I. Strategy

Our Sustainability Strategy

Introduction

Innovation has never been more important than it is today. It’s not just about improving the products we make. It’s about how we invent better ones, work with other companies and organizations to develop markets that value and encourage the creation of new sustainable processes and products, and improve lives by leveraging sustainability as the world’s greatest innovation opportunity.

NIKE, Inc. continues to deliver strong growth. What fuels our success and challenges us? Innovation. It’s our growth engine. It’s what our athletes, consumers and investors expect of us – and always have. It’s what we expect of ourselves. It enables new heights in performance and raises the bar for our industry and beyond.

Our world faces unprecedented change: constrained resources, population growth, heightened connectivity, increased demand. In a world of finite natural resources, our growth is enabled by infinite human resources: innovation and inspiration.

We understand that innovation through the lens of sustainability is fundamental to achieving our vision of growth that is not dependent upon constrained resources.

Indeed, creating and building business models that not only recognize and accommodate but thrive on the constraints of the natural world is the only way we can achieve growth in the present that won’t compromise our ability to grow and succeed for decades to come.

Of course, this transition is challenging for a company that sells physical products and has bold ambitions to provide those products to more people in more places worldwide. Transforming NIKE in this way will take time and is a long-term commitment. It touches every aspect of our business, from how we design and make our products to how we engage our employees and other businesses in our value chain. It begins with placing sustainability at the beginning of the innovation process.

We focus sustainable innovation on our biggest areas of opportunity and risk. We ask difficult questions of ourselves, our business model and our industry. We seek to understand the meta-trends and the signals – strong and weak – that add complexity and uncertainty to the future. Rather than working to avoid only known risk, we work to understand where risks and opportunities may emerge as well as what’s needed to address them and enable new forms of innovation to take hold. 

Based on extensive analysis of the impacts of our business across the value chain (see graph), we know that materials and manufacturing represent the greatest areas of impact on workers, communities and the environment, and the greatest potential for sustainable innovation.

While NIKE has focused on materials innovation for many years, most improvements across the industry have been incremental, not fundamental. The time is right for innovation that leads to a more sustainable palette of materials and chemistries (see Materials Matter). We have focused for many years on improving the working conditions of contract factory workers, increasing productivity, and reducing the environmental footprint of manufacturing, eventually bringing these threads together through implementation of lean manufacturing.

The future of lean for NIKE is to deliver profitable growth through sustainable manufacturing and sourcing. To do this, we are making lean NIKE, Inc.’s manufacturing standard. We require a commitment to lean as part of being accepted into our source base and a minimum commitment and progression for positive ratings by including it in our Sourcing and Manufacturing Sustainability Index, a component of our Manufacturing Index which assesses factories based on sustainability, cost, quality and on-time delivery. We are working with our supply chain to demonstrate the value of lean as a driver of sustained, improved business performance where workers are engaged and enabled to drive business success through continuous improvement. Some of the standard metrics we use to assess factory adoption include productivity, human resources management assessments, turnover, absenteeism, and factory implementation of and results from worker engagement and well-being surveys.

We are now driving a portfolio of advanced manufacturing initiatives that encompass changes to the traditional manufacturing business model that includes the role of workers in the production of better products and services. As described throughout this report, these two areas – materials and manufacturing – are central to our strategy.

Making Today Better while Designing The Future

Sustainable innovation takes many forms at NIKE. Incremental improvements play an important role in our efforts, since even small changes have large impacts across our portfolio. However, incremental changes on their own fall short of the progress needed. 

The scale of today’s challenges requires breakthrough innovations such as entirely new materials and ways to make products. As an example, in 2012 we introduced the first product made using the innovative new NIKE Flyknit technology and manufacturing process. The Flyknit Lunar 1+ running shoe, launched in 2013, reduces footwear waste in the upper by 80% on average compared with traditional production methods. To put a picture to that amount of waste, from its introduction in 2012 through FY13 the total combined material savings from just the uppers of the Flyknit Lunar 1+ compared to a traditional running shoe was 66,000kg – about the same as 12 adult male African elephants. Flyknit is a game changer and we believe there is significant potential ahead as Flyknit technology is implemented more broadly across our footwear offering. 

