MBA Case Study – Nike Considered: Getting Traction on Sustainability

I. Introduction

A. Overview of Nike
Nike is a multinational corporation that designs, develops, and markets athletic footwear, apparel, and equipment. Founded in 1964, Nike is one of the largest and most recognized brands in the sports industry, with a presence in over 190 countries.

B. Importance of sustainability in the fashion industry
The fashion industry is one of the most polluting industries globally, with significant environmental and social impacts. As consumers become more conscious of their environmental footprint, sustainability has become a critical issue for fashion companies to address. Companies that fail to incorporate sustainable practices risk losing consumer trust and market share.

C. Purpose of the case study
This case study examines Nike’s sustainability efforts and its impact on the fashion industry. The study analyzes Nike’s sustainability initiatives, the challenges it has faced, and the strategies it has implemented to address these challenges. The case study also explores the implications of Nike’s sustainability efforts for the fashion industry and other companies seeking to improve their sustainability practices.
II. History of Nike
A. Founding of Nike
Nike was founded in 1964 as Blue Ribbon Sports by Phil Knight and Bill Bowerman. The company started as a distributor of Japanese sports shoes in the US market. In 1971, the company officially changed its name to Nike, and the iconic Swoosh logo was born. Nike went public in 1980, and by the mid-1980s, it had become one of the largest sports footwear and apparel brands in the world.

B. Evolution of Nike’s approach to sustainability
Nike’s first major sustainability initiative was its “Considered” program, which was launched in 2005. The program aimed to reduce waste and improve the environmental performance of Nike’s products. The company set targets for reducing waste, increasing the use of environmentally preferred materials, and designing products that could be easily disassembled and recycled.

Since then, Nike has continued to evolve its approach to sustainability. In 2010, the company launched its “Nike Better World” campaign, which aimed to promote sustainability across its entire business. The campaign included a number of initiatives, including the use of recycled materials in products, the development of more sustainable manufacturing processes, and the implementation of a more sustainable supply chain.

In 2015, Nike launched its “Move to Zero” initiative, which set a goal of zero carbon and zero waste across its supply chain by 2025. The company also committed to using 100% renewable energy in its owned or operated facilities by 2025.

C. Key players and stakeholders in Nike’s sustainability efforts
One of the key players in Nike’s sustainability efforts is Hannah Jones, who served as the company’s Chief Sustainability Officer from 2013 to 2018. During her tenure, Jones oversaw the development and implementation of Nike’s sustainability initiatives, including the “Move to Zero” initiative.”
Another key player in Nike’s sustainability efforts is Eric Sprunk, who served as the company’s Chief Operating Officer from 2013 to 2019. Sprunk was responsible for leading Nike’s sustainability initiatives, including the company’s “Circular Innovation Challenge,” which aimed to identify and develop sustainable solutions for the fashion industry.

In addition to these internal stakeholders, Nike’s sustainability efforts have also been influenced by external stakeholders, including consumers, investors, and NGOs. For example, the company faced significant pressure from Greenpeace in the early 2000s over its use of toxic chemicals in its production processes. In response, Nike developed its Restricted Substances List, which outlines the chemicals that are prohibited in Nike’s products and manufacturing processes.

Nike has also worked closely with sustainability-focused NGOs and industry groups, including the Sustainable Apparel Coalition and the Better Cotton Initiative. Through these partnerships, Nike has been able to collaborate with other companies and stakeholders to develop industry-wide sustainability standards and best practices.

Overall, Nike’s sustainability efforts have been shaped by a range of internal and external stakeholders, reflecting the company’s commitment to a holistic and collaborative approach to sustainability.
III. Nike’s Sustainability Efforts

A. Sustainable Materials and Design
Nike has taken a number of steps to reduce the environmental impact of its products, including developing new materials and using recycled and organic materials. For example, the company has introduced a range of sustainable materials, such as Nike Grind, which is made from recycled sneakers and industrial scraps, and Flyleather, which uses 90% less water and has a 80% lower carbon footprint than traditional leather. Nike has also incorporated sustainable design principles into its product development process, such as reducing the amount of materials used and designing for disassembly and recycling.

