New Balance and CSR 1

Case Study: New Balance and CSR

OL-690-X4261 Responsible Corp Leadership 13TW4

Professor & Dr. Mark Hobson

Kenneth J Comeiro Jr RN BSN MS ANP
07/7/2013

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I. Introduction
New Balance missions statement is Demonstrating responsible leadership, we build
global brands that athletes are proud to wear, associates are proud to create and communities are
proud to host (Veleva, 2010). In the beginning, the vision of one William J Riley was simply to
build arch supports in the hope of alleviating pain for people who spent their days on their feet.
This was in 1906; by 1925 the first running shoe was developed for the Boston Running Club.
Over time New Balance has grown to be a global company with 4100 employees and annual
sales of over 1.6 billion dollars. They are the second-largest manufacturer of athletic footwear in
the United States after Nike, and the fourth largest in the world. More importantly, they are the
only global footwear manufacturer with production in the United States (about 25 percent of
production). Despite their best efforts to maximize production in the U.S. by cutting out waste
through the implementation of Toyota Lean strategies (Becker, 1998), there is still a need to
have production centers in other countries known for its cheap labor and poor working
conditions.
New Balance has always had an understanding of the issues with doing business this way.
They had adopted the Endorsed By No One campaign as a company that wanted to be set apart
from their competitors. They wanted their Corporate Social Responsibility (CSR) initiatives to be
the example for other brands. New Balances advantage was that the other major brands, such as
Nike, Reebok, Brown Shoe and Timberland-were mainly owners of brand names that sourced
their shoes from independent manufacturers. New Balance didnt and this was felt to be a major
plus in lending credibility to their efforts

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In order for this initiative to be effective, there were four areas identified by Veleva
(2010) as the primary focus. First, Human and labor rights issues in the supply chain- as this led
to boycotts of products Second, increasing demands for transparency (or to use slang putting all
your cards on the table). Third, greenhouse gas (GHG) emissions regulation as this is a key
component in the preservation of our home and finally health, safety and product stewardship.
It wasnt until 2009 that New Balance really took a long look at their CSR structure. At
the time there was one social responsibility manager with a CSR steering committee. New
Balance engaged the Boston College Center for Corporate Citizenship to review its practice and
develop recommendations based on its initiatives to assess its CSR and develop a report.
II.Strengths and Weaknesses
A. Overall Governance This can be best described as a mechanism for monitoring the actions, policies and
decisions of corporations, involving the alignment of interests among the stakeholders (Tricker,
2009). Further, Blanchard (2007) stated that good business invests in its people, as development
of its work staff is equally important as its financial gains. New Balances strength was exactly
this as its integrity, values and history was top notch. Employees felt that there was a true
investment in them by corporate. They believed in the vision and what CSR could mean for them
in the long run. On the other hand there seemed a disconnect with regard to meaning of CSR and
most executives still saw CSR as a cost rather than a strategic business driver with measurable
social and business benefits.
New Balance showed strength in its social responsibility by working to avoid layoffs
domestically during the recession, but did not address accountability or transparency. The review

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of its responsible leadership (RL) showed a clear lack of communication, process for developing
CSR goals, and a disconnect with four of its six business strategies and its RL. There were
impressive CSR initiatives such as worker conditions in supplier factories, greening of U.S.
facilities and significant reductions in volatile organic compounds emissions domestically.
However these were not well connected and aligned, nor were they always measured and
communicated to top management. There was a distinct lack of policies and expressed
leadership between top management and the employees. Transparency was a weakness and
something ownership admitted was not a strength of theirs as they admitted to pressure from
watchdog organizations that monitored these issues. There was a lack of communication between
footwear and apparel, domestic and international production with stated CSR goals.
The ultimate weakness that seemed to really jump out was the issues with the steering
committee itself. It was said that it lacked vision and did not have a true top level management
champion for CSR initiatives.

B.

Products and Services

This area was looked at as one of the most important as it measured the reduction the

carbon and toxicity footprint of products through their lifespan. The thought was that with New
Balance global reach that this would be an area of strength. Unfortunately it was a glaring
weakness as most of the corporate structure was unaware of the relationship to CSR and its
current business structure.
New Balance was the first company of its kind to use recycled products in their footwear,
eliminate the carcinogenic and environmentally unfriendly polyvinyl chloride (PVC) from all its
products, and implement a green store design. The elimination of PVC was considered a shrewd

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business decision because they did it before the pressures from non-governmental groups
increased. There were two other areas of weakness noted once again in the apparel division as
they were behind the curve with environmental changes, and its lack of systems to measure the
life cycle impact of its products. The division also lacked research on how the use of
environmentally safe materials was cost effective with regard to durability and longevity.