NIKE’s ability to deploy disruptive technologies like Flyknit at scale multiplies sustainability benefits. And as the game changes, we remain on the offense, always. 

In some cases, where we have direct influence, we use our management tools, expertise and other resources to take a leadership role. One example is the creation and proliferation of the NIKE Materials Sustainability Index (NIKE MSI). (See Materials Matter.

Other opportunities, such as improving working conditions within our global supply chain, are beyond the reach of any single organization and require collaboration with other supply chain participants. One way we are working on these changes is through our collaboration with the Fair Labor Association to develop the Sustainable Compliance Initiative. This initiative, still in development, provides tools to improve the quality, consistency and efficiency of efforts in our industry to comply with country laws/regulations, and company standards. 

For challenges such as building a market for sustainable materials, we need input from a broad range of stakeholders and experts. (See table.) 

After all, risk is interconnected so solutions must be collaborative. Companies that win in the future will be those capable of accessing new sources of knowledge, creativity and capital to accelerate sustainable innovation and bring it to scale. 

To further advance our efforts, at the start of FY14 we embedded our Sustainable Business & Innovation function into the company’s Innovation group (see details). This streamlines the sharing of sustainable innovation throughout the company and continues a nearly 20-year evolution to move corporate responsibility and sustainable innovation from the periphery of the organization to the core of the company. This move ensures that sustainability will be central to the questions asked and the solutions created in the innovation process. 


OUR VALUE CHAIN FOOTPRINT (FY13)

Our “big picture” data collection gives us a view of the overall impact of our business in key impact areas which helps us to focus our efforts on those areas where we have greater impact and understand the interaction between impacts from decisions at different stages of our value chain. This is a point-in-time reference. We continue to update information on the big picture and assess and improve on the more direct and concrete elements of a reportable footprint for year-on-year comparisons.

The purpose of this study was to determine the environmental footprint of NIKE, Inc. – including its products – across four impact areas: CO2e, energy, water and waste. We undertook this work by identifying and quantifying water and energy usage, CO2e emissions and waste created at each stage of the value chain. The impact of each individual product differs considerably, based on its profile, materials used, size and weight, method of manufacture, and location of production, use and disposal.

Understanding Our Impacts, Risks and Opportunities

The journey to integrate sustainability deep into NIKE has required us to show how it supports our company strategy, creates value for stakeholders, mitigates risk and makes our business more resilient. 

To do this we must understand our business and its impacts, so we can make informed decisions that will bring about the greatest change. We also must consider the connectivity across all areas, as a decision in one area may have unintended consequences or enhancements in another. We take a broad view, as we recognize the impacts from our directly controlled operations are a small part of the total system. 

An important factor is our outsourced manufacturing model, which is common across the apparel and footwear industries, as well as many others. The model brings complexities related to lack of direct control over factories that may serve multiple brands and incomplete information about performance and impacts. Nonetheless, our vast and interconnected value chain also offers great opportunities to raise expectations and standards across the sector, in areas such as labor practices and environmental protection, to increase our overall positive impact. This approach has been central to our relationships with contract manufacturers and other brands for many years. 

In 2013, we furthered our study of our environmental footprint across our entire value chain – from raw materials production through consumer disposal of products after use. This is a complex analysis, due to the variation in the availability and quality of data, the need to make assumptions and extrapolations, and the dynamic nature of this system and its many participants. Our knowledge in this area continues to grow. 

The analysis – which covers energy use, water consumption, waste generation and greenhouse gas (GHG) emissions – confirmed what we have long believed about the importance of the design process and materials, and how products are made. These issues are thus the main focus of our programs and this report. 

