BES ken - Analysis of Ethical and Corporate Social Responsibility at Adidas PDF

Preview

Summary

Analysis of Ethical and Corporate Social Responsibility at Adidas...

Description

AN ANALYSIS OF ETHICAL AND CORPORATE SOCIAL RESPONSIBILTY APPROACHES AT ADIDAS COMPANY

MONARCH BU BUSINESS SINESS SCHO SCHOOL-SWITZERLAND OL-SWITZERLAND DR KENNED KENNEDY Y AMADI,PhD

10th February 2017

1

Dr Kennedy Amadi,PhD

Monarch Business School

Business profile Adidas. As detailed by Flippo, H. (2019), Adolph Dassler first began the company in 1920 when he invented spiked shoes for use on tracks and fields, 4 years later he and his brother turned it into a German sports shoes maker. Size. “Adidas is considered the largest sportswear manufacturer In the European region; with over 59,000 employees worldwide at the end of 2019”, (O’Connell, 2020). Geographic regions. Mernock, A. (2012) highlights that while Adidas is based in Europe, their products are present in every country mostly dominating its home region Europe. Products and services. According to adidas.com, the company’s product line-up consists of many different styles and designs of apparel ranging from casual wear to sportswear. Some examples are sandals, hiking shoes, tracksuits, sports shoes and much more. Key Competitors Bhasin, H. (2018), identified some key competitors of Adidas as the following:  Nike: Nike is said to be the number one footwear manufacturer. Adidas faces the greatest competition from Nike.   Puma: The sibling company to Adidas is Puma, the Dassler brothers rivalry carries on into heavy business competition between Adidas and Puma. Main customer segments. As stated by Anon, (2017), Adidas’s market segmentation consists of mainly demographic and psychographic segmentation. In demographic, Adidas classes its consumers based on sex and age, such as female and male clothing, as well as clothing for kids, teens and adults. Psychographic segmentation of Adidas involves classifying based on social class and personalities, such as athletes, gym regulars, sports enthusiasts, brand freaks and image seekers.

2

Dr Kennedy Amadi,PhD

Monarch Business School

EVALUATING APPROACHES TO BUSINESS ETHICS IN ADIDAS COMPANY

“Business ethics refers to the practices and policies involved in business operations and how the general population views controversial business-related topics like corporate governance, insider trading, bribing, discrimination in trade and corporate social responsibility. Business ethics refer to what is right and wrong in trading, and it usually follows the law”, (Twin, 2020). Approaches to business ethics. Business ethics have been interpreted differently in different parts of the world, and this has resulted in multiple different types of approaches to business ethics, some of these are: 1. Teleological approach: According to Chand, S. (n.d.), this approach states that an action is right or wrong based on the outcome and consequence of the action. If the outcome of the action is seen as ethically right, then the action is seen as morally right. a. Advantages: Mairilou, (n.d.), identifies benefits from using the teleological approaches to business ethics as:  

It bases ethics on creating happiness and reducing unhappiness, which is the most sensible appearing approach. “Adidas manufactures apparel and sells it to consumers, which in turn are happy because they have something nice to wear”, (Taylor, 2016).

It also bases ethics on outcomes and consequences of actions, which makes sense ethically. The clothing and shoe industry has always been ethically questioned, mainly due to the use of animal skin in some products; Adidas would be in a much better spot if people only looked at the finished products rather than the means of creation. Robertson, L. (2017), states that Adidas uses leather, wool and feathers for their products. The company has avoided using any hair or skin from exotic animals, which shows that they are making efforts towards these issues. Despite this, their usage of other animal products is not disclosed, which causes uncertainty about the company’s ethics.  It is easy to understand and is mostly common sense. In Adidas, the approach would be easily picked up by the members of the company as it is easy to understand. b. Disadvantages: Mairilou states that there are also limitations involved with the teleological approaches, some include:  Basing ethics on outcomes means that sometimes prediction is needed, which can be hard to come up with. Adidas trying to determine whether their finished product will bring benefits to society will be hard as there is no sure way to know the market’s reaction to new products.  Different people with different morals will result in differing outcomes. 



