Walmart and Nike case analysis
The Walmart and Nike case study highlights moral and human ethical issues faced by companies when dealing with foreign suppliers. The case study also describes how companies source goods from manufactures that violate human rights for workers. Industries and manufacturing companies in developing countries were providing unsafe working conditions for workers, substandard wages, child labor, long working hours, and engaging in several unethical practices. The accusations against companies for sourcing goods without considering ethical principles led to the periodical inspection of manufacturing facilities and the formation of an elaborate code of conduct for foreign suppliers.
The case study discussed the challenges of spotting illegal manufactures and industries that escape and deceive inspection teams. For instance, the Chinese supplier Ningbo Beifa Group was underpaying its workers and unlawfully extending their working hours. The case also describes how Walmart, one of the largest retailers in the world, carried out an inspection at the Ningbo Beifa group and failed to detect unethical activities done by its main supplier. The Chinese supplier also dismissed workers with grievances and coached the factory managers on how to answer questions during the inspection. The Chinese factory also prepared fake payment and overtime records for its workers.
The case study also mentions the strategies adopted by manufacturers to deceive inspectors and pass the plant audit and monitoring process. The elements of deception included concealing information on child labor and unsafe practices, maintaining two separate books, complying to set standards through subcontracting the production, and coaching employees on answering audit questions. Factories deceived the inspection teams through sharing records that indicated appropriate payment of salaries and overtime payment. During the inspection, the factory chased the under personnel away from the factory premises and falsified their records. Manufacturers also shifted their production through subcontracting, which lead to abuse of workers, low payment standards, and overlooking safety procedures for workers.
In this case, the moral and ethical dilemma refers to acceptable or unacceptable standards for practice and compliance with the code of conduct. For instance, the acceptable minimum age set by the international labor organization was fifteen. However, in this case, the Nike Company exceeded the minimum age for its workers by one year for apparel workers and footwear workers, they exceeded by two years le, which raises questions on the appropriate minimum age for workers. The acceptable number of audits required for monitoring suppliers raised an ethical dilemma. For instance, Nike’s SHAPE inspections failed to reach the acceptable annual target of two audits for each of its active contract manufacturers. Also, Nike’s M-Audit focused its monitoring efforts on factories where noncompliance was most likely hence leaving out factories deemed to have a high level of compliance.
Another dilemma in the case was whether or not companies should announce auditing days.The Nike Company announced most of its audits owing to the fact that most of the information depended on the availability of records and personnel for interviews. Also, the low number of compliance staff in Nike company raised an ethical dilemma on the appropriate number of compliance personnel required for assisting and tracking factory remediation. Moreover, owing to customer pressure to lower the prices for products, factory managers find themselves cheating on compliance with standards of labor. Therefore pressure from companies sourcing goods from low-cost and low wage regions has led to low worker benefits and compensation by foreign manufactures. The other ethical dilemma is a lack of harmonized codes of conduct since they are varied hence creating a problem of which is the acceptable standard code of conduct. For instance, the acceptable height of fire extinguishers is varied for different institutions.
Ethical decision making is the process of evaluating and choosing among different options with regards to ethical principles. Utilitarianism is the ethical perspective to be used in the analysis of this case since it focuses on the implication or outcome of a situation (Ferrell & Fraedrich, 2015). It states that there is no clear difference between bad and good. Also, what may be acceptable for a given situation can be unacceptable in another place. It also implies that if the overall outcome of a decision brings positive changes in an organization, the decision is the right one.
The performance of Nike Company concerning supplier relationship is unsatisfactory. Nike’s system of auditing and monitoring fails to achieve the required outcome for ensuring the protection of worker’s rights and their working environment. For instance, the low number of audits conducted at contract factories indicated a lack of commitment to preventing unsafe practices. Nike’s method of monitoring the progress in factories was selective, whereby the factory only attended to companies with a high risk of noncompliance is an example of failed corporate social responsibility. The Nike Company also failed to raise the required amount of staff needed to assist in auditing, whereby only one compliance officer factories were charged with monitoring and inspections of factories the fact that audits were announced rather than announced, it indirectly supported unethical activities in the factories. Moreover, Nike Company had also considered cutting off orders to noncomplying suppliers which led severed relationship with its suppliers
Walmart’s performance concerning supplier relationship is commendable. The number of follow-up audits is remarkably high, with initial supplier factory audits of 14, 750, and 7200 represented follow up audits. The Walmart Company is also proactive towards setting elaborate supplier standards, increasing unannounced audits, and categorization of violations. Walmart did not put off orders for companies that had failed to comply. Instead, it chose to work closely with its suppliers to achieve improved workplace conditions while reducing the violation of human rights. Walmart also trained its suppliers and personnel, which promoted their level of compliance to codes of conduct.
Nike environmental sustainability initiatives include energy management, reduction of carbon emissions, reduction of overall waste through elimination, incineration, landfill, use of material processing for mitigating drought and flooding as well as zero discharge of hazardous waste. The use of solar PV projects has created 20% of the energy demanded by contract manufactures for Nike. Also, 99% of the waste generated by footwear manufacturers is either converted to energy or recycled. The Nike Company also eliminates waste through a reusable coffee cup and dishware programs, reduction of food waste on campus through optimized food production. Nike Company also advocates the refill of reusable water bottles on campus through direct line machines. The Nike Company also utilizes an Aqueduct tool for monitoring of baseline flooding risks and water scarcity for its key suppliers. Besides, the company operates a chemistry program that manages chemicals form innovation through raw materials and to the creation of products.
The Walmart company environmental sustainability initiatives include mitigation of the effects of climate change, disaster response, elimination of plastic waste through recycling, and creating innovation for plastic waste reduction. The company also aims at reducing food waste through capacity building programs in food recovery systems that work with suppliers and consumers. Walmart also engages in coalitions and advocacy to promote environmental public policy that aligns with shared business goals. For instance, Walmart promotes the objectives of the Paris agreement and are also members of the renewable energy alliance.
According to a global sustainability milestone 2010 report, Walmart had exceeded its expected goal of 20 million metric tons of carbon emission to 28 million metric tones from its global contract suppliers. Also, according to the 2019 report on Walmart’s global responsibility indicated an improvement of 10% renewable energy and 16% non -renewable energy. Also, according to this report, Walmart had set a goal for purchasing seven billion kWh of renewable energy by 2020, which was a 60% increase compared to 2010.
The Nike Company is committed to environmental sustainability, whereby it is a signatory of Ceres Bicep Network which comprises of influential companies advocating for clean energy policies and stronger climate change. It also signed its membership in valuing natural capital that consists of nature conservancy and corporate eco forum. Also, the Nike Company is a signatory of the Paris climate change agreement, which consists of investors and businesses committed to addressing climate change. The Nike Company is a signatory of better buildings challenge that focuses on making industrial plants and homes more energy efficient.
References
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.