Citius, Altius, Fortius Faster, Higher, Stronger? …. Richard Sherman.doc · Web viewTitle Citius,...

2012 Cambridge Business & Economics Conference ISBN : 9780974211428

Citius, Altius, Fortius – Faster, Higher, Stronger?Corporate Social Responsibility in the Sporting Goods Industry

W. Richard Sherman, J.D., LL.M., C.P.A.Professor of Accounting

Saint Joseph’s UniversityErivan K. Haub School of Business

5600 City AvenuePhiladelphia, PA 19131

[email protected]

Conference for which the paper is submitted: 2012 Cambridge Business & Economics Conference (CBEC)

Cambridge, England - June 27-28, 2012

Academic departments to which paper pertains: Management

Key Words: Sustainability Reporting; Triple Bottom Line Reporting; Corporate Social Responsibility

ABSTRACT

As in most industries, the global sporting goods and apparel industry is marked by

intense competition. In an Olympic year, companies want nothing more than to have

athletes who wear their brand to run faster, jump higher, and be stronger. Yet despite this

intense competition for market share, the leading companies in the sporting goods

industry have shown a remarkable willingness to cooperate with one another to address

challenges to their corporate citizenship. This paper looks at the corporate social

responsibility issues confronting the industry, the individual company’s responses, as

well as their collaborative efforts.

INTRODUCTION

June 27-28, 2012Cambridge, UK 1


For those passionate about sports, the first image that comes to mind when adidas,

Nike, or Puma is mentioned may be a footballer scoring the winning goal, a tennis player

at match-point, or a runner crossing the finish line. Athletes are often identified with and

by the shoes and apparel they wear – David Beckham & adidas; Maria Sharapova &

Nike; Usain Bolt & Puma - to name just a few. Of course, sporting goods companies

realize this and spend millions of dollars per year to promote that association through

sponsorship of athletic events and the endorsement of their brands by athletes. With

three years remaining on his existing deal with adidas, Beckham signed a lifetime

contract in 2003, worth an estimated at $160.8 million (Boston.com, 2005). In 2010, the

former #1 ranked women’s player but often injured Sharapova renewed her sponsorship

agreement with Nike by eight years for $70 million (Rossingh, 2010). World record

holding sprinter Bolt’s contract with Puma is the largest in track & field history,

comparable to Real Madrid football star Cristiano Ronaldo's four-year contract with

Nike, worth US $32.5 million (£21 million) (Kessel, 2010).

However, a second image which may flash to mind when adidas, Nike, or Puma,

is mentioned is one of the poorly paid and ill-treated worker in the Asian factories with

which these companies subcontract the manufacture of their shoes and apparel. In

particular, Nike has been singled out for its use of alleged sweatshops (Beder, 2002;

Keady, 2012; Porter & Kramer, 2006). Prefacing his speech about Nike’s labor initiatives

at a National Press Club lunch in 1998, Knight noted how some critics had demonized the

company.

It's been said that Nike has single-handedly lowered the human rights standards for the sole purpose of maximizing



profits. And Nike products have become synonymous with slave wages, forced overtime, and arbitrary abuse. One columnist said, "Nike represents not only everything that's wrong with sports but everything that's wrong with the world" (Knight, 1998).

Indeed, the conditions in these factories and how companies manage their supply chain

continue to present the most pressing challenge to corporate citizenship for the industry.

There is another elephant in the room – how to compete in an environment of

limited and diminishing resources. Hannah Jones, Nike’s Vice President of Sustainable

Business & Innovation, sounds the alarm:

We stand teetering between the old and the new. And I believe that this next decade will be the test for all of us. Not because of what might be, but because of what is. At Nike, we have long said that things we have taken for free will become the new gold -- water, waste, carbon. We believe we have entered the era of climate adaptation where we are no longer contemplating the potential, but beginning to grapple with the consequences (Brettman, 2012).

This paper looks at the sustainability initiatives by the three largest companies in

the global sporting goods industry – adidas (Sales €13,344 million), Nike (Sales $20,862

million for FY11), and Puma (Sales €3,009 million) - as they attempt to meet their

corporate social responsibilities. While each company has a unique response, they have

also shown a remarkable willingness to cooperate with one another to address challenges

to their corporate citizenship.

All companies struggle to tell their stories, to communicate the good - and

sometimes the bad - they do in the marketplace, in the community, to and for the

environment, and in society. Quite clearly, the challenge of telling the company’s story



has not been met by conventional financial reporting practices. Triple bottom-line (TBL)

reporting, a term coined by John Elkington in his 1997 book Cannibals with Forks: the

Triple Bottom Line of 21st Century Business, aims to remedy this shortcoming by

explicitly considering not only the economic performance of a firm but also the

company’s environmental and social performance as well. Adidas, Nike, and Puma have

embraced the TBL (also known as People, Profit, and Planet or 3P reporting) and have

been recognized for the quality of their reports. This paper relies heavily on those

reports.