 

 



3

It only focuses on the outcome of the actions. For example, according to Nicholas, S. (2013), Adidas hired an Australian company to kill Kangaroos for their skin which was used to make leather cleats for their shoes. Teleological approach to ethics would overlook this fact because the shoes made from the lighter leather would benefit countless soccer players by letting them run faster.

Dr Kennedy Amadi,PhD

Monarch Business School

      





It can conflict with human rights.

2. Deontological approach: “Also known as non-consequentialist these approaches to ethics states that there are set principles and rules that should be followed when acting, and that the outcome does not justify the actions leading to it”, (Shakil, 2013). a. Advantages: Regoli, N. (2019), states the benefits of deontological ethics as:  The approach facilitates good human conduct as there are morally right principles which guide people. 

It leads to high levels of personal responsibility. This is because every action leading to an outcome is assessed ethically, meaning that individuals will have to carefully plan their actions, and own them. Adidas would benefit from this as all their workers would show responsibility for their actions, and performance appraisal would be easy as a result.



The morals are robust; there is no uncertainty in what is right or wrong. No exceptions can be made to the rules because there are pre-existing principles showing people what is expected of them.





 

b. Disadvantages: As identified by Regoli, N. (2019), deontological approaches to ethics also have cons that make them less ideal, these include:  Deontological principles indicate that no morally wrong actions can be taken, although there are situations where that is not possible. For example Adidas producing goods from animal skin would never work from a deontological standpoint.  The ethics are subject to opinion. The right and wrong in this approach depends on the actions and people involved therefore they are not certain in some ways. 

4

Self-defence situations are not addressed in deontology. Self-defence usually involves retaliation of some type, in deontology, this is morally incorrect. For example if an Adidas competitor plans to defame Adidas to gain market share, Adidas implementing a strategy to counter the attack would be seen as morally incorrect.

Dr Kennedy Amadi,PhD

Monarch Business School

5

Dr Kennedy Amadi,PhD

Monarch Business School

PRINCIPLES OF CSR AT ADIDAS COMPANY

“Corporate Social Responsibility is a way for companies to implement sustainable development into the business, and provide benefits socially, economically and environmentally. This will overall improve the company’s image if undertaken correctly. With more consumers being aware of CSR, more companies are pushed to incorporate it into their models”, (Schooley, 2019). 1. Philanthropic Model of Corporate Social Responsibility. As defined by thegivingmachine.co.uk, (n.d.); philanthropy in a corporate view refers to not only working ethically but also supporting the society by donating money to charities, communities and by generally helping the community apart from through creating job opportunities. Alho, T. (2018), evaluates the helpfulness of Adidas to communities and issues such as natural disasters. The company provides financial assistance to aiding organizations and donates products to be received by the community. They provide monetary and product donations to refugees in camps located in Syria and Turkey. They also create job opportunities for German refugees in their workshops to help them settle. Adidas also works with Save the Children, and by Adidas being able to donate money to the organization; they can in turn help devastated children and their families using the funds. This shows that Adidas adopts philanthropy in their CSR efforts, which in turn gives the company good social standing. a. Advantages. 

 

6

Increase employee engagement and productivity. This is because philanthropy is seen as good deeds, and employees are more willing to help if it is for a good cause. This will also result in more involvement with employees in the CSR efforts of the company. “Adidas employees have many ways of being involved in community projects, one is the Adidas Fund. The Fund involves adidas employees around the world helping out communities not only through monetary donation, but also teaching important values through sport”, (adidas-group.com, n.d). Improved brand awareness and reputation. The general public will have a positive image of a brand after they have made efforts to assist communities, this will increase the brand reputation and image substantially. “Adidas ensures that CSR is a major part of its initiatives and it shows. In 2018 adidas produced more than 5 million pairs of shoes using recycled plastic. Putting the public first in their operations has led to a high CSR ranking and increasing company value”, (sustainabilityvibes.com, 2018).