The footprint graphic (see graph) only tells part of the story. We also made discoveries within these categories, such as the significant effect of cotton and leather on our overall impacts. In the raw materials stage of the value chain, growing cotton represents 87% of water use, and it accounts for more than 63% of water use across our entire value chain. Leather production represents 56% of GHG emissions during the raw materials stage – mostly from methane as a result of cattle’s digestive processes – and more than 18% of our total greenhouse gas footprint. These types of insights are valuable as we develop and evolve our programs moving forward. They compel us to look well beyond the surface levels of the systems we touch and deep into our value chain. This perspective reinforces that our span is much bigger and more complex than one might imagine, stretching even into the agricultural fields where the raw materials for our products are grown and raised, and where some of our biggest system impacts occur. 

By nature, footprinting is backward-looking. Setting our sustainability strategy also requires looking forward, to navigate in the direction we believe the world is heading. 

For many years we’ve focused on meta-trends – “strong signals” – pointing to the sustainability-related issues that pose the greatest business risks or opportunities. These meta-trends include issues such as water scarcity, materials cost inflation, climate change, rising labor costs as well as increased transparency and heightened levels of collaboration.  

We also listen closely to “emerging signals.” Some of the emerging signals we’ve identified – including micro-plastics in the environment and increasing and changing environmental policies – are broader than our company or industry. Issues such as these have the potential to become even more relevant to NIKE in the future. 

Within every sustainability challenge also lies a business opportunity. For example, to better manage constrained resources, we develop and use more recycled and more sustainable materials, and leaner manufacturing processes. To decrease our exposure to labor cost inflation and capacity constraints, we increase the efficiency of our supply chain. We have developed superior materials such as water-based adhesives through green chemistry, which also delivers health and safety benefits to workers. These types of innovations have already delivered substantial benefits to our business, and we expect them to increase in the coming years.


SUSTAINABILITY CHALLENGES AND OPPORTUNITIES
How NIKE, Inc. views, anticipates and responds to emerging signals alongside global trends, risks and opportunities, and business challenges to inform its plans


EMERGING SIGNALS

We also use scenario planning to sharpen our understanding of the potential impact of sustainability issues on our business and to inform decision making. Through scenario planning, we can assess the potential impacts that external issues such as climate change or resource scarcity might have on NIKE. We can model the rippling effect that a percentage change in our use of a more sustainable material might have across the value chain, or the impact of changes to our sourcing base as we fully implement our sustainability indices. We can also analyze how initiatives, such as those that improve energy or water efficiency, or decrease waste, could impact the company’s competitiveness. 

Understanding these interconnections helps us prepare for a range of possible futures and improves our ability to develop innovative solutions to address emerging risks before they become more challenging to manage. 

For example, in 2013 we developed a scenario tool to explore the impacts that climate change, and related water scarcity, could have on cotton, one of our main product inputs. We developed a Business and Environmental Scenario Tool (see below) which gives us the ability to assess overall and intersecting impacts from changes to different scenarios. 

We work with stakeholders and experts from outside the company to validate this work, to develop a collective understanding of the systemic issues we face and to identify shared solutions. 

CASE STUDY: BEST (BUSINESS AND ENVIRONMENTAL SCENARIO TOOL)

BEST provides a 10-year quantified view of environmental and financial impacts from changes to scenarios such as materials used or changes in sourcing. 

Before developing BEST, we:
  • Calculated separately the impact that changes to the business had on each criterion (financial, water, energy, CO2, waste)
  • Took extended time to conduct the environmental analyses
  • Had a limited view due to the focus on and analysis of one criterion at a time, therefore we made decisions based only on one criterion or continued with potentially conflicting analyses across different criteria
  • Often excluded interactions between criteria
  • Usually focused only on Tier 1 suppliers – those with whom we directly contract for goods or services – though a considerable portion of the impact occurs earlier in the value chain
  • Saw each group within NIKE focus on the criteria that were important to them 
With BEST we can:
  • Input one scenario and receive data on simultaneous impacts to five criteria (financial, water, energy, CO2, waste)
  • Complete the analysis quickly, with a turnaround in minutes, rather than weeks
  • Take a holistic view of all criteria and compare the return on investment for all criteria at the same time
  • Capture how changes to one criterion impacts others
  • Take into account a more complete view of the supply chain
  • Provide users with a view of the entire business so they can see how their decisions impact other business areas 
We now use BEST to assess various impacts and decisions. Some examples include:
  • Impacts to costs, water usage and energy usage if we use less cotton and more polyester
  • Changes to the amount of materials purchased, energy used and waste generated if we increase pattern efficiency by certain percentages

