Corporate Social Responsibility, can be defined as the concept which helps in the process of self-regulation of the corporate companies as well as organizations (Tai & Chuang,2014). It is also known by the names of corporate conscience, responsible business as well as corporate citizenship (Hood & Birkinshaw, 2016). In other words, it can be defined, as the self-regulatory kind of mechanism, which a helps a business organization or a company to monitor as well as ensure the active compliance of its employees as well as the rules and regulations followed by it with the spirit of the national as well as international laws and the ethical standards mandatory for the business organizations (Tai & Chuang,2014).
The opinion of Howard Schultz, the ex-CEO Of Starbucks, is important in this regard-“Companies should not have a singular view of profitability. There needs to be a balance between commerce and social responsibility………. The companies that are authentic about it will wind up as the companies that make more money” (Schultz, 2012).
The two companies selected to study the process of corporate social responsibility are Adidas and Nike.
The company Adidas AG, is a multinational corporation which was founded in the year 1920 by Adolf Dassler in the small house of his mother (“adidas Official Shop | adidas”, 2018). The company as per a May 2017 statistics is the 219 largest company in the world in terms of the global annual revenue (“Forbes Welcome”, 2018). The corporation presently, is the second largest manufacturer of sportswear in the world, just after Nike and the largest one in the continent of Europe. The company is operational in more than 160 different countries of the world, employing more than 60,000 employees from these countries (“adidas Official Shop | adidas”, 2018). The company specializes in the manufacture of the various kinds of sports apparels, shoes, sportswear as well as accessories.
The company Nike, on the other hand, was founded in the year 1964 by Bill Bowerman and Phil Knight, as the company Blue Ribbons Sports. The company Nike, just like the company Adidas specializes in the manufacture of sportswear, apparels as well as accessories. It is the largest supplier of sports-shoes as well as apparels related to the sports industry in the world. The company Nike, just like Adidas operates in most of the major countries of the world. It is an American multinational company, employing more than 44,000 employees as per a 2017 statistics (“Forbes Welcome”, 2018).
A detailed study of the annual financial reports of the company Adidas will reveal the fact that there was only a 2% increase in the annual profit of the company in the year 2015 compared to the 10% increase in the year and 41% in the year 2015 (“Annual Report 2014”, 2018).This can be a result of the various changes like the changes in the strategy adopted by the company, changes in the leadership style and various other international factors. The following figure provides the financial details of the company Nike Inc for the past three years-
The above figure clearly shows that there was a decline in the percentage increase in the annual profit for the year 2017 compared to the year 2016 (Bebbington, Unerman & O’Dwyer, 2014). This might be the result of the various factors like the change in the strategic plans of the organization, change in the leadership and several others.
The two companies Adidas and Nike provide the same kind of services to the customers and operate in the same country. However, a closer look at the two companies will reveal some fundamental difference between the companies. Some of the social, economic as well as environmental issues mentioned in the reports of Adidas as follows-
Some of the common social, economic as well as environmental issues mentioned in the reports of Nike are as follows-
The style as well as the presentation of the reports by the company Adidas is very direct and is intended to make the individuals the crisis that the company as well as the world is facing at large at the moment. The company Nike, on the other hand, focuses much on the environmental factor and less on the factors like social as well as economic factors. The company Adidas focus on the sports industry to increase its economic values whereas when the strategy of Nike is taken into consideration it will be seen that the emphasis is less on the sports industry and therefore the prices of the products manufactured by the company is much less than the ones manufactured by Adidas. However, an interesting fact to take into consideration is that the new environmental plan by which the company intends to lower its carbon dioxide emission by 3% from its earlier FY11 baseline increased its revenue by 26% (“Nike’s Sustainability Report Shows Company Reducing Environmental Impact while Continuing to Grow”, 2018).
