I. Strategy

Targets & Performance

Introduction

We are clear on our ultimate destination: To decouple profitable growth from constrained resources. 

Our vision of the future is one in which we see a world in transition from an industrial economy to a sustainable economy – where renewable sources of energy flourish, water is borrowed responsibly and returned clean to communities, waste is a new asset, workers across the industry are consistently valued and environmental impact will be a critical metric of success.

This is a future that will be good for business, economies and communities, and citizens, workers and consumers. And we are determined to set Nike up to lead and thrive, in this environment.

In order to get there, we will need to move from incremental to disruptive innovation. Our aim of decoupling growth from constrained resources will require change at a systems-wide level. No single company can eliminate toxic chemicals from vast supply chains, nor improve living conditions of workers in low-income communities, nor eliminate waste from consumption. We need step change in collaboration to drive collective understanding of the systemic issues we face and agreement on the solutions. Competitive advantage should be built on a sustainable playing field where getting better faster than the competition raises the bar for everyone. That will require relentless focus on systems innovation and collaboration across government, industry, social influencers and even consumers. It also will require putting sustainability at the heart of innovation.

We operate in a globally competitive industry, where markets change, and where local, regional and national policies play into the impacts we have and the way we can address them. In some cases, the kind of large-scale systemic changes needed to make a lasting positive impact in the environment and society – while retaining vibrant communities and businesses – requires movement on all fronts: from government, industry, businesses, even consumers. It sometimes requires agreeing with and moving toward common approaches and definitions. One example is in our approach to sourcing and assessing factory performance by including the expectation of progress toward the Fair Labor Association’s definition of “fair wages” into what we consider compliance. But even that definition is tied to policies and realities such as minimum wage, inflation, community vitality and other things beyond our control. It speaks to the intersection – on all fronts – of efforts needed to bring about a joint vision of a better world.

But vision alone is not enough. Vision is long term. Getting there demands action. We need steps to get there – a plan. We need milestones along the way. We take our environmental and our social targets seriously. In the same way a company’s business targets are based on the planned, the real, the owned and the predicted, we worked to develop targets that organize our efforts, drive our performance and help us to take account of what’s important and how we’re managing.

We know where we’ve been, and we know where we want to go. And we know that there is substantial work ahead. We continue to set the bar higher for ourselves and across our value chain.

We have evaluated our value chain and our impacts, assessed the coming scenarios and challenges, taken account of our progress against past performance, and worked across our business to set targets embedded deeply into the way we operate.

Many of the sustainability issues we seek to solve are still undergoing innovation. Others are firmly in place and moving forward with needed changes.

We deliver on our vision in two ways:

  • Make today better by taking account of our impacts and redefining business performance for the better
  • Design the future by unleashing innovation, embedding sustainability into our approaches to product and manufacturing, and solving challenges in business sustainability for the world

Make Today Better

We can always do better by constantly refining the way we define our performance with greater focus and more attention. We are working to manage our impacts not only in our own business but in its reach across our value chain.

At Nike, we refer to this type of continuous improvement as seeking our “personal best.” It’s much like the one-mile race, with world records bested by fractions of a second over years or decades without a major breakthrough but ultimately resulting in significant cumulative change.

We recognize the bar can always be higher and that sometimes it seems just out of reach. We’re constantly asking ourselves what company co-founder and legendary track coach Bill Bowerman asked the company’s first designers: “Is that the best we can do?”

We have looked across our value chain, at the areas of greatest impact, and where we have solid information to assess, understand and drive performance. In these areas we have defined targets we’re working toward.

Design The Future

We see innovation as an engine, an accelerator, a disruptor, to get us to that future state. Great innovation has the ability to make the status quo obsolete. Like Dick Fosbury who went backward over the bar and changed the high jump forever. Nourishing innovation is both art and science. It demands creativity, patience and high tolerance for failure. It also demands dedication and rigor.

We need scalable system change to transform our business, the industry and markets. These are the breakthroughs, some visible on the horizon and some unseen, that will help us leap forward and turn assumptions about the way we think and operate on their heads.

These breakthrough opportunities are less defined than reliant on the willingness to set the path as we go and to fail along the way. We are sharing our aims and ambitions in this space to bring our stakeholders along in the journey. We have set our vision for what changes are needed in innovation, with our people and culture and in the way we work. We also have two areas of innovation – in product and in manufacturing – that build on our past achievements and on processes we have put in place to drive change.

Our aims, targets and commitments, outlined below, take into account what we’ve learned during the last five years in working toward our past targets. We achieved some, missed others and learned a lot in the process (see Performance Against Past Targets). Now we have a laser focus on what is most relevant to our business and our various stakeholders, and our targets reflect a deeper understanding of our impacts on the world and the integration of sustainability work across our business.

We’ve structured our plan in three levels:

  • Aims show what we aspire to do, even if we can’t measure progress against these today. In this space we define our desire to find a solution and share our strategy and approach.
  • Targets specify our focus and determination to relentlessly improve our performance. We’ve focused targets based on materiality, our ability to measure and what role we can take in bringing about change.
  • Commitments are the promises we make that show where and how we focus our energy and effort by providing insight into how we intend to achieve our targets or address other relevant issues and set the structure for our ongoing reporting. 