ADIDAS – “In the Real World Performance Counts”

Adidas and Puma share a common heritage and a fascinating story of sibling

rivalry. In 1924, Adolf and Rudi Dassler began manufacturing shoes as the Gebrüder

Dassler Schuhfabrik (Dassler Brothers Shoe Factory). Perhaps their most famous

“endorser” was the American sprinter Jesse Owens who won four gold medals at the

1936 Olympic Games in Berlin wearing Dassler spiked shoes. After World War II, the

brothers split bitterly with Adolf (Adi) going off his separate way to create adidas; Rudi

formed his own company which would eventually become Puma. Although located in the

same small Bavarian town of Herzogenaurach, the companies and their employees

maintained a fierce rivalry along the lines of the legendary feud between the Hatfields

and McCoys. Only recently has this relationship begun to thaw. Noteworthy enough to be

included in its 2010 Annual Report, Puma highlights the “historic handshake between

adidas and PUMA heard around the world” – a one day soccer tournament held in

Herzogenaurach with 192 adults and children playing in mixed teams of adidas and Puma


http://www.amazon.com/gp/product/0865713928

http://www.amazon.com/gp/product/0865713928


employees (Puma, 2011: 68). At least, now the families and their respective companies

speak to one another.

Adidas, which also sells products under the Reebok, Rockport, CCM Hockey, and

TaylorMade brands, has been recognized for its sustainability reporting and performance

by numerous organizations. The company is included in the Dow Jones Sustainability

(DJSI), the FTSE4Good, STOXX® Global ESG Leaders indices, and has been named

among the Global 100 Most Sustainable Corporations, and is recognized as the Industry

Leader in the DJSI (adidas, 2012a). As reflected in its reporting, adidas embraces a

balanced view of the importance of its various stakeholders. In short, it has adopted the

Triple Bottom Line (TBL).

We are striving to be the global leader in the sporting goods industry and this demands that we return strong financial results. But leadership is not only about results, it is alsoabout how success is achieved. It is about striking the balance between business needs and social and environmental demands. Balancing these interests requires strong commitment, strategic direction, efficient andcareful execution, as well as regular reflection on the progress made (adidas, 2012b: 6).

As is true for almost all companies in the sporting goods industry, adidas

outsources over 95% of production to independent third-party suppliers, primarily located

in Asia. The reason is simple – lower production costs. In 2011, adidas worked with

more than 1,200 independent suppliers in 63 countries. Of all factories, 67% are located

in the Asia Pacific region, 20% in the Americas and 13% in Europe, Middle East and

Africa (EMEA). 28% of production is in Chinese factories (adidas, 2012b: 43). To

monitor the labor standards in its supply chain, adidas developed a system of key

performance indicators (KPI) which ranks its subcontractors’ performance along a scale



of 1C (lowest) to 5C (highest). The company requires a minimum ranking of 2C for a

supplier to maintain its active status. In 2011, through aggressive efforts to improve the

performance of its lowest ranked suppliers, adidas was able to reduce factories at the 1C

level from 19% to 8%. Under its strategic plan (called Route 2015), adidas has set a goal

of having 60% of its direct suppliers at the 3C level or higher (currently at 39%) by 2015

(adidas, 2012b: 51). New subcontractors (China leading the way with India second) are

subject to initial assessments. Of the 476 new applicants in 2011, 20.7% were rejected by

adidas as not meeting the threshold under its KPI system.

In addition to the audits conducted by its own Social & Environmental Affairs

(SEA) unit (1,401 in 2011), adidas has had more than 280 Independent External

Monitoring (IEM) audits performed as part of its membership in the Fair Labor

Association (adidas, 2012b: 51).

Following a practice initiated by Nike as early as 2005, adidas “published a

complete list of the names and addresses of the factories producing adidas clothes, shoes

and equipment for the London 2012 Olympic Games. The list also shows the status of

worker or trade union representation and whether there is a Collective Bargaining

Agreement in place at the individual facility” (adidas, 2012b: 4).

Although management of its supply chain remains the greatest challenge to its

corporate social responsibility, adidas has adopted a proactive approach towards

environmental stewardship as well. In 2008, it launched its Green Company Initiative

which measures the environmental footprint of its operations. One goal is to become a

zero emissions company (adidas, 2012b: 56).



In 2011, the company implemented EMeReT (Environmental Metrics Reporting

Tool) to better enable it to track its environmental impact and that of its suppliers (adidas,

2012c). Adidas continues to pursue ISO 14001 certification of its major sites. As do Nike

and Puma, adidas is constantly looking to find ways to optimize the environmentally

friendly production of its footwear and apparel. About 90% of all adidas Olympic articles

have some sustainable content. In 2011, 65% of adidas athletic footwear met the

company’s baseline environmental criteria (adidas, 2012b: 3).

NIKE – “Just Do It”

It started with a handshake between two visionary Oregonians - Bowerman and his University of Oregon runner Phil Knight. They and the people they hired evolved and grew the company that became Nike from a U.S.-based footwear distributor to a global marketer of athletic footwear, apparel and equipment that is unrivaled in the world (Nike, 2012a).

