Published 10 years ago.
About a 5 minute read.
The current controversy over supply chain practices of global corporations such as Disney, Walmart and Sears in Bangladesh reminded me of Nike’s past and its subsequent corporate sustainability evolution. Fifteen years ago, Nike underwent arguably more intense scrutiny and brutal attacks for its global supply chain management policies and priorities.
The current controversy over supply chain practices of global corporations such as Disney, Walmart and Sears in Bangladesh reminded me of Nike’s past and its subsequent corporate sustainability evolution. Fifteen years ago, Nike underwent arguably more intense scrutiny and brutal attacks for its global supply chain management policies and priorities. People across the world were burning Nike shoes instead of wearing them; customers were boycotting Nike products; and in 1998 the company’s earnings dropped by 69%.
Soulful Awakening of the Multinational Giant
Like many multinationals, Nike had contracted factories in poor Asian countries for its product manufacturing. Knowing the unsafe working conditions and forced and child labor in those factories, the public demanded greater responsibility from Nike; when the company insisted that those conditions were not its responsibility, it witnessed a huge global public outrage as a consequence. With the backlash came a deeper realization — ignoring supply chain responsibilities was not prudent. The company’s global reputation — a key source of competitive advantage — was at stake. So Nike decided to be more responsible: It conducted extensive training programs for the managers of its contracted factories; and employees were trained for language and cultural sensitivity in order to have deeper interactions with colleagues in factories. Nike started believing that it could help improve Asian labor practices by providing leadership and guidance to factory managers.
Top Management Commitment to Sustainable Business Development
So, what began fifteen years ago as Nike’s horror show of globalization has evolved today into the inspirational story of its transformation to a sustainable global enterprise. Nike is passionately committed to “build a sustainable business and create value for Nike and [its] stakeholders,” and not just its shareholders. Sustainability is no longer about risk management for Nike; it is about growth. Leaders and employees of the company recognize the interconnection between sustainability, brand enhancement, capital efficiency and profitability — Nike’s growth strategies are built on these four pillars. CEO and president Mark Parker is also greatly committed to “decoupling” Nike’s “profitable growth from constrained resources.”
Product Stewardship based on Environmental Innovations
Environmental sustainability principles frame Nike’s business model and its determination to limit the use of natural resources. In fact for Nike, sustainability is an “opportunity for innovation.” Eco-friendly materials, products and process innovation strategies are being deployed. For example, its Flyknit technology, which uses a single thread to knit a shoe upper, helps in preparing more custom fit and lighter shoes and generates less waste during the upper production process. The “waterless dyeing” technology for textiles uses CO2 instead of water. And Nike is collaborating with NASA, U.S. Department of State and USAID to encourage innovations that generate more environmentally and socially sustainable materials and fabrics.
Enhanced Product Quality by Greening the Supply Chain
The company is also aggressively greening its supply chain to reduce and ultimately eliminate the use of toxic chemicals from its processes. It has produced a list of manufacturing-restricted substances, which guides suppliers on toxic chemicals that are not permitted in Nike footwear, apparel and equipment. Through its partnership with Swiss company Bluesign Technologies, Nike is also offering tools such as bluesign® bluefinder that material suppliers can use to select detergents, chemicals and dye systems that meet Nike’s sustainability criteria. With tools such as these, Nike’s material suppliers are producing less toxic and more environmentally friendly materials and using less water and energy.
High Standards of Supply Chain Performance Through Business and Relational Measures
Nike wanted to be more transparent and decided to be the first company in the industry to openly disclose the list of its worldwide factories manufacturing its products. And last year, Nike implemented an advanced “Manufacturing Index,” a single evaluation system, covering all products and brands, that the company uses to assess and improve performance of its contract factories, in line with international standards. In addition to traditional metrics of quality, delivery and cost, metrics of environmental sustainability and ethical labor have been incorporated into the Index. The Index creates one score for each factory and ranks them as Gold, Silver, Bronze, Yellow or Red; all factories are expected to achieve a minimum bronze rating. Gold- and silver-rated factories are rewarded with incentives such as access to Nike leadership and educational resources and technical assistance, and opportunities to receive priority consideration for orders.
Responsiveness to Societal Problems via Stakeholder Engagement
Nike has assumed leadership in tackling certain societal problems — for example, childhood obesity and related diseases in the U.S. Only one out of three U.S. children is physically active; Nike understands the serious implications of this inactivity and has committed $50 million to support First Lady Michelle Obama’s Lets Move! Initiative. It is collaborating with the First Lady and the U.S. Departments of Health and Human Services and Education to educate and inspire kids to pursue outdoor activities. Schools and communities are receiving resources and opportunities that will excite and motivate kids to integrate sports and physical activities into their daily lives.
With more than 900 factories, 750 retail stores and hundreds of thousands of customers the world over, Nike’s business footprint is enormous. Therefore, any sustainability-oriented changes the company makes will undoubtedly raise global consciousness and improve the sustainability footprint of the world as well.
And as we can see, Nike is creating a huge impact already — its message of sustainable business practices and the need to create an economically, socially and environmentally sustainable world is reaching out to the masses in developed and developing countries alike. Its sustainability efforts are being trusted and endorsed by government leaders and celebrities. Indeed, Nike is differentiating itself from its competitors using the power of sustainability strategies. It is emerging as one of the strongest global sustainable brands. And the company still wants to do more — as Parker says, “At Nike, there is no finish line.”
So, the corporations under attack for their responsibility to improve conditions in Bangladesh may want to revisit the Nike story for some inspiration. If Nike can “Just Do It,” so can they.
Published May 17, 2013 5pm EDT / 2pm PDT / 10pm BST / 11pm CEST