Together, these plan elements reflect our work, recognizing as well the great opportunity of partnering across brands and with other sectors to achieve deep and lasting change. We know that our success depends on others, and theirs depends on us.

We continue raising the bar and reaching new heights in innovation and performance, enabling long-term, sustainable growth of our business, and, in turn, a better world.

Raising The Bar

ENERGY & CLIMATE

AIM: Drive innovation, collaboration and public policy advocacy to deliver carbon reductions across the value chain

TARGET: Achieve 20% reduction in CO2 emissions per unit* from FY11 levels through FY15 (in aggregate from assessed footprint in the built environment, logistics and footwear manufacturing)

*Measuring energy and emissions based on footwear

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.

Since 1997 we have made commitments to reducing CO2 across our value chain. Our largest single effort was to eliminate our use of SF6 in air bags. By 2006 we had completely eliminated the use of this gas and others, resulting in a dramatic 80% reduction in our overall CO2 footprint. Of the remaining assessed CO2 footprint, 64% sits in manufacturing and 29% in inbound transportation. We own neither of these parts of our value chain, which makes change a greater challenge and necessitates partnership and careful selection of suppliers.

When we account for growth, and consider emissions per unit of product, we have set ourselves a 20% reduction target. What does this really mean? It means we will need to find ways to scale energy efficiency across a vast, extended, fragmented contracted supply chain. It means we need to see renewable energy sources available, at cost parity, across regions that host supply chains. It means we will need to build renewable energy into our retail and distribution centers, design all new buildings to LEED standards and pursue new concepts in warehousing.

We are also investigating ways in which new technology can dramatically reduce CO2. They’re innovations and not in the immediate pipeline, so not factored into our target.

We also know what we assess today is only a slice of the total impact across our entire value chain. We’re working to improve tracking and reporting, as we expand our assessment. 

COMMITMENTS
Increase contracted manufacturer participation in Nike’s energy and carbon continuous improvement program In FY11 our assessed footprint in contract manufacturing made up 52% of our total assessed energy use and 54% of our assessed carbon emissions. Clearly, manufacturing matters. Finished-goods contracted footwear manufacturing accounts for the most.

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. 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.
From our FY11 baselines, we are seeking per-unit reductions across all contract manufacturing based on the energy data they provide to us.

Key measures:
- total number of factories enrolled in Energy and Carbon program
- per-unit reductions across contracted manufacturing
Expand use of renewable energy in our built environment (where available), including all new retail stores Renewable forms of energy make up a fraction of our total energy use to date but as we expand, we are building additional power purchase agreements and renewable options

Through FY11, renewable energy power purchase agreements were in place at one retail store. In FY12 and beyond, new stores are entering purchase power agreements to power their operations where available. And renewable power is part of the mix at our distributions centers in Lakdaal, Belgium and Shanghai, China.

Key measures:
- percentage of new retail stores with a minimum 80% renewable energy
- total % of renewable energy
Design new build to LEED standards We have built and operated green, proven by Leadership in Energy and Environmental Design (LEED) “green” building certification.

We have achieved LEED certification in buildings: three office buildings, 10 NIKE stores in North America and our Shanghai, China, distribution center. Going forward, we aim to design all new buildings to LEED standards.

Key measure:
- % of new build achieving LEED certification
Assess and report energy and CO2 footprint We know that managing our footprint is important, and to manage it we need to measure it. We are committed to continued improvement in data capture and reporting, and to extending the scope of our reporting to include other relevant segments of our value chain, with reference to the World Resources Institute Scope 3 guidance.

Key measures:
- energy use and carbon emissions, where we can measure, across our value chain
- progress in improving data capture, quality and reporting

 

LABOR

AIM: Transform our working relationship with contract factories to incentivize changes that benefit their workers. Instill changes in our code, instigate innovation, educate to build management capabilities, address root causes in our own processes, work with the industry and reward factories' progressive achievement

TARGET: Source from factories that demonstrate commitment to workers by achieving minimum Bronze on our Sourcing & Manufacturing Sustainability Index by the end of FY20

Changing the way an industry views its labor force doesn’t happen by monitoring factories alone. Monitoring reveals the issues, issues which in turn are locked into a complex web of root causes. The ability to address those root causes is shared by many, owned by no single constituent. 

We know that our role includes holding our suppliers accountable to a set of standards that often goes beyond local law. We also can incentivize shifts in behavior and to apply sanctions when standards are not adhered to. And we can help design and support a system of checks and balances that enable verification and monitoring of our contract supply chain – as a collaborative component of an industry-wide system of checks and balances. We believe in the power of transparency – as a source of education, as a driver of change. We require of our contract factories rapid, complete remediation where issues occur. We know that change won’t happen in isolation, and that meaningful change must be at industry scale.