In the sporting goods industry, Nike (which also sells its products under the

Converse, Umbro, Cole Haan, Jordan, and Hurley brands) is the Big Dog on the block.

Not surprisingly, in this role, Nike takes a lot of hits from various critics ranging from its

use of low-cost Asian subcontractors who manufacturer its shoes and apparel, to its

continued sponsorship of controversial athletes like Kobe Bryant and Tiger Woods, to its

support for and subsequent eulogy by its outspoken co-founder Phil Knight of Joe

Paterno in light of the child abuse allegations against one of Paterno’s most trusted

coaches.

Throughout the 1990s, the company’s reaction was to scoff at critics. In his now

infamous remarks at Nike’s 1997 shareholder meeting, Phil Knight argued that working

conditions had improved so dramatically during the 25 years Nike had outsourced the



production of its shoes that “if a shoe worker in Korea or Taiwan had gone to sleep in the

shoe factory there ten years ago and wakened in a shoe factory in Indonesia or Vietnam

today, would have thought that he or she had died and gone to heaven” (Knight, 1997).

Somewhere along the line, Nike finally got the message and responded. In 2001,

the company formed a Corporate Responsibility (CR) Committee as part of its Board of

Directors to oversee the environmental impact, sustainability, and labor issues of its

major business decisions. (Nike, 2012: 15). After arguing for over a decade that

disclosure of the locations of its subcontracting factories would be a competitive

disadvantage, Nike released this information in 2005, marking the first time this was ever

done by anyone in the industry (Nike, 2012: 32). As Hannah Jones, Nike’s Vice President

for Sustainable Business & Innovation, notes, “This moment also marked us taking a

non-competitive business risk that changed the system” (Albanese, 2012: 2).

It certainly changed the way the investment community viewed Nike. Included in

the Calvert Social Index, the Dow Jones Sustainability Indexes (DJSI), Domini 400

Social Index, KLD Catholic Values 400 Index, KLD Broad Market Social Index, KLD

Large Cap Social Index, KLD Large-Mid Cap Social Index, KLD Global Sustainability

Index, KLD North America Sustainability Index and KLD Select Social Index, and the

FTSE4Good Index, Nike has been recognized as one of the Global 100 Most Sustainable

Corporations in the World, included on the 100 Best Corporate Citizens list, ranked as

one of the World's Most Ethical Companies each year from 2007 to 2009 in an analysis

by Ethisphere, and named in the top 10 of Newsweek's 2009 first annual Green Rankings

(Nike, 2012b). Its sustainability reports (first issued in 2001) have been recognized by

Ceres-ACCA as the best in North America (Ceres, 2011).



Despite the turnaround in public perception, Nike still faces the challenge of

managing its supply chain in a socially responsible way. As noted earlier, adidas has

developed its KPI system to rate the performance of its suppliers. Nike has a variety of

indices that perform the same function. Remembering the fall-out from Phil Knight’s

“died and gone to heaven” remark, the company has gone to great lengths to create

metrics to define “what ‘good’ looks like for factories that supply to Nike.” The results

are complex indices for Materials Sustainability, Sourcing & Manufacturing

Sustainability, Manufacturing, and Considered Design (Nike, 2012:40).

Creating metrics and standards is one thing; making sure they are being followed

is another. “Auditing is the first step toward working to improve factories that may meet

minimum compliance standards but have opportunities to improve their sustainability

performance. It’s also the first step toward eliminating from our supply base those

factories with serious, recurring violations” (Nike, 2012: 31). During FY09, fewer than

half of the factories with which Nike subcontracted were audited; by the end of FY11,

80% were. Of the 1,169 audits conducted in FY11, 59% were by third parties (Nike,

2012: 42). Pursuant to its membership the Fair Factories Clearinghouse (FFC), Nike

shared 39% of its audit results in order to promote transparency throughout the industry.

It is also one of 16 companies whose labor compliance program is accredited by the Fair

Labor Association’s Sustainable Compliance Initiative.

Nike has taken a systems approach to the problem of limited resources and the

devastating environment impact that business operations can have. Key to this approach

is the use of the innovative concept of Considered Design, which evaluates the

environment footprint of a product during its entire life cycle from development through



production to end-of-life recycling. The ultimate goal of a “Considered” product is to

create a fully closed loop in which the original design uses the fewest possible materials

which can then be recycled into a new product.

Just as Nike’s disclosure of the location, names, and other information about its

subcontractor factories may have seemed counterintuitive, its support of the open

sourcing of its audit and design tools and its integral role in the creation of the Green

Xchange platform, a system for licensing patents related to sustainability and other

socially desirable goals at a very low transaction cost, may also seem peculiar in an

intensely competitive environment. Hannah Jones sees this in a different way:

For sure it will demand our collective leadership. For sure, each of our roles is going to be challenged. Perhaps campaigners will need to selectively put down their swords and join forces with business. Perhaps business will have to work together in ways that competitors have never done before. Perhaps we will start sharing intellectual capital and sustainability in an effort to push this thing faster forward. Perhaps we will have to agree to unite around a single unifying message that combines all of us together. Perhaps we will have to think how we pool talent and resources. Perhaps we'll have to define winning in a different way (Brettman, 2012).

