Story:
Nike’s Gameplan for Growth that’s Good for All

Innovation is at the very heart of our culture at Nike. One of the cornerstones of innovation is a willingness and desire to learn. And, while we have learned much from our past and others have learned much from our experience, we believe the next era in the evolution from an industrial economy toward a sustainable economy will teach greater lessons than learned before. This evolution requires us to innovate faster, more radically, more disruptively inside of Nike and throughout out our whole ecosystem. It is a top to bottom, bottom to top, inside out and outside in innovation.

In 2008, we produced a video for our design team. ‘Considered Design’ lays out a vision for the products we strive to produce.  On screen, you see a close up of a runner’s shoes, pacing through puddles and mud.  It evolves into a poetic series of athletes in action.

Considered Design video: http://www.youtube.com/watch?v=1WuyE_x8Vs8

The accompanying voiceover:

“This is not a shoe, it is an ethos, a shoe reborn as a tennis court, or basketball or … a better shoe…Why do [products] have a shelf life? What if ... there was a closed loop cycle? …A shoe can’t change the world, but an ethos can.”

The video was intended to inspire. It also set forth a mandate and a vision. How could Nike design products that have no shelf life? How can we reuse and reinvent products? How could we work towards a closed loop vision? This vision was the first important step in driving a new era of innovation.

Our CEO Mark Parker has a vision to embed sustainability as an ethos, as a a catalyst of innovation to deliver product and services that deliver superior athletic performance and lower enviromental impact and ultimately drive profitable and sustainable growth for the company “It’s not about a few people making sustainable products,” says Nike Considered GM, Lorrie Vogel.  It’s about making sure that every person in the system adopts a different world view, sense of purpose and approach to their job.” 

In order to embed sustainability and make it central to our ethos, we have made significant organizational changes, developed new tools and performance metrics, and redefined our relationship with suppliers and industry peers. We started with a focus on our own internal capabilities, knowledge and practices - our internal innovation phase. Over time, we have expanded our focus to include suppliers and industry peers - our external innovation phase.

Internal Innovation Phase – Corporate Responsibility and The Considered Group

In 2004, Nike’s various sustainability initiatives (including environmental responsibility) had not really worked their way into daily business decisions.  CR was perceived as a risk management function not a valuable market opportunity. It was isolated from Nike’s business units as an add-on or layer to the business strategy and not as a core driver. The good news was that business unit managers spoke aspirationally about the potential of effective CR.

Our team set the conceptual metric of return on investment squared or “ROI²” as CR’s new strategic compass, emphasizing that business decisions included both financial and corporate responsibility returns – people, planet and profit. If CR delivered ROI², it was helping the business succeed and improve its social and environmental footprint. We took a strategic approach to CR that emphasized value creation, collaboration with business units and proactive strategic planning.

“We wanted to show how we could help them deliver returns on investment to our shareholders. The end goal for us had to be that businesses institutionalize CR into the DNA of the company so that CR is a living, breathing approach to how one does business.  By organizing CR around ROI², we hoped it would evolve from being seen as a cost to being an intrinsic part of a healthy business model, complete with profitability and sustainable growth. 

ROI² is Nike’s measure of creating an exponential return from integrating corporate responsibility into our business.  Take waste, for example. In FY05-06 we carefully documented and measured the amount of waste generated across our entire supply chain. In one year, the cost of waste across footwear alone was estimated at $844 million.  Everyone is involved in initiatives to reduce our waste across the supply chain: from designers to chief financial officer to business partners. Less waste is better for margins and better for the environment.  By using design to reduce our waste, we’re tapping one of our greatest resources - innovation – and fueling other insights and successes.  This provided the backdrop to our evolution and to the targets we set over the course of the next five years.

“Under our CEO’s guidance and influence, the team began exploring where best to start integrating this strategy into Nike’s ecosystem. We focused on our product creation process and honed in on product design as a key intervention point.  Due to its position at the beginning of the supply chain, the design function offered great opportunity to design out environmental issues. We wanted to help Nike “design the future...as opposed to retrofit the past.” According to one of my colleagues the choice to work with designers was natural: “The designer’s job is to design the future. It’s natural that they would be huge champions of sustainability and they thrive on daunting, new problems. Also, because design is situated at the beginning of the supply chain, the design function is an opportune intervention point.”

