Sustainable Innovation at Nike
Nike is on its way to transforming its entire supply chain to one committed to sustainable innovation.
Nike is a company whose operations are likely to be negatively affected by climate change as well as future regulations attempting to curb it. While regulations are currently aimed at more obvious industry culprits, as the problem worsens, regulatory bodies are likely set forth laws that will further affect companies like Nike. Nike’s supply chain is both a victim of and contributor to climate change in several ways. The company has already set forth an aggressive undertaking – to transform its entire supply chain – to reduce its exposure to climate change and its limiting impending regulation.
Nike is affected by climate change in many ways. The most pressing issue is their raw materials’ greenhouse gas (GHG) emissions. Nike teamed up with MIT to study the effects of manufacturing cotton, polyester, leather, and rubber – major inputs of Nike’s products – on the environment to better understand their options (1). The research shows that the GHG emissions from producing one cotton t-shirt is equivalent to driving a car five miles (2). Ahead of future regulation, Nike’s manufacturing process is at risk.
The company has employed several changes to its raw material inputs in order to defend itself from potential regulations. For example, they have ramped up their use of organic cotton to produce apparel, and are now one of the top five users of organic cotton in the world (3). Polyester, whose impact on the environment is worse than cotton’s at the equivalent of driving a car 13 miles (2), is also Nike’s most used material by volume. As such, in an effort to curb their need for this environmentally-detrimental material, Nike has started using recycled polyester from plastic bottles, resulting in a lower-carbon material (3).
Shrinking global water supply is a major impact of climate change, and a particularly important one for Nike. Significant water is used throughout the production process. To increase water efficiency, Nike has partnered with material vendors “whose textile dyeing and finishing operations are particularly water-intensive” as well as other suppliers through their Nike Water Program. The program helps members track their water usage and wastage in an effort to mitigate excess water being used. Nike has also created new technologies such as ColorDry to dye fabrics and started using synthetic materials, both of which require significantly less water. Additionally, they invest in raw materials, such as BCI-certified cotton, that are less water-intensive (3).
Furthermore, rising global temperatures have been linked to more unstable weather patterns around the world, due to their direct impacts on rates of rainfall, runoff, and evaporation. This poses a threat to Nike, who has many manufacturing facilities located in low-lying parts of the world, such as Southeast Asia, which are more susceptible to typhoons and hurricanes. In 2008, they were forced to shut down four factories in Thailand due to massive flooding – the proceeding halt in manufacturing cost the company millions of dollars (4).
While the ability to predict natural disasters is of course limited, since the floods the company has taken efforts to reduce their vulnerability to future incidents. They have used tools such as the World Resources Institute’s global water risk mapping tool called Aqueduct to strategically identify water stress levels of certain areas to better predict their susceptibility to floods. They also plan to work with suppliers in threatened regions to ensure contingency plans are in place in the event of a disaster (3).
Other steps Nike is taking include investing in renewable energy in their facilities, the creation of multiple Sustainability Indices to standardize, measure, and incentivize progress, and pursuing LEED-certifications for their newer retail stores (3). While they are already doing a lot of work and have set aggressive targets, there is still more to be done. Nike’s mission is to disrupt their whole supply chain, and their steps so far have focused on their upstream counterparts more so than their downstream partners (albeit, the majority of the contribution to climate change comes from the upstream players). An additional step they could take is to use their clout and influence to persuade other retailers carrying their products to commit to becoming LEED-certified. While they have implemented changes in their own stores, these only represent 0.8% of their retail locations (3). Partnering with retailers with similar sustainability missions could lead Nike closer to their goal.
The company should also increase the amount of synthetic materials they produce in their labs. This would help mitigate both the water usage and GHG emission issues. It could also help their bottom line, as they would have most control over the costs associated with their raw materials.
Finally, they should move some of their factories that are located in disaster-prone areas, such as Thailand, to less risky areas where they can still attain cost-effective labor.
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(1) “Why Nike and MIT See Textiles as Material to Climate Change;” Makower (2015): https://www.greenbiz.com/article/why-nike-and-mit-see-textiles-material-climate-change
(2) MIT Report: Sustainable Apparel Materials (2015): http://msl.mit.edu/publications/SustainableApparelMaterials.pdf
(3) Nike Report: Sustainable Innovation is a Powerful Engine for Growth (FY 2014/2015): http://about.nike.com/pages/sustainable-innovation
(4) Climate Adaptation Experts Help Prepare for Disaster;” Westervelt (2015): https://www.climatecentral.org/news/climate-adaptation-experts-prepare-disaster-18701
Student comments on Sustainable Innovation at Nike
It’s really interesting to learn how Nike manages to leverages its major strength – innovation – to reduce its effect on climate change. I studied the impact of climate change in the fast fashion industry for my blog post and most brand take a much more reactive approach by trying to consume less energy in stores, by using recycling material for their paper bags and organic cotton for their clothes. Nike seems to go a step further by not only putting in place those kind of initiatives but also investing research and development in creating more environmental friendly material for its products. I wish they would commercialize some of the technics you described like ColorDry to fast fashion brand to increase further their impact.
Thank you for the post, HBS_TOM. In my opinion, Nike continues to be the innovation leader within the apparel industry, most recently when it comes to sustainability. I recently attended a recruiting event where Nike’s HR team spent a significant amount of time discussing their sustainability initiatives as a key part of the companies vision and strategy. In addition to what you have spoken about in your post, Nike has developed two innovative programs to create sustainability into their products: (i) Nike Flyknit technology, which produces 60% less waste than traditional cut-and-sew methods. Since 2012, the technology has reduced nearly 3.5 million pounds of waste and (ii) Nike Grind, a palette of premium recycled and regenerated materials created from original materials and products that are used in 71% of Nike footwear and apparel products. http://news.nike.com/news/sustainable-innovation
Yikes – the t-shirt vs. driving a car X miles comparison is striking. It would be interesting to know the GHG emission impacts of using more synthetically produced materials, as you detail in one of your suggested alternatives. Thanks for the eye-opening read; the impacts of climate change are already so tangible (i.e. Nike’s factory shutdowns, along with many other impacts detailed by other posters).