Dr Kennedy Amadi,PhD

Monarch Business School

b. Disadvantages. 

Giving out can hinder objectives. This is because money donated can be spent elsewhere for maximum efficiency.



It needs a lot of time, effort and funds. This is because if a company decides to invest into the community rather than just giving, they will need to allocate resources and time into a project with no direct returns. As stated on adidas-group.com, (n.d.), Adidas clearly displays the effort put into community engagement and donations. Some Adidas community engagement examples are support for refugees, save the children, SOS children’s village, China: Cooperation with ministry of education and many more. Adidas statistics show that in 2019, the company supported 519 total projects. These projects show that Adidas has invested a substantial amount of resources and time into helping the community. Theoretically if they directed the effort into expanding their business, they would earn more overall. Refer to appendix 1 for detailed breakdown of Adidas projects and donations.



 

2. Economic Model of Corporate Social Responsibility. As defined by Pineda, M. (2015), the economic model of CSR states that the purpose of a business is to generate profits, respond to market and quality demand. The model indicates that a business should focus on its shareholders by maximising returns and obeying the law. The model argues that investments from a business’s shareholders should not be spent on activities that do not provide returns. The model insinuates that businesses are already providing the society benefits through taxations on their income and that social responsibility is the job of the government. The model tasks companies to be profitable, and according to Alho, T. (2018), Adidas fulfils this responsibility. The company experienced substantial growth in sales in the year 2016, with worldwide net sales at about 19.29 billion euros. This is estimated to be a 300 percent increase from 2001, the year starting their sustainability reports. These statistics show that Adidas has fulfilled their economic responsibility to be profitable.

7

Dr Kennedy Amadi,PhD

Monarch Business School

IMPLENTATION OF CSR AT ADIDAS COMPANY

As defined by Kraaijenbrink, J. (2019), the sustainability framework ‘triple bottom line’ evaluates a company’s environmental footprint and its influence on the society and economy. The Three P’s of triple bottom line are:  People: this parameter refers to the people who are impacted by the organization positively or negatively, they are employees, suppliers, customers and anyone who is affected by the organization.  “Adidas already places emphasis on social sustainability as they employ 50,000 people not counting jobs created by its sub-companies. With this, more people have jobs and can sustain themselves and their families. Adidas products are also known for the joy they bring customers when they have something nice to wear”, (Taylor, 2016). This shows that adidas are already pursuing the opportunity to incorporate society into their corporate social responsibility efforts.  Although adidas has CSR opportunities in the society there are also challenges that arise. Taylor, L. (2016), identifies a challenge adidas faces from the creation of jobs. This is due to the fact that not all the jobs created are ideal. Adidas sweatshops in Indonesia pay its workers 55 cents an hour. This leads to a bad cycle where young workers are put into work early. This poses as a challenge to adidas’ brand image as the public is concerned about employee happiness.   Planet: this indicates the effect of the organization on its physical environment, such as pollution, using natural resources and others. But can also refer to positive impact such as proper disposal of waste and reforestation.  “Adidas shows its dedication to sustaining the environment by incorporating into their production.  The adidas shoes ‘Adidas Parley’ are a pair of running shoes created from recycled fishing nets in the ocean”, (Taylor, 2016). One can see that adidas is taking advantage of the opportunity to become a more environmentally aware brand.  Although adidas shows that they care for the environment in their shoe manufacturing sector, the clothing side is not as environmentally sustainable. Taylor, L. (2016), highlights that adidas admitted to printing and dyeing their clothing products, and as a result there is heavy polluting of the Citarum River in West Java. This could pose a threat to adidas’ sustainability efforts as people might start questioning the methods used to design adidas clothing.  Refer to appendix 2 for an image of the Citarum River.   Profit: refers to the impact the company’s business activities has on the overall and local economy, such as taxpaying and creation off job opportunities and any other impact on the economy. “Adidas profits have been high since 2016 thanks to their products. This presents a great opportunity for the continuity of the business as their products are more than sustaining the business in terms of profit”, (Taylor, 2016).  “Although adidas is scoring billions of dollars in profit, their share growth is said to decline while competitors like Nike are experiencing a growth in shares. Adidas is said to experience a decline of 3% in share growth whilst Nike is said to experience a 10% share growth in 2018”, (Taylor, 2016). This could be seen as a competitive threat since adidas is already behind Nike.

