EAES 760: Nike, Inc. Transformation to Sustainability Case Study

This case study examines Nike, Inc.'s significant transformation toward sustainability and a circular economy, focusing on their shift from labor exploitation to environmental leadership. The report details Nike's evolution from facing accusations of child labor to becoming a sustainability leader, drive...Read More

1
Team #1 - Corporate
Rachel Grace Fritz
From Sweatshops to Sustainability: The Transformation of Nike, Inc
EAES 760: Organizational Environmental Management
Monday, October 29, 2018

2
I. Introduction
The case study of Nike, Inc is critical to understand the serious and major transformation
a corporation underwent to sustainability and a circular economy, focusing on restoring waste to
be put back into the life cycle, from the concerns of their consumers. Nike was built on the
business model of finding the lowest cost of labor possible that led to child labor and exploitation
to being #16 on Fortune’s Most Admired Companies list, first in Apparel with a commitment to
improving environmental impact. This includes providing transparency and ensuring decent
working conditions in its supply chain, Nike, Inc has undoubtedly changed the public’s
perception of their brand. They have become a sustainability leader in corporate business and it
is vital to analyze this case in the hopes of understanding the importance of transformation to
sustainability. Nike, Inc was selected because they had accusations of child labor that led to
protests against the company and today they are a sustainability leader in innovation, design, and
best brand for the environment. They are an industry leader in apparel and sports brand,
surpassing its competitor Adidas and ESPN in sales at a value of $29.6 billion (PledgeSports,
2017). This is important as many companies believe they can not incorporate sustainability or a
circular economy because it is complicated to implement through the supply chain because they
are so large.
Research questions include how the corporation went from denying the responsibility of
child labor to accepting it and how they are moving forward. This is important to analyze as
other corporations can look towards this case study to understand the importance of the
consumers’ perspective of a brand and the importance of transparency. To include, many fashion
brands do not believe sustainability can promote their business and this study aims to show that
sustainability is vital for a business to thrive. This report will detail the many ways they are

3
going to achieve sustainability within the company including waste reduction, water
conservation, energy savings, renewable energy, and transparency. Different key aspects in their
innovation that progressed new technologies for sustainability and how other brands could also
benefit from their innovations and processes. This case study aims to prove that a large
corporation can transform their business model to sustainability and create a circular economy
from their previous traditional models. This modification is especially important in the apparel
industry because they are a part of the product manufacturing and dye industry, the most
polluting industries (Sen Nag, 2018).
The references within the case study of Nike, Inc was taken from online resources
including reports, press releases, and news articles from websites. Each statistic’s reference was
analyzed to confirm its authenticity to ensure there is no possibility of false claims. This is
especially important in the case of Nike, Inc because of its past of denying responsibility due to
the pretense of it being a false claim.
II. Analysis
The ability for Nike, Inc to grow so rapidly during the 1970s was by outsourcing their
labor overseas in countries with the lowest wages and policies banned the formation of labor
unions while other US footwear companies still produced in America (Baker, 2016). The
exploitation of their factory workers included sweatshops that had child labor with abysmal
working and living conditions, verbal and physical abuse, forced overtime, and toxic emissions
that harmed human and environmental health. If workers tried to demand additional rights or
benefits, Nike would close the location and move the factory elsewhere to operate at the lowest
cost possible (Wilsey, Lichtig). It was not until the 1990s when Nike was criticized in the media

4
and by the community for selling apparel that was produced in sweatshops. During this time,
Life Magazine published an article with a child stitching together a ball with the Nike logo on
the front of the magazine to discuss the issues surrounding the corporation during this time. They
attempted to spread awareness of the living conditions of these industries as it was a relatively
new claim during this decade. In addition to the magazine, a campaign called ‘TeamSweat’ led
by Jim Keady, who denied a multimillion-dollar endorsement deal to spread awareness of the
mistreatment of workers in Indonesia and created a video about the experience of living with the
workers called “Behind the Swoosh.” Nike’s CEO at the time, Phil Knight, and representatives
denied all claims and did not take responsibility for their malpractice until it was a global boycott
campaign towards the world’s best selling brand at the time (Timmus, 2013).
After the release of the video in 1998 and pressure from other executives in the
corporation, Phil Knight finally decided on publicly committing to changing the company’s
practices as he believed the brand had become synonymous with slave wages (Bain, 2017). Phil
Knight committed deeply enough to vow at Washington to root out child labor within his
corporation (Banjo, 2014). In an interview in 2001 with Nike’s director of compliance at the
time, Todd McKean, he stated that their initial attitude was that they do not own the factories so
they can not control what goes on (Heckel, 2001). Later in 1998, Nike took an initial step to
formally committing to sustainability by releasing the first Corporate Environmental Policy
(CSRwire, 2001). In 1999, Nike created a code of conduct to manage its suppliers to ensure they
are following strict regulations and rules to ensure no malpractice. In addition, they conducted
more than 600 factory audits over the next five years to assure the code of conducts were being
demonstrated correctly (Miller, 2014) Nike, Inc first demonstrated transparency by publishing a
complete list of its contracted factories and releasing the first version of a Corporate Social

