The $3 trillion global apparel industry remains the second largest industrial polluter, following oil & gas . The industry is a complicated business involving long and varied supply chains. Each step of the chain requires tremendous consumption and puts pressure on our carbon footprint. The industry accounts for 10% of global carbon emissions and 25% of the world’s chemical usage . The compiled pollution releases toxic chemicals into our air, water, and soil, resulting in the creation of greenhouse gases and diminution of our water resources.
As one of the largest apparel brands, Nike has a significant role to play in shaping the climate change conversation for two primary reasons: corporate social responsibility and business performance.
Corporate Social Responsibility
Operating 566 factories, employing over a million workers, Nike is responsible for the well-being of those workers and the communities they live in . In the late 90s, the company suffered from negative allegations regarding harsh labor and factory conditions. Since then, Nike has made one of the greatest image turnarounds in the recent decade. And focus on sustainability has been the means to achieve it. The company revamped its management tools – one such example includes the Sourcing & Manufacturing Sustainability Index (SMSI), a tool used to evaluate factories on health, safety, and environmental dimensions. By 2020, Nike targets to have 100% of its factories improve to the highest required SMSI scores .
By minimizing the environmental footprint, improving product innovation, and transforming manufacturing, Nike has repositioned its supply chain to use sustainability as a strategic growth engine.
To minimize waste in 2015, Nike used 54 million pounds of factory scrap and transformed it into premium material. Additionally, the company reduced water use per unit in footwear by 43% . These initiatives introduced Nike’s Closed Loop Ecosystem, a new method for designing, finishing, and processing materials (See Figure 1).
Figure 1 – Nike’s new way of thinking about a sustainable product lifecycle
As of September 2017, Nike announced the launch of Nike Flyleather, a new super material made with ~50% recyclable leather fibers, using 90% less water, and an 80% lower carbon footprint. The product is created to maximize performance as it’s 5x more durable and 40% lighter than regular leather . As Nike expands this new material to its leather sneaker portfolio, it’ll have a strong impact on cost reduction and production waste. Similar to the impact the Flyknit technology created post 2012, reducing waste by ~3.5 million pounds.
In manufacturing, Nike diverted 92% of total waste from landfill and incineration without energy recovery. And in Q1 of 2014, Nike reached a major step by introducing a water-free dyeing facility in Taiwan. The factory features high-tech equipment designed to eliminate the use of water and process chemicals from fabric dyeing – Nike names the innovation “ColorDry.” See Figure 2 for an image of the factory .
Water is outpacing population growth, and over the next decade, water demand will exceed the general population growth 4 to 1, implying two-thirds of the world’s population could be living in water-stressed areas . The ColorDry investment marks Nike’s strong commitment to taking a future outlook and reducing its reliance on constrained resources.
Figure 2 – ColorDry technology at new facility in Taiwan
Nike set a prime example of using sustainability as a competitive driving force. As a result, the sustainability initiatives have created a solid foundation to adapt to climate change pressures (e.g., emission cuts, constrained supply of cotton and leather). Nike should now use these same sustainability principles and apply them to its dotcom business, which is an important strategic focus for the next 5 years. Nike plans to grow its E-Commerce business to $7 billion by 2020 (a $5 billion increase over today’s position). The growth will meaningfully increase the number of packages shipped per day, and hence will be compounded by number of packages returned. The growth will inadvertently create lots of waste in the system. In the short-term, I’d like to see Nike use its sustainability best practices in packaging and shipping. A few years ago, Nike hired a design firm to help it rethink packaging, but those ideas haven’t been fully realized in the mainstream . I hope to see Nike expedite the innovation on that front to ride its next wave of growth.
As alluded to earlier, the company has done a great job at incorporating synthetic fabrics to address cotton and water supply shortages, but in some cases, synthetic fibers can emit gases like n20, which are 300x more damaging to the environment compared to co2 . I’m sure Nike has processes in place to monitor such effects, but I’d make sure these reactions aren’t offsetting the hard work.
This brand has truly lived and breathed its sustainability mission and I’m confident it will continue to innovate and set the standard, but can Nike actively expand this standard and help other industry players realize its benefits? Should Nike even play this role? The big question I pose for you, is how can we now create a movement within the apparel industry and get other key players to set high sustainability standards?
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