Sustainability + Nike Case Study

Sustainability + Nike A Case Study Navyasri Parasa Sustainability in Business and Design Winchester School of Art – MA Fashion

Table of Contents 1.

Introduction...............................................................................................................2

2.

Issues and challenges to sustainability and Nike’s approach .............................4

3.

Analysis of Nike’s the Supply Chain .......................................................................6

4.

Role of Stakeholders and CSR impact....................................................................8 4.1 Stakeholder analysis and Business Ethics ............................................................. 8 4.2 CSR Impact ............................................................................................................ 9

5.

The rise of Green Marketing ..................................................................................10

6.

Changing perspectives and consumption patterns in customers .....................12

7.

Key challenges in pursuing sustainable development for Nike .........................13

8.

Recommendations and Conclusion ......................................................................14

9.

References ..............................................................................................................15

10. Appendix .................................................................................................................17

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1. Introduction Since the beginning of the industrial revolution in the late 18th century, came the era of large scale mechanized production lines and mass manufacturing of goods. The textile industry was among the first to be fully mechanized, with the advent of the power loom.(Landes, 2003) The quest for raw materials to meet the demands of the manufacturing industry led to the British Empire turning towards its colonies for raw materials such as spices, tea, silk, cotton, opium, etc.(Brain, 2019) This in time, reshaped history and paved way to the industrialized world that we currently know and live in. Along with industrialization came the increased use of earth’s resources to meet the demands of mass production and a rapid rise in pollution of the environment. From the turn of the current century, there has been an increased focus on sustainability and protection of the earth from environmental degradation. As per the dictionary, sustainability is defined as “a method of harvesting or using a resource so as to not deplete or damage it permanently.”(Merriam-Webster Dictionary, 2020). With the ever increasing population, there is a tremendous strain on the earth to supply enough resources for survival. This is compounded by uneven distribution of wealth and access to resources which leads to unsustainable consumption patterns throughout the world.(The University of Nottingham, 2019) Therefore, it is crucial that sustainability is adapted for our manufacturing industries. Sustainability can be divided into three pillars, as shown in Figure 1 below.

Figure 1. The Three Pillars of Sustainability Image Source: (The University of Nottingham, 2019)

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The three pillars or dimensions include sustainability in terms of: 1. Economic viability – To make decisions that help create sustainable, accessible, efficient and environmental friendly economies.

2. Social equity - Ensuring equal access to resources, improving quality of life, creating equal opportunities and thriving new communities.

3. Environmental protection – To ensure that the environment is not degraded and the resources are not completely depleted, while meeting the economic and society’s requirements.

Achieving sustainability in fashion industry is even more imperative due to the massive impact it has on the planet, as illustrated in Figure 2 below. There is high consumption of resources and waste produced throughout the lifecycle of apparel production. This case study looks into the application and issues of sustainability in the fashion / apparel industry by analysing the sportswear brand, Nike, Inc.

Figure 2. Environmental impact of the fashion industry Image Source: (Harrabin, 2019)

Nike is a multinational powerhouse headquartered in Oregon, USA. It is the world leader in athletic footwear, apparel, sports equipment industry. Nike has suppliers around the world and is involved in massive supply chains; to produce, transport and sell sportswear globally. Hence, this brand provides the perfect opportunity to analyse various sustainability concepts already being implemented and how they can be improved.

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2. Issues and challenges to sustainability and Nike’s approach Fashion, as a definition relates more to the desire to own new and a large variety of clothes, as opposed to clothing, which is a basic human need.(Iran, 2018) This desire is what encourages fast fashion, leading to overconsumption and unsustainable production methods to meet the demand. Some of the common sustainability issues related to the fashion industry include, overconsumption of water, pesticides to grow conventional cotton, water and air pollution caused due to the pesticide usage and chemicals used in the dyeing process. The long transportation links in fashion supply chain further adds to CO2 emissions. Social challenges of the fashion industry includes the hazardous and unsafe working conditions of the suppliers, low wages along with the possibility of forced or child labour, over which the fashion brands may not have direct control. At a global level, not only is strong legislation required, but an effective enforcement method needs to be put in place to alleviate issues of exploitation, waste disposal, responsible sourcing of raw materials. These issues and challenges are especially relevant to Nike since a majority of its production happens outside the United States. There have been several reports in the past, related to unsafe and unfair working conditions at Nike’s contracted factories.(Abnett, 2016; Robertson, 2019).