PUMA – “Back on the Attack”

Although it publishes its own annual reports and is traded on the Xetra, London,

and Frankfurt stock exchanges under its own name, Puma does not have the same

autonomy which adidas and Nike enjoy. Its majority shareholder is the French Luxury

Group PPR, which also owns the Gucci and Yves Saint Laurent brands. Given this

association, it is not at all surprising that Puma does not see itself so much as being in the

sporting goods business but rather as a “lifestyle” company, selling products under the



Puma, Tretorn, and Cobra Golf brand-names. However, just as adidas and Nike have

done, Puma embraces the concept of the triple bottom line.

PUMA as a leading company within the Sportlifestyle industry has the opportunity and the responsibility to contribute to a better world for the generations to come.Through our programs PUMA.Safe (focusing on environmental and social issues), PUMA.Peace (supporting global peace) and PUMA.Creative (supporting artists andcreative organizations), we are making our contribution to build – for ourselves and our stakeholders – a more sustainable future. Sustainability has become an integral part of PUMA’s business strategy and is essentialto the PUMA DNA (Puma, 2012: 15).

Puma has been recognized as a socially responsible company as reflected in its inclusion

in both the Dow Jones Sustainability Index (since2006) and the FTSE4Good (since

2005).

As is the norm in the industry, Puma outsources most of its production of its

footwear and apparel, with 90% taking place in Asia (39% in China; 21% in Vietnam)

(Puma, 2012: 43; 129). This creates the common problem faced by adidas, Nike, and

Puma - evaluating the working conditions at these independent factories which operate in

32 different countries (Puma, 2012: 129). To do this, Puma created World Cat, Ltd., to

serve as its procurement agent. It is within World Cat, Ltd., that the PUMA.Safe program

is housed, and it is under the PUMA.Safe program that environmental and social audits

have been conducted since 1999, with reporting directly to Reiner Seiz, a member of

Puma’s Executive Board, as well as to Zochen Zeitz, the Chief Sustainability Officer of

Puma’s parent PPR (Puma, 2012: 15).

Adidas has its KPI system; Nike has its indices; Puma has developed its own

Sustainability Scorecard and S-Index that assign grades to its subcontractor factories. The



frequency with which a factory is audited depends on the grade received on the

Sustainability Scorecard – once every two years for “A” factories; annually for “B+”

factories; down to every 2-6 months for Grades “C” or “D” (Puma, 2012: 45). Overall,

audits resulted in 53% of the factories received an “A” or “B+” rating (Puma, 2012: 46).

As is readily apparent, the approaches which adidas, Nike, and Puma take to

responsibly manage their supply chains are remarkably similar. What sets Puma apart

from the other two companies is its novel approach to reporting, particularly in regards to

its environmental impact. While they have clearly adopted the Triple Bottom Line

philosophy, there is no connection between how, where, or when adidas and Nike report

their financial bottom line and the reporting of their companies’ environmental and social

impact. In other words, they report financial and non-financial information separately and

at different times. While this is the predominant approach used by most companies in

most industries throughout the world, the Prince of Wales’ Accounting for Sustainability

(A4S) Project has been advocating the necessity for “connected” reporting of financial,

environmental, and social performance for years (A4S, 2010). Indeed, the International

Integrated Reporting Committee (IIRC) was formed in 2010 with the specific goal of

creating a globally accepted framework for accounting for sustainability “which brings

together financial, environmental, social and governance information in a clear, concise,

consistent and comparable format - put briefly, in an ‘integrated’ format” (IIRC, 2010).

The so-called One Report, further developed by Harvard professor Bob Eccles

and Grant Thornton partner Mike Krzus (2010), is the approach which Puma has used for

both its 2010 Annual Report and its 2011 Clever Little Report (Puma, 2011; 2012);

Puma’s provide outstanding applications of this model.



While integrating financial, environmental, and social performance into one

report certainly sends the message that these aspects of a company’s operations are

interrelated and need to be considered holistically, it does not overcome a glaring

weakness in how companies “account” for these impacts. Rob Gray (2002; 2003) has

been arguing for years that it is this non-accounting that has led, or at least, facilitated the

problems we now face.

Accounting is the score-keeper. The 'score' takes no account of environmental matters and so, as a result, neither does 'economic ' decision-making. Given the importance of accounting information and the way in which we account it seems inevitable therefore that 'economic ' decisions must be environmentally malign. The environmental crisis is an inevitable result of the way we accountants do what we do. Accounting bears a serious responsibility for the growing level of environmental devastation (Gray et al., 1993: 22).