B. Supply Chain Management and Labor Practices
Another key area of focus for Nike’s sustainability efforts is supply chain management and labor practices. The company has implemented a number of programs and initiatives to improve working conditions and promote fair labor practices in its factories, such as the Nike Code of Conduct and the Nike Supplier Sustainability Index. Nike also works closely with its suppliers to help them reduce their environmental impact and improve their sustainability practices.

C. Waste Reduction and Circular Economy Initiatives
Nike is committed to reducing waste and increasing the use of circular economy principles in its operations. The company has set ambitious targets to reduce waste and increase recycling, such as diverting 99% of waste from landfills and incineration by 2020. Nike is also exploring new ways to use waste materials in its products, such as creating new sneakers from recycled materials.

D. Carbon Footprint Reduction and Renewable Energy
Nike has made significant progress in reducing its carbon footprint and transitioning to renewable energy sources. The company has set a goal to achieve 100% renewable energy across its operations by 2025 and has already made significant investments in renewable energy, such as wind and solar power. Nike has also implemented a number of programs to reduce the carbon emissions associated with its products, such as improving the energy efficiency of its factories and using more sustainable transportation methods.

IV. Business Model and Revenue Streams

A. Overview of Nike’s business model

Nike’s business model is centered around designing, marketing, and selling athletic footwear, apparel, and accessories. The company operates through a combination of owned retail stores, e-commerce platforms, and wholesale partnerships with retailers. Nike’s portfolio of brands includes Nike, Jordan, Converse, and Hurley.

B. Revenue streams and sources of income

Nike generates revenue from the sale of its products through various channels, including direct-to-consumer, wholesale, and licensing. The company’s direct-to-consumer sales channels include its owned retail stores, e-commerce platforms, and digital apps. Wholesale partnerships with retailers, such as Foot Locker and Dick’s Sporting Goods, are another significant source of revenue for Nike. Additionally, Nike earns revenue from licensing agreements, primarily through its partnerships with professional sports leagues and teams.

In the fiscal year 2021, Nike generated $44.5 billion in revenue, with the majority (83%) coming from footwear sales. Apparel sales accounted for 14% of the company’s revenue, and equipment sales accounted for the remaining 3%. Nike’s largest geographic market is North America, accounting for approximately 40% of the company’s total revenue, followed by Europe, Middle East, and Africa (28%), Greater China (20%), and Asia Pacific and Latin America (12%).

C. Challenges and risks facing Nike’s sustainability efforts

As Nike continues to focus on sustainability, there are several challenges and risks the company must navigate. One significant challenge is the cost of sustainable materials and manufacturing processes. Sustainable materials, such as recycled polyester and organic cotton, can be more expensive than traditional materials, which can impact Nike’s profitability.

Another challenge is ensuring transparency and accountability throughout Nike’s complex global supply chain. The company sources materials and manufactures products in various countries, each with its own regulations and labor practices. Ensuring that all suppliers adhere to Nike’s sustainability standards can be challenging, particularly in regions where labor laws and environmental regulations are less strict.

In addition to these challenges, Nike faces the risk of reputational damage if it fails to deliver on its sustainability commitments. Consumers are becoming increasingly aware of the impact of their purchasing decisions on the environment, and they expect brands to demonstrate a commitment to sustainability. Any perceived missteps or failures in Nike’s sustainability efforts could harm its brand reputation and erode consumer trust.

To mitigate these challenges and risks, Nike has established a comprehensive sustainability strategy that includes setting ambitious goals, collaborating with stakeholders, and leveraging innovative technologies. The company has also made significant progress in engaging with its suppliers and implementing sustainable practices throughout its supply chain. By addressing these challenges and risks proactively, Nike can continue to strengthen its reputation as a leader in sustainable fashion and drive growth for its business.

V. Marketing and Branding

A. Overview of Nike’s sustainability marketing and branding

In recent years, Nike has made a concerted effort to integrate sustainability into its marketing and branding efforts. The company recognizes that consumers are becoming more conscious about the impact their purchases have on the environment, and it has responded by highlighting the sustainable aspects of its products and initiatives.

B. Key marketing and advertising campaigns

One of Nike’s most notable sustainability campaigns is the “Move to Zero” initiative, which was launched in 2019. The campaign aims to achieve zero carbon and zero waste by rethinking the materials used in Nike’s products, optimizing its manufacturing processes, and shifting to renewable energy sources. The initiative has been promoted through a series of marketing campaigns, including a powerful video featuring athletes like LeBron James and Naomi Osaka.

