-437. https://doi.org/10.1093/epolic/eiab009 Bernardis, F., A. (2019). Labor issues and workers’ rights within the global supply chain. How to manage the work environment. The Nike case. http://hdl.handle.net/10579/15805 Bocken, N., Boons, F., & Baldassarre, B. (2019). Sustainable business model experimentation by understanding ecologies of business models. Journal of Cleaner Production , 208 , 1498-1512. https://doi.org/10.1016/j.jclepro.2018.10.159 Brino, V. (2019, November 4). Labor issues and workers’ rights within the global supply chain. How to manage the work environment. The Nike case. http://hdl.handle.net/10579/15805 Church, B. K., Jiang, W., Kuang, X., & Vitalis, A. (2019). A dollar for a tree or a tree for a dollar? The behavioral effects of measurement basis on managers' CSR investment decision. The Accounting Review , 94 (5), 117-137. https://doi.org/10.2308/accr-52332 Eren, H. A., Yiğit, İ., Eren, S., & Avinc, O. (2020). Sustainable textile processing with zero water utilization using super critical carbon dioxide technology. Sustainability in the Textile and Apparel Industries: Production Process Sustainability , 179-196. https://doi.org/10.1007/978-3- 030-38545-3_8 Farooq, Q., Fu, P., Liu, X., & Hao, Y. (2021). Basics of macro to microlevel corporate social responsibility and advancement in triple bottom line theory. Corporate Social Responsibility and Environmental Management , 28 (3), 969-979. Grim, D. M., & Berkowitz, D. B. (2020). ESG, SRI, and impact investing: A primer for decision- making. The Journal of Impact and ESG Investing , 1 (1), 47-65. https://api.semanticscholar.org/CorpusID:221389087

8 Hermanto, Y. B., & Srimulyani, V. A. (2022). The effects of organizational justice on employee performance using dimension of organizational citizenship behavior as mediation. Sustainability , 14 (20), 13322. https://doi.org/10.3390/su142013322 Jiang, W. (2019). Sustainable development of supply chain in footwear industry–take Nike as the case. Asian Business Research , 4 (3), 86. https://doi.org/10.20849/abr.v4i3.690 Lucchini, A., & Moisello, A. M. (2019). Stakeholders’ Pressure and CSR Engagement. A Case in the Apparel Sector. American Journal of Industrial and Business Management , 9 (01), 169. http://www.scirp.org/journal/PaperInformation.aspx?PaperID=89941&#abstract McCleish, D. (2022). Diversity, equity, and inclusion efforts of fashion retailers. University Research Symposium, 389. https://ir.library.illinoisstate.edu/rsp_urs/389 Nike, Inc. (2023). Diversity, Equity, and Inclusion. Nike. https://about.nike.com/en/impact/focus- areas/diversity-equity-inclusion Nike. (2022). FY21 NIKE, Inc. Impact Report. Nike. https://about.nike.com/en/newsroom/reports/fy21- nike-inc-impact-report-2 Nike. (2023). How NIKE, Inc.’s commitment to progress champions women and girls. Nike. https://about.nike.com/en/newsroom/reports/fy22-nike-inc-impact-report Novello, G. (2020). How eco-innovations can lead the way towards the creation of a sustainable business model: A multiple case study of the apparel & footwear industry. http://hdl.handle.net/10579/18029 Paine, L., S., Hsieh, N., & Adamsons. (2023). Governance and Sustainability at Nike (A). Harvard Business School. https://www.hbs.edu/faculty/Pages/item.aspx?num=44895

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