The strength of the reports manufactured by the company Adidas is its emphasis on the various factors of social, economic as well as environmental issues (“adidas Official Shop | adidas”, 2018). The company utilizes the platform provided by the sports industry to increase its profits as well as market value. The company Nike, on the other hand, puts the majority of its focus on the environmental factor and the ways by which to control the damage to the environment. The weakness of the report produced by the company Adidas is its less emphasis on the environmental factor, whereas the weakness of the report of the company Nike is the fact that the sole emphasis of the company is on the environmental factor and not on the capture of the international market, which might actually help the company to increase its profits.
The reports of the company Adidas, covers a range of topics like social, economical as well as environmental factors. The company also utilizes the platform offered by the sports industry to increase its profits as well as sales. The company Nike, on the other hand, focuses much on the environmental issues and less on the social as well as economic factors, which can actually increase its profits as well as sales (“Nike’s Sustainability Report Shows Company Reducing Environmental Impact while Continuing to Grow”, 2018).
The differences between the two countries which influences the social responsibility approaches of the two companies are as follows-
Therefore, it can be safely concluded that the following factors have influenced the reports of the two organizations. The reports of the two companies can thus be said to be a reflection of these two factors.
Some of the key principles of social accounting utilized by the companies of Adidas and Nike are as follows-
The mission statement of the company Adidas states, “The adidas Group strives to be the global leader in the sporting goods industry….continuously strengthening our brands and products to improve our competitive position” (“adidas Official Shop | adidas”, 2018). The website of the company even goes on to provide the four primary values of the company, which are performance, passion, integrity and diversity (“adidas Official Shop | adidas”, 2018). Therefore, it can be safely concluded that the various social reports of the company are influenced by these factors as they try to incorporate these basic mission statement as well as the core values of the company. In other words, it can be said that the various social reports of the company are a reflection of the mission statement as well as the values followed by the organization.
The mission statement of the company Nike states,” To bring inspiration and innovation to every athlete* in the world.” The co-founder of the company, Bill Bowerman even went to the extent of saying that, “If you have a body, you are an athlete” (“Forbes Welcome”, 2018). The core-values of the company as per its ex-CEO Les Kollegian and President Charlie Van Vechten are performance, sustainability, authenticity as well as innovation in order to meet the growing needs as well as requirements of the global customers (“Forbes Welcome”, 2018).
The values as well the mission statement of the company goes a long way in influencing the various social reports of the company as they intend to reflect these aspects of the organization.
A group discussion of the two companies as well as the various reports of the two companies will reveal the fact that the reports published by the two companies are a reflection of the mission statement as well as the values followed by the two companies. The reports of the two companies also give a rough estimate of the various social, economic as well as environmental issues followed by the two companies and which issues are given more preference by the two companies. The reports of the two companies also provide an insight into the kind of corporate social responsibility followed by the two companies.
Conclusion
Therefore, from the above discussion it becomes clear that the concept of corporate social responsibility is an important aspect of any organization or company. It helps in the overall growth as well as the development of the organization or the company concerned. The various social reports published by the companies are a reflection of the various corporate social responsibility policies followed by the organization or the company concerned. The process helps in the creation of positive impact on the society and it also takes the various social, economic as well as environmental factors into consideration. Therefore, it is one of the most important aspects of any organization or company.
Ethical dilemma, also called by the name of moral dilemma, are the situations in which an individual needs to chose among two situations, neither of which resolves the dilemma faced by the concerned individual in a completely ethical manner (Lo, 2012). The general ethics which an individual needs to follow in a business organization or company are listed in the ASC Code of Professional Conduct (Acs.org.au, 2018). There are three essential conditions for the process of ethical dilemma. The first requires an individual, also called “agent”, who faces the moral or the ethical dilemma. The second requires the situations from which the agent must make a choice and the third requires the compromise of the ethical principles.
The “Giving Voice to Values” concept, was popularized by Mary Gentile in her doctoral thesis (Gentile, 2014). It can also be defined, as an innovative approach, which applies to the concept of value-driven leadership within a business or educational organization (Gentile, 2014). According to Gentile (2014), “What if I were going to act on my values? What would I say and do? How could I be most effective?” The entire concept hovers around the motto of doing what is ethically as well as morally right, rather than doing the thing that will bring more profit to the organization.
