NIKE (NKE) Unveils FY10-11 Sustainable Biz Summary; Says Factories with Serious Repeated Violations Remains Low


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May 3, 2012 9:18 AM EDT Send to a Friend
NIKE, Inc. (NYSE: NKE) released its FY10-11 Sustainable Business Performance Summary which introduces its new targets and outlines its progress against key business, labor and environmental goals. The company also discusses the key challenges and its strategy for its work ahead, demonstrating its commitment to a more transparent and sustainable future.

Nike’s long-term strategic vision – to decouple profitable growth from constrained resources – is underscored by new targets and commitments, including a company-wide commitment to further integrate sustainability principles into its innovation processes, governance and portfolios. The work ahead is structured in two levels: continuous improvement targets against key impact areas to “make today better” and broader innovation commitments to “design the future” that establish how Nike is approaching longer-term change.

Nike also unveiled its new factory rating system, the Manufacturing Index, which looks comprehensively at a contract factory’s total performance and includes a deeper look at how a factory approaches sustainability. This Index elevates labor and environmental performance alongside traditional supply chain measures of quality, cost and on-time delivery.

Within the overall Manufacturing Index, the company has developed an innovative Sourcing & Manufacturing Sustainability Index (SMSI) which assesses contract factory performance on sustainability measures including measures of lean, environmental performance (including water, energy and carbon, and waste), health and safety, and labor management factors. After more than two years of development work and concluding a successful pilot program, the SMSI is currently being rolled out across NIKE, Inc.’s global supply chain.

Nike’s report focuses heavily on the role of innovation, transparency and collaboration in addressing sustainability issues. The Summary shows that Nike achieved or made significant progress against most of its previous targets, including waste reduction in footwear manufacturing, utilizing its Considered Design Index guidelines in product design and implementing Human Resource Management training programs in contracted factories.

In some areas, including the reduction of excessive overtime at contract factories, progress was slower than targeted. Nike also changed its approach to some targets, including carbon emissions, based on deeper understanding of the challenges and to improve alignment with business strategy. Incremental progress against several targets was a key driver for Nike to redesign its factory evaluation and sourcing criteria to improve performance in the long-term.

Some of the key results against the last goals Nike set include:
  • The number of factory audits showing serious, repeated violations has remained low, at about 5 percent over the past five years. The number of contract factories with unknown conditions has decreased from 48 percent in FY09 to 8 percent in FY11, due in large part to increased monitoring against NIKE, Inc.’s Affiliate base.

  • Human Resource Management training was conducted in 79 percent of focus contract factories (76 of 98) which covered 94 percent of footwear volume, 43 percent of apparel volume.

  • CO2 emissions from contract footwear factories used to source NIKE Brand product were down 6 percent from FY08-FY11, despite a 20 percent increase in production.

  • 97 percent of NIKE Brand footwear achieved a baseline level or better on Nike’s Considered Index.


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