Nike manufactures athletic apparel and distributes the apparel through its own retail channels as well as other retailers. Therefore, Nike relies on a vast array of raw materials and chemical components as inputs for the production process, making Nike vulnerable to climate change in two ways:
1.Supply shortages and price increases of raw materials due to natural disasters or changes in weather pattern
2.Heavy reliance on electricity and water for manufacturing, distribution and retail centers. Regulations on greenhouse gas emissions will impact the price of electricity and fuel, and drought may reduce the availability of water, thus either reducing supply or increasing the cost of these inputs.
If Nike does not address these vulnerabilities, it risks rising production costs, which would reduce margin or be passed down to the consumer, thus affecting product competitiveness. In addition, large companies like Nike are also increasingly facing pressure from the government and the public to become more sustainable and to reduce environmental impact.
Nike has already taken significant steps into that direction. In 2013, “PlanetSave” identified Nike as “the greenest soccer shoe around” , praising the company for going above and beyond in supporting sustainable production and protecting the environment. Nike is following an ambitious plan with specific targets for 2020. Based on its report and its website , Nike is taking the following measures to mitigate its environmental impact and to make production more sustainable:
1.Product scoring to determine the environmental impact of producing each product, which in turn informs the product design and iteration process.2,3
2.Waste reduction through more efficient product design and manufacturing practices, such as re-using scrap to build new products, as further illustrated in Exhibit 1.(2) In FY2015, “4 million pounds of factory scrap was transformed into premium materials used in Nike performance footwear and apparel.” (2,3)
3.Energy efficiency through its Energy and Carbon Program to reduce energy use per unit every year. From 2008 to today, Nike managed to cut energy use per unit by 50%. Nike also has the ambitious goal of obtaining 100% of its energy through renewable sources (owned or operated) by FY2025. (2,3)
4.Water efficiency- Nike also managed to reduce water use by “18% per unit in apparel materials and 43% per unit in footwear” which “far surpassed” the company’s FY2015 goals. (2,3) Furthermore, it uses innovative technologies such as its “ColorDry” technology “which dyes fabrics using zero water, [which] has saved more than 20 billion liters of water” since 2010.(4)
5.Use of chemicals and innovative materials- Nike established a “restricted substance list” and is developing an array of sustainable materials, such as products that contain fewer and less harmful chemicals to protect environmental pollution.(2,3)
6. Culture of innovation and information sharing- Nike is collaborating with several external entities (e.g. MIT’s Climate Co Lab) to determine sustainability of different materials as well as “new ideas on how to engage industries, designers and consumers to value, demand and adopt low-impact materials.” (2,3)
As outlined above, Nike is already taking significant steps to reduce its environmental impact. However, based on the information provided as well as Exhibit 2 below, it seems that Nike is focusing mostly on the factors within its own control, such as improving product design and manufacturing practices. In reality, Nike is part of a supply chain with many raw material suppliers as well as distributors. Hence, I believe Nike could take additional steps to work its channel partners to further reduce environmental impact throughout the entire supply chain. First, it can select raw material suppliers based on the suppliers’ efficient and sustainable use of resources. Second, it can partner with distributors to reduce the environmental impact of transporting raw materials to factories and finished goods from factories to stores. Furthermore, Nike could work on its own stores to make them more sustainable (e.g., reducing energy consumption, using eco-friendly shopping bags). As an industry leader, Nike could serve as a mentor to its supply chain partners, while also being an industry leader in the types of measures and standards used to measure sustainability efforts.
Exhibit 1: Sustainability in Nike’s product design process
Exhibit 2: Steps Nike is taking to improve environmental footprint
1 PlanetSave “10 Companies with Eco-Conscious Production Processes”, June 21, 2013
2 “Sustainable Innovation is a Powerful Engine for Growth”, Nike’s websiSustainability Business Report, FY14/15
3 Nike website:http://about.nike.com/pages/environmental-impact, last accessed 11/02/2016
4 Nike website: http://news.nike.com/news/sustainable-innovation, last accessed 11/02/2016
Exhibit 1 &2: “Sustainable Innovation is a Powerful Engine for Growth”, Nike’s websiSustainability Business Report, FY14/15
Cover picture: http://about.nike.com/pages/sustainableinnovation
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