II. How We Do Business

Product Design & Materials

Introduction

The “age of abundance” is over. Conspicuous consumption, wanton waste of natural resources, cheap energy – those days are long gone. In this new world, resources are scarce, and sustainability is a business imperative.

At NIKE, Inc., we’ve taken a hard look at what we need to do to thrive in this new world. One key insight: Focus on materials

The choice of materials for our products has environmental implications up and down our value chain – implications for water, land, energy and chemical use; greenhouse gas (GHG) emissions; wastewater discharge; and solid waste. We estimate that materials make up about 60 percent of the lifecycle environmental impacts of a pair of NIKE Brand shoes, whereas the manufacturing process accounts for about 25 percent. (The remainder is split between transport, retail, office facilities, packaging, use and disposal.1)

Consider leather, for example. We design for product performance, and leather has some great performance attributes. In particular, it’s strong and flexible. Since it’s a natural material, people might assume that it’s environmentally benign. But cows require a lot of land, feed and water. The processing of hides into leather uses large amounts of energy, water and chemicals. And leather cutting scrap is the second-largest waste stream in Nike’s footwear value chain (in part because leather comes in the irregular shape of a cow, not in a uniform-edged roll like fabric). Many synthetic leathers have lower lifecycle impacts than natural leather. However, we know that some customers prefer leather over other materials, so in addition to designing with synthetic leathers where appropriate, we are working to encourage the development of lower-impact natural leathers. 

To take an active role in defining the future of materials, our innovation agenda focuses on four areas:

  • What materials we use – including new choices for recycled and recyclable materials
  • Better processes – employing new ways of processing with less energy, water, chemicals or waste
  • Better choices – creating and applying indexes, restricted substance lists, policies and better ways of operating, and sharing them with vendors and suppliers
  • Bringing choices to scale – increasing the scale and availability of new material choices, including sharing intellectual property and enabling recycling of materials

The Materials We Use

We use a vast array of materials in Nike products – more than 16,000 in an average year. (As an example, a single pair of shoes, alone, uses an average of 30-plus materials.) These materials include everything from natural fibers such as cotton and wool to technical synthetic materials such as polyester, nylon, rubber, synthetic leather and ethylene vinyl acetate (EVA). As with leather, many of the natural materials we use have significantly higher environmental impacts than the synthetics.

Given the huge range of materials available, it’s easy to see the difficulty involved in making informed decisions about what materials to use to design a product. In the past decade, we have developed a method for evaluating the environmental impacts of materials and have used that method to assess the more than 80,000 materials that might be used in products across our brands. Our product design teams work to integrate this information in their material selection processes.

How We Drive More Sustainable Choices: Considered Design

The materials in just our NIKE Brand footwear and apparel products come from 900 different material vendors (i.e., supplier companies). We do not source directly with these vendors; they are independent companies that sell materials to our contract finished-goods manufacturers based on our design specifications. To drive sustainability improvements in materials, we focus on the part of the value chain over which we have the most control: product design.2

Decisions made in the product design phase determine the majority of a product’s environmental impacts. Nike teams design products with very detailed material specifications, and by providing those teams with the information they need to choose better materials from better vendors, we can improve the sustainability of our products.

To do this, in 2006 we introduced Considered Design. This design ethos – together with evaluation systems for footwear and apparel that we call the Considered Indexes – enables our product-creation teams to easily compare materials and make informed, sustainable choices during the design phase. The Considered Indexes represent years of research and analysis of materials and their environmental impacts (including energy use, GHG emissions, water use, land use, waste and chemical use) and consolidates that information with the major manufacturing environmental impacts (waste and solvents) into a decision-making tool that our teams can use to score their footwear and apparel designs in just minutes.

We provide our product creation teams with extensive training in how to use the Considered Indexes and on the importance of focusing on the sustainability of materials. The teams are given scoring targets for each season of products they design. In the current version of the Considered Indexes, materials make up 35 percent of the score for footwear and 60 percent of the score for apparel, so it’s clear to the design teams that focusing on materials is an effective way to meet their goals.

While the Considered Indexes have been used primarily by the NIKE Brand, our Affiliate brands have also begun introducing and using them to evaluate their product designs and have committed to adopt the indexes by the end of FY15. For example, Hurley International scored selected apparel designs in FY11.