Puma has tackled this issue head on with the development and release of the

industry’s “environmental income statement” – the E P&L.

While nature is much more to us humans than a mere business, the E P&L seeks to answer the seemingly simple question: How much would our planet ask to be paid for the services it provides to PUMA if it was a business? And how much would it charge to clean up the ‘footprint’ through pollution and damage that PUMA leaves behind?(Puma, 2012: 37)

Using a sophisticated methodology created in partnership with

PricewaterhouseCoopers and Trucost, Puma released its first E P&L in 2010, in which it

calculated the environmental impact for the key areas of greenhouse gas emissions

(GHG), water use, land use, air pollution and waste, generated through the operations and



its supply chain to be € 145 million (Puma, 2011b). [See Appendix B for the details of

this analysis.]

Mirroring Nike’s Jones call to arms in addressing the environment crisis, PPR

Chief Sustainability Officer Jochen Koch believes this “Environmental Profit and Loss

Account has been indispensible for us to realize the immense value of nature’s services

that are currently being taken for granted but without which companies could not sustain

themselves . . . The results of the PUMA E P&L underpin the urgency for a paradigm

shift in the way we all currently do business and I have been pleased to also see that the

release of PUMA’s first results has generated widespread interest among governments,

corporations, NGOs and academics” (Puma, 2011b).

The results of the E P&L also reveal an interesting and important interrelationship

between the social and environment consequences of managing Puma’s supply chain.

Puma found that only 6% of its environmental impact was caused by its core operations

in 2010; it was its supply chain that was responsible for 94% or € 137 million (Puma,

2011b).

The E P&L is only the first stage of Puma’s development of environmental

financial statements. However, unlike Gray’s suggestion for “shadow accounting” (Gray,

2002) which would actually be used to adjust reported earnings, “these costs, which will

not affect PUMA’s net earnings, will serve as an initial metric for the company when

aiming to mitigate the footprint of PUMA’s operations and all supply chain levels”

(Puma, 2011b). As Puma’s initiative evolves, it will further include the impact of its

social performance (Stage 2) and indirect economic consequences (e.g. job creation and

tax contributions) of its business (Puma, 2011c). Once completed, Puma will have



implemented its own brand of “sustainable stakeholder accounting” advocated by

Sherman (2002; 2003; 2010) by attaching monetary values to environmental and social

consequences of its operations, thereby, facilitating stakeholders’ ability to adjust both

the profit & loss and the balance sheet (assets, liabilities, and equity accounts) to reflect

the specific impact of interest to them.

COLLABORATION

Obviously, Adidas, Nike, and Puma are competitors. They are fighting intensely

for revenue, brand loyalty, market share, and recognition. Yet within this competition,

they have seen the importance, indeed the necessity, to cooperate in addressing the

common problems they face.

Collaboration is essential. Nike is a large company by most standards, but our ability to influence meaningful change at the systemic level has limitations. It is absolutely crucial that we work with other players to prompt real, sustainable system change.

We embrace partnerships and open-source collaboration. We have proactively shared our sustainable design tools to help create an industry standard and continue to look for ways to scale innovations at Nike and across our industry. And we work with global players including the United Nations Global Compact initiative to support its principles and to report our carbon data to the Carbon Disclosure Project (Nike, 2012: 4).

To go beyond merely addressing the symptoms of the problems, we realized that we had to actively collaborate with others, including governments, NGOs, activists and, yes, our long-time competitors (Nike, 2012: 49).

This collaboration has taken many forms. Most often, the companies share

information and ideas as members of the same organizations. Adidas and Nike worked to

develop and test the Fair Labor Association’s Sustainable Compliance Initiative (FLA -



SC I) which identifies a common set of monitoring questions for subcontracting factories

they share (adidas, 2012c: 14). Along similar lines, the Fair Factories Clearinghouse

(FFC) provides a common compliance monitoring platform, enabling each company to

collaborate on activities in shared factories. As noted previously, pursuant to its

membership the Fair Factories Clearinghouse (FFC), Nike shared 39 percent of its audit

results in order to promote transparency throughout the industry.

All three companies are Founding Circle Members of the Sustainable Apparel

Coalition (SAC), an industry-wide group of leading apparel and footwear brands,

retailers, manufacturers, NGOs, academic experts and the U.S. Environmental Protection

Agency, representing an estimated 30% of global apparel and footwear sales (SAC,

2012). To further the SAC’s objective of reducing the environmental and social impacts

of apparel and footwear products around the world, Nike has made its Materials

Sustainability Index and Environmental Apparel Design Tool available publicly, through

the SAC, to help any apparel designer quickly make design decisions that would reduce

the environmental impact of their products (Nike, 2012: 29).

In another example of collaboration among competitors, adidas, Nike, Puma and

other companies in the sporting goods & apparel industry released a joint roadmap

towards zero discharge of hazardous chemicals (ZDHC) in the supply chain by 2020 for

public consultation. [See Appendix C for this response.] The roadmap included specific

commitments and timelines and sets a new standard of environmental performance for

the global apparel and footwear industry (Adidas, 2012:10).