We have invested in and helped catalyze and lead industry collaboration, working in partnership with civil society and government. Through collaboration and innovation, we believe we can encourage, support, catalyze and help scale new manufacturing models - where skilled and empowered workers are recognized as a competitive strength. We have included contracted factories’ progressive movement toward the Fair Labor Association’s “fair wage” approach into our Code Leadership Standard, embedding wages in the way that we will source and evaluate contract factory performance

We have aligned our sourcing practices and purchasing power to incentivize those contracted factories that prove they’re going beyond compliance and demonstrate practices that build teams of motivated, productive and healthy workers who produce innovative, high-quality and sustainable products.

Our Sourcing & Manufacturing Sustainability Index (SMSI) includes assessments of health and safety, worker empowerment, protection and compensation, and factory lean progress along with environmental performance. The SMSI is one component of the Manufacturing Index which weighs sustainability alongside quality, cost and delivery. The Index provides filters for sourcing decisions and incentivizes progress.

As part of the SMSI, we require factories to measure and report on key performance indicators tied to worker empowerment, including health and safety, and investment in employee training. 

COMMITMENTS
We will align sourcing decisions by the end of FY20 to prioritize sourcing in factories that have eliminated excessive overtime*.

* Our Code of Conduct defines excessive overtime as: 1) more than 60 hours in a week; or 2) less than one day off in seven
Excessive overtime is a serious issue – in terms of both hours worked and days on the job without a break. These represent the greatest proportion of time-based violations in our supply chain. It’s endemic to the industry, which makes eliminating it from our supply chain even harder. It’s driven by multiple complex factors and we are focusing on these areas through continued analysis of root causes, which has led us to identify and address key business processes upstream from the factory.

We will continue to track factors our impact on excessive overtime at factories and believe that the inclusion of excessive overtime in our Sourcing & Manufacturing Sustainability Index will elevate the issue and help us to recognize where and when these issues arise and to factor this aspect of factory performance into our sourcing decisions.

We will work with industry, governments, academics and others to address broader issues of excessive overtime.

Key measure:
- number and % of Excessive Overtime Incidents and % Nike-influenced
Require commitment to lean manufacturing and demonstrate progress toward a lean culture for contract factories to move beyond compliance by end of FY15. We have aligned our sourcing strategy to focus on optimizing the source base to work with long-term partners that are invested in lean manufacturing and that understand the value of a stable, skilled, empowered workforce. We think that products are best made in factories that have converted to lean manufacturing, and have made human resources management systems core to their business model. 

Lean manufacturing has been a hallmark of our approach with factories and is the foundation of how we advance sustainable manufacturing. Lean manufacturing is a business system and continuous improvement philosophy that aims to deliver the highest-quality product while eliminating waste, including lost time and material. At Nike, we also believe lean can empower workers and teams.

The success of the lean approach depends on the implementation of physical changes to production processes, increased leadership capabilities and the development of an empowered workforce. Lean manufacturing seeks to engage the minds of those closest to the work to solve the problems that prevent them from delivering quality product on time, every time.

Since FY09, Nike has provided resources to contract factories to support their transition to the lean approach, including training, coaching and technical assistance.

Key measure:
- % of factories with 100% lean-certified lines
- % of factories completed lean core training
Develop and test new models of manufacturing by the end of FY15 that serve to improve worker compensation, skills and livelihood and share findings to drive industry change We will work with contract manufacturers and a variety of other stakeholders to pilot new approaches to compensation that are integrated into the lean manufacturing mode and reinforce the value of recruiting and retaining a stable, skilled and empowered workforce.

We will support in-depth research that demonstrates the business case for why a new model of manufacturing that addresses workforce compensation is competitive and sustainable.

 

We will share findings with key stakeholders including factories, supply chain associations, government, academics and labor organizations.

 

CHEMISTRY

AIM: Minimize the impact of product ingredients throughout the lifecycle

TARGET: Achieve zero discharge of hazardous chemicals* for all products across all pathways in our supply chain by 2020

We are committed to making our products in ways that protect workers, consumers and the environment – all while delivering the high quality and performance for which we are known. One aspect of this commitment is to eliminate, reduce and responsibly manage hazardous chemicals in our supply chain.

In 2001 we released our Restricted Substance List (RSL) that details chemical compounds that cannot be present in any finished products sold by NIKE, Inc. The RSL includes substances that are banned by law, as well as chemicals we’ve restricted voluntarily.

We also have field teams that work closely with contracted factories to reduce toxics in production through process modification, innovation and operational improvements.

In 2010 we established our Sustainable Chemistry Guidance (SCG), to encourage our material vendors and contract manufacturers to use and develop the right kinds of chemistries – i.e., more sustainable options.

In 2011 we joined with other brands on the Road to Zero, an ambitious plan to remove hazardous chemicals* by 2020. We released – jointly with other footwear and apparel manufacturers – a roadmap for achieving this goal.

*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.