Next-Generation Tools

We are now working to take the Considered Indexes to the next level. We have been on a multi-year journey to refine the footwear and apparel Considered Indexes based on feedback from product creation teams. Updates are expected to launch in FY13 (see box below). Indexes for equipment are also under development.

In addition, we have significantly upgraded the materials rating tool embedded in the indexes and are calling the new tool the Nike Materials Sustainability Index (Nike MSI). Development of the Nike MSI finished in FY11, and designers are beginning to use it in FY12 (see infographic).

One major improvement in the Nike MSI is that it rates material vendors in addition to materials themselves, providing strong incentives for the vendors to become more environmentally sustainable. We score material vendors on criteria such as whether they are complying with the Restricted Substance List (RSL) testing requirements and the Nike Water Program requirements; if they take part in materials certification processes, such as the Global Recycle Standard; and whether they have ISO 14001 certification or operate out of certified “green” buildings. Rating higher on these types of criteria will increase a vendor’s overall Nike MSI score.

We also hope the Nike MSI will drive vendors to develop more environmentally preferred materials, which will score higher on the index.

We have collaborated with and trained material vendors to familiarize them with the new Nike MSI. As of the end of FY11, we had trained approximately 500 vendors.

Measuring Our Performance

We set a goal of having all newly designed NIKE Brand footwear models designed at world headquarters3 score at the baseline level on the Considered Index – meaning they meet Nike’s baseline sustainability criteria – by the end of FY11. We very nearly met that goal. In the last two seasons of FY11, 97 percent of footwear met this standard (see table below).

For NIKE Brand apparel, we’re working to reach 100 percent baseline for new global apparel styles through FY15. For the Fall ’11 line, 26 percent of apparel achieved the baseline level, outpacing the ramp-up schedule to the 2015 goal. Hurley International also scored a selection of its apparel designs in FY11, with 40 percent reaching baseline or better.

We have also seen progress in specific equipment product areas, such as bags (where 24 percent scored baseline or better for Fall ’11) and inflatable balls.

So, what does this mean in terms of the sustainability of our products? The truth is, it’s a challenge to figure out how to measure that. Rather than working toward a certain percentage of, say, recycled content in a finished product, we have worked to improve our base materials, and we are now creating systems that allow us to better assess the impacts of the resulting products.

That said, we do already have some ways to measure our success. For example, over the past five years we have achieved a 19 percent reduction in waste related to the production of footwear uppers. Considered Design contributed to that gain, along with manufacturing process optimization and other best practices. That’s the same as not producing 15 million pairs of shoe uppers over that time period. Our use of Environmentally Preferred Materials (EPMs) – ones that have lower environmental impacts throughout their lifecycles in terms of chemistry, water, energy use and waste – provides another strong indicator of our progress.

Environmentally Preferred Materials

Over the past decade, we have worked to develop environmentally preferred alternatives to our most-used materials, such as cotton, polyester and rubber. We have steadily increased our use of EPMs over time, with a 77 percent increase in our use of EPMs in footwear from FY05 through FY09. We have a current average of eight EPMs per shoe out of an average of 32 total materials.

We assess our use of EPMs based on the volume of production for each product design. Because contract factories typically source materials directly from material vendors, we do not have direct insight into volume of materials purchased or everything that happens to materials before they become final products. Some variables include the amount of waste generated between purchase and actual manufacturing, although much of the waste in factories is recycled or otherwise diverted from landfills. Our ability to assess the total amount of material in footwear also is complicated because the systems do not currently track the volume or percentage by weight of that material for given styles, which change seasonally. Because of this, the Footwear Considered Index counts incidents of material use as a proxy.

The following are some of our most commonly used EPMs, along with data on our progress in increasing their use. (See the performance summary table for information on progress toward our overall EPM targets, and visit our Design Experience.)

