NIKE combats Global Warming: “Just Do It” for the Planet

NIKE efforts to reduce their global footprint

In 2015, NIKE products were produced in 700 factories, across 42 countries, by over 1 Million factory workers [1]. To say that they have a global impact – whether positive or negative, on natural resources – is an understatement.

 

To put their impact into perspective, in 2013, 10 billion kilograms of cotton was used by the global apparel industry; this resulted in 107.5 million tons of CO2-eq – or the impact equivalent of 24 million miles driven by a passenger car (a few other conversions are below) [2].

tomchallenge_climate

Equivalent impacts to the cradle-to-gate impact of one cotton t-shirt.

Equivalent greenhouse gas impacts of cotton's use in the global apparel industry

Equivalent greenhouse gas impacts of cotton’s use in the global apparel industry

 

Keep in mind that this only refers to the cotton material used by manufacturing companies. In addition to the materials used, companies such as NIKE use water in their supply chain, generate manufacturing waste, and have less than optimal renewable energy as part of their owned and operate facilities.

 

This leaves NIKE in a particularly vulnerable position, given the realities of Global Climate change. For example, in 2008, weather-related irregularities, like floods shut down four NIKE factories in Thailand. Furthermore, the rise of droughts in regions that produce cotton, means less cotton is produced, the price of cotton increases, and more market volatility is introduced, which all negatively the company’s bottom line. This water issue is of paramount importance; the World Economic Forum has flagged water quantity and quality as the biggest threat facing the planet over the next decade [3].

 

NIKE has not stood idle versus these climate change challenges; they’ve adopted new approaches to (1) minimize the impact of changing climate conditions and (2) reduce their environmental footprint. For example, Nike is using more synthetic material that is less dependent on weather conditions. NIKE is also “using lower-impact, high-volume materials – such as recycled polyester and certified Better Cotton (cotton grown according to the Better Cotton Initiative Standard System) – that drive energy efficiency and water efficiency” [6].

 

A summary of NIKE’s 2020 Environmental Impact goals [3]

  • A 10% reduction in the average environmental footprint
  • Reach 100% renewable energy in owned or operated facilities through FY25 and encourage broader adoption, as part of an effort to control absolute emissions
  • Eliminate footwear manufacturing waste to landfill or incineration, while continuing to reduce overall waste
  • Innovate and adopt new approaches to reduce water use in the supply chain, with a 20% reduction in freshwater use in textile dyeing and finishing (l/kg) per unit of production
  • Zero discharge of hazardous chemicals

 

While these efforts have helped reduce their overall carbon footprint, there is still much room for NIKE to improve. For example, the company’s CO2 2020 emissions goals remain weak targets at best.

NIKE Inc Revenues and Emissions
NIKE Inc Revenues and Emissions

As evidenced by the exhibit above, very little progress has been made since 2000. Just as NIKE continues to have aggressive revenue and bottom line financial goals, the same rigorous approach should be applied to their Global Carbon Footprint commitments. As a starting point, NIKE should reduce their 2 Million mTons of CO2 Target to about 1.5 Million mTons.

 

While NIKE continues to make strides in their efforts to reduce their carbon footprint, a few questions should remain top of mind for executives. How much will these efforts impact their bottom line, and how will shareholders react if NIKE decides to up the spend on these efforts? Secondly, will increased attention to environmental impact have an adverse effect on their product quality? For example, will the adoption of synthetic non-cotton materials decrease the performance aspect of NIKE’s apparel?

 

On the grander scheme of things, not taking steps to further combat the impacts of global warming will have a wide range of effects, the most important of which are:

  • Rising Sea Levels
  • Changing Weather Patterns and extreme weather
  • Pressure on water and food
  • Political and security risks
  • Human Health risks
  • Impact on Wildlife and Ecosystems

 

NIKE’s mission statement is “To bring inspiration and innovation to every athlete in the world” [4], but if NIKE and other corporations don’t accelerate their efforts, there might not be a world left.