In late 2005, the Considered Design ethos was formally embedded within our business strategy, with a focus on high-performing, aesthetically pleasing greener products. The Considered Group is a think tank, tool box, internal consultancy, competitive catalyst, and an antenna to the outside world. It serves as the hub of the Considered design ethos – consider the choices, consider the impacts. Their mandate is to provide inspiration, education, and the tools to drive sustainability best practices deep into Nike’s product creation units and processes.  The team’s objectives include helping Nike assess the entire product lifecycle.

The whole structure of Considered Design is thoughtfully designed to cultivate innovation. Instead of commanding and controlling how the business units implement sustainability, the team places responsibility for sustainability in the hands of designers.  The team is a centralized hub with reach into key Nike functions. The hub’s spokes are product creation units, to which Considered disseminates knowledge, tools, and support.  The team has both environmental and product creation expertise and collaborates closely with the related product engines. Considered’s GM, Lorrie Vogel, explained the organizing philosophy: “If you don’t know how to translate environmental knowledge into products and processes, you’ll always be outside of the product creation engine.”

The Considered team was surprised by how difficult it was to create usable metrics for the product teams. They developed a holistic, predictive way to score products at different intervals throughout the development process. After 18 months of extensive work on developing the right metrics for the tools, the Considered Index was introduced in September 2007.

The Index provided predictive metrics that would work uniformly across Nike’s varied footwear line.  It evaluated a product’s bill of materials (BOM), a roster of all materials specifications for a shoe’s components, using Nike’s Materials Assessment Tool, an abbreviated life cycle analysis for raw materials. The Index scored environmentally preferred materials (EPMs) on multiple criteria including toxic hazard, energy and water usage, recycled content, recyclability, and other supply chain responsibility issues.

As a learning and motivation tool for Nike’s product teams, the Index included a “Change Agent” category. Teams could win points for up to three new significant footprint-reducing product or process ideas. Lesser awards were also given to teams that adopted other teams’ recent innovations.

The Index was carefully calibrated to reward only those products that performed above Nike’s historical averages, with Bronze representing baseline sustainability and Silver and Gold both qualifying as “Considered”; the distinction was purely internal. The Considered team planned to toughen the Index’s scoring over time.

As one manager noted, “The intention is that we just keep raising the bar. As we do, business units will have to improve.”

The Considered team trained product teams how to use the Index. It built a network of Considered “super-users” who served as internal category experts on Considered questions and provided feedback to the Considered team. Through super-users, Considered would provide updates on noteworthy examples of inspirational implementation and innovation.

The Index ran on an intranet calculator. Product teams could self-score their products in a minute by entering their product’s BOM number and clicking checkboxes for design and process options. While teams scored their product at the end of the development process to receive an official Considered rating, many product teams used the Index at interim product gates. The very fact that the information and scoring was public was motivating. It cultivated peer competition and energized the pace of adoption and innovation.

From the beginning, the team had visible CEO level support. As Vogel explained, “CEO Mark Parker believes that sustainability is the future of Nike. He also wanted to see the scores up on the wall so that we could really track and learn from the process.” 

Since Nike began setting targets years ago, we have learned the greatest opportunity to drive change is in the areas where we have the most impact.  Materials create Nike’s greatest environmental impact.  Nike also controls the design and became the area of focus to roll out the Considered Design ethos in 2009.  This same methodology and rigor has been applied to design sustainability into the way we source and manufacture our products. 

Nike’s effort to drive further innovation throughout the company and integrate sustainability into the very core of our efforts is multifaceted.  We have scripted a new vision. We changed the organizational structure and introduced a whole new department. We provided training and leveraged technology. And, we encouraged healthy competition and celebrated successes.

Even the best strategy comes to nothing without the commitment, people and processes to make it happen.  Continuing to integrate sustainability into our business, rather than layering it on top of how NIKE, Inc. and our brands currently operate, will increase and accelerate progress, drive scale and the proliferation of sustainable innovation, and enable broad employee engagement.

At Nike, dedication to and accountability for sustainability begins at the top. In 2001, we formed a Corporate Responsibility (CR) Committee as part of our Board of Directors committee structure. The CR Committee has oversight of environmental impact and sustainability issues, labor practices and corporate responsibility issues in major business decisions.

In FY06, we created a management framework to ensure executive accountability for corporate responsibility across the company. The Vice President for Sustainable Business & Innovation (SB&I) reports directly to President and CEO Mark Parker, and co-manages dedicated teams with business and functional executives to develop and review policies with Board oversight, approve investments and evaluate and refine our approach and direction.

