Advocacy
We recognize that climate change is a global issue and will require global solutions that involve players not accustomed to working together. A global approach requires strong, joined-up thinking and voices, including those of business.
We see legislation as a key lever in reaching Intergovernmental Panel on Climate Change (IPCC) goals. One new foray into advocacy has been our work with Business for Innovative Climate and Energy Policy (BICEP) coalition, which is hosted by Ceres, a nonprofit, national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges. Work began in FY08 with founding partners Timberland, Levi Strauss & Co., Starbucks and Sun Microsystems. Additional partners have since joined, including Symantec, eBay, Gap, Aspen Ski Company, Cliff Bar and Seventh Generation. BICEP members believe that climate change will impact all sectors of the economy and that diverse business perspectives are needed to provide a full spectrum of viewpoints for solving the climate and energy challenges facing America.
BICEP's goal is to work directly with key allies in the business community and with members of Congress to pass meaningful energy and climate change legislation that is consistent with a set of core principles.
Collaboration
The key to our approach - in energy, climate emissions and across the corporate responsibility agenda - is collaboration, both inside our business and outside. Our external collaborations include work with governments, NGOs and business coalitions.
For example, our work with Business for Social Responsibility's (BSR) Clean Cargo Working Group, an industry collaborative, demonstrates that shippers and carriers can work together to create transparent industry standards for measuring and reporting emissions from logistics. Industry collaborative groups have enabled a wider circle of agreement on standards and reporting between business partners. Because our relationships are built upon mutual benefits, we are able to use the results from BSR reporting to engage our key business partners in meaningful follow-up discussion and detailed project planning. Results from the emissions tool inform better dialogue between carrier and shipper regarding strategies and projects that will further reduce emissions from transportation.
We recently developed a partnership with the World Federation of the Sporting Goods Industry, which is working alongside the U.S. Department of Energy, U.S. State Department and the National Association of State Energy Officials to establish energy efficiency tools that can be incorporated into supply chains.
We also presented at the World Economic Forum (WEF) 09, seeking to highlight to world government and business leaders the need for breakthrough change - climate policies, incentives for innovation and a forum for sharing ideas, and projects that work to speed adoption and implementation. One idea that we presented at the WEF is the GreenXchange. The GreenXchange is a project of Nike, Creative Commons, Best Buy, Mountain Equipment Co-Op, Yahoo, nGenera, IDEO, 2degrees, and the University of Washington that will launch publicly in 2010. It is a system for licensing patents related to sustainability and other socially desirable goals at a very low transaction cost. By making this private intellectual property visible and usable, we aim to accelerate the development of green technology.
NIKE, Inc. also is working on creative collaborations that engage consumers on climate change through connection to sport. Since 2007, we have been supporting Focus the Nation, an organization that empowers young leaders to accelerate the transition to a more just and prosperous clean energy future through education, engagement and action. In 2009 we supported the Focus Roots Fellowship program. Together with Climate Ride, Youth Noise and the Danish Embassy to the United States of America, Focus the Nation selected two fellows and awarded a $10,000 grant in the community action categories of sport and art.
In addition, recipients participated in a 300-mile, multi-day bicycle ride from New York City to Washington DC called Climate Ride to share their progress with 200 other riders. In late 2009, recipients traveled to Copenhagen, Denmark, to present their projects to the international communities participating in the COP15 Climate Treaty negotiations.
Product Creation
Across all our efforts, we work to design sustainability into our products from the outset. The value of addressing energy at the design phase is enormous - eliminating energy-intensive materials and processes has the most potential to reduce our overall carbon footprint. It is the most effective place to intervene in the overall system.
In FY07 we began working to identify the carbon footprint and embedded energy of our products. For example, an average pair of Nike running shoes - the Nike Air Pegasus 25 - results in the use of a total of 42 kWh of energy and 18 kg of CO2 throughout its life. More than 50 percent of that energy and CO2 came from materials and materials waste. That's a surprising amount when compared to manufacturing processes (less than 30 percent) or logistics (less than 10 percent), both often cited as carbon culprits.
When we analyze our Nike footwear lines, we see that the embedded energy of the materials in a shoe averages 26 to 30 kWh per kg. But a shoe's energy and carbon footprint can improve based on material choices. Recycled materials can reduce embedded energy by up to 50 percent. While leather materials carry similar embedded energy as other typical shoe materials, its CO2 footprint is about three times higher due to the methane produced from cows at the source.
