Through our work in assessing and addressing Nike's overall climate impact, we have come to focus on footwear manufacturing as the area of greatest impact. Footwear manufacturing represents 62 percent of Nike's overall carbon footprint (excluding energy embedded in materials) and nearly 90 percent of Nike's manufacturing footprint.
We are focused on the regions and factories where our production is concentrated. These include the locations of greatest impact (China, Vietnam and Indonesia) and our largest manufacturing partners (the top five of which 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 opportunities for cost savings and CO2 reduction. These pilot projects revealed significant potential to reduce the impacts of energy use on our contract footwear factories, both environmentally and financially. Our next step was to understand how to integrate these energy savings opportunities into our lean manufacturing program and fully integrate the energy savings program into our manufacturing practices.
In November 2008 we officially launched our footwear energy efficiency program with five of our largest manufacturing partners. These five groups represent approximately 60 percent of Nike footwear manufacturing volume and operate 19 factories between them, with production primarily in China, Vietnam and Indonesia and one factory in India. Early reviews are showing excellent results: absolute CO2 footprint was down 6 percent despite a 9-percent increase in production. Energy intensity as measured by kWh per pair improved by 16 percent.
Assuming that nonparticipating contract manufacturing groups operated at the same level of efficiency in FY09 as they did in FY08, we estimate that our total footwear footprint decreased from FY08 to FY09 by 4 percent.
Percentage Changes FY08 to FY09 for participants (represents 60 percent of Nike footwear production volume)
Footnote: Emission totals were calculated based on actual energy use and fuel types reported by contracted factories, following the WRI/WBCSD GHG Protocol (www.ghgprotocol.org).
We thought long and hard about CO2 emission reduction targets. Our ideal was to set a baseline of energy used per pair - how much energy it should take to produce a shoe, but we realized such a baseline does not exist. Two factors influence the energy used to produce a shoe: production volume - the number of shoes each facility produces - and the type of shoe produced. For example, a sandal requires less energy to make than an Air Force One basketball shoe. If we established targets, we would have to constantly adjust them based on volume and consumer preferences.
Our second choice was to set a global footwear percentage reduction target. We believe that it is important for our contract manufacturing partners to own the target because they ultimately implement the changes. Most of our partners are already managing toward their own internal targets. However, there was a lot of uncertainty about what could be achieved, with some contract manufacturing groups setting conservative targets and others being very aggressive. Reaching a consensus was difficult and, after several rounds of discussions, we realized that the attempt to set targets was distracting us from the real work of reducing energy consumption.
The ROI on energy efficiency is high and the financial incentive assures that contracted manufacturers will continue to invest in this area. The results from the first seven months of our footwear energy efficiency program speak for themselves. For the next few years, rather than focusing on a target, we are focusing on implementing a world-class energy management program and bringing all of our contracted factories to the same relative energy performance level. After these factories have made the necessary investments in training and energy savings equipment, we will introduce targets to keep the factories focused on saving energy and carbon.
Our manufacturing climate strategy is driven by science. We have a responsibility to move toward the levels identified by the Intergovernmental Panel on Climate Change. We will do this through efficient manufacturing processes and facilities, integrating energy analysis into product design through the Considered Index, and using financially feasible renewable energy sources.
Footwear emission totals were calculated based on actual energy use and fuel types reported by contracted factories, following the WRI/WBCSD GHG Protocol (www.ghgprotocol.org,).
The reported values are estimates calculated every other year based on our best available information at the time. The FY08 scope changed as more information became available. FY04 and FY06: Inline production for Thailand, Vietnam, China and Indonesia. FY08: Global production, excluding B-grades, overruns and promo orders.
Some of our efforts to reduce energy use and emissions at contracted footwear factories during FY07-09 include:
We have assigned dedicated staff to oversee the formal footwear manufacturing energy program. This program includes projects with our largest contract manufacturers and with good financial returns.
As suppliers plan for new factories or expansions, we are working with them on factory designs that can deliver significant energy savings while optimizing production, water use and health, safety and quality of life for workers.
We continue to focus on factories with the greatest impact. Once we demonstrate results and streamline our process, we will roll out the program to the rest of our footwear base. We anticipate that the lessons we are learning in footwear manufacturing can be shared and applied in factories producing Nike apparel and equipment.