The SB&I team acts as a catalyst for sustainability companywide. Made up of about 130 people, the team leads sustainability strategy development; provides content expertise and consulting to teams companywide; collaborates with sustainability specialists in other parts of the organization; drives sustainability integration; leads engagement with stakeholders; works to mitigate risk and facilitate compliance; and reports on our progress to scale the impact of sustainable innovation beyond Nike.

Our new executive-level Committee for Sustainable Innovation also steers our efforts specific to innovation.  In 2011, we launched an executive-level Committee for Sustainable Innovation. This group is chaired by our CEO and oversees our innovation pipeline and portfolio. It helps to fully capitalize on opportunities by accelerating adoption and bringing these activities to scale.

Ultimately, the greatest measure of our success can be found in the finer detail of Nike’s culture.  The very vocabulary of Nike designers has changed. We now hear team members say ‘ that’s an inconsiderate design’ in commenting on a product that does not meet the new criteria.

External Innovation Phase – Materials Sustainability Index, GreenXchange, Sustainable Apparel Coalition

As Nike advanced through a company-wide adoption of the Considered ethos, it became clear that for true, holistic change, we needed to focus beyond our own internal operations. To drive adoption and scale at an industry level, to ultimately change the marketplace for the better, Nike recognized the potential benefit in sharing knowledge, information and tools with suppliers, peers and other stakeholders.

Four key initiatives show what we are doing to cultivate innovation outside the business: the Nike Material Sustainability Index (MSI), the GreenXchange, the Sustainable Apparel Coalition, and the DyeCoo waterless dying strategic partnership.

Nike Material Sustainability Index (MSI)

The materials in just our NIKE Brand footwear and apparel products come from 900 different material vendors (i.e., supplier companies). We do not source directly with these vendors; they are independent companies that sell materials to our contract finished-goods manufacturers based on our design specifications. To drive sustainability improvements in materials, we focus on the part of the value chain over which we have the most control: product design.

Decisions made in the product design phase determine the majority of a product’s environmental impacts. Nike teams design products with very detailed material specifications, and by providing those teams with the information they need to choose better materials from better vendors, we can improve the sustainability of our products.

We are now working to take the Considered Indexes to the next level. We have been on a multi-year journey to refine the footwear and apparel Considered Indexes based on feedback from product creation teams.  In addition, we have significantly upgraded the materials rating tool embedded in the Indexes and are calling the new tool the Nike Materials Sustainability Index (Nike MSI). The Nike MSI is embedded in the Indexes that our designers and developers use to assess potential products, and it plays a pivotal role in product design.

One major improvement in the Nike MSI is that it rates material vendors in addition to materials themselves, providing strong incentives for the vendors to become more environmentally sustainable. We score material vendors on criteria such as whether they are complying with the Restricted Substance List (RSL) testing requirements and the Nike Water Program requirements; if they take part in materials certification processes, such as the Global Recycle Standard; and whether they have ISO 14001 certification or operate out of certified “green” buildings. Rating higher on these types of criteria will increase a vendor’s overall Nike MSI score.

The Nike MSI does more than rate our material vendors, however. It also scores materials according to (among other things) the chemicals required to make or process them. These scores enable our Nike product-creation teams to make more sustainable, less-toxic choices during product design.  It also assigns sustainability scores to materials based on multiple criteria, including how much water is required to produce them and the water stewardship of vendors that process them. The Nike MSI creates a strong incentive for material vendors to enroll in the Nike Water Program and reduce their water-related impacts by recycling process water or implementing innovative low- or no-water coloring processes – as these activities help to increase their MSI scores. Water-efficient materials from water-efficient vendors receive more points on the MSI, and, therefore, stand a better chance of being selected by our product creation teams than other similar materials. 

Materials are a substantial cost, so identifying long-term access to affordable materials that meet our environmental standards is key to our ongoing success and our ability to decouple materials from scarce resources.

GreenXchange

Over the past ten years of working on sustainability, we have come to understand the value of collaboration and shared knowledge. Without it, companies replicate efforts, reinvent wheels and often only make incremental progress.

Nike worked with the collaboration nonprofit, Creative Commons which also believe in the power of open innovation. Nike and Creative Commons share a vision of creating a digital platform that promotes the creation, sharing and adoption of technologies that can potentially solve important global or industry-wide challenges.

