Did you know that it can take up to 2,700 litres to produce the cotton needed to make a single t-shirt?1 Considering that the global apparel industry produces more than 150 billion garments in a year (roughly equal to 20 new pieces of clothing for every person on the planet), the apparel industry is both an enormous user and polluter of water2. Apparel manufacturers such as Nike are increasingly feeling the effects of water scarcity and climate change on their operating models.
Climate Change is Slowly Disrupting Nike’s Supply Chain
Water scarcity is the top global risk to society over the next ten years according to the World Economic Forum3. The Intergovernmental Panel on Climate Change (IPCC) concluded that increased precipitation intensity and variability due to climate change is projected to increase the risks of flooding and drought in many areas of the world where the textile supply chain operates4. (Exhibit 1) The adverse effects of climate change will constrain water availability for the apparel industry.
Exhibit 1 Map of Water Risk5
Nike utilizes over 700 factories around the world, with many located in regions under high water stress, including China, India, and Thailand6. In 2008, flooding in Thailand temporarily shut down operations at four Nike factories. Extreme weather in regions that produce cotton can disrupt production, creating market volatility in the price of cotton. The company acknowledged concerns that extreme weather caused by climate change can negatively impact its operations going forward, citing it as a financial risk in their 10-K disclosures7.
Minimizing the Dependence on Water
Nike identified the need to innovate with materials and manufacturing processes in order to mitigate the threats posed by extreme weather and global water scarcity and has undertaken several initiatives over the last decade to transform its supply chains. Nike has focused on incorporating lower-impact materials, such as recycled polyester and certified Better Cotton (grown according to the Better Cotton Initiative Standard System) that drive water efficiency8. The company is one of the top buyers of organic cotton, which uses less water than conventional cotton9. Nike is also using more synthetic material that is less dependent on weather conditions. The company developed a ColorDry process that eliminates water from fabric dyeing, which has saved more than 20 million liters of water and minimized wastewater pollution10. Nike also works with contract factories and material vendors to track and report water use and wastewater discharge compliance8 (Exhibit 2). With these initiatives, Nike was able to “reduce water use by 18% per unit in apparel materials and 43% per unit in footwear manufacturing,” far surpassing its goals for 20158.
In 2015, Nike collaborated with researchers at Massachusetts Institute of Technology to study the environmental and social impact of textiles. The goal of the report was “to galvanize the material industry and the chemical industry that supports them into change” and “kickstart a much bigger conversation with the industry [to] send signals to the materials vendors and the chemical companies that do the inventing behind them2.”
What Else Can Nike Do?
Included in Nike’s 2020 sustainability goals is the commitment to “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”8. While Nike has made huge strides towards addressing the negative effects of climate change on their business, efficiency improvements in water usage may not be sufficient to compensate for the growing worldwide demand for water and the negative impacts of extreme weather on water availability. Nike should focus on farther extremes of the value chain, looking at both the harvesting of raw materials and the consumption patterns of end consumers.
Reducing water waste at the raw material stage can have the greatest impact on water conservation, although it is where Nike has the least influence. The World Wildlife Fund estimates that nearly 60% of water used for agriculture (about 396 trillion gallons) is “wasted annually due to leaky irrigation systems and wasteful field application methods11.” Nike should partner with farmers to improve farming techniques so that water is not wasted.
Consumers can also greatly reduce the environmental impacts of their apparel by changing their consumption patterns and the way they care for clothing. It is estimated that 70% of a garment’s lifecycle impact (the sum of environmental impacts caused by the product’s existence) come from washing and drying, and not from the harvesting or manufacturing process12. Nike can focus product innovation on developing apparel that does not require water-intensive laundry care.
One of the biggest obstacles environmentalists face is motivating people to action, and Nike is in a unique position where it can leverage the power of its brand to bring about change at all levels of the value chain.
 World Wildlife Fund, “The Impact of a Cotton T-Shirt”. January 2013, http://www.worldwildlife.org/stories/the-impact-of-a-cotton-t-shirt, accessed November 2016
 Makower, Joel. “Why Nike and MIT See Textiles Material to Climate Change.” GreenBiz, September 2016, https://www.greenbiz.com/article/why-nike-and-mit-see-textiles-material-climate-change, accessed November 2016
 Ganter, Carl. “Why World Water Crises are a Top Global Risk.” World Economic Forum. January 2015, https://www.weforum.org/agenda/2015/01/why-world-water-crises-are-a-top-global-risk/, accessed November 2016
 Intergovernmental Panel on Climate Change, “Climate Change and Water. IPCC Technical Paper VI”. June 2008, http://www.ipcc.ch/pdf/technical-papers/climate-change-water-en.pdf, accessed November 2016
 Sustainable Business Group, “The State of the Apparel Sector 2015 Special Report: Water” 2015, http://glasaaward.org/wp-content/uploads/sites/4/2015/05/GLASA_2015_StateofApparelSector_SpecialReport_Water_150624.pdf, accessed November 2016
Davenport, Coral. “Industry Awakens to Threat of Climate Change”. New York Times. January 2014, http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html, accessed November 2016
 Nike, Inc Form 10-K. May 2015, https://www.sec.gov/Archives/edgar/data/320187/000032018715000113/nke-5312015x10k.htm, accessed November 2016
 Nike FY14-15 Sustainable Business Report. http://s3.amazonaws.com/nikeinc/assets/56356/NIKE_FY14-15_Sustainable_Business_Report.pdf, accessed November 2016
 GreenBiz. “Nike, Walmart Top US Buyers of Organic Cotton.” June 2010, https://www.greenbiz.com/news/2010/06/01/nike-walmart-top-us-buyers-organic-cotton, accessed November 2016
 The Guardian. “Nike ColorDry Adds Water-Free Dyed Fabric to Sustainable Materials Menu.” December 2013, https://www.theguardian.com/sustainable-business/nike-colordry-water-free-sustainable-materials, accessed November 2016
 Clancy, Heather. “How to Fix the 10 Worst Wastes of Water.” March 2014, https://www.greenbiz.com/blog/2014/03/19/10-water-system-problems-leaks-nike-microsoft-google, accessed November 2016
 Clay, Jason. “Cotton carbon emissions: how the shirt on your back affects climate change.” April 2012, https://www.theguardian.com/sustainable-business/cotton-reduce-environmental-impact-consumer-behaviour, accessed November 2016