Nike’s Sustainability Strategic Framework

NIKE’s Sustainable Business and Innovation team focuses on enabling the company to thrive in a sustainable future, and provides the insights, tools and expertise to hardwire sustainable decision making into global business operations.

Given the trends and analysis described earlier, NIKE drives sustainable business innovation in three strategic ways:

  1. Deliver a portfolio of sustainable products and services that enhance athlete performance
  2. Prototype and scale sustainable sourcing and manufacturing models
  3. Explore new sources of revenue not based on constrained resources

These pillars are underpinned by skills and capabilities that enable their success. The sections below describe these pillars and how they work together to drive the disruptive innovations that will shape our future.

It’s important to note that NIKE also continues to focus on other important aspects of corporate responsibility including compliance, stakeholder management, employment practices and community investment. These play an important role in our overall performance, and our programs and progress in these areas are described later in this report.


SUSTAINABILITY STRATEGIC FRAMEWORK

Materials Matter

NIKE’s main environmental impacts, by far, are realized in the products we sell and the materials used to make them. 

The materials we choose have impacts that ripple across every stage of the value chain. The approximately 900 million units produced annually through our supply chain are made from more than 16,000 materials selected from more than 1,500 different vendors, chosen from a staggering 80,000 material options. 

From our analysis, the production of these materials – from growing cotton and harvesting rubber, to raising livestock for leather and extracting oil for polyester – represents 21% of the total energy use throughout our value chain, 73% of the water consumption and 33% of the greenhouse gas emissions. When you include materials processing activities, such as the dyeing and finishing of fabrics, those percentages increase to 54% of total energy use, 83% of water consumption and 56% of GHG emissions. 


THE EVOLUTION OF OUR PRODUCT SUSTAINABILITY INDEXES

Reducing materials-related impacts is among the strongest levers we have for improving our overall environmental performance. However, it’s challenging to reach far upstream into our value chain and influence the behavior of companies and individuals over which we have no direct impact. Therefore, we focus on product design, an area we do control. Decisions we make in the design phase determine the majority of a product’s environmental impacts, and can have exponential effects up and down our value chain. These impacts are embedded in the creation of materials, from how much they weigh to transport, to how much water and energy is used in washing them, to what is left when a product’s useful life is over. However, our materials decisions are limited by what materials are available and their expected performance attributes. So, we also seek to understand and engage others who play critical roles in the process of developing, creating and bringing materials to market. 

Over the past several years, we have created scoring tools and indices that give our product creation teams the information they need to make better decisions about materials based on sustainability as well as performance characteristics. Two key improvements help a design’s score: reducing waste by improving pattern efficiency, and the choice of more sustainable options (e.g., recycled polyester rather than virgin polyester). We tested and rolled out our updated footwear and apparel indices in FY12; both include the NIKE Materials Sustainability Index (NIKE MSI). The NIKE MSI measures energy and water use, waste generation and chemical use in materials. We have communicated with and trained our material vendors to help them understand the NIKE MSI and how they can improve their materials’ scores by providing more sustainable options, which makes them more attractive to work with as a source for materials. 

Collaborating with others is key to fueling disruptive innovation. Our strategy includes strategic partnerships and making selective investments in breakthrough technologies in the materials space. In 2012, for instance, we made a minority investment in DyeCoo Textile Systems B.V., a Netherlands-based company that has developed the first commercially available waterless textile dyeing machines. By using recycled carbon dioxide, DyeCoo’s technology eliminates the use of water in the dyeing process. This holds great promise for NIKE, since dyeing and finishing represents about 5% of water use across the value chain. In 2013, we worked with Far Eastern New Century Corp. and DyeCoo to launch the “dye house of the future” in Taiwan to optimize the dyeing process. This new process, which we call ColorDry, provides the most consistent color results to date and eliminates water and process chemicals from the dyeing process. 

