Excerpt from WSJ article: (Please read this excerpt and provide your response to the questions listed)
Hannah Jones, Nike Inc.’s head of sustainable business, had been lecturing colleagues for years about the dangers of manufacturing in Bangladesh. Yes, the country featured some of the cheapest factories in the world, she argued, but the athletic-gear maker could ill afford another public pasting over its labor practices.
Her counterparts in the production division, charged with squeezing costs, countered that they should all visit the place together and then decide. So one day last year, five of them slogged up a dirty staircase to the top floors of an eight-story building here that housed one of Nike’s suppliers, Lyric Industries.
Rolls of fabric were strewn across the production floor and some windows were bolted shut, Ms. Jones recalls, clear-cut hazards in the event of a fire. The building was filled with other businesses, and there was no telling how safe those were. After spending the morning speaking with Lyric managers, workers and people in the neighborhood, they flew home and decided to cut ties with the company.
The decision came not long before another garment-manufacturing hub known as Rana Plaza collapsed, killing 1,100 people in a suburb of Dhaka, in the worst industrial disaster in Bangladesh’s history. The tragedy, which happened a year ago this month, has forced Western apparel sellers to re-examine their world-wide search for cheap labor, which has turned Bangladesh into an exporter of $20 billion of clothing a year. “Our competitors were moving fast into Bangladesh and the pressure was getting bigger and bigger,” says Nike Chief Operating Officer Eric Sprunk. “We needed a strong point of view to say, ‘Are we going to increase our source base there or not?’ “
Nike’s internal conflict over Bangladesh shows that its effort to clean up its act in the developing world, which began about 20 years ago, remains a work in progress. As the U.S. apparel industry sends more production to low-cost nations, Nike’s experience offers a lesson in the difficulty of managing the twin priorities of controlling costs and maintaining acceptable working conditions.
One faction inside Nike, led by Mr. Sprunk and other manufacturing executives, had argued the company could put the necessary safety controls in place to produce in Bangladesh and better match rivals’ cost and margin advantages. But a team led by Ms. Jones, chief sustainability officer, had insisted the company couldn’t guarantee working conditions there would be safe.
The decision to cut ties to Lyric Industries, with which Nike had worked for more than a decade, and to another factory reduced Nike’s footprint in Bangladesh to four facilities. In effect, it conceded that problems outsourcing production to the country couldn’t be easily fixed.
Over the years, Nike’s use of overseas manufacturers has periodically sullied its image, and its campaign to eliminate such problems hasn’t been easy. It has plowed money into helping factories and sacrificed sales at key moments when standards were breached. It has largely eliminated problems such as factory-worker deaths and the use of certain hazardous chemicals.
But problems persist.
Questions you need to address:
1. Ever since the campaign against its labor practices in the 1990s, Nike embarked on a long process of “compliance”. However, shareholders and stakeholders are looking beyond mere compliance.
Today, sustainability is of utmost importance to companies and its stakeholders.
What are some of the things that Nike can/should do to address the issue of sustainability? Your response should address (a) the core idea of sustainability; (b) the three P’s of sustainability; and (c) the three R’s of sustainability.
2. How should Nike integrate sustainability into the depths of its company? Your response should address supply chain activities ranging from design to manufacturing to all other operations of its supply chain.
3. How should Nike go ahead with its practice of outsourcing manufacturing to countries with low-cost labor? Should this be discontinued or should it be continued with some changes? Provide ample justification.
Provide a two-page (double spaced; font size 11) written response to the questions listed above.
You may refer to the text book or any other online resources for additional information required for your write-up.
You may want to look up some information about Nike and allegations of worker exploitation during the 1990s.