Nike Case Study Analysisv2

8/3/2019 Nike Case Study Analysisv2

1/8

Case Study Analysis of NikeSustainability Goals

SUS 500 Principles of Sustainability

Liana Harriot

October 15, 2011


2/8

ABSTRACT

Nike, a company that is over 40 years old, is the largest seller of athletic footwear andapparel in the world and the leader in its field. After negative reactions from stakeholderspertaining to its position regarding their contractors unfair and unsafe labor and

environmental practices in the late 1980s and early 1990s, Nike began to undertake atotal overhaul towards their business practices.

Nike, in the last 20 years, has been on a strong pursuit to becoming sustainable. Bycontinually developing and implementing new methods to achieve sustainability, Nikehas been the forerunner within the industry regarding sustainability issues and values.Nikes branding power is so large that it will lead the way for all other companies in theindustry to follow suit and may serve as an example for companies in other industries.Nike corporate strategy continues to evolve as well and by opening its doors to externalstakeholders and third parties like The Natural Step, Nike shows they are open forsuggestions to better the company, increase their profitability and reputation andbecome a world leader in sustainability.

Nike will also need to continue to be consistent to maintain the social, economic andenvironmental balance that makes up their triple bottom line.


3/8

GOALS THE COMPANY HOPED TO ATTAIN WITH THEIR SUSTAINABILITYEFFORTS

Nike had been pursuing a strategy of global sourcing opportunities to produce products

at a lower cost in the 60s, 70s and 80s. This strategy had been fiscally rewarding, butas it became known about the mistreatment of its contracted workers, the chemical usedto build their products and environmental degradation committed, Nikes image began tosuffer.

In the late 1980s, Nike came under attack as the companys overseas labor practiceswere exposed. Activists alleged that Nikes contractors workers were subjected tosweatshop conditions. These accusations began to create significant negative publicrelations problems for the company. Nikes management first denied responsibility forcontract factory workers and resisted any attempt at change, but gradually came to seethat their company was part of the problem and wanted to change their outlook on theirbusiness processes and practices.

Eventually Nike began addressing its labor and sustainability issues in a more strategicway. By the mid-1990s, Nike realized that corporate social responsibility needed to be acore part of Nikes business in order to maintain long-term profitability. Nike began aserious commitment to overhauling the labor practices in its suppliers' overseas factoriesafter it was targeted by activists campaigning against sweatshop conditions. Nikeformulated a Code of Conduct for its suppliers that required them to observe basic laborand environmental/health standards. Nike also began making a business case forsustainability strategy for the entire company by acknowledging that a competitiveadvantage could be gained by being proactive on environmental and social issues.

Nike created an external structure, the Nike Environmental Action Team (NEAT), and

partnered with a third party, the Natural Step to implement sustainability principlesthroughout its organization. With input from the Natural Step, the NEAT team has beenable to identify sustainability process that has identifiable costs that have affected long-term environmental and financial performance. They have been able to articulate howNikes financial performance would be impacted by stakeholders reactions tosustainability performance by linking the impacts of this strategy on both corporatestrategy and performance.

Under then CEO Parkers guidance and influence, the Neat team began exploring howto tackle Nikes environmental footprint using this new strategy, and homed in on productdesign as a key intervention point. CEOs Parkers insights along with Hannah Jones,Nikes head of corporate responsibility, became a driving force behind the new

approach. The NEAT and design teams decided that there was a great opportunity tophase in environmental issues at the beginning of the supply chain process. Joness

team decided it needed to help Nike design the futureas opposed to retrofit the past1.

After Natural Step and the NEAT team identified the stakeholders to be impacted, theybegan formulating a framework of sustainability principles. In recent years, Nike hasmade sustainability a core corporate value by fully integrating sustainability into their allaspects of their business operations. The Nike Environmental Action Team (NEAT) hasmade great strides for Nike since being implemented in 1993. NEAT has lead the way


4/8

to rewriting Nikes environmental policy and begin the process of integratingsustainability principles in its business operations and throughout the company.

The major sustainability goals for Nike were:

1. Develop answers for the social and environmental problems that Nike contractors

production posed to the environment

2. Integrate the solutions into the companys business practices by making sustainability acore tenant of the companys mission

3. Apply the principles of sustainability to its business operations by developing anorganizational realignment to set the stage for a re-visioning of the companysenvironmental policy

4. Taking the initiatives to address the environmental life cycle of its products byimplementing closed loop product life cycle

5. Develop its approach to product innovation by defining a long-term vision for productionof sustainable products

6. Build internal skills & knowledge about sustainable business by educating employees inthe principles of sustainability

7. Have an industry wide list of sustainability targets

8. More positive public perception of Nikes social responsibility

9. Create new financial models to include sustainability principles to reflect the full cost ofdoing business, ultimately providing transparency and potential additional benefits toboth Nike and consumers.

Nike has been very successful in its innovative efforts towards sustainability thus far.Nike has been able to fully integrate sustainability into their operations and have beenable to show tangible results. The NEAT team and The Natural Step set Nikes future

goals including designing products within a fully closed loop, using only sustainablematerials, water stewardship, and climate stability.

