July 18, 2011

NIKE, Inc.’s Response to Greenpeace Report

NIKE, Inc. (Nike) has long been committed to developing products and business models that contribute to a more sustainable supply chain. We have demonstrated that commitment over the last ten years. Recently, Greenpeace International released a report entitled ‘Dirty Laundry - Unravelling the corporate connections to toxic water pollution in China’, that has called into question both Nike and our industry’s commitment to sustainable manufacturing. Nike responded to Greenpeace and confirmed that Nike does business with the two factories in the Youngor Group Co, Ningbo Youngor Knitting and Underwear and Ningbo Youngor Sportswear in Zhejiang Province. These factories are cut and sew facilities; they do not have manufacturing processes that include use of the chemicals called out by Greenpeace. Further, Nike has responded to Greenpeace underscoring our comittment to aspiring to the same goal of a toxic-free future. We believe that there is an opportunity to collaborate on the way forward as we both move towards less waste and the elimination of hazardous chemicals and non-renewable energy consumption.

We are continuously working toward improving water usage and management of water in our global supply chain. We’ve worked with Business for Social Responsibility's Sustainable Water Group to implement water quality guidelines at apparel material supplier facilities in China and are currently implementing the guidelines with footwear material suppliers.

In 2008, we began the China Environmental Transparency Program working with IPE (Institute of Public & Environmental Affairs) to track factory environmental compliance status at factories as part of their Green Choice Alliance. This program covers all Nike contract factories, new sources and key material suppliers. For China it is our aim to bring all of Nike contract factories into the program in the next six months. When we find one of our contract factories or suppliers in China on the IPE list, we immediately communicate with that factory or supplier to determine the root cause and for the factory or supplier to develop corrective action and remediation plans.

Material supplier facilities participating in the Water Program submit production and water use data, discharge permits and laboratory test results on an annual basis using the H2O Insight online reporting system.

July 18, 2011

NIKE, Inc.’s long-term vision is to create products and business models that are decoupled from constrained resources. We are committed to innovating new ways to design products from materials that require less water and fossil fuels and that can be 100 percent renewable and recyclable at the end of their lifecycle. Through innovative design, science, technology and process changes, we believe we can design out waste, eliminate hazardous chemicals and non-renewable energy consumption. Innovation also allows us to design in new materials and new approaches to products.

We believe this is not just an imperative for Nike but for the industry as a whole and consumer goods at large. Our goal must be to seek ways to decouple economic growth from scarce and constrained natural resources and continue to push the boundaries of innovation – getting closer to closed-loop business models. Addressing chemistry and water are major factors to reaching this ultimate goal. Nike’s aim is to improve water efficiency and reduce or eliminate hazardous chemicals from our own supply chain.

Nike does business with more than 900 contract factories in nearly 50 countries around the world. This work is done within a complex and tiered network of buyers, agents, distributors and material suppliers. Generally, material suppliers, chemical suppliers, and dyeing/finishing facilities are shared among a number of brands. We acknowledge the need for industry-wide collaboration in order to create lasting, scalable, systemic change.

Nike shares the aspirational goal of a toxic-free future outlined by Greenpeace and we believe our path to achieving this shared visions starts with how we manage our own supply chain. We have already begun that work. We have established standards and new approaches to guiding product development and manufacturing. However, consistent implementation and adoption of these standards across our entire supply chain remains a challenge we continue to address. We have always acknowledged that this is a journey, and the scale of change needed across such an extensive shared and complex set of industries is a long-term commitment, and that despite work done we still have much work ahead of us. We have piloted and created benchmarks for many of these initiatives through the NIKE Brand and have plans to integrate throughout the business. We also know to succeed, new forms of collaboration must occur between NGOs, government, suppliers, brands and civil society. This collaboration must occur alongside a flow of innovation, science and technology.

Our commitment is to work with Greenpeace to share the work we have embarked upon within our own supply chain, and to offer to partner with Greenpeace to help catalyze and accelerate these new forms of collaboration that will shift industries.