GreenXchange, a web-based marketplace we founded with several other companies, was born in conversation leading up to the World Economic Forum in Davos in 2009, and launched in 2010.  By using a set of standardized, free, legal tools, patent owners can make portions of their intellectual property portfolio available under a set of terms between the current choices of "all rights reserved" and "no rights reserved."  With GreenXchange patent licensing tools, patent owners open up a wide swath of technologies for research, development and innovative commercial uses.  Patent users receive the rights they need to innovate, and patent owners receive credit for their works - as well as the option to receive annual licensing payments.

GreenXchange builds on a culture to create common spaces for innovative reuse, as well as standardization efforts for biological materials and scientific data. It also bridges some key gaps in the way that green technologies are developed and utilized.

Many active R&D companies create green technologies that are not core to their business: they may represent good practices shareable across a large set of companies - sometimes even including competitors - but lack the business infrastructure to make those patents available for wider use.

GreenXchange was our first foray into open innovation with other businesses, set up to allow organizations to collaborate and share intellectual property. We have gained significant insights from this collaboration which continue to inform our strategy to bring sustainability innovations to scale.  The very concept of GreenXchange is a management innovation. Instead of taking a proprietary, short term approach to developing and controlling important information and sources, we have done the opposite. Nike continues to urge its  peers to collaborate, and is leading the way through its own commitments. 

Sustainable Apparel Coalition

Complementing our work to improve factory conditions, Nike is exploring ways to evaluate and communicate the environmental and social performance of individual products. We are doing this in cooperation with the Sustainable Apparel Coalition (SAC), a group of which we were founding partners.

The SAC is an industry-wide group of leading apparel and footwear brands, retailers, manufacturers, NGOs, academic experts and the U.S. Environmental Protection Agency, working to reduce the environmental and social impacts of apparel and footwear products around the world.

The SAC believes a common approach for measuring and evaluating sustainability performance is essential for driving a “race to the top” in the apparel supply chain. Apparel retailers and brands can compare the performance of products and upstream supply-chain partners, and those partners will have a single standard for measuring and reporting performance to their downstream customers. Eventually, this approach can provide a foundation for reporting to consumers on the environmental and social footprint of the products they purchase.

Through multi-stakeholder engagement, the Coalition seeks to lead the industry toward a shared vision of sustainability built upon a common approach for measuring and evaluating apparel and footwear product sustainability performance that will spotlight priorities for action and opportunities for technological innovation.

The Sustainable Apparel Coalition’s vision and purpose are based on a set of shared beliefs:

• The environmental and social challenges around the global apparel supply system affect the entire industry.
• These challenges reflect systemic issues which no individual company can solve on their own.
• Pre-competitive collaboration can accelerate improvement in environmental and social performance for the industry as a whole and reduce cost for individual companies.
• This collaboration enables individual companies to focus more resources on product and process innovation.
• Credible, practical, and universal standards and tools for defining and measuring environmental and social performance support the individual interests of all stakeholders.

DyeCoo waterless dying strategic partnership

Nike recently entered into a strategic partnership with DyeCoo Textile Systems B.V., a Netherlands-based company that has developed and built the first commercially available waterless textile dyeing machines. By using recycled carbon dioxide, DyeCoo’s technology eliminates the use of water in the textile dyeing process. With no water consumption or auxiliary chemical use, a reduction in energy use, elimination of drying and improving the process, the technology can enhance the quality of the dyed fabric and potentially revolutionize textile manufacturing.  Our VP of Merchandising and Product, Eric Sprunk further explains, "Waterless dyeing is a significant step in our journey to serve both the athlete and the planet, and this partnership reinforces Nike’s long-term strategy and deep commitment to innovation and sustainability.  We believe this technology has the potential to revolutionize textile manufacturing, and we want to collaborate with progressive dye houses, textile manufacturers and consumer apparel brands to scale this technology and push it throughout the industry."

Postlude

In earlier years, we were about innovating solely to deliver optimal performance to our athletes, and strong financial returns to our stakeholders. We also had to react to risks and constraints in our ecosystem. Organizationally, the initial charge resided with the Vice President of the Corporate Responsibility Group. Over time, we made further changes to support, iterate and integrate the leadership vision thoughout the company. It meant an evolution in our approach. Now, our long-term vision is to deliver growth that is good for all – our athletes, our consumers, our investors, our suppliers, our partners, and the world in which we operate.  We are using sustainability to redefine business performance and look to show the industry how we can embed sustainability into our approaches to product and manufacturing, and solve challenges in business and sustainability for the world.  To enable adoption, our innovation strategy focuses on utilizing better processes, making better choices and bringing those choices to scale. We develop certain tools, such as the Considered Index, to drive our internal integration. We set targets that align to and support our strategy and have expanded our focus to our supply chain and industry peers. We work to optimize and improve our impact, and, at the same time, we innovate with a focus on changing the future.