Nike has also partnered with organizations such as the Better Cotton Initiative and the Sustainable Apparel Coalition to promote sustainable practices in the apparel industry. Additionally, the company has launched a number of sustainable product lines, such as the Flyleather line, which is made from recycled leather scraps, and the Space Hippie line, which is made from recycled materials such as plastic bottles and scrap yarn.

C. Sponsorship deals and partnerships

Nike’s sustainability efforts have also been integrated into its sponsorship deals and partnerships. For example, the company has partnered with the National Park Foundation to promote sustainability and outdoor recreation. Nike has also partnered with the United States Olympic and Paralympic Committee to create sustainable uniforms for athletes at the 2020 Tokyo Olympics.

In 2020, Nike also announced a partnership with Good360, a non-profit organization that distributes excess inventory to those in need. Through this partnership, Nike is able to donate unsold products to communities in need, reducing waste and supporting social causes.

Overall, Nike’s sustainability marketing and branding efforts have been successful in promoting the company’s commitment to sustainability and attracting consumers who prioritize environmentally conscious products. By incorporating sustainability into its marketing campaigns and partnerships, Nike has been able to align its brand with social and environmental responsibility.
VI. Challenges and Risks

A. Regulatory and legal risks: Nike’s sustainability efforts may face regulatory and legal risks in the form of environmental regulations, labor laws, and intellectual property rights. Failure to comply with regulations and laws could result in fines, lawsuits, and damage to the brand’s reputation.

B. Reputation and brand image risks: Nike’s sustainability efforts are integral to the company’s brand image and reputation. Any negative impact on the environment or labor practices could damage the brand’s image and reputation. Consumers are increasingly demanding more sustainable products, and failure to meet these demands could lead to lost sales and market share.

C. Supply chain and labor risks: Nike’s supply chain is complex and involves sourcing materials from various suppliers across the world. Ensuring that suppliers adhere to sustainable practices and labor standards can be challenging, and failure to do so could lead to negative publicity and damage to the brand’s reputation.

D. Mitigation strategies: Nike has implemented various mitigation strategies to address these risks, including investing in sustainable materials, partnering with suppliers to improve working conditions, and improving transparency in its supply chain. The company has also established a robust grievance mechanism to address any concerns related to its labor practices.

VII. Future Outlook

A. Key growth opportunities and challenges: The fashion industry is facing increasing pressure to become more sustainable, and Nike is well-positioned to capitalize on this trend. However, there are also significant challenges, including the need to balance sustainability with profitability and the complexities of managing a global supply chain.

B. The role of technology and innovation in shaping the future of Nike’s sustainability efforts: Technology and innovation will play a critical role in Nike’s efforts to become more sustainable. The company is investing in new materials and manufacturing processes that reduce waste and emissions, as well as exploring the use of new technologies, such as blockchain, to improve transparency in its supply chain.

C. Strategies for sustainable growth and success: To achieve sustainable growth and success, Nike will need to continue investing in sustainable materials and manufacturing processes, partnering with suppliers to improve labor practices, and promoting transparency in its supply chain. The company will also need to ensure that its sustainability initiatives align with its overall business strategy and values.

VIII. Conclusion

A. Summary of the case study and key takeaways: Nike’s sustainability efforts have evolved over the years, driven by increasing consumer demand for sustainable products and a growing awareness of the environmental and social impacts of the fashion industry. The company has implemented various initiatives to address sustainability challenges, including investing in sustainable materials and manufacturing processes, improving working conditions in its supply chain, and promoting transparency and accountability.

B. Implications for other companies in the fashion industry: Nike’s sustainability efforts provide valuable lessons for other companies in the fashion industry. Companies need to take a holistic approach to sustainability, addressing environmental, social, and governance issues throughout their operations and supply chain. They also need to ensure that their sustainability efforts are aligned with their overall business strategy and values.

C. Future outlook for Nike and the fashion industry as a whole: The fashion industry is facing increasing pressure to become more sustainable, and companies that fail to address sustainability risks will face significant challenges in the coming years. However, companies that embrace sustainability and invest in new technologies and business models will be well-positioned to succeed in a rapidly changing industry. Nike’s sustainability efforts provide a roadmap for other companies looking to become more sustainable and succeed in the fashion industry.