(Words: 651)

 

 

[1] http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html

[2] Sustainable Apparel Materials | Materials Systems Laboratory Massachusetts Institute of Technology Cambridge, MA | October 7, 2015

[3] NIKE 14/15 Sustainable Business Report

[4] Climate Change in 2016: Implications for Business | Harvard Business School Press | October 14, 2016

[5] http://help-en-us.nike.com/app/answers/detail/a_id/113/~/nike-mission-statement

[6] http://about.nike.com/pages/environmental-impact

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4 thoughts on “NIKE combats Global Warming: “Just Do It” for the Planet

  1. I really enjoyed this post. I thought it was particularly interesting in the context of some of the lessons we have recently gleaned in class. I think there is a direct parallel to the IKEA case, where we discussed the reputational importance of spearheading sustainability initiatives regarding wood procurement and use, given IKEA’s sheer size– its role as industry leader affords the company many options, but also places an enormous target on its back. NIKE faces a similar dynamic in the apparel industry. Secondly, I thought it was very interesting to hear about NIKE Football’s 2010 World cup South Africa campaign in our marketing class, and I think some of the lessons from Nike executives in that instance can shed some light on the issues at play in your post. Nike product designers continually stated that they needed to lead with good products– if they couldn’t improve the products while simultaneously reducing how climate-damaging and material-intensive they are, then they would scrap any initiatives. It is not sufficient to design a friendlier product– it has to be an overall better product as well, from a quality v. cost perspective, or consumers simply will not adopt it and any sustainability gains will evaporate.

  2. Your post was very interesting and I fully agree that Nike should have equally rigorous carbon footprint goals as top and bottom line goals. However, I’m not quite sure I agree when you say “Furthermore, the rise of droughts in regions that produce cotton, means less cotton is produced, the price of cotton increases, and more market volatility is introduced, which all negatively the company’s bottom line.”

    Droughts in regions that produce cotton may certainly result in lesser cotton being produced in that region but there will be another region (likely 1-2 latitudes higher) where more cotton will be produced given warmer weather. If you check this Risky Business Report – http://riskybusiness.org/report/national/ – it goes on to say that production of crops will change regions as some areas become warmer than they were and others that were colder, now suddenly become the right places to grow those crops.

    I would therefore argue that one of the key things that Nike does is understand which locations in the world could have a higher proportion of cotton production that earlier and then plan for transport / production near that location if the economics work!

  3. I believe that there is a significant opportunity for Nike to leverage their connection with consumers in order to not only reduce their emissions at the company level, but also reduce emissions at the consumer level. Because Nike is a clothing brand, their clothes likely lead to thousands of loads of laundry annually, if not more, in which water and electricity cause for significant amounts of waste. There are, however, new personal sized foot-powered washing machines that require 80 percent less water and detergent than a typical washing machine, and do not run on electricity. [1] If Nike leveraged its connection with it’s athletes to use this type of machine to clean their own clothes after a match or practice, they may be able to have an even quicker, and grander environmental impact, at no cost other than advertising their program, or markdowns given as an incentive to those that use the more efficient washing machines.

    Treacy, Megan. “Foot-powered washing machine lets you clean your clothes off grid.” http://www.treehugger.com/gadgets/foot-powered-washing-machine-lets-you-clean-your-clothes-grid.html, accessed November 2016.

  4. Thank you J.E.S. for your post!
    My first impression when reading this was Wow Nike ! they have certainly improved a lot in their sustainability efforts since their sweat shop scandals in the 90s.
    As for your last questions I believe that Nike has been benefited by all these sustainable practices. First, they have been able to reduce water and energy consumption hence reducing costs. Also, with their suppliers program they have been able to help suppliers to produce more and in a more sustainable ensuring supplies for the future. I believe that both of these things can become a competitive advantage in the future.

    When thinking about quality, I don’t think that Nike will reduce product quality in order to increase sustainability. By increasing the use of plastic in the building of their products they are also innovating in new ways that could improve performance. For example T-shirts made of recycled water bottles can be dry-fit and last for longer time than the cotton shirts. Check out this video on how nike is building T-shirts out of water bottles…. https://www.youtube.com/watch?v=wEKFJWdJ5jg…. I do believe though that a lot of people after watching this video will believe that their Tshirts are overvalued that can produce a drop in revenues.. Maybe this is the reason why Nike hasn’t put that much money (at least in developing countries) into advertising this new way of making products.

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