Disruptive Innovation at Nike

Nike has emerged as a leader in alleviating the effects of climate change. Through disruptive innovation, Nike intends to build a sustainable network that fosters growth and financial success.

While the global apparel industry has not been at the forefront of the climate change conversation, it has had a material impact on the global environment. In 2015, the industry produced approximately 400 billion square meters of fabric from nearly 100 million tonnes of yarn, and in 2009 utilized 1 billion kWh of electricity.[i] As a leader in the industry, Nike has contributed to and is affected by climate change. In 2006, Nike sourced materials from 700 factories across 52 countries, creating a massive international supply chain with a carbon footprint of 1.36 million tonnes.[ii]  60% of this footprint is derived from the underlying materials used to create shoes.[iii] As natural resources become more constrained and costly to obtain, Nike will need to seek sustainable materials. Similarly, as climate change disrupts weather patterns and water supply, Nike will need to find innovative and alternative strategies for its production processes.

Following a labor scandal in the 1990s, Nike has been a leader in assuming corporate responsibility and has been committed to alleviating the effects of climate change. For example, in 1993, Nike instituted a recycling program called “Reuse-A-Shoe” where Nike collected discarded shoes and recycled the materials. As of 2007, Nike had recycled more than 20 million pairs of discarded shoes.[iv] In 2005, Nike was committed to using only organic cotton. Yet, the network was not extensive enough for this to be an attainable practice. In response, Nike developed the “Organic Exchange,” which was committed to building a vast, sustainable organic cotton network.[v] As materials are Nike’s primary environmental concern, Nike created a Materials Sustainability Index, which rates materials based on environmental impact criteria.[vi] This index enables Nike and other industry leaders to make more educated decisions when purchasing materials.

Today, Nike believes that innovation and design represent an opportunity to improve sustainability. Nike partnered with the MIT Climate CoLab to “bring innovation in materials to the forefront of the climate conversation.”[vii] This partnership encourages designers to submit their proposals for a sustainable product. Nike then helps product creators make more environmentally conscious decisions about the materials they use.[viii] Nike believes that creating this type of “disruptive innovation” will not only improve the environment but will also be financially accretive. As reflected in the below chart, since 2000, Nike has decreased its carbon emissions while dramatically increasing revenue.

emissions-and-revenue[ix]

Going forward, Nike must seek innovative avenues to achieve its mission of reaching 100% renewable energy in its facilities by 2025. [x] Nike should continue to develop and advertise the view that sustainability will drive innovation and growth. However, Nike should be mindful that consumers may perceive the quality of the products to be inferior. Nike will need to control the messaging by highlighting the innovation and high-tech design in their products. However, based on consumer reaction on quality, Nike may need to downplay the use of sustainable materials.

Nike should also be mindful of future legislation when designing sustainability plans. The Paris Agreement was signed by 195 countries in 2015 who committed to reduce emissions by keeping the increase in global temperature to well below 2°C above pre-industrial levels.[xi] Nike was a strong supporter for this regulation arguing that this was an “unprecedented turning point in global action on climate change.”[xii] In the future, however, legislation may be more restrictive, and Nike should be prepared for any negative implications on its production process. Additionally, more stringent regulation may be instituted at the regional level, and Nike, as a global player, should be cognizant of how this will impact its supply chain.

Nike has demonstrated its power as a global leader committed to sustainability. Going forward, it must continue to innovate and adapt to a changing landscape to remain competitive. (798 words)

 

 

[i] Kirchain, Randolph, et al. “Sustainable Apparel Materials.” Materials Systems Laboratory Massachusetts Institute of Technology, October 7, 2015, Cambridge, MA.  http://msl.mit.edu/publications/SustainableApparelMaterials.pdf

[ii] Henderson, Rebecca, et al. “Nike Considered: Getting Traction on Sustainability.” MIT Management Sloan School Learning Edge, January 21, 2009, Cambridge, MA. https://mitsloan.mit.edu/LearningEdge/CaseDocs/08.077.Nike%20Considered.Getting%20Traction%20on%20Sustainability.Locke.Henderson.pdf

[iii] “MIT Climate CoLab and Nike Call for Materials Innovation to Combat Climate Change.” Nike website, September 25, 2015. http://news.nike.com/news/nike-inc-and-mit-climate-colab-materials-innovation-to-combat-climate-change

[iv] Rahmiford, Shahin, et al. “Recycling of Footwear Products.” Center for Sustainable Manufacturing and Reuse/Recycling Technologies (Smart), Loughborough University, December 2007, Loughborough UK. http://www.centreforsmart.co.uk/system/downloads/attachments/000/000/002/original/Footwear_recycling_position_paper.pdf

[v] Svendsen, Ann C, et al. “Convening Stakeholder Networks: A New Way of Thinking, Being and Engaging.” Journal of Corporate Citizenship, Sheffield, UK, Autumn 2005.

[vi] “Sustainable Innovation is a Powerful Engine for Growth.” Nike FY 2014-2015 Sustainable Business Report, Beaverton, Oregon, 2015.

[vii] “MIT Climate CoLab and Nike Call for Materials Innovation to Combat Climate Change.”

[viii] “MIT Climate CoLab and Nike Call for Materials Innovation to Combat Climate Change.”

[ix] “Our Ambition.” Nike website. http://about.nike.com/pages/our-ambition

[x] “Sustainable Innovation is a Powerful Engine for Growth.”

[xi] “Paris Agreement.” European Commission Climate Action, March 11, 2016. https://ec.europa.eu/clima/policies/international/negotiations/paris/index_en.htm

[xii] “Sustainable Innovation is a Powerful Engine for Growth.”

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2 thoughts on “Disruptive Innovation at Nike

  1. Great post – it’s awesome to see that Nike has been able to simultaneously increase revenues while also reducing emissions (particularly emissions/unit). You make a great point that Nike needs to tread carefully when it comes to marketing its products as “sustainable” as it could potentially lead quality concerns for customers. In some ways they’ve already achieved the best of both worlds: they’re receiving “earned media” in the form of articles highlighting their sustainable practices which could engender brand loyalty from the segment of consumers for whom sustainability is an important issue yet they haven’t had to risk alienating consumers who don’t care about sustainability by explicitly marketing their products as such. It’s a difficult balance to achieve but they seem to be managing it very well thus far.

  2. Interesting article on Nike’s practices. While it is definitely going in the right direction, wouldn’t you agree that given their very sizeable carbon footprint they should look for more avenues to reduce their impact on the earth? Especially if 60% of their footprint still comes from the material it uses, isn’t their a big (and imperative) opportunity for them to focus on using truly sustainable materials in their products? They have put several interesting initiatives in place as you outline, but the quesiton is whether it is going far enough. Activists may not have picked upon Nike’s contribution to pollution yet, because as you say they have larger contributors to deal with, but it would be in Nike’s best interest to pre-empt this long-term threat by getting real about sustainability today and avoid having to deal with the very real consequences of public scrutiny.

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