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Environmental Case Studies
Governance and Sustainability at Nike (A)
What types of CSR issues that Nike had to deal with in the 1990s?
In the 1990s, Nike’s executive team had to deal primarily with the labor issues such as working conditions at the contract factories and wages. Company’s critics claimed that the workers at the contract factories were grossly underpaid and suffered from the inhumane treatment. At first, Nike’s executives responded to those claims rather defensively, asserting they were not responsible for the behavior of their suppliers. Besides, they argued that the working conditions and wages at their contract facilities all over the globe should not be measured against the U.S. standards. Nevertheless, in the late 1990s, the company’s approach shifted.
How has the focus of CSR issues shifted over time?
In the late 1990s, the company acknowledged that the working conditions at the contract factories badly needed changes and improvements. The corporate responsibility department was created in order to explore and solve these problems. Nike held independent monitoring, expanded education programs for its workers, and strengthened health and safety standards. Over time, the environmental issue became the core of Nike’s strategy, as well. The company launched programs concerning the water and energy use in the supply chain, eliminating toxic discharges, and product recycling, for example.
If you were a sustainability manager at CSR, are there any more initiatives that you would suggest for the company to work on?
As a sustainability manager at CSR, I would suggest the executive team to focus on the community engagement as much as possible. Of course, the labor and environmental issues would remain the core of the company’s strategy. However, the community investment would become a question of greater importance with time. According to the monitoring held by Jill Ker Conway, communication between managers and workers at the contract factories is often poor because they speak different languages. I would focus on the educational programs so that all Nike’s managers and employees worldwide could easily share their ideas and feel the importance of their voice in the company’s development.
What kind of values do you think that the company can obtain by being engaged in the CSR activities? Please list at least three different values that you can conceive.
Being engaged in the CSR activities, the company earns the trust of its workers, gains customer loyalty and, this way, takes stronger positions in the market. The focus on the social and environmental impact results, among other things, in creating a better brand image and gaining new customers. Therefore, a well thought-out CSR strategy serves as the most effective advertising for a pace-setter like Nike.
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Microsoft’s Unlimited Potential (A)
How have Microsoft’s citizenship programs and initiatives evolved over years?
Since the very beginning, Microsoft’s citizenship programs have embraced three major areas: transparent and innovative business practices, improved Internet safety and privacy, and investments in the knowledge economy. The company’s leaders divided all those programs into “Required,” “Responsible,” and “Aspirational” activities and made progress in each of the three categories. Over years, the management realized that Microsoft needed more activities in the “Aspirational” area such as promoting social and economic opportunities for people with lower income.
What are the areas of focus for the “Unlimited Potential”?
These areas include education programs for students and teachers, local software innovations, and various grants encouraging an increased use of software and hardware by the governments and NGOs. The “Unlimited Potential” focuses on the needs of users not only of those at the top of the economic pyramid but also with lower levels of disposable income. According to Bill Gates, Microsoft’s mission is to enable all human beings throughout the world to achieve their full potential with the help of education and relevant technology products.
What types of initiatives has Unlimited Potential Group started?
Unlimited Potential Group has started the projects concerning mobile technologies and payments, shared access for the Internet cafes, low-cost computing solutions for the emerging markets, and affordable flash-based devices for education. Thus, the company has provided cashless transaction services for mobile phone subscribers in India and China, SteadyState software for iCafe owners, and low-cost Windows offerings for the first-time PC users, for example. Since these initiatives targeted a huge middle- and bottom-of-pyramid market, Microsoft cooperates with local governments, NGOs, and multilateral agencies.
Do you think that the initiatives started by Unlimited Potential Group bring about both social benefits to the people in the developing world and profits to the company?
The initiatives started by Unlimited Potential Group seem to bring both social and economic benefits. Nevertheless, the profits of the company are still at the top, to my mind. The deeper Microsoft penetrates the emerging markets throughout the world, the more customers it gains. Of course, it is great that Microsoft promotes computer literacy in the developing countries but the computer literacy or Internet access are hardly a vital point for people who starve or have no roofs over their heads.
De Beers: Addressing the New Competitiveness Challenges
What parts of the diamond industry do you find interesting or different from other?
The most interesting part of the diamond industry is the value chain that consists of several demanding steps from the exploration and mining to the jewelry manufacturing and retailing. The initial steps have often required much investment in the infrastructure in remote areas. Moreover, almost each step (first of all, mining and processing) involves extensive security measures. Since rough diamond sorting had been performed manually for a long time, it required aptitude and high proficiency and utterly depended on the human factor.
What is the issue of “conflict diamonds” or “blood diamonds”?