Through these accomplishments Nike has developed new methods to create the sameproducts with less of an environmental impact. They have eliminated almost all PVCuse, use organic cotton, and significantly reduced the use of petrochemical solvents towater based solvents. The results of these various activities have begun to producesome significant changes among Nike suppliers. For example, as a result of its variousinspections, audits and internal research, Nike has been able to virtually eliminate theuse of petroleum based chemicals in its footwear production.

However management and the NEAT team recognized that focusing efforts inside Nike

would not be enough to implement sustainability values; they had to collaborateextensively with external stakeholders partners like factories and materials vendors tocreate more sustainable products. There was an acknowledgement that the companyneeded to look at the entire manufacturing life cycle, including product design,manufacture, and end of life to incorporate sustainability principles into all facets ofproduction.

The result was Nike's Considered Design initiative, a company-wide program thatincorporates green principles into Nike's design guidelines to help the company create


5/8

products with more environmentally friendly materials and fewer toxics and waste. Itfollows the closed loop business model.

CORPORATE PARADIGMS SHIFTS THAT HAD TO TAKE PLACE FOR THOSEEFFORTS TO BE SUCCESSFUL.

The International Institute for Sustainable development, Deloitte & Touche and the WorldBusiness Council for Sustainable Development (1992) defines sustainable developmentas For the business enterprise, sustainable development means adopting businessstrategies and activities that meet the needs of the enterprise and its stakeholders todaywhile protecting, sustaining and enhancing the human and natural resources that will be

needed in the future2.

It took a major overhaul for this definition to be relevant for Nike. The previously heldintractable view that Nike was not responsible for their suppliers treatment of theirworkers failed to acknowledge that their stakeholders werent limited to just theircustomers and shareholders. Nike Management had previously failed to account forreputational or social risk to their organization and was now paying the price for their

shortsightedness with negative press and reputation. Once Nike managementrecognized that there was a broader set of external stakeholders that could impactcorporate profitability, , that they were accountable for, the process of thinking differentlyin the context of sustainability began to take hold.

A complete 180 degree turnaround from prior business decisions had to be made in thebusiness processes and corporate planning had to be revamped throughout thecompany. Visible leadership from then CEO Phil Knight helped usher in thedevelopment of sustainability strategies. The Nike management developed a newexternal structure for corporate responsibility. The company did in-depth analysis intoresponses or lack of, to the unsafe, unfair and unhealthy practices of its suppliers. Aftermuch soul searching, research and analysis, the company came to the realization that

corporate responsibility had to be a core part of Nikes business.

Although initially there was much resistance within the company to the concept ofsustainability values and practices. However, strong strategic support from the topechelons of Nike was valuable in formulating an environmental culture in all aspects ofthe business, a view that persists to this day. In order to facilitate understanding andimplementation of its standards, Nike introduced factory-wide training and educationprograms to its facilities

Corporate responsibility is no longer a staff function at Nike. Its a design function, asourcing function, a consumer experience function, part of how we operate. Nike CEO

Mark Parker3


6/8

CAN THE BUSINESS CASE FOR SUSTAINABILITY BE MADE PURELY ON THEPROFIT POTENTIAL OR MUST ALTRUISM PLAY A PART?

The stakeholder analysis begins by identifying the various groups affected by the

businesss activities. These include shareholders, creditors, regulators, employees,customers, suppliers, and the community in which the enterprise operates. It must alsoinclude people who are affected, or who consider themselves affected, by theenterprises effect on the biosphere and on social capital. This is not a case of altruismon a companys part, but rather good business. Companies that understand whattheir stakeholders want will be able to capitalize on the opportunities presented. Theywill benefit from a better informed and more active workforce, and better information inthe capital markets.

From a broader perspective, however, it is clearly in the interest of business to operatewithin a healthy environment and economy. If companies arent good corporatecitizens as reflected in a triple bottom line accounting that takes into account social

and environmental responsibilities along with their financial ones, eventually their stockprice, profits and entire businesses could suffer.

The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims tomeasure the financial, social and environmental performance of the corporation over aperiod of time. Only a company that produces a TBL is taking account of the full cost

involved in doing business4

If sustainable development at Nike is to achieve its potential, it must continue to beintegrated into the planning and measurement systems of all facets of its businessenterprises. Nike seems to be setting a good example, after all, their motto is JUST DO

IT and they seem to be doing just that.


7/8

References


8/8

1 Nicholas Casey, New Nike Sneaker Targets Jocks, Greens, Wall Street, The Wall Street Journal,February 15, 2008.

2 International Institute for Sustainable Development (1992). Business strategies for sustainabledevelopment (1992) Retrieved from http://www.iisd.org/business/pdf/business_strategy.pdf

3 Innovate for a Better World: Nike FY05-06 Corporate Responsibility Report, Nike Inc., May 2007, pp 4

4 Triple Bottom Line (2008). In The Economist (2008) Retrieved from http://www.economist.com/node/14301663

Documents

Nike Case Study Analysisv2