Nike’s race against climate change
Nike is not “just doing it” when it comes to corporate environmental protection initiatives — they’re acing it.
The global sportswear giant has been affected by climate change at multiple levels of its operating model – from supply chain to production. Droughts in countries that supply Nike’s cotton (used in apparel products) have led to price and demand volatility of this key input, disrupting its supply chain. In 2013, four factories contracted by Nike in Thailand had to be temporarily shut down due to excessive flooding [1]. Nike has partnerships with several factories across Southeast Asia, including Vietnam and Indonesia, and these are all at risk of extreme weather conditions – negatively impacting production and putting the livelihood of their workers at risk. The water supplies at these factories have also been compromised due to global water shortages [2].
As the effects of climate change pose significant costs and risks for Nike, the company has a vested interest in helping curb climate change and has taken an active role in implementing sustainable business practices.
Materials
Nike has increasingly started sourcing synthetic materials which are less dependent on weather conditions compared to cotton. It is also one of the world’s largest buyers of organic cotton, which is produced through a more environmentally-friendly process. The company is increasingly using dyed-yarn fabrics in their sneakers as these fabrics reduce production pollution and biodegrade more effectively. They in fact make more sense economically as well as these fabrics pose less of a material and labor cost compared to traditional leathers. Nike has also stopped sourcing leather from cattle raised in the Amazon rainforest, as the cattle industry contributes to 80% of the deforestation in this region, according to Greenpeace [3].
The company is now in partnership with organizations such as NASA, USAID and MIT Climate CoLab to develop new and innovative materials that can be produced with less of an environmental impact [4]. The company recently announced that 71% of its footwear materials come from waste products of its manufacturing process, such as its Nike Grind material which is composed of rubber scraps [5].
Water and electricity usage
Nike has partnered with DyeCoo, a Dutch industrial equipment firm, to launch a new production process in its factories which would reduce energy use by 60% and eliminate the need for water during fabric dyeing (a process that currently consumes 100-150 litres per 1 kg of textiles according to Nike) [6]. The company has also designed a metric called the Nike Materials Sustainability Index to which it upholds its own company as well as its vendors, to ensure sustainable practices across the supply chain [7].
Going forward, there are a number of additional steps Nike can consider taking:
Knowledge sharing
A lot of the factories and mills that Nike uses to produce its shoes and apparel in Southeast Asia also produce goods for other global and local brands. But as a global giant, Nike has access to organizations and partnerships (e.g. MIT, DyeCoo) that elude many smaller companies. If Nike is serious about curbing climate change at a larger scale, the company should consider spreading its knowledge of innovative materials and more environmentally-friendly production processes across the industry, or offering some of its innovative materials at a discount to other firms. Though this might mean helping out their competitors, this move is unlikely to dampen Nike’s competitive edge given the company’s significant market share and brand power. As the public becomes increasingly cognizant of the importance of environmental protection, it could in fact even help improve Nike’s popularity and willingness to pay among its consumers.
Consumer behavior
Given Nike’s scale, it is also in in the unique position of being able to drive impact by influencing customer behavior. The company can consider going in the direction of other apparel brands such as Marks & Spencer by lowering the suggested water temperature in the washing instructions for its products to save on energy usage and also extend the life of their products [8]. They could also make a bigger push to encourage their customers to hand in their old shoes and apparel for recycling and use these scraps as input for their Nike Grind material and other innovative materials. By providing discounts to consumers that recycle, they would improve their own brand publicity while also driving down input costs. Finally, they can consider using the various sports tournaments they sponsor as opportunities to spread awareness about climate change and increase demand for products made using innovative materials. For example, their sponsored athletes could wear jerseys made from environmentally-friendly fabrics, encouraging customers to purchase similar products rather than traditional fabrics that require more resources to make.
By taking such strides, Nike would continue to lead the way in promoting sustainable business practices. Other sportswear and apparel companies should consider taking a few lessons from Nike’s playbook to drive better outcomes both for their bottom lines and for the environments in which they operate. (798 words)
Sources:
[1] http://www.environmentalleader.com/2014/01/27/coke-nike-call-climate-change-commercial-threat/
[2] http://www.nytimes.com/2014/01/24/science/earth/threat-to-bottom-line-spurs-action-on-climate.html?_r=0
[3] https://www.greenbiz.com/article/why-nike-and-mit-see-textiles-material-climate-change
[4] http://news.nike.com/news/nike-inc-and-mit-climate-colab-materials-innovation-to-combat-climate-change
[5] http://www.csmonitor.com/Environment/2016/0511/Why-Nike-is-making-most-shoes-from-manufacturing-waste
[6] http://www.environmentalleader.com/2013/12/03/nikes-waterless-dye-factory-cuts-energy-use-60/
[7] https://www.greenbiz.com/blog/2012/05/03/nike-innovates-zero-toxic-discharge
[8] https://corporate.marksandspencer.com/media/press-releases/archive/2007/23042007_mshelpscustomerstothinkclimatebyrelabellingclothing
One of the interesting dynamics about Nike’s support of sustainable practices is how it will influence end consumer perception of the brand as a performance and athletic-based apparel manufacturer. Given Nike’s emphasis on constantly innovating to bring the best product to market for athletes everywhere, it will be important to ensure that the sustainable materials do not detract from consumer perceptions of the brand as offering high-end or even elite performance. It will be interesting to see how Nike’s mission statement evolves, if at all, into the future and whether or not sustainability stands alongside performance in its ultimate goal.
Thanks for the post Aparna! It seems like Nike “stumbled” into sustainability practices due to need rather than benevolence (which to be frank, seems to be the case for a lot of corporations). They got squeezed due to low supplies of cotton and other raw materials and so had to innovate themselves out of that bind. They wanted to reduce their dependence (and costs) with regards to utility and energy usage and so created the Nike sustainability index. The one common theme seems to be that most companies do not seem to budge on climate change unless it directly affects their profitability or are faced with major enough PR issues.
I really like your idea of getting customers more involved in the overall message of sustainability though. While it may not make much sense from a profitability standpoint, it really would help with the authenticity of the entire push and like you mentioned, could even result in more sales!
Another idea that could help with Nike’s sustainability cause is to start establishing itself as a thought-leader in emerging markets like Indonesia and Vietnam. As one of the largest players in those labor markets, a little could go a really long way in making serious regulation changes in those countries early enough to create a lasting difference. After all, it is much harder to change once companies are already set in their ways, with emerging markets, we have the option of creating best practices early on and learning from the collective mistakes of the rest of the world.
Very thoughtful article on this iconic customer brand.
As I read through the strategy of those fast moving affordable luxury brands, I cannot help but think that they have a structural conflict of interest: Nike wants sales. So Nike wants fast moving shoes. People need to have more pairs (tennis, casual, running, basket, barefoot…) and change those more often. This creates very negative climate externalities.
Not long ago, people kept leather shoes for 10 years and they were multi-activity and multisport. We kept the jean but now live in a fast fashion world that consumes more ressources moving inputs and outputs around.
When will Nike provide with an all-round pair of shoes lasting 10 years?
I’ll be a buyer because these trainers will be iconic.