COMMITMENTS
Establish industry-wide management coalition In 2011 we joined other brands in establishing the Road to Zero. We will continue working with other brands and encouraging other brands to join in the effort to drive systemic change across the industry.
Expand chemicals management and awareness training As part of the joint Road to Zero, we are working to increase education of contracted factories through our Sustainable Manufacturing training and with major material vendors through our Restricted Substance Lists work.

Key measure:
- number and percentage of material vendors and contracted factories trained
Expand use of positive chemistries In 2010, we introduced a Sustainable Chemistry Guidance (SCG) section to our RSL documentation that highlights “positive” chemistries. Nike believes that elements of an independent standard for the textile industry could be used to expand this program by significantly increasing the number of chemical preparations listed. Nike will:

- Evaluate screening tools that could allow rapid expansion of our SCG with recommended chemical preparations and technologies.
- Pilot the targeted use of a chemical screening tool for a select set of Nike vertically integrated suppliers

Key measure:
- number of material vendors and manufacturers providing signed commitment to Green Chemistry Program
Expand material traceability In August 2011, Nike launched a material traceability pilot for organic cotton and recycled polyester with six of its strategic supply chain partners. Pilot objectives include evaluation of process certification standards, traceability software tools, and resource requirements to scale a material traceability program across material supply chains.

Key measure:
- progress on pilot and efforts 
Explore disclosure advancements Disclosure and chemical inventories are among the most challenging of issues to be addressed moving toward the zero discharge of hazardous chemicals by 2020. Although we see potential value in disclosure, we also believe that the strategy will require tools for data exchange that reflect the decentralized structure and legal and regulatory conditions of the industry’s supply chains.

As a member of the GC3 (Green Chemistry and Commerce Council), Nike will participate in a pilot project to evaluate the feasibility and benefits of standardizing chemical data types/formats/collection systems across supply chains. The pilot project will utilize a simple consumer product to gather chemical data from the supply chain to populate a chemical data superset (to the greatest extent possible/practicable) in a specified format. This project will help inform our strategy for tracking chemicals in the apparel and footwear supply chain.

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

 

WATER

AIM: Borrow water and use it responsibly

TARGET: Improve efficiency by 15% per unit in apparel materials dyeing and finishing and footwear manufacturing (from FY11 through FY15)

Water stewardship – including attention to water quantity and quality – is an essential part of our sustainability strategy. Freshwater supplies around the world are under pressure, which is pushing costs up. Since water is essential for communities to survive and thrive, water scarcity has potentially far-reaching effects.

Some parts of our value chain can be water-intensive. Dyeing and finishing facilities that supply fabric for our apparel, for example, use and discharge from 12 to 24 gallons of water per pound of textile. Therefore, we are working to design products from materials that require less water to produce, help material vendors and contract factories to reduce their water-related impacts, and eliminate hazardous substances from discharging into water. 

The two greatest areas of water impact in our assessed value chain are in apparel materials processing (dyeing and finishing) estimated at 3 billion gallons annually, and in footwear manufacturing estimated at 3.5 billion gallons annually.

With manufacturers, our field teams actively work with contract factories, providing advice on a range of approaches, including expanded leak detection, appropriate reuse of grey water and technology innovation and adoption.

Our work is based on self-reported figures, from contracted factories including those reported into the Nike Water Program which tracks both volume and compliance. Because material vendors produce for many brands, we are not separating our own impacts and aim to see an average reduction across all vendors enrolled, accounting for an estimated 60 billion gallons of water annually.

COMMITMENTS
Increase participation in Nike Water Program across NIKE, Inc brands We launched the Nike Water Program in 2001 to help our material vendors address their wastewater quality. In the first year, about 50 vendors participated; in FY11, more than 500 took part.

Vendors enrolled in the Water Program must supply detailed data regarding the processes they employ, the materials they produce and how much water they use and discharge. If they discharge more than 50 cubic meters of wastewater per day (as about half of them do), we also require copies of wastewater discharge permits and laboratory water-quality testing results. Vendors self-report this information using H2O*Insight, an online data collection system Nike developed.

The data and documentation that vendors provide allow the Water Program to first assess whether vendors are compliant with their own discharge permits and local environmental standards, and then whether they also meet Nike’s water-quality guidelines which were developed jointly with other apparel brands through Business for Social Responsibility’s Sustainable Water Group. (Business for Social Responsibility is a U.S.-based membership organization focused on corporate responsibility). If vendors are not compliant, we require a plan and timeline for improvement.

Key measures:
- total number of vendors and manufacturers enrolled in the Nike water program
- compliance with standards
Drive industry change through expanded access to the use of Nike-developed H2O*Insight Tool We launched the Nike Water Program in 2001 to help our material vendors address their wastewater quality.

In 2011 we worked with a third party to make the H2O*Insight Water Tool, developed for the Nike Water Program, available to other companies, enabling our vendors and other brands worldwide to more effectively track water quantity, quality and efficiency indicators.

Key measure:
- total number of non-Nike factors and vendors using tool
Assess geographic impact of water We know all water is local. It is drawn from and returned to a community and its availability and quality has the potential to help or hold back health, quality of life and prosperity.