The issue of “conflict” or “blood” diamonds concerns the war-torn African diamond-producing countries such as Angola, the Democratic Republic of Congo, and Sierra Leone. In the 1990s, some NGOs accused the diamond industry in those countries of supporting the rebel groups who could freely sell diamonds and get their profits. That way, diamond fueled the conflict, and even the sanctions of the United Nations did not help solve the problem.
What is the Kimberly Process?
The Kimberly Process is a certification system for international trade in rough diamonds. It is an agreement between De Beers and other producers, local governments, and NGO representatives, which was designed to bring the African conflicts to a halt. According to this scheme, each diamond gets a forgery-proof certificate of its origin. Being enacted by 70 participating countries throughout the world, the Kimberly Process allowed reconciling the production of diamonds and trade among the signatory countries.
How can De Beers provide pressures to its stakeholders to be more ethically responsible through its supply chain?
Ethical responsibility became an important part of De Beers’ strategy when the company faced social challenges in the 1990s. Trying to align the company’s interests with those of stakeholders, De Beers launched a four-part Supplier of Choice program. Among other requirements, stakeholders had to comply with the best-practice principles concerning business and ethical conduct. The company obliged its stakeholders to increase social investments, in other words, provide nutritious meals, local health facilities, and vaccination programs for workers in order to create the friendly school environments for children.
When it comes to ethical products, what are different types of buyers in Switzerland?
According to Migros’ research, buyers in Switzerland can be divided into three groups. The first one of 19% is presented by people interested in ethical labels. These buyers read the information about the label background and share it with their friends. The second and the largest group of 55% are “passive” buyers who do not choose consciously on the labels but can mention at least one. Finally, the third group of 26% consists of the buyers who feel no concern for the ethical labels and do not inform each other about such products.
In response to different needs from customers, what types of products has Migros developed over years?
Migros has developed three segments of products according to their origin, as well as rational and emotional desires of customers. They include “Basic,” “Standard,” and “Premium” segments. The first one has competitive prices and meets minimum requirements, such as no child labor, for example. The second category goes a little further and promises such benefits as animal-friendly husbandry. Besides, it gives preferences to Swiss agriculture. The third segment provides products of four groups meant for more rational or emotionally driven buyers.
The case indicates that there is a large portion of consumers in Switzerland for ethical products. Do you think that ethical products described in this case material can be sold in your country?
Hypothetically, all the ethical products mentioned in this article can be sold in any country. A great number of consumers all over the world are interested in the origin of the food they buy and prefer ethical labels. Nevertheless, the problem is the price of such products. Since they cost up to 30% more expensive than comparable non-organic products, not every consumer is willing to pay for them. Of course, Swiss labels will be priced much higher in other countries as still they are sure to find their buyers.
The end of the case reading suggests that Riedener is wondering if there was even more that could be done by the company to deal with the competitive situation. What would you suggest for the company to do more?
According to Migros’ strategy, the company gains customers not only with the help of more or less competitive prices but also other marketing tools. Many products of Migros are aimed at emotionally driven consumers who prefer quality to price. That is why; I would further develop and promote ethical projects, trying to make them familiar to a larger number of consumers. For example, I would establish real links between farmers and buyers by printing more advertising booklets about food production and by holding thematic meetings, for example.
Corporate Responsibility & Community Engagement at the Tintaya Copper Mine (A)
What kind of company is BHP Billiton? What is the size of the company?
BHP Billiton is one of the world’s largest mining conglomerates. At the end of 2004, it had 100 operations in 20 countries and a net income of $3.4 billion.
What are the social and environmental issues associated with the mining operations?
The major social issues are human rights violations in Espinar and other provinces of Peru. Local communities claim that BHP Billiton’s mine staff has committed such violations as eviction of residents, harassment of mine laborers, and mistreatment of women. Besides, according to the communities, some land purchases have been conducted in illegal and unethical ways. In some cases, the communities were pressed by the local authorities to sell their land at a very low price. The environmental issues came to the fore in the early 1990s. Some community members living near BHP Billiton’s operations complained that the wastewater from the processing plant contaminated pasturelands, as well as local springs and rivers (the Ok Tedi River), wiping out fish populations and devastating residents’ livelihoods.
In response to the events described on Page 14, in your opinion, what should the company do now? Please provide reasons for your opinions about the strategies that the company should take.
To my mind, a new Dialogue Table between residents, mine’s managers, and local government can save the situation. Since the protesters concern the mine’s economic contribution to the province scarce, the parties shall make the calculations concerning the fund together. The information about the fund must be published in the local press and be open for discussions. Besides, the mine’s top management shall empower local people to occupy some policy-making positions in the mine in order to reestablish credibility. There must be an independent nonpolitical work group that will monitor the situation in the mine, study the grievances, and work out recommendations for the managers to prevent any further conflicts.