Decreasing materials use is also core to our approach. NIKE Flyknit technology revolutionizes the age-old craft of shoemaking by knitting the shoe upper with individual strands of yarn, which drastically reduces manufacturing waste and materials compared to traditional cut-and-sew methods while providing strength and support where it’s needed most. The Flyknit Racer’s laces are 30% recycled polyester, the upper is colored with water-based inks, and the sock liner is made from recycled materials. We also use 100% water-based adhesives in the midsole and outsole to reduce the use of volatile organic compounds. We’re only just beginning to see the potential for Flyknit and we plan to increase use of this technology in the coming years. 

To continue to drive innovations like these, we have a Materials Science Innovation function that explores the next generation of materials – for instance, non-petroleum-based, low environmental impact feedstocks for apparel fabrics. This function also considers how innovations in other fields – such as medicine and biomechanical engineering – might transfer to our industry. 

All of these efforts build on work we have done for years to identify and develop environmentally preferred alternatives to our most-used materials, such as cotton, polyester, leather and rubber. For example, we helped to establish the Leather Working Group, which has created standards for better environmental management of leather processing, and are Pioneer members of the Better Cotton Initiative. 

New Methods of Manufacturing

Manufacturing is another major part of the equation. We estimate that more than 2.5 million people work at various stages throughout our supply chain, including more than 1 million in the factories we contract with directly. This makes manufacturing our biggest area of impact on people. That’s not a new insight, and we have been working for years to help raise the bar for working conditions, not only in our own supply base but across our industry. We have done this by developing and communicating our Code of Conduct and Code Leadership Standards, and by assessing suppliers’ compliance with our requirements and legal standards. We have also worked with our suppliers to help them develop their human resources management capacity so they can proactively manage and engage their workforce. 

These efforts led to an insight that has been critical in our work with factories: that lean manufacturing benefits factory owners and workers, increases productivity, reduces environmental impacts, enhances our brand, and that workers are key to the successful implementation of lean. 

This integrated approach is reflected in how we assess performance. Factories are rated using our Sourcing & Manufacturing Sustainability Index (SMSI), a component of our Manufacturing Index, which puts sustainability considerations on equal footing with quality, cost, delivery, and is one tool we use to select factories with which we do business. This approach serves as a way to identify factories to engage with more collaboratively and to which we direct more attention, resources and business. The SMSI incorporates results of other scoring tools that measure progress in worker health and safety; labor compliance; human resources management; lean implementation; energy and carbon management and other environmental sustainability issues. 

We are now working to implement an enhanced vision of lean manufacturing as part of a portfolio of initiatives we’re calling the “manufacturing revolution.” This transformation is a response to significant trends in our supply chain, including advancements in technology and engineering, and ongoing volatility in labor and materials pricing. It aims to redefine both how our products are made and what they are made of. It includes innovations in advanced technology, as well as manufacturing excellence and modernization. 

As we look ahead to a new era of manufacturing, we also see opportunities to create a more sustainable, stable supplier base. To implement the changes we’re anticipating, the workers employed by our suppliers will need to learn and use multiple skills. During 2013, we conducted two pilot studies in Indonesia that tested both the technology and human aspects of lean manufacturing implementation. The pilots measured changes to productivity, cost and worker engagement, and found significant improvements in a number of areas when lean manufacturing lines were compared to control lines. We are collaborating with other organizations and contract factories to encourage them to look at additional opportunities to improve the lives of workers outside the factories. 

Beyond Products

In 2009, we founded our Sustainable Business and Innovation Lab to focus on materials and manufacturing innovation partnerships as well as revenue sources that are decoupled from constrained resources, including through digital services. Among other initiatives, the Lab helped to fuel our vision to extend NIKE’s leadership in athletic footwear, apparel and equipment into the digital realm of fitness, coaching and training services. 