CONCLUSION

Companies in the sporting goods and apparel industry are engaged in a battle

where success has traditionally been measured by revenue, profit, market share – and

even the number of Olympic medals won by the athletes who wear their shoes. However,

the playing field is changing, and along with this change is how success is measured.

Consumers nowadays increasingly expect companies to do more than just consider social and environmental issues. They want the products they buy to be the best, helping them be the best they can be. But they also want to buy these products from companies that are at the leading edge in terms of making a difference to the world at large (adidas, 2012: 7).

This paper has explored the ways in which the industry leaders - adidas, Nike, and

Puma - have responded to the challenges presented to their corporate citizenship. It has

relied heavily on reports issued by the companies themselves. [See Appendix A for a

summary of the characteristics of the companies and their reporting.] Some may question

the significance of focusing on these communications. Indeed, the skeptic may believe

that reporting is little more than self-serving product of corporate public relations

departments. However, extending the common management maxim, “if you don’t

measure it, you can’t manage it,” this paper would argue that if you can’t report it, then

you can’t manage it; and, if you can’t manage it, then you can’t change it. In this sense,

reporting is a necessary precondition for change to a more sustainable future by forcing

organizations to measure and communicate many more dimensions of their impact on the

world than the traditional financial reporting practices would.

The working conditions in the factories with which the companies have

subcontracted to make their shoes and apparel and the wages which these “independent”



factories pay their employees will continue to be the most important challenges to

corporate social responsibility. As individual entities, Adidas, Nike, and Puma take

similar approaches to responsibly manage their supply chain. These approaches involve

setting standards, grading or rating the subcontractors’ compliance with those standards,

and periodic auditing to further test for compliance. However, their individual efforts are

not the only responses they make.

It also leads to collaborative working. We recognise that many of the issues we face cannot be solved by the adidas Group alone and working with other actors in our industry helps drive lasting change. So for example, the adidas Group acted as the lead party in a supplier-brand caucus formed in 2010 to engage with Indonesia’s trade union movement. Its aim was to develop a basic framework for the exercise of trade union rights in the workplace. An agreement was finally reached and signed in Jakarta in June 2011. The protocol is recognised as a landmark achievement in Indonesian labour rights. When Greenpeace launched its Detox Campaign calling for an end of discharge of hazardous chemicals in the textile industry, we worked with a coalition of other brands to develop a joint roadmap towards the zero discharge of hazardous chemicals by 2020. (adidas, 2012: 4).

The second major issue facing adidas, Nike, and Puma is the environmental

impact which their operations have. This is not unique to the sporting goods industry.

Indeed, although the impact may be greater (e.g. extractive industries) or lesser, the

concern for increasingly limited resources is common to all companies in all industries.

Yet, it is in responding to this common challenge that the sporting goods companies have

differentiated themselves. Each company has its own “green” initiative, using

environmentally preferred materials, less toxic adhesives, with more recycling. Nike has

taken this a step further with its Considered Design approach which considers the

environmental impact at each stage of a product’s life cycle. Puma’s development and



release of its environmental profit & loss account represents a dramatic contribution to

the conversation. As Alan McGill, partner, Sustainability and Climate Change, PwC,

observes:

These values are enough to make any business pay attention. The PUMA E P&L offers a real insight into the environmental consequences of commercial decisions and at the same time highlights potential commercial consequences of the environmental realities unfolding around the world. This will make many companies consider how they can apply similar analysis in their own organisations. Companies – big and small – are now reliant on global supply chains, making their environmental footprint much larger than many realise. Assigning economic values to the environmental impact of a company’s operations enables a business to tackle vital questions now, not just about environmental impacts, but business risk, costs savings and finding new ways to become more effective. Without measuring them, the impacts cannot be managed, or reduced (Puma, 2011b).

Perhaps the most surprising aspect of responses made by the three largest

companies in the sporting goods industry is the remarkable willingness which they have

shown to cooperate with one another to address challenges to their corporate citizenship.

In an industry dominated by catch phrases – adidas’ “In the Real World Performance

Counts”; Nike’s “Just Do It”; Puma’s “Back on the Attack” – perhaps the best lesson

learned is we are all in this together. Citius, Altius, Fortius – Faster, Higher, Stronger?

Yes, but only if we work together.



REFERENCES

Accounting for Sustainability [A4S] (2010). Connected reporting. Accessed 25 May 2012, [available at http://www.accountingforsustainability.org/about-us/project-history].

Albanese, M. (2012). How she leads: Hannah Jones of Nike. Accessed 25 May 2012, [available athttp://www.greenbiz.com/blog/2012/02/06/how-she-leads-hannah-jones-nike?page=0%2C1].

Adidas (2012a). Awards. Accessed 25 May 2012, [available at http://www.adidas-group.com/en/sustainability/Our_Programme/Awards_and_recognition/default.aspx].