Over the years, Nike has risen up to these challenges through a multi-prong approach that encompasses all three pillars of sustainability, which are elaborated in a detailed “Impact Report” released every year.(Nike. Inc, 2019c). The main target issues for the year 2020, shown below in Figure 3 are divided into the following categories: 1. Minimizing environmental footprint (Environmental), 2. Transforming manufacturing (Economic), 3. Unleash human potential (Social).

Figure 3. Nike’s priority target issues for the year 2020 Image Source: (Nike. Inc, 2019c) Navyasri Parasa – 31401627 Sustainability in Business and Design

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Nike has rolled out projects such as achieving 100% renewable energy use in all the facilities owned or operated by Nike around the world by 2025. 99% of the waste from footwear being manufacturing is recycled and converted to energy to power their factories, thereby eliminating landfill wastes and pollution from incineration. Nike is also embracing sustainable raw material sourcing through recycling around 1 billion plastic bottles into recycled polyester and other materials to be used for producing apparel and footwear. This is evident in a 22 percentage point increase in use of sustainable materials for apparels and a 62 percentage point increase in the use of certified organic cotton for its products compared to 2014 levels (Nike. Inc, 2019c). Other environmental challenges being addressed by Nike include an innovative approach to reducing freshwater utilization during dyeing and finishing processes through investing on water risk mitigation plans for the suppliers and working towards 100% of the suppliers meeting Nike’s waste water quality and sustainable sourcing requirements. Nike has also been innovating in the area of eliminating the discharge of hazardous chemicals through 100% compliance with ZDHC Manufacturing Restricted Substances List (MRSL). At a global level, Nike monitors the company’s implementation of policies, tracking their effectiveness and future policy making through a corporate governance model that involves discussion on priority sustainability issues (e.g. Forced labour, Ethical conduct, Circular Systems Design etc.) along with decision making form the Board of Directors as well a Corporate Responsibility, Sustainability and Governance committee (Ref. Appendix. A). This ensures that the values and importance of sustainability, human rights, inclusion, and social responsibility are driven through all the levels of such a diverse and multinational corporation.

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3. Analysis of Nike’s the Supply Chain Majority of the garments found in landfills and incinerators are traditionally designed in a linear, cradle to grave model beginning with resource extraction, production, sales and eventually disposal (Gwilt and Rissanen, 2011). But these are very unsustainable models which impacts various resources, processes and people around the world. There is a requirement to move towards design strategies that not only focus on post purchase concepts of “Reduce, reuse and recycle” but also aim at lower resource utilization, and lower consumption of higher quality and durable goods at pre-manufacturing stage. One such approach could be through applying a cradle to cradle concept, which is a closed loop system inspired from nature. Here, products are classified as either biological components – which turn into food for the biological cycles or technical nutrients - that are absorbed into technical cycles for further production.(Sherratt, 2013) These cycles are illustrated in Figure 4 below and provide a guideline that could be used by Nike.

Figure 4. Cradle to Cradle cycle concept Image Source: (Wautelet, 2018)

Nike’s supply chain spans worldwide due to cost benefits. Majority of the manufacturing is outsourced to suppliers worldwide with most of the raw materials being sourced within the manufacturing host country by independent contractors. Therefore, embracing a robust supply chain management model would ensure standards of sustainability and quality of products are met.

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The below Figure 5 illustrates the size and span of Nike’s global supply chain. Its goods are produced in 41 countries at 533 factories with more than 1 million workers. Raw materials are sourced form 11 countries and 78 facilities.(Nike. Inc, 2019b). Nike sells its products through NIKE owned retail stores along with digital platforms and through independent distributors and licensees worldwide. These are supported by 6 primary distribution centres in the US and 67 distribution centres outside of the US.(Singh, 2019)

Figure 5. Nike Supply chain Image Source: (Nike. Inc, 2019b)

Nike mas made major strides in establishing a good supply chain through long term supply with high quality and less number of factories that meet Nike’s stringent sustainability and corporate responsibility while minimizing environmental impact and creating a safe, valued, strong and engaged workforce. A similar commitment is shown at the highest level, through Nike’s Corporate Responsibility, Sustainability & Governance Committee of the Board of Directors who review and evaluate Nike’s sustainability practices and provide management oversight. In line with the cradle to cradle concept, Nike has committed to accelerate the implementation of circular economy and has published its 10 principles of circular design (Ref. Appendix. B)(Nike. Inc, 2019a). These principles consist of (1) low impact, upcycled and recycled materials, (2) designs with cyclability in mind, (3) waste avoidance in product creation process, (4) easy disassembly of products to preserve value, (5) green chemistry to eliminate hazardous wastes, (6) refurbishment through repair or components or materials, (7) versatility in products to adapt to changing styles and purposes, (8) durability through high quality production and materials, (9) recycled or biodegradable packaging, (10) establishment of new models to extend the product lifecycle.