A similar incident occurred at Adidas recently where the manager as well as the stakeholders were confronted with an ethical dilemma and we had to make a choice between increasing our profit percentage or doing what was ethically right which entailed a momentary decline in the profit margin. The stakeholders of the company Adidas were in favor of the manufacture of the sports shoes made from sulphurated rubber, which was cheaper to procure and would increase the profit percentage significantly. However, sulphurated rubber is non-biodegradable and therefore, causes significant damage to the environment. The manager of the company, was thus faced with an ethical dilemma where he can do what was right for the organization or doing the thing that was morally as well as ethically right.
The company under consideration here, Adidas specializes in the manufacture of sportswear as well as various sports apparels and accessories. The company as a matter of fact, is the second largest sportswear manufacturing company in the world, just after Nike. The stakeholders of the company are the individuals from the various parts of the world who had invested in the business and intend to make money from the annual profits of the company. Therefore, their sole interests will be in increasing the sales of the good and services manufactured by the company and in increasing the annual profit. Traditionally, the company used various materials for the manufacture of the shoes, which were environmentally destructive. In the light of the recent environmental events, the company decided to shift to various other bio-degradable materials for the manufacture of the shoes which were much costlier than the traditional materials used by them before and therefore, they significantly decreased the profit margin of the company.
Therefore, the manager, CEO as well as the stakeholders were confronted with the ethical dilemma wherein they were required to chose from doing what was profitable for the organization or the thing that was profitable for the environment. The primary objective of the stakeholders was to increase the profit percentage by any way possible. The CEO as well as the manager of the company were in favor of the use of the bio-degradable materials for the manufacture of the products as that would not only be the right thing to do but it would help the company in the longer run. This would help in the creation of positive brand image of the company and it was noticed that the annual profit of the company Puma increase by 26% in the year 2016 with the use of bio-degradable materials for the manufacture of their products. Therefore, the authorities were confronted with doing the thing which was morally as well as ethically wrong but financially profitable or doing the thing which was morally as well as ethically right at the cost of financial loss for the time being.
It is to be noted, that the point of view of the stakeholders was not completely wrong. They had invested money in the company with the sole motive of making money out of it. In the incident under consideration they were not in favor of the use of sulphurated rubber for the manufacture of the products but they were in favor of using the means which would yield the maximum amount of profit. However, if the dictum of the stakeholders is followed and the company uses the sulphurated rubber for the manufacture of the shoes that would cause significant damage to the environment and indirectly affect the future of the company itself. The stakeholders can take a leaf out of the page of Puma, which uses 100% biodegradable materials for the manufacture of its products and despite the initial losses they are making a significant amount of profit presently.
Characters involved:
Mark Smith: Manager, in his late 40s
Matthew Miller: CEO of the company, in his early 50s
Harley Dawson: Shareholder, in her early 30s
Anthony Waller: Shareholder, in his early 60s
Scenario:
Mark, Matthew, Harley and Anthony are assembled in a conference room to discuss the ethical dilemma situation which the facing at the moment. The room is well furnished and consists of around ten chairs most of which are empty. There is an open window in the right hand wall and a projector on the left hand wall. The assembled company looks very serious and anxious to get on with the business.
Script:
Anthony: So what is all this fuss about the use of new materials for the manufacture of the shoes? I mean shoes are shoes, how does it even matter with what material they are made of?
Matthew: Mr. Waller it does matter what they are made of. We need to think of the bigger picture here. The use of the material, which we are using at the moment, to manufacture shoes is environmentally destructive and it is going to hurt our prospects in the longer run.
Harley: Anyways, we are not making a lot of money at the moment and heeding to your advice is definitely going to cost us more amount of money at the moment and thereby, decrease the profit margin even further.
Anthony: I agree with Miss Dawson. I invested in this company to make money and not care about some environmental issues and about saving the world. I know people who have invested in lesser known companies and that too lesser amount of money but they are making more amount of money in a single month than I end up making in the whole year.