Adidas (2012b). Performance counts – Sustainability progress report 2011. Accessed 25 May 2012, [available at http://www.adidas-group.com/en/SER2011/].

Adidas (2012c). Green company performance analysis 2011. Accessed 25 May 2012, [available at http://www.adidas-group.com/en/sustainability/assets/environmental_statements/2011_Green_Company_Performance_Analysis.pdf].

Beder, S. (2002). Putting the Boot In. The Ecologist 32(3), pp. 24-28, 66-7. Accessed 25 May 2012, [available at http://www.uow.edu.au/~sharonb/nike.html].

Boston.com (2005). Athletes endorsements. Accessed 25 May 2012, [available at http://www.boston.com/business/redesign/business/gallery/sports_endorsements/].

Brettman, A. (2011). Hannah Jones of Nike delivers message of doom and hope at GoGreen '11 conference. Accessed 25 May 2012, [available athttp://www.oregonlive.com/playbooks-profits/index.ssf/2011/10/hannah_jones_of_nike_delivers.html].

Ceres (2011). Best sustainability reports. Accessed 25 May 2012, [available at http://www.ceres.org/press/press-releases/nike-wins-top-ceres-acca-award-for-best-sustainability-reporting].

Eccles, R. & M. Krzus (2010). One report: Integrating reporting for a sustainable strategy. Hoboken: Wiley & Sons.

Elkington, J. (1997). Cannibals with forks: the triple bottom line of the 21st century business. Oxford: Capstone.

Gray, R.H. (1992). Accounting and environmentalism: an exploration of the challenge of gently accounting for accountability, transparency, and sustainability. Accounting Organizations and Society, 17(5): 399-425.


http://www.ceres.org/press/press-releases/nike-wins-top-ceres-acca-award-for-best-sustainability-reporting

http://www.ceres.org/press/press-releases/nike-wins-top-ceres-acca-award-for-best-sustainability-reporting

http://www.boston.com/business/redesign/business/gallery/sports_endorsements/

http://www.adidas-group.com/en/sustainability/assets/environmental_statements/2011_Green_Company_Performance_Analysis.pdf

http://www.adidas-group.com/en/sustainability/assets/environmental_statements/2011_Green_Company_Performance_Analysis.pdf

http://www.adidas-group.com/en/sustainability/Our_Programme/Awards_and_recognition/default.aspx

http://www.adidas-group.com/en/sustainability/Our_Programme/Awards_and_recognition/default.aspx


Gray, R., Bebbington J., & Walters, D. (1993). Accounting for the environment. Princeton: Markus Wiener Publishers.

Kessel, A. (2010). Usain Bolt signs biggest athletics sponsorship deal ever with Puma. Accessed 25 May 2012, [available at http://www.guardian.co.uk/sport/2010/aug/25/usain-bolt-biggest-sponsorship-deal-puma].

IIRC (2010). Integrated reporting. Accessed 25 May 2012, [available at http://theiirc.org/wp-content/uploads/2011/09/IR-Discussion-Paper-2011_spreads.pdf /].

Keady, J. (2012). An open reponse to Nike’s Hannah Jones – Jim Keady breaks down Nike’s PR spin on wages. Accessed 25 May 2012, [available athttp://educatingforjustice.org/an-open-reponse-to-nikes-hannah-jones-jim-keady-breaks-down-nikes-pr-spin-on-wages/].

Knight, P. (1997). Remarks at Nike’s annual shareholder meeting. Accessed 25 May 2012, [available at http://business.nmsu.edu/~dboje/NIKknightmeetingse2297.html].

Knight. P. (1998). Nike’s labor initiatives – a speech at the National Press Club Lunch, May 12, 1998. Accessed 25 May 2012, [available at http://business.nmsu.edu/~dboje/NIKphilspeech.html].

Nike (2010). Corporate responsibility report FY07-09. Accessed 25 May 2012, [available at http://www.nikebiz.com/crreport/content/pdf/documents/en-US/full-report.pdf].

Nike (2012a). About Nike. Accessed 25 May 2012, [available at http://nikeinc.com/pages/about-nike-inc].

Nike (2012b). Reporting recognition. Accessed 25 May 2012, [available at http://www.nikebiz.com/crreport/content/about/1-4-6-reporting-recognition.php?cat=governance-accountability].

Nike (2012c). Sustainable business performance summary FY 10-11. Accessed 25 May 2012, [available at http://www.nikeresponsibility.com/report/files/report/NIKE_SUSTAINABLE_BUSINESS_REPORT__FY10-11_FINAL.pdf].

PUMA (2011a). Annual report 2010. Accessed 25 May 2012, [available athttp://ir2.flife.de/data/puma/igb_html/index.php?bericht_id=1000004&index=&lang=ENG].