C. Operations
The accumulated impacts of human activity over the past two centuries are now
threatening our continued well-being (www.thenaturalstep.org, 2013). New Balance has made
strides to be on the forefront in reversing this
According to Veleva the report showed that operations were one area where New Balance
was particularly strong and could provide leadership for the entire industry. Many of the
initiatives demonstrated clear business value with regard to dollar savings, and reduced costs of
production while increasing productivity. As mentioned before the intangible benefits of their
operation was improved worker safety and high morale. New Balance had a robust
environmental program and good restricted materials program in its footwear division. New
Balance sought out reputable chemical manufactures and worked to develop systems that
reduced the amount of solvents used. This was effective in cutting at least 5% of production cost.
They recycled ninety-nine percent of their waste and were leaders in the reduction of the weekly
hours that its Chinese workers put in from seventy to sixty which increased production by thirtyfive percent. They worked to improve worker productivity through wellness initiatives and job
education seminars. They replaced chemical cleaners with greener products and improved energy

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efficiency via better lighting, servers and electricity increasing renewable energy by thirty
percent. Ironically one of the most important strengths has led to their greatest weakness.
They were heavily invested in the domestic manufacturing and its employees avoiding
lay-offs during the recession. The push for Made in America was a big plus amongst the
domestic side. These business strategies lead to one of the biggest weaknesses. As they
considered shutting down international production, it threatened the strides to improve workers
social impact. It also showed a glaring operational weakness with truly understanding cultural
aspect of work ethic and needs of international workers. Again the apparel side of things had a
large gap between the operational aspect and its CSR management as many of its products was
found to pose health risks. In the end there was a large gap between domestic and international
productions was a large gap with regard to its CSR initiative indicating an urgent need for
correction in order for success of its CSR company wide.

D.Community Support
This is again another area where New Balance strength lies. Employees were made to
feel empowered to reach out and help others within the community. Philanthropic endeavors rose
from a few hundred thousand to over six million dollars. Social marketing was strategic in its
delivery as it went hand in hand with many of the volunteer events. Boccalandro (2009) states
that volunteering also helps improve public relations, branding and reputation, employee team
and skill building, recruitment and sales. New Balance embraced this and its employees showed
high job satisfaction.

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This issue and most glaring weakness was that it did not align with the business strategy.
It was U.S. focused and emphasis was on areas such as childhood obesity and The Boys and
Girls Clubs of America. These were not representative of international needs and issues.

III.Analysis
We have discussed the importance of the three spheres and the importance to Human
Civilization. Society shifts because of a change in technological advances, recognition of unmet
needs and consciousness about issues raised through increased information (Waddock, 2002).
New Balance as a whole has developed innovative methodology to cut cost, increase production
and save the environment. They have developed rules and policies to aid in the economic side of
their company and have developed a strong civil community practice. There are three spheres
and a clear cut vision as to what they want to achieve. They have developed the tools and ideals
for success. The issue is not the framework but the lack of communication. They dont have the
voice or the right leadership to bring it all together. There is no overlap or connectedness with the
spheres; they are operating independently which in turn makes it inefficient. This is obvious by a
global company that focuses on the domestic side instead of the worldwide operations.
New Balance needs to adopt a leadership team that will champion the efforts of it CSR on
a global scale. The steering committee looked like a paper lion from the review and would
benefit from its redesign. Toyota Lean (Becker, 1998) uses an approach that puts ten people in a
room from all over the organization for a five day period, from executives to house cleaning
staff. They are given a problem area to focus on and come up with process improvement. This
would be a good way to develop a better leadership committee. They need to focus on the risks
and opportunities material to the company on a global scale and develop a framework for what

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they are already doing and incorporate that into clear cut identifiers. This will have a unified
message across not just the domestic but international theatre. Finally the biggest area is the
communication. The corporate hierarchy needs to have a better overlap of the company spheres
to connect all the pieces within its organizations. There needs to be a better way of information
flow between the domestic and international sides as well as the employees and the
administration. The spheres may be operating but they don't know what the other one is doing.
Good things may be happening but no one knows about it. In my profession which is healthcare,
if it isn't communicated, it didn't happen.