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Hence, Nike’s Circular Systems Design embraces a circular future with re-use, recycle and regeneration of materials to the maximum extent, at its core. This concept will dictate the designs as well as the souring requirements from external suppliers and stakeholders across Nike’s supply chain.

4. Role of Stakeholders and CSR impact As discussed in the previous section, Nike’s supply chain extends world-wide with factories in Asian countries such as China, Vietnam, Indonesia and Thailand manufacturing up to 90% of Nike’s goods.(Singh, 2019).

4.1

Stakeholder analysis and Business Ethics

It is crucial that all the stakeholders act in harmony to support the large supply chain. A stakeholder can be defined as “any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization.”(Freeman, 1984) Subsequently, stakeholder engagement refers to the way companies, employees, consumers and political groups engage in a responsible way for the common good of the environment and the society at large (Weiss, 2014). The primary and secondary stakeholders of a group is shown below in Figure 6, with the primary being those directly interacting with the business such as suppliers, employees, customers, factory owners etc.

The secondary stakeholders comprise of the media, various NGOs, consumer groups, and the society at large which are impacted by the business.

Figure 6. Primary and Secondary stakeholders Image Source: (Weiss, 2014)

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Similarly, business ethics refers to a moral philosophy that involves the differentiation between right and wrong and consequently taking decisions and acting for the greater good of the stakeholders and society.(Weiss, 2014). In the context of Nike, the primary stakeholders include their employees, suppliers, factory owners. Engaging with the factory owners, Nike has been undertaking annual training events, supplier engagement events to share information on sustainability policies, labour law best practices along with annual training to those directly involved the supply chain management. (eg: Community events in Thailand and Malaysia addressing migrant worker management and risks of forced labour respectively.) Nike has also been prioritizing the wellbeing of factory workers and engaging with them to understand their needs and improve performance. Steps such as uplifting the culture of health and safety, elimination of excessive overtime and sharing the gains from productivity to the factory workers ensures an engaged workforce. Nike had implemented a Manufacturing Index in 2012, which is a scoring system for the supplier factories based on sustainability and labour practices along with metrics such as quality, cost and on time delivery. These have been targeted to deliver improvement in factory workers wellbeing and unplanned absenteeism. (Nike. Inc, 2019c)

4.2

CSR Impact

Urip describes CSR as a practice through which an organization serves not only the best interests of itself but also caters to the wider community by creating bigger opportunities.

This would fuel the company’s long term success along with benefit for the wider society.(Urip, 2010) CSR programs provide substantial growth opportunities, when these principles are embraced fully. Nike has been on the forefront CSR projects which are covered in its “Unleash Human Potential” sphere of issues. Some of the community impact programs undertaken include conducting Kids events from ages 7-12 to get active, coaching close to 100,000 community coaches to improve coaching experiences for kids.

Nike also encourages majority of the employees to engage in activities supporting the local community, with donations of $9.8m and more than 147,000 hours volunteering hours contributed by the employees in the FY 2019. Nike has also invested $ 417m on various programs that impact the community.(Nike. Inc, 2019c)

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5. The rise of Green Marketing Green marketing refers to the adoption of environmental friendly and low resource consuming strategies throughout the stages of the supply chain. These include the use of recyclable packaging, sustainable sourcing, clean and pollution free manufacturing etc. As per studies conducted world-wide, close to 70% of the people responded that they would spend more on a green product. (Weiss, 2014)This demonstrates the massive potential in embracing green marketing strategies by developing and showcasing green, environment friendly products. Sportswear is usually associated with an active, healthy and green lifestyle and therefore, Nike can work to be a pioneer by adapting green marketing principles through their supply chain and also advertise them accordingly. But Nike surely is leading the way in using “green” materials and creating environment friendly products.