Nike continues its existing commitments and investments toward:

  • Eliminating toxics across our supply chain

  • Driving sustainability through innovation

  • Collaborating to accelerate industry change

Progress toward the above commitments will continue to be tracked and publicly disclosed through tools such as our CR Report. Current Nike programs/tools already dedicated to these commitments include:

  • Global Water Program

  • Restricted Substances List

  • Green Chemistry Program

  • Sustainable Chemistry Guidance

  • Considered Index

  • Materials Analysis Tool

Global Water Program Nike has been working towards water stewardship for more than a decade. Our global water program was launched in 2001. The key goals of this program are for contract factories to improve their water efficiency and wastewater quality and to ultimately return clean water to communities and the environment. Specifically, we direct the contract factories who, in turn, direct materials suppliers, to borrow water responsibly by using low or no-water processes where possible, improving the efficiency of water-intensive processes, and treating and recycling wastewater effectively. We have established a number of chemical and water programs that drive innovation and evolve how our products are manufactured. Our Global Water Program has grown from a trial of approximately 50 suppliers to tracking well over 500 suppliers this year. This allows us visibility to, and influence of, water quality for more than 50 billion gallons annually. Due to the shared nature of suppliers, our water program allows us to influence more than 10 times the amount used for Nike product alone. In early 2011, Nike released the H2O-Insight Water Tool in the hopes of allowing it to become an independent industry tool. By doing this, we are hoping to allow a much greater pool of brands and suppliers to participate in tracking water quality, quantity, and efficiency. We also believe that through collaboration, the industry tool can evolve more quickly and robustly. The H20-Insight Water Tool was a significant investment by Nike toward a greater industry priority – water stewardship.

Restricted Substances List We established a comprehensive list of restricted substances (RSL) in 2001 in an effort to guide our suppliers in the production of safe and legally compliant product. The RSL is based on the most stringent worldwide legislation and also includes substances that Nike has voluntarily decided to restrict. In addition to the lists of substances, we also communicate test requirements and methods to our suppliers, to guide them in the production of safe and legally compliant product. Since we started our program we have incorporated RSL into NIKE Brand supply agreements and into new and renewed agreements with our Affiliates. Through public disclosure and trainings, we have raised the product chemistry awareness of thousands of internal and external people. In addition, we have collected tens of thousands of data points from testing. Our RSL and data collection system for testing has served as a model to multiple brands and we continue to assist industry players as they develop their own programs. The entire list can be found on Nikeresponsibility.com/RSL.

Our RSL impacts multiple levels within the manufacturing process with a concentrated effort to elimination of hazardous chemicals at the material level. We selectively monitor and test for compliance across the factory base. Testing must be performed at third-party laboratories that we have audited and approved to help ensure high quality data.

Green Chemistry Program We have also created a Green Chemistry Program that allows us to educate our supply chain how to proactively identify, target and eliminate hazardous chemicals. We meet with factories, material vendors, and chemical suppliers regularly to promote the innovation and hazard reduction that green chemistry principles can deliver to consumer products. An example of green chemistry engagement by Nike includes our Environmentally Preferred (EP) Rubber formulation that reduces the use of high hazard chemicals 96 percent by weight. This single reformulation reduces high hazard chemical use by multiple tons each year. To encourage the sharing of sustainable innovation, Nike shared the EP Rubber patent, and more than 400 others on the GreenXchange platform (http://greenxchange.cc/). This website was created to share these kinds of sustainable innovation and encourage industry collaboration.

Another example of green chemistry is demonstrated in the replacement of solvent based adhesives with water based adhesives for the NIKE Brand. This innovation required a significant change to how NIKE Brand footwear was manufactured, and resulted in a 95 percent reduction of volatile organic compounds (VOC) per pair of shoes. This meant that an average NIKE Brand shoe went from 340 grams of VOC in 1995 to approximately 15 grams in 2006.