One example of NIKE's efforts that focuses on services is the NIKE+ digital platform that enables athletes to track and analyze movement – for example, to share their workouts and calories burned and personal targets and performance. NIKE+ has grown into a full ecosystem, delivered with different apps and services, with more than 18 million members spanning the globe at the end of FY13. Collectively, members have run more than 1 billion miles, the equivalent of 40,000 times around the earth at the equator. This expanding business supports athletes’ health and wellness, opening additional opportunities to NIKE. 

In early 2013, we launched the first NIKE+ Accelerator, which hosted 10 companies for a three-month, immersive, mentor-driven startup program. Leveraging the success of NIKE+, participants worked to create products and services to inspire athletes across a broad range of activity and health goals, including training, coaching, gaming, data visualization and “quantified self.” Participating companies pitched their business concepts to more than 1,000 investors, potential strategic partners and prospective collaborators. Through the program, we received more than 1,000 requests for access to the NIKE+ development platform. 

Strengthening Our Core

For more than 15 years, we have been on a journey of sustainability integration. This task is essential. To achieve ongoing, profitable growth, sustainability considerations must be deeply embedded throughout the company. At NIKE, sustainability is not just about vision and values. It depends equally on having the systems, structures, people, responsibilities and accountabilities in place to ensure our commitments are reflected in our day-to-day business activities.

During the last two years, we have advanced business integration on several fronts. Some changes relate to refining our internal organizational structures to more effectively drive sustainable innovation. These include the following: 

  • The Sustainable Business & Innovation (SB&I) team focuses on a broad range of areas including finding and deploying new chemistries, training supplier factories on energy and water efficiency programs, partnering with product teams to promote the use of more sustainable materials and designs, developing scenario planning tools, gathering information about social and environmental performance within NIKE and its supply chain, and evaluating and reporting that performance. The team also drives several of our external engagement activities, collective action efforts and open innovation agendas to accelerate and scale game-changing solutions. Importantly, SB&I became a part of NIKE’s Innovation organization in 2013, streamlining the process of scaling sustainability innovation throughout the company. 
  • The Materials Science Innovation function, which grew out of the sustainable product research and design function within SB&I and focuses on sustainable materials, now reports into NIKE’s product innovation team. It includes a dedicated sustainable product R&D team, making it even better aligned with broader apparel and footwear materials research. 
  • The Sustainable Manufacturing Excellence team is formally aligned to both SB&I and NIKE’s sourcing functions. This enables a strategic outlook for the future of manufacturing and a holistic view of the impacts and capacity-building work done with factories as well as joint planning for future growth. 
  • A new product sustainability team works directly with NIKE’s product groups to drive sustainable innovation deeper into the company’s product creation processes and pipeline. 

Other recent changes reflect the deeper integration of several important processes and activities throughout the company. For example: 

  • Our NIKE Apparel Sustainability Index and NIKE Footwear Sustainability Index have become part of the standard tools used by our global product creation teams. This ensures that design decisions take environmental factors into account. 
  • We integrated our Manufacturing Index which includes the Sourcing & Manufacturing Sustainability Index into our sourcing selection and evaluation criteria. The Index assesses suppliers on relevant dimensions related to lean manufacturing, such as on-time delivery and defect rate. As a result, sustainability is a factor in all supplier ratings. 
  • We created and launched a business simulation experience – NIKE 2021 – a half-day strategy immersion in which participants adopt roles as chief executive, chief financial officer, and vice presidents in supply chain, product, brand, innovation and sustainability. Together they compete against other teams to plot strategic investments and decisions that consider impacts to cost of materials and manufacturing, product availability, revenue and net income. Nearly 2,000 employees from senior executives to teams in product development, finance, supply chain and geographies have participated. NIKE continues to evolve the experience and deliver it to more teams. 
  • We have publicly discussed and published our perspective on the risks of climate change and sustainability-related issues in broader forums. This illustrates the increasing importance of sustainability issues to the company and our stakeholders. 