One such example is Nike Vapormax Random, shown in Figure 7, launched in 2019. It is created from unused Flyknit yarns which would have headed for wastage, giving it the random multi coloured look. While the bottom Air sole is constructed from 75% recycled materials such as discarded CDs.(Nike. Inc, 2019c)

Figure 7. Nike Vapormax Random Shoes Image Source: (Nike. Inc, 2019c)

Nike has introduced options on its mobile app to easily search, shop and learn about sustainable products on the webstore. This is enabled through a shop sustainable tab which can be used to identify sustainable products and learn about the raw materials used. These sustainable products are highlighted by a specially designed “Sunburst Logo”, shown in Figure 8, which consists of the original Nike “Swoosh” rotated into a circular pattern, signifying the circular design concepts.(Nike.com, 2018) Navyasri Parasa – 31401627 Sustainability in Business and Design

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Figure 8. Nike Sunburst logo with sustainable products on nike.com Image Source: (Nike.com, 2018)

Yet another area where Nike excels in its green marketing is through the use of recycled, repurposed or biodegradable materials to create packaging. One such example shown in Figure 9 is the Air Max Shoe Box that was created from recycled containers and coffee cups with no added chemicals.(Tucker, 2017) Such innovative and sustainable designs bring a very positive image to the Nike brand and has a potential to dominate the sportswear industry.

Figure 9. Nike Air Max recycled packaging Image Source: (Tucker, 2017) Navyasri Parasa – 31401627 Sustainability in Business and Design

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6. Changing perspectives and consumption patterns in customers The demand for sportswear has grown greatly in the recent times due to the rise of healthy lifestyle. With the advent of online retailers, the customers have vast information to aid them in their decision making process while buying these sportswear. There is also an increased focus on sustainable fashion products due to greater awareness of the customers. Whereas, incorporating sustainable features into the products can drive up costs but an initial investment in latest manufacturing technology can pay dividends in the long run through economies of scale. One of the innovations in sportswear includes seamless manufacturing, illustrated below in Figure 10, which integrates seamless knitting process with Computer aided design and manufacturing (CAD/CAM) to achieve zero material waste and a better body fit.(Fung and Liu, 2019)

Figure 10. Comparison of different manufacturing techniques Image Source: (Fung and Liu, 2019)

Such innovations can provide sustainable features along with functional properties and increased production speed, thereby meeting the demands of the new emerging customers. With the rise of the tech savvy and ethically inclined Millennials and Gen Z, the sportswear consumption patterns are shifting towards apparel made from sustainable materials. Nike has been innovating constantly to meet this demand and has introduced various products such as the use of recycled polyester from plastic bottles with a 30% reduced carbon emission rate compared to virgin polyester. Nike Flyknit technology uses high strength, light weight recycled fibres while producing 60% less waste compared to traditional manufacturing techniques. Nike Air shoes are designed with 50% recycled manufacturing waste and are made from 100% renewable energy. Nike also runs recycling programs for used shoes to crate grind material, used in sports surfaces and other products. (Nike. Inc, 2019c) Navyasri Parasa – 31401627 Sustainability in Business and Design

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7. Key challenges in pursuing sustainable development for Nike Since Nike is a global giant with production centres away from the headquarters, some of the key sustainability challenges for Nike based on prioritization through all the stages of the supply chain are summarized below, with actions taken by Nike to address them. (Ref. Appendix.C): 1. Worker compensation – Nike is currently working with factories to develop new compensation models, experimenting with Fair Labour Association’s compensation tool.

2. Forced labour, human trafficking and modern slavery – Nike is working with NGO’s and international labour organizations to address the risks of forced labour, especially for migrant workers.

3. Child Labour – Nike forbids the use of child labour anywhere in its supply chain and has strict standards on verifying worker’s age prior to hiring. This has led to zero child labour findings in the past 4 years. (Nike. Inc, 2019c) 4. Workplace hazards – Nike provides strict guidelines and laws that need to be met by the contractor factories which focus on fire safety, building safety, occupational health and machine safety.

5. Energy consumption – Nike is embracing the use of renewable energy sources throughout the supply chain. Implementing solar photovoltaics on factory rooftops and cutting energy consumption at retail stores are some examples.

6. Material sourcing – Nike is pioneering the use of 100% sustainable materials in footwear and are using recycled polyesters, alternative leathers, organic cottons in their apparel to decrease environmental impact.

