NKE: Insight on Sustainability

Conclusion: Nike's press release on its Sustainability program should not be a stock mover. But it shows the evolution of how this started as a defensive strategy to combat perception about sweat shops, to being a commercial initiative across the organization.

 

 

Nike is on the tape highlighting its ‘Green’ initiatives, and is setting new targets for upping the ante on a go-forward basis. Some will simply ignore this as being PR nonsense. Others might get excited as it relates to new financial targets. Both will miss the point.

 

Quick aside: The timing is interesting, as it comes within weeks of the headlines of the WalMart/Mexico bribery fiasco, Reebok/India, and allegations of Nike/China (executive of China Soccer Assn accepted $273k -- $30k from Nike). These headlines get real big real fast, and are often blown out of proportion. Perhaps Nike went on offense in communicating these efforts (that were already in place) pretty darn quickly to avoid getting lost in sensationalistic headlines.

 

The key here is that new ‘Social Responsibility’ plan is not really new, but an evolution of something that’s been working. Hannah Jones, VP of Sustainable Business and Innovation at Nike, has pretty much been doing some iteration of this for the past 24 years. (this is not a gratuitous management shout out -- it matters).  Make no bones about it, Jones has risen to the level where she is arguably the most influential woman at Nike – perhaps second only to Jeanne Jackson (VP Direct to Consumer). 

 

Here’s a rough – and I mean very rough – timeline of Nike’s Sustainability effort.

1988: Hires Hanna to tackle several social issues as the head of Consumer Affairs in EMEA. Over time, one of these ends up being press about Nike's involvement with 'sweat shops'. So Nike is forced into a defensive strategy such that it is not the poster child for poor working conditions in Asia. By the mid 1990s, that’s pretty much done.

 

Late 1990s: Nike starts to weave Social Responsibility into its business model, specifically with factory management, transportation and logistics.

 

Early 2000s: Nike’s Supply chain blows sky high (remember i2/SAP and ensuing Foot Locker fallout?). Nike shakes the etch a sketch clean and adopts Lean manufacturing and other practices from more efficient product manufacturers.

 

 

2004: Promotes Hannah to head up Social Responsibility out of Beaverton.

 

2006/06: Social Responsibility evolves from being a defensive tactic, to a cost/working capital saving mechanism, to a business. Nike launches Nike Considered, a product that removed dangerous chemicals from the equation, took down solvent use by 80%, and  dramatically improved the ease of assembly. See product below. Though this was a commercial product, think of it like a concept car (all about the design and process) on which future products with better mass appeal will be introduced.

  

Today: Job title has changed with the job function. Now VP Sustainable Business and Innovation. This is a Mark Parker touch. Everything needs to stem from Innovation. All new platforms need to synch with sustainability principles. The good news is that Sustainability usually means that the process is more efficient (ie less working capital), and to boot, the consumer is more likely to pay up for it. The best example here is the much awaited Nike Flyknit, which reverse engineers the construction of the shoe and results in a 5.6oz running shoe (the average runner is about 12oz)

 

THE EVOLUTION OF NIKE SUSTAINABILITY


Nike Considered (2005) 

NKE: Insight on Sustainability - 5 3 2012 10 04 39 AM

 

Nike Flyknit (June 2012)

NKE: Insight on Sustainability - 5 3 2012 10 16 20 AM