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The Swoosh goes green – Environment Sustainability Proposal by Nike

Overview

The world’s leading sports footwear company, Nike which was founded on a handshake is now determined to embrace the environment. Nike’s vision is to create a sustainable economy with planet, people and profit go hand-in-hand. Nike is thus, focusing on sustainable manufacture of its products, sustainable development of their products and the conception of a sustainable marketplace. Nike is determined to design products and persuade their supply chain to create less waste and protect the interest of sports around the globe.
Since 1990’s, Nike is making efforts to reduce its environment footprint by practicing several steps like recycling shoes, phasing out sulfur hexafluoride and manufacturing sports accessories from waste and working along with different NGOs. Nike had also introduced a product line “Considered” in 2005 which insists on designing the products on the principles of sustainability.
In FY05-06 CR Report of Nike, they shared an ambitious 5-year plan where the designers were expected to design shoes using fewer quantities of detrimental adhesives and more of recycled material. This concept was also proposed for apparels and sports equipment. In their report, Nike announced that they were aiming at making their facilities and business travel climate, neutral by 2011. Nike had also set a target of manufacturing its footwear with the minimum environment standards by 2011, their apparels by 2015 and sports equipment by 2020.

Objectives

  • To study the strategies and the methods adopted by Nike to reduce its carbon footprint.
  • To study the different challenges that Nike is facing in its pursuit to realize its environment goals and what further goals Nike can set.
  • To study and analyze the creation, sharing and adoption of innovations by Nike to minimize its impact on the environment.
  • We will also look back at the targets which were set by Nike in its environmental sustainability initiatives and the progress done by them so far.

Synopsis

Strategies­ - Nike is exploring all the closed-loop models and is analyzing all the crucial areas which were ignored once, to increase the environment sustainability. They are trying to find novel and innovative means to design the product, manage energy consumption and resources which are required by Nike to run their global business. Few years back, Nike started working on improving the labor, environmental as well as social consequences of their business model which also involved some risks. Now, Nike has travelled much ahead, leaving behind many issues, focusing on philanthropy, risk management and acquiescence to one which is more sustainable and will benefit people, profits and planet at large.
As a leading athletic brand worldwide, Nike is finding ways towards a more sustainable future. The demand to create new and customizable products is ever-increasing. Thus, Nike is seeking a controlled environment where natural as well as human resources go hand-in-hand. Nike is seeking a potential impact to youth, products, sport, labor forces, development, working conditions, supply chains, and much more.
The manufacture of the products requires raw materials, water as well as energy. As these resources are becoming scarce, the cost of competition for resources is also going up. With customization and multiple markets options, Nike’s strategy is portraying some visibility for business growth in the near future. Nike is associated with almost all sports worldwide and thus, the brand value can be used to sport and to spread the message of global action on climate change that will protect the world.
Nike says that rather than acting towards a sustainable economy there is no other alternative and thus it is coming up with numerous efforts to minimize its environment impact.

Challenges – To gain an understanding of potential implications to their business and examine ways to go green, Nike has been working since many years to examine the challenges that they face as well as the measures that are needed to overcome them and gain a competitive edge.
Nike is looking forward to develop new business concepts that will help them to succeed in the sustainable economy. They are looking forward to create a road map regarding the challenges that the brand is facing. Thus, develop the expertise that will lead them to a successful future. Nike was also facing the challenge to continue their evolution as well as improving their current model during their transition. There were also issues regarding the designing of their products which could go eco-friendly, the corrugated boxes as well as the retail bags which Nike uses. The boxes and the retail bags could be designed in a way that will be recyclable. The lighting facilities used in Nike’s stores were also required to ponder upon in order to Go Green.
Nike became the chair of the World Economic Forum’s Consumer Industries Working Group on Sustainable Consumption in the year 2008. The goal of Nike in this group is to spur the industry collaboration on the solutions that will help to achieve a sustainable economy. In order to overcome the above challenges, Nike joined hands with World Economic Forum, The Natural Step, Deloitte and Touche and Business for Social Responsibility.
Nike also faced the challenge about the existence of their customer brand in a sustainable economy. They were required to explore new ways of doing business and continue to make their existing business model better. Thus, Nike was staring at two key challenges: first, the solutions that will require systemic change according to industry and secondly, the scale and difficulty level of the changes that would demand new changes and novel approaches to collaboration and innovation. Thus, optimistic measures were required to fulfill the solutions to these challenges.