Sustainable Chemistry Guidance (SCG) In 2010, we introduced a Sustainable Chemistry Guidance (SCG) section to our RSL documentation. The SCG is intended to highlight “positive” chemistries. This guidance will continue to expand as we engage chemical suppliers to identify chemistries and treatments that are more sustainable and lessen the environmental impact of apparel and footwear production. To be listed in the SCG, suppliers must prove that the chemistry has a positive impact. This proof can require disclosure of formulations or lifecycle assessment (LCA) data. The SCG gives factories alternative chemistries and also offers an incentive to suppliers that are working to eliminate hazardous chemicals (or otherwise decrease the impact of manufacturing). An example of SCG engagement includes the listing of PVC Free/phthalate free screen print inks – a major accomplishment for the apparel industry. Another example is the listing of an enzyme treatment that significantly reduces water, energy, and chemicals used for the production of cotton fabric.

Considered Index From the beginning of the design process, our aim is to design product that is more sustainable. To help do this, we introduced the Considered Index in 2006, a design tool that helps NIKE Brand designers make more sustainable choices to reduce waste, use more sustainable materials and reduce toxics.These decisions lead to using less water in the manufacturing process, using recycled and organic materials or using materials that are better for the environment with fewer volatile organic compounds.

The Considered Index Tool has allowed us to begin the process of creating targets for newly created NIKE Brand products to meet Considered Index baseline standards. For NIKE Brand footwear, we achieved this goal of meeting our baseline standard for three consecutive seasons in 2011.Using the index, over the past five years, there has been a 19 percent reduction in waste from the production of NIKE Brand footwear uppers. This type of waste savings equates to not producing 15 million pair of footwear uppers per year. In addition, we have seen a continual increase in the number of unique Environmentally Preferred Materials (EPM) in our footwear (a 77 percent increase from FY05-FY08) which has resulted in a current average of 8 unique EPMs per shoe.  In order to fast track and encourage the adoption of environmentally preferred processes, Nike continues its commitment to collaboration within the industry and released a web based tool (Environmental Apparel Design tool) based in this index in 2010. Our goal is to drive sustainability into all of Nike product, and through collaboration, help the entire industry do similar.

Materials Analysis Tool As part of the Considered Index, Nike created a materials analysis tool (MAT) that enables designers to review chemistry, energy/CO2, waste and water/land-use inputs when designing products so they can understand upfront how to make more sustainable choices in design.

We believe that 60 percent of our environmental impacts are from materials. Our philosophy is to positively impact choices at the product design level, so we can positively contribute ultimately to the environment.In the past year alone for FY11, the NIKE Brand doubled its use of recycled polyester in apparel, which is produced from discarded plastic bottles.This use is equivalent of taking 285 million bottles out of landfill.

We have improved upon MAT and plan to release the data to the industry this year to further our commitment to open source collaboration as an essential means to unleashing innovation and creating industry scale. Nike is releasing all of the data, research and information, so that companies can thoroughly understand the approach that Nike has used.They may use it to more easily integrate sustainability into their businesses.We work closely with the Sustainable Apparel Coalition, who have committed to reviewing this tool this fall for possible integration to an industry-wide index.This type of collaboration is key to ensuring the industry is working off the same set of standards to progress along a journey towards a sustainable economy.

Further to our existing and broad level of commitment, we offer to partner with Greenpeace on the following:

  • Work with Greenpeace, the industry, and other relevant NGOs to use our leverage and business relationships to focus on water issues in China.

  • Work with Greenpeace, other relevant NGOs, and industry to promote greater water management in China and beyond through the use and further enhancement of the recently released H20-Insight Tool.

  • Work with Greenpeace, other NGOs, and industry to develop strategies and timelines for the goal of eliminating hazardous chemicals from the footwear and apparel industry.

  • Participate in an industry forum to create comprehensive programs for monitoring progress toward the goal of eliminating hazardous chemicals from the footwear and apparel industry.