New Balance
Essay Preview: New Balance
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As the fourth largest athletic footwear manufacturer in the world, New Balance is uniquely positioned to be a model of corporate social responsibility. Founded in 1906 by 33-year-old English immigrant, William J. Riley, New Balance initially focused it efforts on providing quality arch supports for people on their feet all day and over time grew into the shoe manufacturer we know today. Throughout its history, New Balance has operated as a company committed to “doing the right thing” by bringing fitness, comfort, and excellence to both competitive and everyday athletes as well as giving back to the community through philanthropy and charitable partnerships. This is a commitment that is reinforced by New Balance’s corporate mission statement, “Demonstrating responsible leadership, we build global brands that athletes are proud to wear, associates are proud to create and communities are proud to host.” (“New Balance Mission,” 2015)
For most of New Balance’s history, “doing the right thing” was something that was just done, something that can be attributed to the founder’s vision and the company’s limited market. After being acquired in 1972 by James Davis, New Balance experienced significant growth forcing itself to look inward and evaluate its processes while remaining true to the company’s mission. By 2009 New Balance was a global company that employed 4,100 people and had sales topping $1.61 billion. (Veleva, 2010) It was the second-largest athletic footwear manufacturer in the United States, and the fourth largest in the world. It was also the only global shoe manufacturer with production in the US. (Veleva, 2010) As a result of such rapid growth, New Balance leadership understood that they would need to incorporate corporate social responsibility into their overall business strategy.
One of the first steps the company took in implementing CSR was shifting to a lean production system that would utilize flexible manufacturing technologies to deliver goods on demand, minimize inventory, maximize the used of multi-skilled employees, flatten the management structure, and focus resources when and where they are needed. (Veleva, 2010) In doing so New Balance was able to significantly improve productivity and reduce waste, which was seen in the reduction of time it took to manufacture a pair of shoes; 3 hours versus 8 days.
In addition to streamlining its production processes and reducing its waste, New Balance was also aware of some of the challenges that manufactures in its field faced. Due to the high labor costs associated with assembling athletic footwear, many manufacturers moved their production overseas. In doing so they opened themselves up to a new level of scrutiny from consumers who were concerned with human and labor rights violations that often took place in these overseas factories. The increased accessibility to real-time news and Internet exposure heightened the possibility of reputational risks that required the development of mitigation strategies. Additionally, consumer demand for increased transparency, increased government regulation of greenhouse emissions, and overall consumer concern of environmental impacts played into the development of New Balance’s CSR strategy.
As a part of New Balance’s 100-year celebration in 2006, owners James and Anne Davis committed to corporate responsibility, making it a key component of the company’s vision and mission. (Veleva, 2010) A CSR team known as the Responsible Leadership Steering Committee was created and tasked with overseeing several areas of responsible leadership: philanthropy and community investing, environmental sustainability, socially responsible compliance, product life cycle, and domestic manufacturing. Unfortunately, New Balance did little to promote these efforts towards CSR and the limited public awareness lead to the company ranking at the bottom of both internal and external surveys pertaining to CSR. (Veleva, 2010) In response to these results, New Balance engaged a research team from the Boston College Center for Corporate Citizenship (BCCC) conduct and in-depth CSR assessment and to provide recommendations for improvement. Additionally, the Center for Reflection, Education and Action (CREA) was asked to help compile all of the information, goals and indicators pertaining to the company’s social and environmental performance in order to develop the company’s first publicly available CSR report. (Veleva, 2010)
The BCCC’s research team spent four months in 2009 visiting production facilities and interviewing internal stakeholders across all job functions and external stakeholders that included an NGO and a retailer while focusing on 4 key areas of concern: overall governance, products and services, operations, and community support. Below are some of the findings:
Overall Governance
All interviewees identified the company’s history, values and integrity New Balance’s top strengths
There is a collective sense of personal accomplishment and pride in what the company was doing
Sr. Management had a strong basic support for CSR, however that was no clear consensus or understanding of what it should encompass or what the corporate goals were i.e. some interviewees believed that the RL priorities were related to philanthropy and volunteering while others thought that they pertained to overseas factory compliance. Executive level interviewees saw CSR simply as a cost instead