IV. Implementing CSR

A well-designed CSR implementation framework integrates economic, social and
environmental decision making throughout a firm, from the board of directors to front-line
officials and supply-chain partners and is therefore intimately connected with effective corporate
governance (Hohnen & Potts, 2007).
With New Balance, the first step was taken with regards to its CSR assessment of the
company. It is imperative to assess what is already being done and where the areas most needed
for improvement are. The timeline for this process is dependent on the needs of the company and
what they are trying to accomplish. The assessment itself requires a full commitment within the
corporation for cooperation and the right team asking the questions. Once the assessment is
complete, the timeline for implementation is again dependent on the goals of the company within
the community for process improvement. It is better to do it right than do it quickly
While this assessment is being done, relationships with senior staff, employees and other
stakeholders are important to be fostered for the sake of developing strategies. An effective CSR

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implementation includes using CSR ideals and methods to foster support for the plan. Once the
plan is in place then it is imperative to start with the actual implementation. This involves
creating a working group of all stakeholders to do a scan of CSR commitments; for development
and preparation of preliminary drafts. Once this is done, then it is time to actually implement by
developing an integrated CSR decision-making structure; that will prepare and introduce into
effect the CSR business plan. Its imperative at this stage to set measurable targets and identify
performance measures. Remember to continue to engage employees and others to whom CSR
commitments apply throughout the process to show that you are invested in the process. This can
be done through ongoing design and conduction of CSR training and working with the teams to
establish mechanisms for addressing problematic behavior for continues success. Again one of
the most important aspects of the overall success to create internal and external communication
plans. These include social media, web pages through a company sponsored intranet, maybe a
wiki page, discussion boards or advertisement and speeches. Agenda items at each an every
meeting is important. In our corporate structure, we use a daily Broadcast Massachusetts General
Hospital (MGH) email
At this point the measurement and verification of performance is done to assure that
changes being proposed are in fact happening. Verification is a form of measurement that can
take place in any number of ways: internal audits, industry (peer) and stakeholder reviews, and
professional third-party audits. It seems that third party reporting is really becoming the industry
standard as it can be tailored to the companies needs for CSR reporting. The importance of this
addresses how societal trends are affecting a firm and, in turn, how the firms operations are
affecting society. The reports demonstrate a companys motivation and willingness to position
itself in a broader context. Transparency seems to be an issue that New Balance and other shoe

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manufactures have. By sharing information with stakeholders, trust is gained and shows that the
information viewed is credible. The reporting itself can also be assured, with third parties
assessing the reports reliability.
Finally there are workgroups among employees, management and the other stakeholders
to assess performance review the reports and develop strategies to improve the process. At this
point we start at the beginning with the next idea or current one for the next run through.

V. Conclusion
There is an old adage that my grandfather used to say on a daily basis before he passed
on. It was that nothing good is ever easy and every uphill climb will make you a better person,
unless of course you fall down and hurt yourself. The point is that CSR is the backbone of what
makes companies thrive within the current culture. We have abused our environment and taken
advantage of cheap labor overseas, turning the other cheek for the bottom line. New Balance has
the right idea and the right tools for a framework to reverse these effects and integrate CSR into
its culture. Its efforts to enhance and support the domestic side of things that we as Americans
complain about so much as lacking created a breakdown in its message worldwide. With an
overlap of the three spheres to promote open communication and effective CSR strategies, New
Balance can continue to show the world the bar is set high on the international and domestic side
for growth, change, and solvency.

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References
Becker, R. (1998). Lean Manufacturing and the Toyota Production System. Retrieved July 5th,
2013 from http://www.sae.org/manufacturing/lean/column/leanjun01.htm
Blanchard, S. (2007). What is on the Mind of Great Companies?.
U.S. Business Review, 8(5), 10-11.
Boccalandro B., (April 2009). Mapping Success in Employee Volunteering: The Drivers for
Effectiveness in Employee Volunteering and Giving Programs and Fortune 500, Boston
College Center for Corporate Citizenship, Retrieved July 6th from http:// www.cnjg.org/
s_cnjg/bin.asp?CID=18173&DID=48999&DOC=FILE.PDF
Hohnen, P., & Potts, J. (2007). Corporate Social Responsibility an Implementation
Guide for

Business. International Institute for Sustainable Development

Retrieved July 6th from http://www.iisd.org/pdf/2007/csr_guide.pdf

The Natural Step (2013). The Four Systems Conditions. Retrieved June 18th, 2013,
from http://www.thenaturalstep.org
Tricker, A. (2009), Essentials for Board Directors: An A-Z Guide, Bloomberg Press,
New York
Veleva, V. (2010). New Balance: Developing an integrated CSR strategy. London, ON, CA: Ivey
Management Services.
Waddock, H. (2002) Leading Corporate Citizenship: The Three Spheres of Human Civilization.
Ohio: The McGraw-Hill Companies, Inc