Introduction

In sustainability – as in sports – what counts is how you perform on the field. A sound game plan or strategy is essential to success. Then as you progress, people want to know: How did you do? Did you meet your goals, or fall short? What was the final score?

At NIKE, we have developed a series of sustainability-related aims, targets and commitments to help ensure we are on track and making progress. The remainder of this report details our performance. It is divided into two major parts:

• Make Today Better, which covers our progress in six key impact areas and shows how we are redefining the business to improve our performance.
• Design the Future, which illustrates how we are unleashing innovation to drive our business forward and embedding sustainability into our approaches to product and manufacturing.

We provide a snapshot of our progress toward all of our aims, targets and commitments. We believe one of the best ways to see these types of change in action is through the comparison of products. We have evaluated three representative, iconic styles of footwear and the lifecycle impacts across the value chain: the 2008 Air Pegasus 25, the 2014 Air Pegasus 30, and the 2014 Flyknit Lunar 2. We provide a deep comparison of the energy, emissions, water and waste impacts of these models at every stage of the value chain as an illustration of how changes to materials and methods of manufacture – both incremental and game changing – are bringing to life our vision of decoupling growth from constrained resources. 

PRODUCT IMPACTS

FROM PEGASUS TO FLYKNIT

A footprint includes many different kinds of impacts that must be measured through the scientific evaluation of all processes and steps – from growing or processing the materials that go into the product, to how it’s made, to how it’s used and disposed. To understand our products’ footprint we have conducted a thorough analysis of four key environmental aspects: energy use, greenhouse emissions, waste, water use and chemistry. In this analysis, we look at these five aspects across three typical-profile running shoes in popular styles and common sizes.

Continuous learning will be essential, as some of our goals will be difficult to meet. For instance, we are still working, along with others in our industry, to identify a consistent, meaningful and reliable way to track progress toward our target of zero discharge of hazardous chemicals by 2020. In FY12, Converse introduced a new, 13% lighter-weight shoebox, and our new NIKE Brand shoebox will be completely rolled out by the end of FY15. The NIKE Brand box is 3% lighter, which is great progress, but will not get us all the way to our 10% weight reduction target. In each of our impact areas, we are working to solve the most pressing problems. Our footprinting work confirmed what we had long believed: that our greatest impacts, and therefore our highest priorities for progress, reside in the parts of our value chain that we do not control directly. Much of our work over the past few years has been to devise and deliver on ways to best influence those impacts – such as through our indices, which help us to rank and evaluate suppliers and help them understand our aims. 

At the same time, we are increasingly aware that our key impact areas often overlap and interconnect. For example, efforts to reduce hot water usage in a factory may have the positive effect of also reducing energy usage, because less water needs to be heated. We also know our actions have far-reaching effects and consequences that are sometimes unintended – though not necessarily negative. For instance, if we can help a factory use less water – or on a bigger scale if we make factory sourcing decisions with water availability and use as a key criteria – we can help whole communities maintain or improve their access to water for personal use. Similarly, helping to improve water quality (for instance by working toward our goal of zero discharge of hazardous chemicals) can broadly help to enhance community and environmental health. 

We can address a number of these issues through game changing innovations like NIKE ColorDry, developed by our strategic partner Dyecoo Textile Systems B.V. to take water out of the material dyeing process. This type of sustainable innovation takes considerable time and investment to prove and bring to scale. But the opportunity for NIKE ColorDry extends broadly, and provides quality improvements as well as water impacts: no water used, no discharge, no competition with local resources. 

Another example is our decisions about where to source plant-based materials, like cotton, which have far-reaching effects on how land is used in a given community and whether there’s enough land to grow food for local populations. We are always working to identify and assess these kinds of interactions, trade-offs and consequences, recognizing that there are multiple paths to “better,” with some solutions not even invented yet. 

In the end, we know the best way to tackle challenges is simply to get to work. You can only train so much. Then it’s game time. You have to perform. We report on what we’re doing, and how we’re doing, on the following pages. 