We have incorporated water and land use considerations into some of our most important tools: our Nike Materials Sustainability Index and our Risk Index for sourcing.

To better understand where we have the greatest impact and how we can make better decisions, we will work to map the geographic impact of water in our value chain and share our progress and learnings.

 

WASTE

AIM: Use less, buy less to reduce impact across the value chain 

TARGET: Achieve 10% reduction in waste from manufacturing across NIKE, Inc. and shoebox weight per unit (from FY11 baseline through FY15), building on reduction in footwear manufacturing of more than 35% per pair in first 10 years of program

Our waste assessment conducted in FY06 showed key areas of solid waste in our value chain: 26% of which was in manufacturing, 32% in product packaging, and 32% in shipping/packaging. We focus our effort on reducing all waste streams, but especially in the greatest areas of impact.

Across our whole value chain, our single greatest waste item is corrugated cardboard. We’ve worked for years on reducing the overall content in our boxes and developed alternatives with various degrees of success for recyclability and performance. Our boxes are sustainable with 100% recycled content since 1995 and 15% waste removed from 1995 to 2006, but with the advances we’ve made to date it’s more and more difficult to make meaningful progress. But we’re back at it – aiming for a 10% reduction in weight of our footwear shoebox.

We’re also targeting reducing waste even further in footwear manufacturing, where we have already achieved a 35% reduction in grams of waste per pair in contracted footwear factories for the NIKE Brand over 10 years.

Distribution centers handle a high volume of waste but they do not generate the vast majority of it – most comes in from shipping and goes out based on customer requirements. Other areas – including the offices and retail environments– also are important to the overall waste picture. We focus our efforts in recycling, reusing, repurposing or composting as we also work to reduce the amount of waste.

COMMITMENTS
Reduce waste in manufacturing We regularly work with our contract finished-goods manufacturers to assist them in reducing waste. To date, we’ve focused on helping them to optimize manufacturing processes, segregate waste at the source, measure waste types and volumes, and target reductions of high-volume waste materials. We have also led the development of six dedicated recycling centers in three countries – China, Vietnam and Indonesia – to support our closed-loop vision.

In NIKE Brand footwear manufacturing, we had a goal to achieve a 17 percent reduction in total waste from FY06 to FY11, as measured in grams of waste per pair of shoes. We achieved this target in FY09 and continued to improve, decreasing to 149 grams per pair during FY11 despite a 38% increase in production since FY06.

Key measure:
- Average grams per unit solid waste
Improve packaging Across our whole value chain, our single greatest waste item is corrugate. We’ve worked for years on reducing the content in our box and developed alternatives with various degrees of success for recyclability and performance. We’re back at it – aiming for a 10% reduction in weight of our footwear box which since 1995 has used 100% recycled content.

Key measure:
- Average weight of footwear box at NIKE and Converse
Increase recycling, reuse, repurpose & compost of waste
(manufacturing, retail, distribution centers, offices)
In FY11, total waste generated by our NIKE Brand contract footwear manufacturers was 48.7 million kgs, 85 percent of which was diverted from incineration or landfill through in-house recycling, closed-loop recycling, downcycling and other efforts.

At NIKE, Inc. World Headquarters in Oregon, we have worked hard to improve recycling rates. While our total waste rose in FY11, along with our employee base, the percentage of waste diverted from landfill through commingling and composting rose from 54 percent in FY09 to 65 percent in FY11.

Key measures:
- total solid waste
- % diverted from landfill/incinerate

 

COMMUNITY

AIM: Deliver focused areas of impact through innovation, partnership, advocacy and movement making, with a stable source of funding to allow for a portfolio of innovation to scale and flourish

TARGET: Invest a minimum of 1.5% of pre-tax income in communities annually

Our commitment to innovation does not stop with product and process. It extends to the way we view our role in communities. In practice that means two things. One, we continue to define clearly focus areas for strategic programming. And two, we will continue to build approaches that depart from traditional giving and philanthropy, instead seeking to deliver impact at scale.

Three key examples of this approach: NIKE’s focus on Access to Sport, delivering public/private partnerships, that promote policy shifts, to ensure sport is built into the lives and infrastructure of communities around the world. The Nike Foundation, with the strategy of investing in adolescent girls to tackle poverty. LIVESTRONG, leveraging our marketing acumen to support and give the Lance Armstrong Foundation a voice and revenue streams to support its work on cancer.

While our target is financial in nature — we’ve targeted a minimum community investment of 1.5% of pre-tax profit- the real story is what we do with that money. We focus on combining capital, engaging in innovative partnerships, and developing marketing, business acumen, and public policy advocacy in new ways to drive change at scale. 

COMMITMENTS
Build and expand access to sport agenda We set out an agenda to focus investment in building long-term access to sport. We have engaged in research and have begun establishing partnerships and expectations, as well as metrics for assessing the long-term drivers of success. We will share updates on this work, development of metrics, and progress against them.
Tap the power of our brands to engage consumers and leverage support for the issues they care about  We use our brands to leverage support from others and from consumers in key areas. We will match funding to key strategic initiatives, both existing and new. We will share results in the stories and impact as well as key information on amount funded, amount raised and where our work has leveraged additional commitment.