5
Responsibility (CSR) report in 2001, the first in the sportswear industry to do so and the
corporation continue the publications today (Birch, 2012). In their first CSR report, they detailed
their pay scales and working condition in their factories that many people of the community were
questioning. It also discussed the accusations and admitted fault in which they were working
towards fixing, vital to ensure consumers can trust them (Newell, 2015).
Today, The Global Exchange has stated that Nike has done more than any other
corporation in the shoe-and-clothing industry to make sure workers are treated fairly (Beaverton,
2018). In addition, there are many different ways Nike is using innovation to promote
sustainability and a circular economy include:
Waste Reduction
Nike utilizes a circular economy, or “cradle to cradle” cycle instead of a traditional
economy, everything is reused and never wasted. With innovations in a sustainable leather called
FlyKnit, Nike uses the most recycled polyester than any other sportswear brand. In addition,
75% of all shoes and apparel from Nike contain at least some recycled material (Nike, Inc,
2018).
Globally, Nike has diverted up to five billion plastic bottles from landfills since 2012 by
their innovations in their football kits made with recycled plastic (Nike, Inc, 2018). Around the
world, there are over ten thousand athletic surfaces from Nike’s surplus in manufacturing
materials such as rubber, foam, fiber, leather and textile blends (Nike, Inc, 2017).
Energy Savings
With partnerships with wind companies, Nike is able to set a goal of sourcing 100%
renewable energy to their owned and operated facilities in North America by next year. This
proposed plan is the energy equivalence of powering about four-hundred thousand average

6
American homes. Hannah Jones, Chief Sustainability Officer and VP of the Innovation
Accelerator for Nike. “Investing in renewable energy is good for athletes, the planet and for
business” (Nike, Inc, 2018).
Conservation of Water
Nike has incorporated a carbon-based dyeing process that dyes garments without using
water or chemicals called Nike ColorDry by partnering with a Dutch startup, DyeCoo Textiles.
Compared to traditional methods of dyeing, it reduces dying time by forty percent, energy use by
around sixty percent, and the factory’s footprint by twenty-five percent (Korosec, 2013).
Previously, Nike’s contracted textile plants were using and wasting about three billion gallons of
water a year, 325 million gallons at Nike alone (Newell, 2015).
Transparency
Nike demonstrates transparency by publishing CSR reports each year with contracted
suppliers and responding to crises fast and effectively. After the deadly fire at Dhaka garment
company that killed 112 factory workers, Nike decided to investigate their own suppliers in
Bangladesh. Vice president of global sourcing and manufacturing and the vice president of
sustainable manufacturing and sourcing set out to the country to speak with managers of the
facility, people in the neighborhood, and the factory workers. They decided after their interaction
and what had been discovered that it was best to cut ties with one supplier due to their lack of
compliance with the code of conduct.
III. Conclusions
Nike, Inc has transformed its public image by incorporating sustainability into their
business model and ultimately following what consumers requested. Today, more corporations

7
are looking towards progressing sustainability as it reduces business costs and increases profits.
However, the issue of sustainability in corporations is a deeper situation dealing with many
different factors that could prevent this. To solve this, it is best to look at one of the largest
corporations in the fashion industry that was able to change their entire supply chain to be
environmentally-focused so other corporations in the industry could initiate it into their business
model, Nike, Inc.
It is strictly essential for corporations to have sustainability leaders to take initiative
within the company and be the face of change, such as Elon Musk at Tesla. The case study of
Nike, Inc shows the lack of representation at the beginning by Phil Knight, the CEO and this
frustrated consumers and even his own executives. If a corporation wants to transform, it must
have sustainability leaders in the company to represent the brand to prevent consumers from
thinking that the brand is associated with bad press.
If a corporation is looking towards a sustainable supply chain, it is best to look towards
the transformation of Nike, Inc for aid in the process. First, they admitted their wrongs and
promised to do right and published their yearly CSR, vital to transparency for consumers. They
analyzed their issues and decided their first endeavors would be to solve issues in their social
pillar in sustainable sourcing in manufacturing. This is a crucial step as it is a large risk to have
child labor as this could lead to bad public relations, or ‘PR’, that was experienced by Nike.
Audits of manufacturers in foreign countries will show to the public that you are overlooking
operations closely even though the manufacturer is far away.
If the corporation has solid ties to their suppliers with a strict code of conduct for
manufacturers in their countries, these corporations could discover new innovative ways to
progress their sustainability for long-term economic success. Partnering up with startups such as

