NIKE: Managing Ethical Missteps-Sweatshops to Leadership in Employment Practices Phil Knight and his University of Oregon track coach Bill Bowerman founded Blue Ribbon Sports, later renamed Nike, in 1964. The idea, born as a result of a paper written by Knight during his Stanford MBA program, was to import athletic shoes from Japan into the U.S. market otherwise dominated by German competitors Puma and Adidas. The company initially operated as a distributor for a Japanese athletic shoe company, Onitsuka Tiger, but also developed its own brand of athletic footwear to promote in the American market. The company’s relationship with Onitsuka Tiger ended in 1971, and the Nike brand was created in 1972 (“Nike” after the Greek goddess of victory). The company was renamed Nike in 1978, and has grown to be the largest worldwide seller of athletic goods, with approximately 19,000 retail accounts in the United States and about 160 countries around the world.

CRITICISMS OF NIKE’S MANUFACTURING PRACTICES In order to remain competitive and keep manufacturing costs low, athletic footwear production has moved to areas of the world with low labor costs. Assembly of shoes (as well as low-cost apparel, footwear, radios, TVs, toys, sporting goods equipment, and consumer electronics) began shifting offshore in the 1960s: first to Japan, then to Korea and Taiwan, and starting in the 1980s to Southern China. By the mid 1980s, Taiwan and Korea supplied 45 percent of the world footwear exports, and the trend has continued for production to continually shift to lower-cost Asian nations

ENVIRONMENTAL PROBLEMS RELATED TO TEXTILE INDUSTRYBecause of the nature of the textile industry, Nike faces numerous challenges and potentially critical problems. Because of the processes involved in making the materials, the textile industry negatively impacts the environment wherever manufacturing is located. Problems generated by the textile industry in general, and Nike specifically, are increased water deficits; climate change; pollution of land, air, and waterways; and large fossil fuel and raw material consumption. In addition to these environmental hazards, today’s electronic textile plants expend significant amounts of energy. All these issues are exacerbated by Western cultures that have a consumption-based mentality that clothing is disposable and that one must buy each new season’s “must-have” items

NIKE RESPONDS TO THE CHALLENGES Public protests against Nike have taken the forms of boycotts and picketing of Nike stores. Universities have even been known to cancel their deals with Nike to produce branded athletic goods. In 1998, Nike revenues and stock prices decreased by approximately 50 percent, leading to the laying off of 1,600 workers. Nike’s first reaction to all of the bad press was to do damage control. Nike launched a large public relations campaign involving individual consumer retailers and large university contracts to combat the damaging allegations of child labor, inhospitable working conditions, and low or nonexistent wages. In an effort to directly address the concerns of student activists, Nike visited several college campuses, opening dialog with students and university administration about its manufacturing policies. Nike even invited teams of Dartmouth graduate students to tour the Indonesian and Vietnamese factories for three weeks at Nike’s expense

NIKE’S CORPORATE SOCIAL RESPONSIBILITY Despite the challenges Nike has faced in the past few decades, the company has come far. Indeed, Nike’s corporate social responsibility (CSR) practices have been evolving since 1991. At first Nike’s approach to CSR could be characterized as insufficient and generally lacking in any true forms of regulation and implementation throughout its global supply chain. Manufacturers in foreign locations were simply trying to comply with the minimal contract requirements, while at times overlooking fair labor practices in order to perform as low-cost suppliers. Nike’s initial response to criticism was reputation management rather than wide-scale changes in its practices. However, as more and more issues have surfaced and been brought to the attention of not only the corporation but also its consumers, Nike has increased its efforts to be more ethical in its manufacturing practices and has become somewhat of an industry leader in certain areas. Corporate responsibility can evolve through five stages.