International Rivers Network and the Bujagali Dam Project (A)
What kind of financial arrangement (equity and debt) were prepared for the Bujagali project?
According to the averaged estimation, the Bujagali project had a total expected cost of $582 million. AES, the largest independent power producer in the world, provided $115 million of equity, and AES Nile Power Limited raised $464 million of debt financing. Power sales to Ugandan Energy Board (UEB) prior to the commissioning date generated an additional equity of $3 million. Because of the poor credit rating of UEB and the Ugandan government, the debt could be funded or guaranteed by the African Development Bank (AfDB), the World Bank, or some export credit agencies. According to the agreement, the International Finance Corporation of the World Bank and the AfDB lent $60 million and $55 respectively; meanwhile, International Development Association and export credit agencies guaranteed the remaining $349 million of commercial debt.
What are the social and environmental concerns over the project?
According to the environmental impact assessment (EIA), about 15,000 people would be affected by the Bujagali project, and 2,236 would have to leave their houses because of the transmission lines and the dam. Two local NGOs stated that the project would bring 2.4 million of Bagosa clans integrated to the Bujagali Falls to spiritual and cultural death. Besides, the project would contribute to the spread of tropical diseases such as malaria, as well as diminish some endemic fish species, that way harming commercial fishing.
What were IRN’s concerns over the project?
IRN (International Rivers Network) is a non-profit organization that protects rivers and watersheds all over the world. The organization studied the economic analysis that justified the Bujagali project and questioned the promised benefits considering some environmental and social issues. Though, IRN and other NGOs did not have access to all the information they needed, they proved the dangers of the project and ramped up a campaign against AES and the dam. Despite their efforts, the World Bank did not even postpone the voting.
Do you think that the World Bank group should move forward with the project?
To my mind, the best decision of the World Bank group would be to re-examine the benefits and risks of the project once again and delay the construction of the dam for a while. Since the first reports of the IFC contained several shortcomings and lacked objectivity, it would be reasonable to conduct another detailed analysis of the project. Moreover, AES had obviously violated own principal of providing affordable power in environmentally and socially responsible ways; therefore, it could not remain the project developer. Consequently, the World Bank group should further support the project considering all possible risks in close cooperation with other developers.
Nestle: Agricultural Material Sourcing within the Concept of Creating Shared Value (CSV)
What is the concept of Creating Shared Value?
Creating Shared Value is a key concept in the strategy of Nestle. It covers the three core topics, which are most critical to their business: water, nutrition, and rural development. This concept focuses on such questions as fostering healthful lifestyles among consumers, extending and sustaining their lives, reducing the water usage in the agriculture and production process, and investing in the infrastructure of rural communities upstream in the supply chain. Though, the terminology of CSV is quite new, in fact, these core topics have been driving the company’s strategy for many years.
Relating to Hans Joehr’s first question (Page 20), what do you think are the prominent topics to address for the next 10 years for the company?
To my mind, for Nestle, the main topic to address for the next 10 years is further agricultural development because, without sustainable agriculture, the company has no future. Nestle shall further work on technologies in order to reduce the water and energy usage and encourage the most efficient agricultural practices among the suppliers. Besides, it is important to foster healthy lifestyle among buyers not only by promoting correlating products and sports activities but also by holding thematic meetings with farmers, for example.
Relating to Hans Joehr’s third question (Page 20), what emerging technologies, adapted practices, or new business plans you can think of that goes along the concept of CSV? Please suggest a new business idea in the food industry that may contribute to solving global issues discussed in this case.
I guess that new business ideas in the food industry shall focus on the core topic of nutrition. The more Nestle studies the impact of different products on human health, the more new concepts in production and marketing they will develop. For Nestle, one of successful business ideas can be a brand new line of nutritious products for people with special health issues (obesity or diabetes, for example). Such food shall look and, in fact, be so delicious and healthy that even “common” consumers would feel free to buy it.
In order to make the business plan that you answered for Q3 successful, with whom should Nestle work with (Hans Joehr’s fourth question)?
As the business ideas are going to be focused on nutrition, Nestle should further cooperate with all possible health organizations and institutions. The company shall invest more in its Clinical Development Unit, Institute of Health Sciences, and other units of that kind. Besides, Nestle should collaborate more with the suppliers, providing the best agricultural technologies. Of course, the company shall continue working with its customers and give them more information about the origin and production of the food and beverages they buy.
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