Make Today Better

				Lagging   On Plan   Significant Progress   Achieved
Topic	Aim	Target	Progress	Commitments
Cut Energy	Drive innovation and collaboration and engage in public policy advocacy to deliver carbon reductions across the value chain	Achieve a 20% reduction in CO2 emissions per unit from FY11 levels through FY15 (in aggregate from assessed footprint in the built environment, logistics and footwear manufacturing)	13% reduction at the end of FY13	Increase contracted manufacturer participation in NIKE’s energy and carbon continuous improvement program Expand use of renewable energy in our built environment (where available), including all new retail stores Design new NIKE, Inc. builds to LEED standards Assess and report energy and CO2 footprint
Empower Workers	Transform our working relationship with contract factories to incentivize changes that benefit their workers. Instill changes in our code, instigate innovation, educate to build management capabilities, address root causes in our own processes, work with the industry, and reward factories’ progressive achievement	Source from factories that demonstrate a commitment to workers by achieving minimum bronze rating on our Sourcing & Manufacturing Sustainability Index by the end of FY20	68% of factories rated bronze or better at the end of FY13	Align sourcing decisions by the end of FY20 to prioritize sourcing in factories that have eliminated excessive overtime Require commitment to lean manufacturing and demonstrate progress toward a lean culture for contract factories to move beyond compliance by the end of FY15 Develop and test new models of manufacturing by the end of FY15 that improve worker compensation, skills and livelihood, and share findings to drive industry change
Reject Toxics	Minimize the impact of product ingredients throughout the lifecycle	Achieve zero discharge of hazardous chemicals for all products across all pathways in our supply chain by 2020	Executing according to plan	Establish an industry-wide management coalition Expand chemicals management and awareness training Expand use of environmentally preferred chemistries Expand material traceability Explore disclosure advancements
Slash Water Use	Borrow water and use it responsibly	Improve water efficiency by 15% per unit in apparel materials dyeing and finishing, and in footwear manufacturing, from FY11 through FY15	10% reduction at the end of FY13 23% reduction at the end of FY13	Increase participation in NIKE Water Program across NIKE, Inc. brands Drive industry change through expanded access to the use of NIKE-developed H2O* Insight Tool Assess the geographic impact of water
Reduce Waste	Use less, buy less to reduce impact across the value chain	Achieve a 10% reduction in waste from finished goods manufacturing across NIKE, Inc. and in shoebox weight per unit (from an FY11 baseline through FY15)	8.6% reduction at the end of FY13 3% reduction at the end of FY13	Reduce waste in manufacturing Improve packaging Increase recycling, reuse, repurpose & compost of waste (manufacturing, retail, distribution centers, offices)
Support Communities	Catalyze human potential by creating community and business impact through a portfolio of innovative partnerships, advocacy and movement-making initiatives	Invest a minimum of 1.5% of pre-tax income in communities annually	1.6% of pre-tax income contributed to communities in FY13	Build and expand Access to Sport agenda Tap the power of our brands to engage consumers and leverage support for the issues they care about Through the NIKE Foundation, continue to use insight, innovation and inspiration to equip adolescent girls in the developing world and transform their world so their full potential can be realized and they can stop poverty before it starts Engage, encourage and enable employees to support communities

Design the Future

				Lagging   On Plan   Significant Progress   Achieved
Topic	Aim	Target	Progress	Commitments
Unleash Innovation	Integrate sustainability principles into our innovation processes, governance and portfolios to generate innovation that delivers products and services that combine performance, innovation and sustainability			Build sustainable innovation capabilities across the business to drive a disruptive innovation agenda as we continue our endless pursuit of delivering performance products and services to athletes Develop and prototype an index to drive and measure how sustainability is integrated into our innovation portfolios, decision making and processes. Share a version of this index and lessons learned with others in an effort to contribute to larger-scale adoption of approaches that link sustainability and innovation to drive business growth and performance Develop tools, processes and systems to establish metrics to measure impact that can be shared as part of the index, without compromising the competitive nature of innovation
Revolutionize Product	Design products that provide superior performance and lower environmental impact across NIKE, Inc.	Understand and improve the environmental profile of our product designs by the end of FY15		New NIKE Brand global footwear product* achieves minimum silver rating on NIKE Footwear Sustainability Index by the end of FY15 New NIKE Brand global apparel product* achieves minimum bronze rating on NIKE Apparel Sustainability Index by the end of FY15 New NIKE Brand global* equipment product achieves minimum bronze rating on NIKE Equipment Sustainability Index by the end of FY20 Expand reach of indices to score other NIKE, Inc. product (i.e. products of Affiliate brands, licensees and carryover products) Increase use of environmentally preferred materials
Transform Manufacturing	Drive improvement in factory sustainability performance by implementing sourcing systems that include measures of sustainability performance (as well as traditional performance metrics of cost, quality and delivery) in selecting factories with which to source from over time	Source all products from factories that have achieved bronze or better on our Sourcing & Manufacturing Sustainability Index by the end of FY20		Incorporate factory labor and environmental performance criteria into production vendor sourcing selection and evaluation Enable contracted factories to expand and optimize their labor and environmental sustainability capabilities Engage external partners to drive sustainability and transparency across the industry
People & Culture	Tap our people and our culture, our most powerful source for innovation and change			Invest in employee development Engage employees Inspire ideas and ignite innovation
How We Work	Build sustainability into the DNA of our business model, into our operations and culture where innovation is unleashed, shared and scaled			Hardwire sustainability in the way we do business Measure the business value of sustainability Be a catalyst of sustainable innovation Participate in multi-sector efforts to drive system change and market transformation