Key measures: - Amount funded; amount raised
Through the Nike Foundation, continue to use insight, innovation and inspiration to equip adolescent girls in the developing world and transform their world, so that their full potential can be realized The Nike Foundation is dedicated to investing in adolescent girls as the most powerful force for positive change on the planet. Our work defining and scaling the girl effect has gained support – funded primarily by NIKE, Inc., the NoVo Foundations and the UK’s Department for International Development. We work with others as well, from the World Bank to the Center for Global Development.

Since 2007, the Foundation has committed more than $100 million to programs and partners benefitting adolescent girls.

Key measures:
- Total amount funded by NIKE, Inc.
Engage, encourage and enable employees to support communities  We understand the passion and drive of our employees and support their efforts to be valued contributors and participants in their communities. We will continue to match employee contributions and enable employees to develop networks around their interests and passions.

Key measures:
- % of employee participants in matched giving program

 

UNLEASH INNOVATION

AIM: Integrate sustainability principles into our innovation processes, governance and portfolios to generate innovation that delivers products and services that combine performance, innovation and sustainability

“The best way to predict the future is to design it,” Buckminster Fuller said.

Sustainability is the world’s greatest innovation challenge. Sustainability applied to mainstream innovation generates new, surprising solutions that can deliver breakthroughs in performance, business and sustainability.

And that’s where innovation comes in. NIKE, Inc. started with thoughts of innovation – how to run faster, make lighter, develop new materials, see connections that held promise for leaps and bounds in performance. It is how we began and how we’ve continued to drive success in delivering performance in product and across our business. Disruptive innovation creates new markets, new products, new sources of revenues, even new industries. It fuels competitiveness, growth and jobs. Great innovation disrupts and makes the status quo obsolete. So why wouldn’t we apply innovation to sustainability? What if, knowing what we know now, we were to challenge our problem solvers with this: Make it better, make it perform and make it sustainable. Not or, not only, but AND.

What if we integrated the filter of improved performance and sustainability in our innovation processes, portfolios and resources?

What could happen if we applied systems thinking to how we turned a concept into a reality, so that our processes, systems, engineering and manufacturing built workers’ rights and sustainability into the design, rather than being retrofitted in hindsight?

By inextricably linking sustainability and innovation we can think differently about both the opportunities and the solutions.

Re-imagine materials that eliminate waste, water, toxics, scarce resources, fossil fuels. Re-imagine products that have an afterlife where what was waste destined for landfill becomes a new source of value.

Re-imagine manufacturing. What if manufacturing processes could evolve, bringing the insights and skills of the worker to the center of the value proposition. We believe the next wave of economic growth and competitiveness could well emerge from this nexus of sustainability and innovation. And we look forward to making this our journey.

COMMITMENTS
We will build sustainable innovation capabilities across the business to drive a disruptive innovation agenda as we continue our endless pursuit of delivering performance products and services to athletes. 
We will develop and prototype an Index to drive and measure how sustainability is integrated into our innovation portfolios, decision making and processes. We will share a version of this Index and lessons learned with others in an effort to contribute to larger-scale adoption of approaches that link sustainability and innovation to drive business growth and performance.
We will develop tools, processes and systems to establish metrics to measure impact that can be shared as part of the index, without compromising the competitive nature of innovation.

 

SUSTAINABLE PRODUCTS THROUGH DESIGN AND MATERIALS

AIM: Design products that provide superior performance and lower environmental impact across NIKE, Inc.

TARGET: Understand and improve the environmental profile of our product designs by the end of FY15

We measure the environmental profile of our products through our indexes built on our Considered Design ethos introduced in 2005. We built tools to assess environmental impacts – energy and carbon footprint, water and land use, chemicals and waste. These tools make the process of assessing materials and overall product design by development teams easier. The Index provides comparability and drives behavior internally and in absence of industry standards helps to create new standards that we share.

We shared those tools with the industry and we’ve made strides in improving the design of our products.  We have made further updates taking into account the performance of materials vendors in addition to the environmental performance of the materials themselves. We hope the result, a new Nike Materials Sustainability Index, will drive further transformation.

We assess performance as rated, Bronze, Silver and Gold.

As we calibrate between our old and new indexes and set the bar higher for some of the indexes, we will set definitions for these levels in FY13 based on rigorous analysis of the pilot program in FY12 and will share and assess accordingly. 

COMMITMENTS
Footwear: New NIKE Brand global footwear product achieves minimum Silver rating on Nike Footwear Sustainability Index by the end of FY15. Building on the success of all new NIKE-brand footwear designs reaching baseline standards in FY11, we’re setting the bar higher. In FY13, following adoption of the updated Nike Footwear Sustainability Index which builds upon our Considered Index, we will set thresholds that define Bronze, Silver and Gold status. We will report on the percentage of styles that reach minimum Silver status.