During 2013, NIKE also aligned community engagement activities more closely with our businesses and geographies. This embeds planning and performance tracking into the appropriate business cycles and increases accountability. 

As we integrate sustainability even more deeply throughout the company, the role of the SB&I team continues to evolve. Using a unique set of capabilities and expertise, the team focuses on activities that enable more sustainable decision making companywide that often involves a longer time horizon than the typical business planning cycle. This includes: 

  • Providing a holistic perspective on sustainability opportunities and risks 
  • Working in partnership with business functions to set and deliver against companywide sustainable innovation priorities 
  • Delivering analysis and guidance on sustainability-related investments 
  • Building a center of excellence in sustainability data capture, analysis and disclosure 
  • Developing tools and capabilities such as environmental footprinting (see graph), scenario planning (see case study) and systems thinking (see table)
  • Facilitating companywide sustainability target setting, performance measurement and reporting (both internal and external) 

In addition to having the right structures in place, integration is also about engagement. Everyone at NIKE has an important role to play in making the company sustainable and we encourage leaders and employees to grasp the issues and opportunities ahead, consider the sustainability implications of their decisions, and be accountable for their actions. 

To help educate internal audiences, and to improve our ability to measure sustainability integration across key business levers, in FY13 we further developed a two-part Sustainable Business Roadmap, consisting of a framework and an assessment. The framework describes what sustainability integration looks like across the areas of strategy, structure, operations and employees. It identifies levers that enable integration within those areas, such as leadership commitment, resourcing and education. The framework also describes tactics – such as establishing goals, budgeting for sustainability efforts as a part of standard business processes, and embedding sustainability learning opportunities in employee development – that provide context and a means to measure integration. Business teams will use the assessment to identify current levels of integration and opportunities to drive business performance within their functional areas. 

This Roadmap not only provides us a better understanding of where we are today in terms of integration, but it will also guide us in building the organizational capabilities we will need to realize our sustainability objectives. The tool will be piloted in 2014 and is expected to inform further iterations of our sustainability integration strategy. 

Integrating sustainability enterprise-wide is challenging, and remains a work in progress. We have learned a great deal in the more than 15 years we have been working toward a more sustainable supply chain and business. To share our experience in this area with others, in 2013 we engaged with professors at Harvard Business School who produced Governance and Sustainability at NIKE – a case study about our journey. This publication, which is being taught at business schools, describes how we transformed from a company that reacted to external pressures while working to minimize reputation risks to one that views sustainability as among our leading innovation opportunities. Another case study, published by Stanford Graduate School of Business – NIKE: Sustainability and Labor Practices 1998-2013 – highlights our long-term journey of sustainability and labor. 


IDENTIFYING AND DEVELOPING SYSTEM-CHANGE INITIATIVES
System Barrier Description Strategy Nike Actions
Lack of common standards Without a shared understanding of materials-related impacts, designers cannot make efficient decisions. Establish a universal standard through industry collaboration, leveraging our extensive experience in this area. In 2012, to enable alignment on a common language and set of definitions related to materials footprinting, we opened the NIKE Materials Sustainability Index (NIKE MSI) for public use. In 2013, the NIKE MSI became a core part of the cross-industry Sustainable Apparel Coalition’s Higg Index.
Continually changing information about materials Information about the impacts of more than 16,000 materials used in our industry is continually evolving. Create an open technology platform that enables experts worldwide to contribute and share information related to materials. In 2011, we engaged external data experts to help us envision the future of information sharing and tools innovation in this space. We created a mechanism to allow experts and brands worldwide to contribute to and benefit from a shared, current dataset of materials information.
Lack of access to information Designers and other decision makers cannot make informed, sustainable choices about materials unless related information is easily accessible Develop tools for non-technical users to integrate sound information about materials into their decisions. In 2013, NIKE collaborated with our design networks including, the London College of Fashion through a sponsored studio project to test the prototype app which became MAKING in 2013. The app helps designers and product creators make informed decisions about the environmental impacts of the materials they choose. Leveraging information in the NIKE MSI, MAKING ranks materials used in apparel based on four environmental impact areas: water, chemistry, energy and waste. Through direct comparisons, designers can quickly see how material choices stack up. We envision that this innovation will help to catalyze other advances in this area.
Insufficient focus on materials innovation While we have focused significantly on materials design and use in past years, our journey to find, create and innovate new materials has really just begun. Engage system participants in a process of collective transformation. In April 2013, NIKE hosted the LAUNCH 2020 Summit. Along with NASA, the US Agency for International Development, and the US Department of State, we convened 150 materials specialists, designers, academics, manufacturers, entrepreneurs and NGOs to catalyze action around the sustainability of materials and how they are made. This included introducing the LAUNCH 2020 Challenge Statement, an open call for innovation to transform the system of producing fabrics.