8
the contract between DyeCoo and Nike or the wind companies and Nike reap ultimate benefits.
Since sustainability is such a new field of research, most new innovations are startups from
young entrepreneurs and engineers and corporations could see the best success in this area for
innovation. Partnering with a company is the best decision because the corporation would not
have to make their own new innovative way and can outsource their project.
Today, Nike is a favorite brand by millennials in part because of the comprehensive
commitment to sustainability and transparency across their supply chain (Doshi, 2018). The
public image of corporations has definitely changed over the last three decades as consumers are
holding them more responsible for their actions on humans and the environment. Sustainability
has become a forefront of a business and this case study served as an example of the possible
backlash that can happen if a corporation denies of progressing their sustainability and the
paramount modification that can be achieved when a corporation advances towards sustainable
development.

9
IV: References
Bain, M. (2017, August 31). Nike is facing a new wave of anti-sweatshop protests. Retrieved
October 29, 2018, from https://qz.com/1042298/nike-is-facing-a-new-wave-of-anti-
sweatshop-protests/
Beaverton. (2018, May 21). Labor Group: Nike Not Living up to Promises. Retrieved October
29, 2018, from https://abcnews.go.com/Business/story?id=88176&page=1
Birch, S. (2012, July 06). How activism forced Nike to change its ethical game | Simon Birch.
Retrieved October 29, 2018, from https://www.theguardian.com/environment/green-
living-blog/2012/jul/06/activism-nike
CSRWire. (2001, October 15). Nike Releases First Corporate Responsibility Report. Retrieved
from http://www.csrwire.com/press_releases/24905-Nike-Releases-First-Corporate-
Responsibility-Report
Doshi, S. (2018, June 27). Transform Your Company Into A Leading Sustainable Business.
Retrieved October 29, 2018, from
https://www.forbes.com/sites/yec/2018/06/26/transform-your-company-into-a-leading-
sustainable-business/#58d1fe795da2
Heckel, J. (2001, November 29). Nike, Adidas Officials Discuss Sweatshop Issues at University
of Illinois. Retrieved October 29, 2018, from https://www.highbeam.com/doc/1G1-
80410049.html
Korosec, K. (2013, December 03). Nike's Waterless Dye Factory Cuts Energy Use 60%.
Retrieved October 29, 2018, from https://www.environmentalleader.com/2013/12/nikes-
waterless-dye-factory-cuts-energy-use-60/
Miller, D. T. (2014, October 10). Sarah Soule: How Activism Can Fuel Corporate Social

10
Responsibility. Retrieved October 29, 2018, from
https://www.gsb.stanford.edu/insights/sarah-soule-how-activism-can-fuel-corporate-
social-responsibility
Nag, O. S. (2018, April 17). The World's Most Polluting Industries. Retrieved October 29, 2018,
from https://www.worldatlas.com/articles/the-top-10-polluting-industries-in-the-
world.html
Newell, A. (2015, June 18). How Nike Embraced CSR and Went From Villain to Hero.
Retrieved October 29, 2018, from https://www.triplepundit.com/special/roi-of-
sustainability/how-nike-embraced-csr-and-went-from-villain-to-hero/
Nike, Inc. (2017). MAXIMUM PERFORMANCE MINIMUM IMPACT. Retrieved October 29,
2018.
Nike, Inc. (2018, May 15). Did You Know 75% Of All Nike Product Contains Recycled
Material? Retrieved October 29, 2018, from https://news.nike.com/news/sustainable-
innovation-air-bag-manufacture
Nike, Inc. (2018). Waste. Retrieved October 29, 2018, from https://sustainability.nike.com/waste
Nike, Inc. (2018, January 18). Nike Takes Steps Toward 100% Renewable Energy in North
America. Retrieved October 29, 2018, from https://news.nike.com/news/nike-renewable-
energy-wind-farm
PledgeSports. (2018, September 21). 10 Biggest Sports Brands in the World. Retrieved October
29, 2018, from https://www.pledgesports.org/2018/01/10-biggest-sports-brands-in-the-
world/
Timmus, M. (2013, May 8). When it comes to branding, just do it right. Retrieved October 29,
2018, from https://www.worldfinance.com/strategy/corporate-governance-strategy/when-

11
it-comes-to-branding-just-do-it-righ
Wilsey, M., & Lichtig, S. (2018). The Nike Controversy. Retrieved October 29, 2018, from
https://web.stanford.edu/class/e297c/trade_environment/wheeling/hnike.html