Timeline

1964  Blue Ribbon Sports founded by runners and revolutionaries - Bill Bowerman and Phil Knight  -as a distrbutor for the Onitsuka Tiger footwear brand (now ACIS)

1971  Swoosh logo designed for $35.  The Nike swoosh the spirit of the winged goddess who inspired the most courageous and chivalrous warriors at the dawn of civilization

Year-end revenues reach $1million.

1972   BRS founds Nike

 late 1970s  Nike establishes headquarters in Beaverton, Oregon, expansion internationally.

1985  Sock Racer championed Bowerman’s minimalist values with a breathable four-way-stretch upper, instead of layers of fabric, reducing weight and using less materials.

1988  Launch of ‘Just Do It” campaign and the reputation for unique and inspiring ads.

Revenues exceed $1.2 billion

1990  Niketown stores launched; Labor practices questions

1992  Nike’s first Code of Conduct published to guide practices in contract factories

1993  Nike launched its Reuse-A-Shoe program, allowing consumers to drop off any brand of worn out athletic shoes. Nike grinded the shoes and used the recycled material and manufacturing scrap in new sports surfaces. Since its launch, Nike has recycled more than 25 million pairs of athletic shoes.

1995  Nike began the journey of phasing out volatile organic compounds (VOCs) or petroleum-derived solvents (PDS) from its footwear production, reducing the use of VOCs 90% in just over five years to 2001.  Nike also started to manufacture its shoeboxes with 100% recycled cardboard.

1997  Nike committed to fully phasing out SF6, a global warming gas used in Air-Sole cushioning units. In 2006, Nike completed the phase out of all F-gases in Nike-branded footwear.  Nike began to blend organic cotton into a range of t-shirts.

2000  Nike Woven started the conversation about using less adhesives and less waste while maintaining comfort, performance and breathability.  The Standoff Singlet worn in Sydney was the first time Nike used 75% recycled polyester in a performance product.

2001 CR Committee of Board established.  Nike also established its first comprehensive list of restricted substances (RSL) to guide suppliers in the production of safe and legally compliant product. The RSLs were based on the most stringent worldwide legislation and also included substances that Nike had voluntarily decided to restrict.

2004  Hannah Jones assumes role as VP, Corporate Responsibility. 

That year, Nike also developed an environmentally preferred rubber that contained 96% fewer toxins by weight than the original formulations.  Also, Nike’s first retail introduction of apparel, the Men’s Fitness recycled polyester track suit, was made from 100% recycled polyester in a range of men’s fitness jackets and pants.

2005  Considered Design was formed as an ethos of the company to create products that address environmental impact by reducing waste, increasing the use of environmentally preferred materials and eliminating toxics. Nike introduced the Considered Boot, using a single shoelace woven between the leather parts of the upper, minimizing adhesives and allowing for easier disassembly.

2006  Mark Parker becomes CEO

2007 Considered Index introduced.  Also, the Nike Long Ball Slip-On was a unique performance-based shoe constructed without the use of solvents to hold it together.

2008  Nike launched the AIR JORDAN XX3, incorporating sustainability without sacrificing performance. That same year, the Air Pegasus 25, one of Nike’s most iconic running shoes, was designed to maximize efficiency.

2010  GreenXchange launched and some of the world’s leading football (soccer) players wore the most environmentally friendly and technologically advanced jerseys on the pitch.

Also, Nike’s EADT software application enabled designers to make the most sustainable choices right at the start of the product creation process, in real time. The tool was created based on Nike’s internal Considered Index, tested and utilized since 2006, and released to the industry to support transparency and collaboration.

2011  Sustainable Apparel Coalition launched.  Also, using a new fabric that’s both thick and soft, the women’s Nike Legend Pant was made from recycled polyester, material made from recycled plastic water bottles.  The Nike Legacy GS Boardshort brought performance and innovation to the next level for the competitive surfer, while also lowering environmental impact.

2012  Implementation of Nike Materials Sustainability Index began.  And, NIKE, Inc. announced a strategic partnership with DyeCoo Textile Systems B.V., developer and builder of the first commercially available waterless textile dyeing machine. The technology eliminates the use of water in the textile dyeing process.