Sustainability is a Team Sport

At NIKE, we increasingly see sustainability as a source of competitive advantage and business value. However, we also see a bigger picture. Ultimately, our collective future depends on solving problems that are much larger than any individual company or organization can tackle on its own – issues such as climate change, resource scarcity and substandard working conditions. 

We recognize we must do our part to help transform entire systems rather than just addressing our role within the parts of the systems we touch. There is no substitute for the collective action this requires. Significant collaboration is necessary to organize the diverse capabilities, resources, insights and political will needed to develop solutions and bring them to scale. In sustainability, we win or lose together. 

For systems to change, we must first understand them and our role in them, and other participants must improve their understanding as well. Two years ago we launched a more formal approach to systems innovation within SB&I. Drawing on systems theory and capitalizing on the insights and involvement of experts within and outside the company, we have developed an approach to mapping complex systems, building cross-sector networks, mobilizing resources and fueling open innovation. This helps us to understand how a system works – the key players, relationships, transactions, points of leverage, barriers and opportunities – and to create a shared vision for change. It also supports our efforts to engage with the broader network of stakeholders. 

Our understanding in this area continues to increase, as we gain insights into how we can most effectively create change depending on our role in a specific system. Our ability depends on our role, the type of business relationship, regulations and many other factors. 

We are working to apply systems thinking to materials and manufacturing. We have collaborated for many years with other companies in our industry through organizations such as the Sustainable Apparel Coalition, with multistakeholder groups including the Fair Labor Association, and with organizations such as the International Labor Organization and the International Finance Corporation. Our efforts have been aimed at raising the bar for performance across our industry, which requires actors across the value chain to collaborate, share information and innovate more effective, efficient and equitable ways of doing business. Based on this analysis, we developed strategies to address the main barriers to progress in this complex system, and launched initiatives to tackle them. 

We have also worked to positively change systems in other areas of need: 

  • Created by the Nike Foundation in collaboration with partners, and informed by insights from thousands of hours of research about the impacts of girls living in extreme poverty around the world, the Girl Effect leverages the unique potential of adolescent girls and provides them with resources to end poverty for themselves, their families, their communities, their countries and the world. 
  • In 2012, with more than 70 organizations from government, civil society and companies, we launched Designed to Move, a study on the effects of physical inactivity in childhood and the need to build physical activity into the daily life of children. The report articulated the decline in physical activity and economic costs of that decline. With a coalition approach we provided research and defined a physical activity agenda and framework for action, including creating early positive experiences for children and integrating physical activity into everyday life.  

Helping transform entire systems is complex, difficult and requires long-term investment and effort. We’re committed to the process – it’s essential to achieving our vision of a sustainable business. We look forward to learning more in the coming years. 

Notes

Hazardous chemicals are those that show intrinsically hazardous properties (persistent, bio-accumulative and toxic; very persistent and very bio-accumulative; carcinogenic, mutagenic and toxic for reproduction; endocrine disruptors or equivalent concern), not just those that have been regulated or restricted in other regions.

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