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8. Recommendations and Conclusion In conclusion, this essay carries out a case study on the key issues of sustainability from the point of view of the sportswear giant, Nike, Inc. Various challenges have been discussed based on the three pillars of sustainability, while looking into the specific issues faced by Nike. This was followed by a review of Nike’s vast supply chain and how cradle to cradle methods are being implemented to create a circular design system. Followed by it, a review of stakeholder engagement and CSR programs have been studied, with their impact on the local community. A newly emerging trend of green marketing and its importance have been discussed along with Nike’s progress in that field. Customer consumption patterns and behaviours have been discussed with Nike’s response to the same. Finally key challenges to sustainable development, identified throughout the supply chain and how Nike is dealing with these have been addressed. One of the recommendation that I believe would greatly benefit Nike is to continue its innovation in the field of sustainable development and put in place robust audits, engagement with NGOs and local communities to ensure its sustainable policies are reviewed periodically and corrected if and when required.

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9. References Abnett, K. (2016) Just Fix It: How Nike Learned to Embrace Sustainability, Business of Available

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https://www.businessoffashion.com/articles/people/just-fix-it-

hannah-jones-nike.

Brain, J. (2019) The Cotton Industry - Historic UK, Historic UK Ltd. Available at: https://www.historic-uk.com/HistoryUK/HistoryofBritain/Cotton-Industry/

(Accessed:

15

April 2020).

Freeman, R. E. (1984) Strategic management: A Stakeholder Approach. Boston: Pitman.

Fung, E. and Liu, R. (2019) ‘Sustainable Sports Fashion and Consumption’, in Muthu, S. S. (ed.) Consumer Behaviour and Sustainable Change, p. 19. doi: 10.1007/978-981-131265-6.

Gwilt, A. and Rissanen, T. (2011) Shaping sustainable fashion: Changing the way we make and use clothes, Shaping Sustainable Fashion: Changing the Way We Make and Use Clothes. London: Earthscan. doi: 10.4324/9780203126172.

Iran, S. (2018) ‘Sustainable Fashion: From Production to Alternative Consumption’, in Schneider, A.-M. (ed.) Sustainable Fashion Governance and New Management Approaches. Cham, Switzerland: Springer.

Landes, D. S. (2003) The Unbound Prometheus. Cambridge University Press. doi: 10.1017/CBO9780511819957.

Merriam-Webster Dictionary (2020) Sustainable. Available at: https://www.merriamwebster.com/dictionary/sustainable (Accessed: 2 April 2020).

Nike. Inc (2019a) Nike Circular Design. Available at: https://news.nike.com/news/nikecircular-design-workbook.

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Nike. Inc (2019c) Purpose moves us - FY19 Impact Report, Nike.Com. Portland. Available at: https://purpose.nike.com/.

Nike.com (2018) Nike.com Launches Program to Highlight Sustainable Design, Nike.

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Available at: https://news.nike.com/news/nike-earth-day-sustainability-2020.

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Sherratt, A. (2013) ‘Cradle to Cradle’, in Idowu, S. O. et al. (eds) Encyclopedia of Corporate Social Responsibility. Berlin, Heidelberg: Springer Berlin Heidelberg, pp. 630–638. doi: 10.1007/978-3-642-28036-8_165.

Singh, A. (2019) Nike Manufacturing and Supply Chain Strategies, Market Realist.

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The University of Nottingham (2019) The three pillars of sustainability, Sustainability, Society and You. Available at: https://www.futurelearn.com/courses/sustainability-societyand-you/0/steps/4618.

Tucker, E. (2017) Nike releases Air Max shoebox made from recycled cartons and coffee lids, dezeen.com. Available at: https://www.dezeen.com/2017/03/27/nike-releases-airmax-shoebox-made-from-recycled-cartons-coffee-lids-design-sustainable-packagingarthur-huang-miniwiz/.

Urip, S. (2010) CSR Strategies. Singapore: John Wiley & Sons (Asia) Pte. Ltd. Weiss, J. W. (2014) Business Ethics A Stakeholder and Issues Management Approach.

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10.

Appendix

A: Nike Corporate Responsibility, Sustainability and Governance committee(Nike. Inc, 2019c)

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B: Nike Circular design principles shown below. (Nike. Inc, 2019a)

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C: Nike FY 2019 priority issues. (Nike. Inc, 2019c)

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