PUMA (2011b). Puma completes first environmental profit and loss account which values Impacts at € 145 million. Accessed 25 May 2012, [available at http://about.puma.com/puma-completes-first-environmental-profit-and-loss-account-which-values-impacts-at-e-145-million/].


http://business.nmsu.edu/~dboje/NIKphilspeech.html

http://business.nmsu.edu/~dboje/NIKknightmeetingse2297.html

http://educatingforjustice.org/an-open-reponse-to-nikes-hannah-jones-jim-keady-breaks-down-nikes-pr-spin-on-wages/

http://educatingforjustice.org/an-open-reponse-to-nikes-hannah-jones-jim-keady-breaks-down-nikes-pr-spin-on-wages/

http://www.guardian.co.uk/sport/2010/aug/25/usain-bolt-biggest-sponsorship-deal-puma

http://www.guardian.co.uk/sport/2010/aug/25/usain-bolt-biggest-sponsorship-deal-puma


PUMA (2011c). PUMA’s environmental profit and loss account three-stage development process.Accessed 25 May 2012, [available at http://about.puma.com/wp-content/themes/aboutPUMA_theme/media/pdf/2011/en/epl1116.pdf].

Puma (2012). Clever little report 2011. Accessed 25 May 2012, [available at http://about.puma.com/wp-content/themes/aboutPUMA_theme/financial-report/pdf/2011/PUMAGeschaeftsbericht2011_ENG.pdf].

Rossingh, D (2010). Sharapova said to renew Nike contract for 8 years, $70 million. Accessed 25 May 2012, [available athttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEb7VavCSYtM].

SAC (2012). Sustainable apparel coalition - Founding circle members. Accessed 25 May 2012, [available at http://www.apparelcoalition.org/4.html].

Sherman, W. (2002). Corporate social responsibility, corporate social performance, and sustainable stakeholder accounting. The International Business & Economics Research Journal, 1 (3), 43-57.

Sherman, W., D. Steingard & D. Fitzgibbons (2003). Sustainable stakeholder accounting: Beyond complementarity and towards integration in environmental accounting. A chapter in Research in corporate sustainability: the evolving theory and practice of organizations in the natural environment. Sanjay Sharma & Mark Starik, Editors, Cheltenham, UK: Edward Elgar Press: 257-294.

Sherman, W. (2010). Measuring and communicating the value created by an organization. American Journal of Business Education, 3 (5), 87-98.


http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEb7VavCSYtM


Appendix A: Company Characteristics adidas Nike PumaRevenue (in millions) € 13,344 $20,862 € 3,009Net Income (in millions) € 671 $2,133 € 230.10Total Assets (in millions) € 11,380 $14,988 € 2,582Employees 46,824 37,515 10,836 First Sustainability Report 2000 2001 2002Year Covered by Last Report 2011 FY 2010-11 2011

# of Reports Issued 12 5 7GRI Reporting Level C B A+

External Verification NoneReview by Stakeholder

Panel

Limited Assurance by

PwC

Chief Sustainability Officer

None Named Global

Director of Social &

Environmental Affairs

Hannah Jones Vice President of Sustainable

Business & Innovation

Jochen Zeitz Chief

Sustainability Officer of the PPR Group

Subcontractor Factories 1,232 1,034 540Factory Audits 1,501 1,169 382



Appendix B: PUMA’s Environmental Profit & Loss Account



Appendix C: Greenpeace Detox Campaign

March 19th, 2012

On March 15th 2012, Greenpeace wrote to brands and notified them that another Detox publication will be launched soon. While the letter does not indicate further details about the content of the report, Greenpeace has requested brands to commit and announce a full elimination schedule and implementation of a full ban of APEs (alkylphenol ethoxylates). On March 16 the following response was sent to Greenpeace.

‘In November of 2011, acting with a deep sense of commitment and urgency, the undersigned brands established the Joint Roadmap toward ‘zero discharge of hazardous chemicals by 2020’. We all recognize that industry collaboration at all levels is needed for us to achieve our challenging goal. To help build the critical mass needed to affect change in our industry, the signatory brands have accepted G-Star into the Joint Roadmap Collaboration. We are also actively recruiting other brands, consultants, NGOs, advisors, and industry players to participate with and guide us on this journey. At this point in time and to build further leverage in the industry it is crucial to enlarge the group of brands and for this purpose the Joint Roadmap sets a clear framework for commitments.

With regard to your inquiry about APEOs, we wish to inform you that all brands have already or will very shortly communicate to our respective suppliers the need to source APEO free chemical preparations.

In April 2012, we will be posting our first Joint Roadmap status update. In this update, we will describe the progress we have made and the state of the collaborative projects.

We hope that you will continue to support the engagement with other brands at the same level playing field with the purpose of achieving critical mass for this endeavor.

Kind regards,adidas Group, C&A, G-Star, H&M, Li-Ning, Nike, and Puma


Citius, Altius, Fortius Faster, Higher, Stronger? …. Richard Sherman.doc · Web viewTitle Citius,...

Documents

Transcript of Citius, Altius, Fortius Faster, Higher, Stronger? …. Richard Sherman.doc · Web viewTitle Citius,...