  • Organic cotton: Organic cotton is grown and harvested without the use of synthetic chemical pesticides, fertilizers or defoliants. Nike was the world’s third-largest user of organic cotton in 2010, according to the Textile Exchange. The percentage of NIKE Brand cotton apparel that includes a minimum of 5 percent organic cotton has grown from 47 percent in FY04 to 90 percent in FY11. All told, we used more than 7 million kg of organic cotton in FY11 – approximately equivalent to the amount used in 15 million T-shirts, and representing 10 percent of our total cotton use that year, up from 2 percent in FY04. While we remain committed to increasing our use of organic cotton, we are also moving toward the use of cotton grown to standards set by the Better Cotton Initiative (BCI). We signed on to the BCI’s “Fast Track Program” in 2011 with the commitment to source 100 percent more sustainable cotton – Better Cotton or organic – by the end of FY20. The BCI establishes standards for the management of inputs such as pesticides, fertilizers and water; it also seeks to improve livelihoods and stability for farmers. Also, with the aim of making Better Cotton a truly mass-market commodity, the BCI intends for Better Cotton to be sold at the same market price as conventional cotton, making it more affordable for companies like Nike, and for consumers.
  • Recycled polyester: Recycled polyester textiles, which can be made from used beverage bottles, have lower energy use, less raw materials extraction and less waste compared to virgin polyester fiber. In FY11, we doubled our use of recycled polyester in apparel compared to FY10, the equivalent of removing more than 280 million plastic bottles from the waste stream. The number of NIKE Brand garments containing at least some recycled polyester fiber grew from 3,000 in FY04 to 31.5 million in FY11.
  • Environmentally preferred rubber: In the late 1990s, Nike researched environmentally preferred rubber and developed formulations suitable for performance footwear. We now have two environmentally preferred rubber base formulations, used in more than 30 finished rubber compounds that meet a range of sport performance requirements. (See the Chemistry section for details.) In FY11, 80 percent of NIKE Brand footwear designs used environmentally preferred rubber, up from 3 percent in 2004.
  • Leather: We have been working to ensure that the leather we source is as sustainable as possible. In 2006, we collaborated with tanneries and other footwear brands and retailers to establish the Leather Working Group (LWG). The LWG developed an environmental assessment protocol that was launched in 2007 and updated in 2012. The LWG protocol establishes standards for better environmental management of leather processing. We have made significant progress in sourcing from tanneries that have joined the LWG and certify their processing facilities to the LWG protocol. As of FY11, all active NIKE Brand leather supplier facilities achieved LWG certification, and we are making progress within our Affiliate brands.
  • Synthetic leather: There are many qualities of synthetic leather, but all are made with a textile substrate coated with a polymer. Typically, the polymer coating process requires the use of solvents. We’ve been working for more than a decade with synthetic leather suppliers to reduce and eliminate the use of solvents in the manufacturing process or switch to more environmentally preferred solvents. (See the Chemistry section for detail.) 

Sharing Our Tools with the Industry

We have made several of our scoring tools available to the industry in an effort to improve the sustainability of materials beyond our own value chain. For instance, we shared our Materials Analysis Tool with the Sustainable Apparel Coalition (SAC), which has used it in evaluating an approach to an industry-wide apparel index. (SAC estimates that its members represent approximately 30 percent of global apparel and footwear sales.) We have also shared the next generation of this tool – the Nike Materials Sustainability Index – with the SAC, which is now reviewing it as they build a public version scheduled to launch in 2012. Also, in 2010 we made available publicly, through the SAC, the Environmental Apparel Design Tool. This tool is a simplified version of our Considered Index, and can help any apparel designer quickly make design decisions that would reduce the environmental impact of their products.

These efforts are tied to our commitment to greater traceability and transparency. Our long-term vision is to have a widely adopted industry means of rating and reducing the environmental impact of products – a vision we share with the SAC. The complexity of this vision is recognized throughout our industry, which is why we’re working together.

Looking to the Future

Our Considered Design ethos – and the belief that design processes adopted broadly can be a key driver of systems change – has been a corner stone of our sustainability strategy. Going forward, we believe our next-generation indexes will accelerate progress in product and materials sustainability throughout our value chain – particularly the Nike MSI, which will encourage material vendors to become more sustainable themselves and to create more environmentally responsible materials. Our vision is that through these efforts, our material vendors will be our sustainable innovation partners in pushing new and better materials to scale.

At the same time, Nike’s R&D teams are working to accelerate the innovation of new materials and expand our palette of available EPMs across all NIKE, Inc. brands. For example, we have developed definitions for “good,” “better” and “best” EPMs for our strategic materials. But most of the “better” and “best” options remain theoretical at present – much more research must be done before they can be brought to market. Through innovations in these types of materials, we aim to create disruptive change in the industry and set new benchmarks for sustainability and performance.


Notes

1 - For apparel, the use phase includes considerable water and energy impacts due to washing and drying.
2 - While this section focuses on design, it’s important to note that we also train material vendors and collaborate to drive better performance.
3 - The majority of NIKE footwear (by volume) is designed at our world headquarters in Oregon.

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