Mark: Sir, I completely understand your concern but tell me what are you going to do with all these money if would not have fresh air to breathe, clean water to drink, what will you do if all round the year you will be suffering from diseases. Mr. Waller I know money is the most important thing in the world and it is this reason itself why we are here. But don’t you think that we owe something to the environment and this Earth itself from which we are making so much this money?
Anthony: You and your morals Mark! Its time enough that you give them some rest and start thinking about making more profit. That is what you were recruited to do after all. Don’t you think that you owe something to us and therefore should help us in increasing our profits?
Matthew: I am on the side of Mark on this Mr. Waller. We actually owe something to this planet as well and it is our primary responsibility to make our effort to save. The use of sulphurated rubber for the manufacture of shoes would not only affect the environment but our reputation as well. Think of the message that we would be delivering to our customers with the use of that rubber.
Anthony: I don’t care about reputation or message, when you are hungry you cannot quench your hunger with that.
Harley (jokingly): Are you actually that hungry Mr. Waller?
Anthony (angrily): Can you be serious for a minute here? It is not only for me that I am talking but for you as well as all our stakeholders. Are you that naïve Miss Dawson?
Harley (Still smiling): A minute is too long to be serious but I think if I do my best I will be able to pull it off……..(smirks) You know at times I can really punch way above my weight!
Anthony: Harley, can you please cut it out? So where were we?
Matthew: Mr. Waller, please don’t get me wrong. We all are here for the same reason. I know that what I am asking you to do is going to hurt your financial prospects for the time being. But think of the bigger picture. This would help in the creation of a positive brand image of our company and would help in the increase of the sales in the longer run. Look, at the performance of our rival company Puma. They use recycled materials for the manufacture of their shoes and that has actually helped them. Do you know what was their revenue increase percentage of the company Puma for the year 2016?
Anthony (grumpily): No
Mark: 26%
Anthony: Now, that is impressive!
Mark: Yes, it is. And you know what is more impressive about that?
Anthony: The extra amount of money that the shareholders get, of course.
Mark: No! The thing that is impressive about that is they did it doing the right thing. Look Mr. Waller, I know that you are and had I been in your shoes I would have done the same thing. But we have some ethical responsibilities as well. It is about doing the right thing. The thing that is morally right and for the betterment of the largest amount of people. Do you really want us to be the kind of company, which only cares about its shareholders and not about its moral as well as ethical responsibilities?
Matthew: See, if you can do something and we actually have the opportunity of doing it, that does not mean that we actually have to do it, do we?
Harley: Of course, not!
Mark: At the end of the day I know that it is important to make money but at the same time it is also important to be professional, ethical, moral as well as responsible.
Anthony: Enough of your quotes from the ASC Code of Professional Ethics. I know all about them.
Harley: I am glad that you know about. But don’t you think that knowing is just not enough, you need to implement them as well?
Anthony: Miss Dawson, on whose side are you in?
Harley: Well, at the moment I am on the right side, literally as well as metaphorically. See am even sitting on the right hand side of your chair!
Anthony (angrily): You are incorrigible!
Harley (proudly): I will take that as a compliment. Thank you, Mr. Waller.
Anthony (a bit more serious): Can we please get back to business?
Matthew: Sure Sir. That is what we have assembled here for!
Anthony: You do not need to remind me that.
Harley: Seriously?
Anthony: Look guys, it is not that I am love with that sulphurated rubber thing. All I want is to increase my share of profit and all I know is that if we use that thing then we will be able to manufacture products at a much cheaper as well as faster rate. The thing that you are asking me to approve of is going to cost our company more amount of production cost than we are already spending on them and what is the guarantee that in the near future that is actually going to increase our profit percentage?
Matthew: To begin with, there is the evidence of Puma.
Anthony: It worked for Puma. What is the guarantee that it is going to work for us as well?