8

Dr Kennedy Amadi,PhD

Monarch Business School

Adidas already adopts the triple bottom line framework in their Corporate Sustainability Reporting efforts. While they mostly benefit from these opportunities, there are also potential threats that need to be addressed by adidas to avoid any future problems. Adidas could focus on the identified threats and turn them into opportunities by putting up incentives to restructure their way of production. This would ensure their safety in the future as well as improve their brand image and reputation. It would also improve their reporting as they would have more sustainability topics to report on. An example would be to use organic colouring in dyeing their clothes to avoid pollution from artificial dyes; thus they would have converted a threat into a potential opportunity.

9

Dr Kennedy Amadi,PhD

Monarch Business School

ADIDAS COMPANY’S PRINCIPLE OF SUSTAINABILTY Youmatter.world, (2020), defines the principles of sustainability as the foundation of the concept of sustainability. The principles are the economy, society and environment. Beattie, A. (2019), defines the 3 pillars of corporate sustainability as: Economy. This principle of sustainability is about focusing on profit. A business has to be profitable to sustain, but with that said; it does not mean that a business can overlook the other 2 principles just because they are profitable. Taylor, L. (2016), describes the level of profits made by Adidas as more than sustainable. The company’s profits are ever increasing as time goes, meaning they are set in terms of sustainable profit. Society. The social pillar indicates that for a business to be sustainable, they need to maintain good and supportive relationships with their stakeholders, community, and employees. Stakeholders and communities support the business on the outside, while employees participate in business activities, so keeping these groups happy is mandatory in order to be sustainable. “An example of social sustainability in Adidas would be the fact that it creates a large number of job opportunities spread across the company and its sub companies for the public to undertake. Adidas also gives attention to the society through the making and selling of its clothes and shoes, which bring satisfaction to its customers”, (Taylor, 2016). Refer to appendix 3 for Adidas pillars of sustainability. Environment. The environmental principle is what majority of businesses tend to focus on, because it is the one with the most impact. The pillar entails companies finding alternative materials for their products and activities with an aim to reduce the harming of its physical environment. This does not only benefit the environment, as using recycled materials saves funds that would be used to buy the materials instead. An example of this as highlighted by Taylor, L. (2016), would be Adidas using plastic from recycled fishing nets found in the ocean to create a pair of running shoes; the ‘Adidas Parley’. This incentive has not only benefitted the environment by reducing ocean pollution, but has also saved Adidas funds that would be spent on creating the shoes from scratch. Importance of Sustainability. Future State, (2018), describes the importance of sustainability as a mandatory part of business success. Organizations with sustainability efforts in place are ahead of others, in the sense that they will be in business for a long time. Some reasons why sustainability is important are as follows:  

10

It helps secure the future for the business and people: the most important reason that people continue working towards sustainability is for the continuity of people’s lives on the planet. Sustaining the environment involves making the planet a safer place for people to continue living, and this is a top priority for everyone. Sustainability of the business is also important because it helps them gauge the future and how they are going to survive for the years to come such as by identifying sources of raw materials.

Dr Kennedy Amadi,PhD

Monarch Business School

“Adidas is the only company in its industry that has been publishing sustainability reports on an annual basis starting from 2001. The company has been committed to sustainability since 1989, and continues to show their concern for the environment through its CSR incentives”, (Sicoli et al. 2019). This shows that Adidas realized the importance of sus...