We will measure based on product ratings on the Nike Footwear Sustainability Index.
Apparel: New NIKE Brand global apparel product achieves minimum Bronze rating on Nike Apparel Sustainability Index by the end of FY15. Building on our work over the past five years in improving the environmental profile of our NIKE-brand apparel designs, we’re continuing within the Nike Apparel Sustainability Index and targeting 100% of new global apparel product achieving minimum Bronze through FY15. As we convert to the new Index we will convert current thresholds that define Bronze, Silver and Gold status. We will report on the percentage of styles that reach minimum Bronze status.

We will measure based on product ratings on the Nike Apparel Sustainability Index.
Equipment: New NIKE Brand global equipment product achieves minimum Bronze rating on Nike Equipment Sustainability Index by the end of FY20. Building on our work over the past five years in improving the environmental profile of NIKE-brand equipment designs, we’re continuing within the appropriate Nike Equipment Sustainability Indexes (in development) and targeting 100% of new global equipment product achieving minimum Bronze by the end of FY20. As we convert to the new Index we will convert current thresholds that define Bronze, Silver and Gold status. We will report on the percentage of styles that reach minimum Bronze status.

We will measure based on product rating on the appropriate Nike Equipment Sustainability Indexes.
Other Product: Expand reach of indexes to score other NIKE, Inc. product.
(i.e. products of Affiliate brands, licensees and carry over products)
Building on our work over the past five years in improving the environmental profile of product designs, we’re expanding the reach of our scoring. We will introduce and expand use of the Nike Footwear and Apparel Sustainability Indexes across our affiliates and into licensee and styles not previously scored.

We will measure based on % of total product scored by Indexes.
Better Materials: Increase use of environmentally preferred materials. Building on our work to increase use of environmentally preferred materials in our product design, we will increase our use of better materials, especially among our top-volume materials including polyester, cotton, leather and rubber. These efforts will rely upon advances in recycled content, more sustainable cotton (we signed on to the Better Cotton Initiative’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), all leather certified to Leather Working Group medal standards, and expanded green rubber formulations.

We will measure by environmentally preferred materials (kg) as a % of total materials used for our top-volume materials.

 

SUSTAINABLE MANUFACTURING & SOURCING

AIM: Drive improvement in factory sustainability performance by implementing sourcing systems that include measures of sustainability performance (as well as traditional performance metrics of cost, quality and delivery) in sourcing-evaluation processes when selecting factories with which to invest or divest over time

TARGET: Source all products from factories that have achieved Bronze or better on our Sourcing and Manufacturing Sustainability Index by the end of FY20

Sustainability is one measure of our overall assessment of contract factories, alongside costing, quality and delivery. A factory’s sustainability score is assessed through our Sustainable Manufacturing & Sourcing Index (SMSI) which includes measures of lean, environmental performance (including water, energy and carbon, and waste), health and safety, and labor management factors. Introduced in FY12 and extended in FY13 and beyond, the ‘Bronze’ rating is achieved by factories meeting Nike’s Code of Conduct and Code Leadership Standards.

The Index changes the way we engage with contract factories, moving beyond compliance to change the rules of the game – put simply, volume of orders will flow to the factories that can deliver on all elements of performance and that show commitment to doing so.

In FY12 we will transition all factories from letter grades into the new standards, with previous letter grades of A and B (top ratings) transitioning to Bronze status, with C becoming Yellow and D becoming Red. This conversion will establish our baseline as we work toward Bronze or better status for 100% of contracted factories. 

COMMITMENTS
All product will come from factories that have achieved Bronze or better on our Sourcing & Manufacturing Sustainability Index by the end of FY20. Sustainability is one measure of our overall assessment of contract factories, alongside costing, quality and delivery. A factory’s sustainability score is assessed through our Sourcing & Manufacturing Sustainability Index (SMSI) which includes measures of lean manufacturing, environmental performance (including water, energy and carbon, and waste), health and safety, and labor management factors. Introduced in FY12, the ‘Bronze’ rating is achieved by factories meeting at least Nike’s Code of Conduct and Code Leadership Standards, as determined through annual factory assessments

Factory scoring prior to FY12 was based on a letter-grade assessment. All factory scores are being converted to the new index, with typically A and B grades (top ratings) becoming Bronze, C becoming Yellow and D becoming Red. We started the new baseline in FY12.

We will measure based on the rating on the SMSI.
Incorporate factory labor and environmental performance criteria into production vendor sourcing selection and evaluation Building on our work of over 20 years in releasing a Code of Conduct and Code Leadership Standards, and holding factories accountable through audits, we have placed sustainability (including lean, labor, health, safety, environment and human resources management) alongside traditional factory measures.

We will measure factories both prior to entry into our supply chain and as part of their ongoing performance evaluation.

We have also introduced a risk index to identify key country-specific risk factors in sourcing evaluation including political risk, social/compliance risk, economic risk and infrastructure and climate risk. Factories seeking entry to our supply chain will first be assessed against this index.

