III. Impact Areas

Energy & Climate

Introduction

Climate change is perhaps the ultimate system-wide challenge, in that the “system” is our entire planet. Indeed, climate change and the related issue of ever-increasing energy demand pose challenges to our business, our industry and society as a whole.

We believe that we need strong energy and climate policies to protect our supply chains and ensure market certainty, as well as to help create jobs, level the playing field among businesses, enhance economic development and ensure our global competitiveness as we move into the future. 

We recognize the recommendations of the majority of leading climate scientists that the global economy needs to see greenhouse gas emissions reduced 80 percent below 1990 levels by 2050. We recognize that there are a number of ways to reach this level of mitigation. And that includes us.

At NIKE, Inc., reducing our own contributions toward climate change is a primary aim of our sustainability strategy. But we know that doesn’t go far enough, so we also work to provide leadership in the business community (and beyond) toward climate stability.

To do this, we have been working for well over a decade to understand, track and decrease energy use and greenhouse gas (GHG) emissions across our value chain and to share what we’ve learned with others in industry. We also advocate for strong and effective climate-related legislation and regulation.

Our Approach

The energy use and GHG emissions under our direct control – i.e., our office buildings, distribution centers, retail stores and a portion of business travel – represent a small slice of the lifecycle carbon footprint of our products. We report1 our energy use and GHG emissions from those sources, as well as from finished-goods contract manufacturing facilities and inbound transportation.2 

There are 6 Greenhouse gases - SF6, CO2, CH4, NO2, HFCs, PFCs. We have phased out of SF6 and no longer use it. The majority of our measured emissions are CO2. Facilities and Footwear includes CH4 and NO2 and are rolled up into a reported CO2e calculation. For simplicity we speak to all of our measured emissions in tons of CO2 since it is the predominant unit of measurement. 

We are still working to identify the full lifecycle energy and GHG impacts of individual Nike products. So far, we understand that substantial amounts of energy are needed to create the materials that go into our products and to maintain them in the use phase (i.e., the washing and drying of apparel). We have developed a methodology to assess impacts across the value chain and are working to scale up this effort across our wide array of products. (For additional information on our progress, please see Targets & Performance chapter.)

Contract Manufacturers

Finished-goods footwear manufacturing is our largest measured source of GHG emissions. In FY08, we launched the Nike Energy and Carbon Program with contract footwear manufacturers to help reduce these emissions. In FY10, we expanded the program to include apparel and equipment manufacturing, and in FY11 we further expanded it to include select material vendors. Based on lean-systems thinking, this program trains, consults with and coaches our manufacturing partners in strategies for making short- and long-term energy and carbon-efficiency gains.  

The Nike Energy and Carbon Program has proven effective already. NIKE Brand contracted footwear factories’ absolute carbon dioxide (CO2) emissions were down 6 percent from FY08 through FY11 – despite a 20 percent increase in production.

Our new factory rating indexes (described in the Manufacturing and Materials sections) provide incentives for factories – as well as our material vendors – to implement the Energy and Carbon Program and show progress. Simply put, we hope that factories’ and vendors’ efforts to score higher on these indexes (and thus have a better opportunity to grow their relationships with Nike) will promote competition and innovation among them.

The new indexes will also provide incentives for our designers to make choices in the design phase that ultimately will reduce energy use in contract factories. For example, our analysis of energy use in footwear factories showed that the majority of energy is used to heat metal molds to create footwear components. Through their designs, our product designers dictate the number of molds used to create a product. The new Nike Footwear Sustainability Index, to be released in FY13, includes an energy score based on the use of molds. This thus provides a scoring incentive for designers to reduce design-driven energy use in factories. See our Design Experience online.

We are also helping contract manufacturers to embed sustainability – including energy efficiency – into the design and construction of new factories. We have a design workshop covering factory layout, energy-efficiency technologies, water-reclamation strategies, Leadership in Energy and Environmental Design (LEED) “green” building certification and more. About a dozen such workshops have been held. Already, a new factory has opened in Indonesia that is anticipated to be 50 percent more energy and carbon efficient than existing factories, earning a LEED Gold certification. The Nike Apparel Innovation and Training Center in Sri Lanka also earned this recognition. A factory in Vietnam is seeking LEED certification, and we are working with two other factory groups that may seek such certification in the future.

Inbound Transportation

While we have worked with our shipping partners to optimize transportation choices, this effort has not resulted in an absolute reduction in emissions. From our baseline year (FY03) through FY10, we achieved a 12 percent reduction in emissions per unit. In FY11, continued revenue growth coupled with factory capacity constraints required additional air freight to meet customer demand. This change resulted in FY11 emissions well above our target zone. We now know that in order to significantly reduce emissions from transportation, we need three things: better planning, better carbon accounting tools and a commitment from our key logistics partners to accelerate their adoption of cleaner vehicles and cleaner fuels. We are fully engaged with our strategic logistics partners and are addressing emissions on a per-unit basis on all three fronts.

We are also currently migrating to a new, more accurate carbon accounting tool for inbound product transportation and plan to extend the emissions accounting to outbound transportation in FY13. We believe that our old tool has been materially overstating our transportation-related emissions based on best-available averages at the time.

Progress and Performance

Our absolute energy use and CO2 emissions have risen and fallen in recent years in line with production levels. For example, our energy use was down in FY09 and FY10 due to the global recession and resultant decreases in production. In FY11, production (and energy use) was back up.

