Over the past 20 years, a multitude of companies in the apparel industry have made a relentless push towards reducing the carbon footprint of their operations and products. Nike, a leading fitness apparel corporation, began to focus on issues surrounding climate change as early as 1995 after discovering the global warming potential of a gas contained in the air-sole cushioning units of their footwear. Today, Nike is leading the charge to reduce their carbon emission levels. Nike has partnered with universities such as University of Delaware and M.I.T. to measure and reduce its carbon footprint throughout its entire supply chain as well as transform customer behavior and design choices to embrace sustainability.
Figure 1: Nike total greenhouse gas emissions (tonnes CO2 equivalents) FY092
Emissions in the Apparel Industry
The global apparel industry uses nearly 1 billion kWh of electricity, making it “a significant contributor to global greenhouse emissions.”4 The footwear industry alone contributes “a significant portion of the apparel sector’s environment burden” with “most of the emissions [being] released during the shoes’ material processing (29%) and manufacturing phase (68%).”3 Insights such as these have led to apparel companies analyzing not only how their in-house operations contributes to emissions but also how their suppliers “source, design, manufacture, and deliver products.”1
Figure 2: Breakdown of total Global Warming Potential (GWP) impact of running shoes by product life cycle3
Sustainability at Nike
Nike, understanding its responsibility to reduce its footprint, has set three overarching goals2 to reduce its carbon footprint in the coming years:
- Travel – reducing carbon emissions from business travel and travel within Nike-owned and operated facilities
- Manufacturing – developing an emissions reduction strategy for major footwear and clothing manufacturing facilities
- Supply chain – developing a strategy to reduce greenhouse gas emissions from supply chain activities and logistics
Business travel accounted for a significant amount of carbon emissions generated by Nike. In 2000, Nike got ahead of the issue by purchasing carbon credits to offset almost half of its carbon emissions from business travel. Since then, Nike has found ways to substantially reduce its travel-related emissions. Today, Nike is able to sell carbon credits after reducing their carbon levels through initiatives such as Nike’s alternative transportation program for Oregon-based commuters. This cash flow from carbon credits has provided Nike with additional capital to further analyze ways to reduce their business travel carbon footprint.
Manufacturing solutions employed by Nike involve analyzing its use of high greenhouse gas-producing materials, such as cotton, polyester, and leather. Changing its practices on materials used in its products will prove to be complex since “materials are not simply a bundle of physical properties; materials influence the manner in which a product is fashioned, the form of that product, and, ultimately, its performance while in use.”4 Altering the material properties of its products can be detrimental to Nike’s financial performance if the quality of its products suffer from implementing sustainable material practices, a concern that is top of mind for Nike.
Along with its focus on substantial reductions in greenhouse gases from manufacturing operations, Nike is strategizing ways to measure its carbon footprint along the supply chain. Nike is working with the University of Delaware to develop a model to measure carbon emissions created during the movement of goods from distribution facilities to retail. Additionally, Nike has been “exploring [greenhouse gas reduction] strategies around packaging, fuel, economy and air freight.”2 These solutions “will require [Nike] to partner with the most progressive retailers and logistics suppliers”2 to reduce emissions while continuing to meet strict delivery requirements.
Future Considerations for Nike
As Nike continues to aggressively reduce its greenhouse gas footprint, several questions arise about how these efforts will affect the company’s future success. How much will these initiatives affect Nike’s accounting practices? Will Nike follow the lead of PUMA, another active wear company, in introducing an environmental profit and loss account to their financial reports? And how will shareholders react to increased spending on sustainability initiatives? Finally, will the pursuit of a lower carbon footprint result in a decrease in quality of Nike’s goods? Nike has to innovate beyond its products to reduce its footprint while enabling the company to grow and continue to be a dominant force in the apparel sector.
1 PricewaterhouseCoopers, “Driving CO2 out of the supply chain and off retailers’ shelves”, 2012, https://www.pwc.com/gx/en/retail-consumer/assets/pwc-driving-carbon-from-the-supply-chain.pdf, accessed November 2016.
2 Nike, FY 2007-2009 Corporate Responsibility Report, http://www.fibre2fashion.com/sustainability/pdf/nikesustainabilityreport.pdf, accessed November 2016
3 Lynette Cheah et al., “Manufacturing-focused emissions reductions in footwear production”, 2013, http://www.sciencedirect.com/science/article/pii/S0959652612006300, accessed November 2016.
4 Randolph Kirchain et al., “Sustainable Apparel Materials”, 2015, http://msl.mit.edu/publications/SustainableApparelMaterials.pdf, accessed November 2016.