We aim to assess all factories entering our supply chain through the SMSI and Risk Index and will measure based on the percentage of new sources going through this process.
Expand and optimize factory labor and environmental sustainability capabilities We began working directly with contracted factories on HRM, Lean and Sustainability training in 2000 and have expanded efforts through FY11 to reach more than 76 factories, covering 94 percent of footwear volume and 43 percent of apparel volume across NIKE Brand.

We will strengthen and expand the training, focused on educating factory management and their senior leadership, surveying production workers, building capabilities and instilling lean processes.

We will measure by number of factories trained and percentage of volume represented.
Engage external partners to drive sustainability and transparency across industry Building on our work across the industry, including sharing our Codes, Leadership Standards and audit tools, we have signed on to using the Fair Labor Association’s Sustainable Compliance Initiative (SCI) tools. Together, with other brands in our industry, we are aligning audits and tools and providing greater comparability. We will continue to work on improving the tools and processes in partnership with the Fair Labor Association and other brands.

Key measure: rate of use of the SCI tools

 

PEOPLE & CULTURE

AIM: Tap our people and our culture, our most powerful source for innovation and change

At NIKE, Inc., we believe that a talented, diverse and inclusive employee base helps drive the creativity that is central to our brands. Our global strategy for human resources (HR) is to help unleash this potential across every area of our business by enabling leaders to make great decisions that, in turn, enable Nike’s business growth.

HR’s global objectives are responsive to employee survey feedback as we develop initiatives that drive employee engagement, create opportunities for all employees to develop and unleash their potential, and strengthen our culture where unfiltered feedback is always available.

COMMITMENTS
Invest in employee development NIKE, Inc. will have an integrated approach to functional and professional development that is appropriate for employees to help them realize their individual career potential.

This commitment is a result of a significant investment in enterprise leadership, manager excellence and functional capabilities all supported by a digital learning infrastructure to help us reach all employees globally.
Engage employees Transform engagement surveys for better, in-the-moment employee engagement.

An “always open” pulse/polling approach, with regular feedback rollup, enabled by social technology will replace traditional census surveys.
Inspire ideas and ignite innovation  Promote the power of diversity & inclusion by:
  • Expanding the composition of our leadership teams to reflect the global nature of our business
  • Amplifying the importance of team culture as a driver of innovation by capturing unfiltered employee feedback
Collaborating with partners in academia and business to help companies gauge their ability to create open & inclusive cultures.

 

THE WAY WE WORK

AIM: Build sustainability into the DNA of our business model, into our operations and into our culture where innovation is unleashed, shared and scaled

To advance in innovation and sustainability, both must be an inextricable part of the way we work.  

We know sustainability is a challenge that demands two approaches: building sustainability principles into the heart of business strategy and decision making - cultural, organizational, process, policy shifts. Sustainability is also an innovation challenge, which demands a new set of tools be deployed in order to hunt and solve innovation challenges. We are building capability across NIKE, Inc. to be able to do both.

COMMITMENTS
Hardwire sustainability in the way we do business Through the management construct and reporting lines, NIKE, Inc. will continue to build accountability of sustainability in the business and embed sustainability considerations into corporate strategy, policies, processes and management systems to guide day-to-day decision making.

We will open source and share key tools developed that enable employee education and integration.
Be a catalyst of sustainable innovation  Ignite, nurture and accelerate sustainable innovation through strategic partnerships, collaboration platforms, and open source development and data to unleash innovation and scale new solutions.

We will share tools, findings and new methods of sourcing and data to drive sustainability as the heart of a new, collective intelligence built around the principles of collaboration.
Measure the business value of sustainability Research and manage ways of measuring, tracking and reporting business, social and environmental impact of our sustainability efforts.

We will share updates on progress, tools and data on our work to develop new approaches to quantify and report the business value of sustainability.
Participate in multi-sector efforts to drive system change and market transformation Nike will seek out and engage collaboration partners.

On an annual basis, as part of our strategic planning process, we engage and consult with a diverse group of external stakeholders on sustainability risk and opportunities.

NIKE, Inc. will continue to work closely with industry and other partners to advocate on relevant sustainability public policy issues.

We will continue to build coalitions, collaborations and partnerships that enable the hunting & scaling of innovation, and the mainstreaming of sustainable business practices across industries. We will continue to report on that work.

Performance against Past Targets

The following goals, set out in our FY05/06 report, describe our ambitions based on the world we knew, the way we were organized and what was important. Some things have changed. Some haven’t. In some areas our focus is sharper, reflected in either adjusted or updated targets. In other areas, we have shifted as the world or our approach has shifted – for instance, focusing on reducing the use of energy overall in our value chain rather than on achieving climate neutrality through offsets. Further discussion of our efforts is included in relevant sections of this report.

Explore our past targets and performance against them below – select goals: 1) To bring about systematic change for workers in the footwear, apparel and equipment industries, 2) Create sustainable products and business models, 3) Let me play. Unleashing potential through sport. Access status and performance on individual topics at left.

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