Firefighting scandals can unlock long term supply chain improvements

Supply chain scandals are troublingly regular occurrences in the news. In this day and age where compliance is becoming mandatory and where ethics and human rights are loudly defended, why are companies allowing themselves to be in a position where they can be (rightfully) exposed as perpetrators of such bad business practices… and repeatedly?

A recent article about Nike’s transformation from sweatshop scandals to sustainable business really got us thinking about the typical response and action businesses take following a scandal. Short-term crisis management seems to be the go-to approach, as companies desperately try to clear their name and rebuild their reputation and consumer trust. Scandals get an instant reactive response rather than a well-thought out plan that will not only achieve those short-term crisis management goals, but also ensure that changes are made throughout the business that will prevent such scandals from re-occurring.

 

What Nike’s approach has taught us:

  • YOU CAN COMPLETELY TRANSFORM YOUR BUSINESS REPUTATION

Nike was able to go from being “synonymous with slave wages, forced overtime and arbitrary abuse,” in 1998, to now being one of the “relatively few large, public companies making investments in potentially game-changing innovations for the sake of sustainability.”

When companies do good, it’s recognised both internally and externally.

 

  • IGNORING PROBLEMS WON'T MAKE THEM GO AWAY

Although Nike managed to transform from scandals to sustainability, it wasn’t plain-sailing. Back in the 90’s when the original cases of child labour and hazardous working conditions came to light, Nike tried to continue on as if nothing had happened/was still happening, trying to pass the blame solely onto the third-party suppliers, who they claimed to have ‘no control over’, essentially ignoring the entire situation. This approach, which they stuck to for years, caused them more harm than good, and quite rightly so. How can you be ignorant to the fact that these workers are producing your goods, within your supply chain and are therefore part of your business – whether you work in the same office/building/country/continent or not?

This behaviour saw Nike's prior years’ successful growth (from $919 million revenue in 1984 to $9.6 billion in 1998) start to fall, and in millions. The scandals were taking a toll, and Nike began to realise that if they continued to ignore the problems rather than take action, they would lose their tentative market share. A top-down strategy to clean up the supply chain was devised.

 

  • SUSTAINABILITY IS KEY TO BUSINESS SUCCESS

Nike launched their sustainability initiatives in response to the scandals, yet these initiatives have become a key tool in future-proofing the company in a time where pressure and risk is high, which is the main learning point for other businesses. Nike have managed to develop a respectable, modern and powerful brand image which has seen a vast increase in their sponsorship/partnership deals and most importantly, sales.

So although scandals are intimidating, remember that to significantly lower the risk of scandal re-occurrences, fire-fighting shouldn’t solely be reactive with the aim of concealing, strategies needs to be thought-out with long-term change, progression and prevention in mind.