We have begun applying this type of analysis to other areas, including apparel, to help us understand energy use throughout the product's life cycle, from the materials chosen through to what's used to launder and maintain the garments. We are investigating incorporating energy components in our Considered Index, our measurement of product sustainability which already evaluates materials, chemicals and waste. By providing our product designers and developers with the Considered Index at the very start of process, we help them choose less energy-intensive materials and manufacturing processes.
This significant progress in accurately quantifying and prioritizing actionable areas of our footprint, has helped guide development of the next stage of our strategy. Currently, when we guide designers and developers to choose materials with lower embedded energy, a limited palette of materials is available. In the next stage, we plan to progress to creating a whole new array of choices. We are investing in groundbreaking collaborative innovations to develop new materials that can be recycled or have significantly lower embedded energy, at a commercially-viable scale.
Manufacturing
Manufacturing represents our greatest category of impact after materials. Our work to reduce this impact relies on partnering directly with contracted manufacturers.
Footwear manufacturing accounts for approximately 90 percent of our manufacturing footprint. Almost all of our energy and climate work is focused on these processes. We focus further on the locations of greatest impact (China, Vietnam and Indonesia), and on our largest manufacturing partners (the top five, which together represent 60 percent of our footwear production by volume).
In 2007 and early 2008, we conducted detailed evaluations of the energy use at two footwear factories to understand the financial and CO2-reduction opportunities. These two pilot projects revealed significant opportunities to reduce the impacts of energy use on our contract footwear factories, both environmentally and financially. Buoyed by these results, in November 2008 we officially launched our footwear energy efficiency program with five of our largest manufacturing partners. In the first seven months of the program, these five factory groups achieved a 7-percent absolute reduction in CO2 emissions even as production increased in those facilities by 10 percent.
We have learned that to achieve sustainable reductions in our manufacturing footprint, we need to invest in capacity building and making it easier for contracted factories to adopt the latest clean technology innovations. We have transformed the way we address changes in manufacturing with contracted suppliers. As part of the creation of our Sustainable Business and Innovation group, NIKE, Inc. created a team focused on sustainable manufacturing. In part, that team is dedicated to partnering with factories to develop customized strategies, business cases and process innovations for energy efficiency retrofits and new builds.
Delivery
Most of our delivery operations, which include logistics and distribution, are not NIKE, Inc.-owned. Capturing and tracking accurate data on our impacts is a challenge outweighed only by the need to collaborate to achieve results. In recent years, the increasing cost of energy and public pressure has begun to inspire innovations to reduce the amount of oil used to get goods from a factory dock to a retailer's shelf. However, tapping these opportunities and scaling them up requires coordinated efforts and investments across the chain - from manufacturers, distributors, carriers and retailers. Our work with BSR's Clean Cargo Working Group is the vanguard of our plans to accelerate cross-industry collaboration and innovation in this space.
Nike Retail
In Nike retail stores, we have worked to adopt and incorporate energy efficiency measures in both new build and existing facilities. We are incorporating LEED-CI (commercial interior) certification standards into newly built Nike Factory Stores, resulting in measurable reductions in water (45 percent) and energy (25 percent) compared to standard designs. We are also extending the certification to new factory stores. In addition to the stores themselves, we have been addressing the way that we use materials and their impacts in retail. Eventually we hope to apply what we've learned to other retail settings across the range of brands in the NIKE, Inc., portfolio.
Where We Work/Moving People
The work we undertake at our own sites has included energy efficiency projects, renewable energy projects and the purchase of carbon offsets and Renewable Energy Certificates.
Highlights include a platinum LEED-NC-certified building at our world headquarters, other building innovations, and some new on-site production of renewable energy in the United States and EU. Specific examples are provided with the discussion of our facilities/travel target.
On the Horizon
As we continue to make strides across all areas of our climate and energy impact, we also continue to face challenges.
Data collection and accuracy remains a significant issue. For some areas, such as apparel and equipment manufacturing, we use historic factors applied to production numbers to estimate energy use and emissions. For others, such as footwear manufacturing, we rely on factories and others in our supply chain to provide accurate information. To improve our evaluation and accounting, we have implemented an enterprise carbon accounting project that will begin in FY10.
Our supply chain depends on business partners who make and distribute our products. Our ability to partner with them — and their commitment to achieving reductions — is critical to our success. Through these partnerships, we influence and educate but do not own the programs or outcomes. This reality makes planning, goal setting and resourcing particularly complex.
In the United States and Europe, many of our achievements are leveraged by national- or state-level legislation and incentives. In the United States, we see a critical need for national price on carbon to level the playing field and enable us to continue to reduce our carbon footprint through the deployment of energy efficiency, green building and renewable energy.