Mark: We are not asking you to allow us to use this new innovation just because our competitor Puma is using it and making profit by using it.
Anthony: Then are you wasting my time by trying to convince me so that you can use it?
Matthew: Because it is the right thing to do.
Anthony: Why waste your breath trying to be the angel when you can surpass all others by being the devil?
Harley: Forbidden fruits taste the sweetest!
Matthew (losing patience): See Mr. Waller, I know that you don’t care about the kind of material that we use for the manufacture our products. All you care about is the annual profits. But think of this as actually an opportunity. Do you b think that 2 years down the line our customers will still be buying our products if we don’t innovate and do what is right? Look what happened with Nokia. The offer for the use of the android software was initially made to them but they were too busy basking in their glories that they forgot to think about the future. Samsung, on the other hand, utilized the innovation and look where the company is now. All I am asking you is to give us a chance. I don’t know whether what I am asking you is going to work or not. I am just asking you to do what is morally as well as ethically right. Is that too much to ask for?
Anthony: No, what you are asking is not much. But I need to take into consideration the interests of other shareholders as well and if it backfires then I will be answerable to them.
Matthew (confidently): Anthony, I know that you are in a tough situation and had to answer a lot of people. All I am asking is to give us a chance. Even if it backfires then you will at least have the consolation that you tried to do some good not only for yourself but for the greater number of people.
Anthony: Okay. Go ahead. Let us see where that is going to take us. I will talk to the other shareholders and provide you with the go-ahead permission.
Harley: Shall we raise a toast to that?
After this, the conversation moves to general inquiries and soon Mr. Waller and Matthew leave to discuss some financial matters. Mark leaves to cater to some urgent business and Harley sits humming in the conference room.
References
Acs.org.au. Retrieved 18 January 2018, from https://www.acs.org.au/content/dam/acs/rules-and-regulations/Code-of-Professional-Conduct_v2.1.pdf
adidas Official Shop | adidas. (2018). shop.adidas.co.in. Retrieved 15 January 2018, from https://shop.adidas.co.in/
Annual Report 2014. (2018). www.adidas-group.com. Retrieved 15 January 2018, from https://www.adidas-group.com/media/filer_public/2b/2f/2b2fd619-5444-4ee8-9c07-baa878d658c4/2014_gb_en.pdf
Balch, O. (2018). Nike reveals a new, innovative game plan for sustainability. the Guardian. Retrieved 15 January 2018, from https://www.theguardian.com/sustainable-business/nike-sustainability-report-social-environmental-impact
Bebbington, J., Unerman, J., & O’Dwyer, B. (Eds.). (2014). Sustainability accounting and accountability. Routledge.
Epstein, M. J., & Buhovac, A. R. (2014). Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers.
Forbes Welcome. (2018). Forbes.com. Retrieved 15 January 2018, from https://www.forbes.com/companies/nike/
Forbes Welcome. (2018). Forbes.com. Retrieved 15 January 2018, from https://www.forbes.com/companies/adidas/
Gentile, M. C. (2014). Giving voice to values: an action-oriented approach to values-driven leadership. SAM Advanced Management Journal, 79(4), 42.
Hood, N., & Birkinshaw, J. (Eds.). (2016). Multinational corporate evolution and subsidiary development. Springer.
Lo, B. (2012). Resolving ethical dilemmas: a guide for clinicians. Lippincott Williams & Wilkins.
Nike’s Sustainability Report Shows Company Reducing Environmental Impact while Continuing to Grow. (2018). Nike News. Retrieved 15 January 2018, from https://news.nike.com/news/nike-s-sustainability-report-shows-company-reducing-environmental-impact-while-continuing-to-grow
NKE Income Statement. (2018). NASDAQ.com. Retrieved 15 January 2018, from https://www.nasdaq.com/symbol/nke/financials?query=income-statement
Schultz, H. (2012). Pour your heart into it: How Starbucks built a company one cup at a time. Hachette UK.
Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03), 117.
Zadek, S., Evans, R., & Pruzan, P. (2013). Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.
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