Measures – Nike’s single largest material purchase is the corrugated cardboard. Almost 50% of Nike’s packaging consists of shoebox and its shipping carton. Thus, with an intention to reduce packaging waste, Nike applied innovative design and came up with different materials and alternatives in order to reduce load and shipping cost. But it was also observed that in most of the markets, majority of the materials won’t be recyclable. The research started again and with the help of innovative engineering, a box which will use 30% less material than a 1995 vintage box was discovered. These fully recycled and recyclable boxes will aid in saving 200,000 trees annually and the box will be used by Nike in 2011.
Understanding the significance of collaboration and sharing of knowledge, Nike along with nonprofit Creative Commons has formed GreenXchange. This collaboration ensures patent licensing tools, patent owners that enable an array of technologies for research, development and pioneering commercial uses
Nike had researched a great deal regarding the improvement in the sustainability of retail bags. Previously, Nike outsourced the retail bag business only to the printers that were certified by FSC (Forest Stewardship Council). FSC paper was too costly at that time and as the time went by, Nike encouraged the printers to make use of FSC-certified supplies. Since this time, four years have gone by and now Nike uses the bags which are manufactured with the help of FSC-certified papers. These bags were printed on FSC-certified printers which were operated using soy-based inks and distributed by FSC-certified fulfillment company. As a result of this chain, Nike uses the FSC certification number and logo on every retail bag in Singapore and North America.
Nike has adopted remote lighting management in their retail stores and has also reduced the energy waste. Nike has identified body suppliers which use sustainable materials and are located near Nike centers. This helps in reducing the traffic and miles travelled from manufacturing plants to Nike center as well as also reduce the long-distance shipping.
Nike has also been operating Re-Use a show program under which the old shoes are dropped at collection sites located worldwide. In case of non-availability of collection center there is a mail-in option. These shoes are then delivered to Nike's Wilsonville, Oregon facility and the Meerhout, Belgium facility where they are separated in 3 parts, ground up and are recycled.


At the 2010 FIFA World Cup, Nike introduced environmentally friendly national team kits. These eco-friendly kits were used by Brazil, USA, Portugal, Australia, Netherlands, South Korea, Slovenia, New Zealand and Serbia. Nike used recycled polyester for this purpose and prevented around 13 million plastic bottles which totaled around 254,000 kg of polyester waste. This huge was recycled and an eco-friendly kit was manufactured.

Targets and Performance – In FY05-06 CR Report Nike had announced ambitious 5 year plans to create sustainable products and business models. We will analyze the measures taken by Nike as well as the performance of the brand and try to grade their feat.

  • In case of footwear, Nike is looking to develop all the footwear products under the Considered standards by FY11. Nike had launched 10% of spring 09 models as well as 17% of seasonal production under the Considered standards.  Thus, the work is on target. Nike gets 7/10 for their performance in this case.
  • Nike announced that all its apparel products will meet the Considered standards by FY15 whereas 100% top-volume retail product will reach the standards by FY20. The apparel target is quite on track with the development of Spring 2010 product season whereas the Manual Considered Index in place for Bags product type, FY10. This performance can be rated as 7/10.
  • In case of waste reduction for footwear, Nike has set the ambition to reduce waste by 17% from FY06 to FY11. Nike has already reduced 24% waste from in FY09. This is indeed a great achievement fetching 10/10 for Nike.
  • The apparels target was set in FY09 and is going good, whereas in case of packaging the target was to achieve 30% reduction. Nike has launched the light weight shoe boxes in FY09 and the innovation is all set to be utilized. The performance 8/10.
  • For footwear, Nike’s target was to maintain current petroleum-derived solvents grams/pair amount. This was seen at around 95% reduction from FY95. Nike has achieved this target in FY04 and has also dropped an additional 1.9 grams per pair from FY06 through FY09. Nike gets 10/10 here.
  • Nike had set the goal of increasing the EPMs (environmentally preferred materials) by 22% by FY11. The target was already met in FY08. Moreover, they also achieved 77% increase from FY06 to FY09. Once again Nike got it right and deserves 10/10 for their efforts.
  • Nike is viewing to reduce the CO2 emissions on the footwear manufacture front. The external target wasn’t much visible, but Nike achieved a 6% absolute CO2 reduction after 7 months of work. Despite the unclear targets, Nike managed 6% CO2 reduction which truly a good attempt – 9/10.

So, we can conclude that Nike did quite a descent job in achieving its target. Despite, investing hugely in Going Green, Nike recorded the following numbers in revenues, EPS, Return on Investment and Revenue Distribution of Nike.
(Refer fiq 1.1) Revenue Performance of Nike, Fiscal Year 2004-2010.  (Source – Nikebiz.com)

revenue_performance_nike
diluted_eps_performance
return_on_invested_capital
revenue_distribution

(Refer fiq 1.2) Diluted EPS Performance of Nike, Fiscal Year 2004-2010. (Source – Nikebiz.com)
The reported EPS amounts comprises of certain non-recurring expenses and benefits.
(Refer fiq 1.3) Returns on Investment of Nike, Fiscal Year 2004-2010. (Source – Nikebiz.com)
(Refer fiq 1.4) Revenue Distribution of Nike, Fiscal Year 2005 vs. 2009. (Source – Nikebiz.com)

Nike’s Future Plans Despite spending great deal on the research and development and diverting their most of the resources and designing efforts towards the economic sustainability goal, Nike has estimated that its sales will shoot up by 40% through 2015 to $27billion. Nike also expects to generate $12billion in cumulative cash flow through the next five years.
Nike hasn’t just emerged as a survivor by its sustainability efforts, but they have done it with a competitive edge. Thus, this Athletic giant has proved to its competitors that Impossible Is Nothing. The targets and the performance of Nike towards “Going Green” have been outstanding. As per Nike’s slogan they wished to Just Do It and in fact they Just Did It.

The Writer Ravi Krishnani is Senior Editor at Application Nexus India and can be reached at ravi.k(at_the_rate)applicationnexus.com as well on his Facebook Page.

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