Descriptions of Assessed Energy and tCO2 Emissions Business Segments
Segment Comments Notes
Facilities [1,2] Better data accuracy applied in FY10 and FY11 For Nike-owned and -operated facilities, FY06 through FY09 energy use reporting is based on calendar years. For FY10 and FY11, we converted to fiscal year reporting. World Headquarters and all major Global Distribution Centers are included, along with U.S. Niketowns and Employee stores. All other retail locations are excluded at this time for consistency. Reported GHG is in tCO2e instead of tCO2.
Business Travel [1,3] No more use of carbon offsets; new methodology applied in FY09. See Goal 2 in the Performance against Past Targets table in the for a broader discussion of change in approach Includes all commercial air travel, majority of global car rentals and all owned aviation.
Inbound Transportation [3] Increased due to unexpected demand increase; moving to more accurate carbon accounting methodology.  Noted in previous years as “inbound logistics.” Covers shipment from finished goods factories to distribution centers globally.
Footwear Manufacturing [3] Energy-efficiency program and new methodology applied in FY09; expanding into apparel and materials vendors.  Finished good manufacturing, with 90 percent factory-reported primary data and 10 percent extrapolated. Reported GHG is in tCO2e instead of tCO2.
Apparel Manufacturing [3] Calculated using extrapolations based on lifecycle analysis data. This enhancement improved the data and our ability to extrapolate to other facilities with more accuracy. For perspective, the energy used across the entire cut-and-sew contract base for our production is estimated to be equivalent to a single footwear factory.
Equipment Manufacturing [3] Calculated using extrapolations based on lifecycle analysis data. 

Expanding Our Impact

Climate stabilization – i.e., reducing global emissions enough to avoid the most serious consequences of climate change – is a huge challenge for all sectors of society, but it also presents enormous opportunities to decouple economic activity from energy use and GHG emissions. We are working with like-minded companies and other institutions to encourage operational and public policy changes that help achieve climate stabilization.

In March 2011, for example, Nike sponsored a two-day, multi-stakeholder Climate & Energy Summit at our world headquarters in Oregon. The Summit brought together key participants in Nike’s sustainability efforts, peer companies, NGOs with climate expertise and academics to discuss Nike’s strategy, approach and opportunities, as well as the new GHG Accounting Protocol. All told, 78 individuals took part. The event enabled us to share the best practices we’ve discovered and hear feedback from others.

NIKE, Inc. is a founding member and currently holds a Steering Committee position on the Clean Cargo Working Group, an industry collaboration of carriers and shippers, which developed the standard for measuring and reporting emissions from ocean transportation.

In November 2008, we helped to establish the Business for Innovative Climate and Energy Policy (BICEP) as a project of Ceres. BICEP is an advocacy coalition of businesses committed to working with policy makers to pass meaningful energy and climate legislation that will enable a rapid transition to a low-carbon, 21st century economy. BICEP aims to create new jobs and stimulate economic growth while stabilizing our planet’s fragile climate. BICEP membership now includes 21 major brands, covering sectors from apparel and personal products to IT, sports and real estate. During the 2009-2011 time period, BICEP conducted multiple activities and outreach on important climate and energy policy. In particular, BICEP worked to advocate for comprehensive climate legislation, mobilized voices to defend the Clean Air Act and the U.S. Environmental Protection Agency, and organized in opposition to California Proposition 23, which would have undermined California’s groundbreaking climate bill (AB 32). For more information on BICEP, visit www.ceres.org/bicep.

In addition to our work with BICEP, we have worked with the Climate Group, and participated actively in business-related forums at the Copenhagen, Cancun and Durban United Nations Conference of the Parties.

Looking Ahead

We have been actively measuring and reducing our greenhouse gas footprint for some time. Many have noted our leadership in this area. While setting targets for continued reductions, we note that a lot of the “low-hanging fruit” is gone. We recently set new targets for energy use and CO2 emissions. Achieve 20 percent reduction in CO2 emissions per unit from FY11 levels through FY15 (in aggregate from assessed footprint in the built environment, logistics and footwear manufacturing). We also aim to achieve LEED certification in all new Nike retail stores.

We realize that some areas of our energy and carbon footprint have yet to be measured. The new World Resource Institute’s Scope 3 standard has expanded our understanding of our footprint and sets a framework for Nike to assess the complete lifecycle impacts of our products, packaging and operations across our full value chain. We have identified a number of these areas and have set targets to measure new baselines. For example, we are developing new baselines in our materials and manufacturing supply chain, packaging, waste, distribution centers, logistics and retail. For more on the scopes and our progress in these areas, please see additional information online. We look forward to seeing similar efforts across our industry.

Nike is continually upping its game. The Scope 3 standard responds to the effects of globalization and, viewed through the lens of sustainable innovation, sets the context for much of what we’re about to do including setting the pace for others to follow.


Notes

1 - In addition to sharing data and information in sustainability reports like this one, we report our energy use and GHG emissions annually to the Carbon Disclosure Project. See www.cdproject.net.
2 - In this section, “inbound transportation” refers to emissions from the transport of our products from manufacturing facilities to distribution centers. “Facilities” include Nike World Headquarters and all major NIKE, Inc. distribution centers, as well as U.S. Niketown stores and stores for employees. For consistency, other retail locations are not included.

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