Nike Environment Analysis

I. Company Profile

An apparel and equipment company with 900 manufacturing facilities worldwide, Nike operates on six continents. The company's worldwide headquarters is located in Beaverton, Oregon. Nike owns facilities in Oregon, Tennessee, North Carolina and the Netherlands, and operates leased facilities for 15 NikeTowns, over 70 Nike Factory Stores and over 100 sales and administrative offices and employees more than 50,000 people. Nike is the largest sports and fitness company in the world.

II. Management of Overseas Environmental Issues

A. Management issues

Reporting structures, systems, and certifications

Nike currently has a team of 60 people at its worldwide headquarters and in the field that is responsible for managing Nike's supply chain factories and contracted manufacturing facilities. Nike operates with regards to its Code of Conduct, Leadership Code and Standards known as MESH (Management, Environmental, Health and Safety), and local compliance. This environmental team will increase to an estimated 80 people by the end of 2002. The team is responsible for monitoring of contracted facilities. There are four regional areas of operations: North Asia, South Asia, Europe, Middle East and Africa, and the Americas. Nike also has functional units, which set standards, infrastructure management, and protocol for Nike's Environmental, Health and Safety systems. At the corporate level, Nike has a Vice President of Compliance. Together, the environmental teams, functional units, and Vice President of Compliance are responsible for 900 facilities worldwide.

In order to facilitate understanding and implementation of its standards, Nike introduced factory-wide training and education programs to its facilities. Nike also prints its codes and regulations in languages of the countries where its operations are located so that non-English speaking employees have access to the information.

Nike expects that its contracted facilities apply and adhere to Nike policy and regulation regarding Management, Health, Safety and Environment (MESH) and monitors their facilities to ensure compliance. One of the challenges of requiring contractors to adhere to Nike's code of conduct in regards to environmental practices is the lack of infrastructure that exists in some developing countries. Serious challenges confront Nike when requiring a contractor to responsibly dispose of hazardous waste when there is no infrastructure in the country that can handle hazardous waste disposal. Contractors do not have a means to dispose responsibly and therefore do not comply with Nike standards. Sometimes it is also the case that local regulations are of a lower standard and so contractors are operating legally by the country's standards but are not adhering to Nike's standards.

Forty-five of Nike's 900 factories are footwear factories; the remainder are apparel factories. In recent years Nike has been interested in certifying its facilities under ISO 14001, but the aforementioned challenges of dealing with contracted facilities has made full implementation of the certification plan infeasible. The nature of the apparel business focuses on a continuous change; therefore, the majority of Nike's manufactured products are changing on a seasonal basis. The issue here is that implementation becomes difficult when products and contracting sites are changing. As a result, most of Nike's significant initiatives are implemented in footwear factories, which are typically more stable, and Nike is currently working on an ISO 14001 certification plan for all its footwear factories.

Product design and stewardship

Nike has created a new logo for products that are sustainable and environmentally safe. Products like 100% PVC free and others that are considered to be of a proper sustainability level are awarded the logo.

One of Nike's most significant challenges is the use of sulphur hexaflouride (SF6) in the air bladder of its footwear lines. Nike has reduced the usage of SF6 by 68% from a peak of usage in 1997. Nike currently has a goal to eliminate 100% of SF6 from its products by the year 2003. Another product challenge has been the use of harmful chemical adhesives and mold removal solvents. Nike has begun the use of alternative water based adhesive in its product, reducing the use of harmful solvents by 88% since 1995, and has eliminated the use of 1.6 million gallons of solvent per year. Nike is in the process of creating a restricted manufacturing substance list to which its apparel contractors will adhere.

End product compliance standards out of Europe, as well as restricted substance lists, which require the absence or reduced presence of certain substances, have pushed Nike to phase out these substances in its products. Many of Nike's more pressing environmental issues relate to eliminating the use of harmful materials or chemical contents in its products. Nike has been managing a PVC phase out plan since 1998 and currently has a new line of footwear that is 100% PVC free. Nike is also working on phasing out PVC from its equipment line, but this has been quite difficulty because Nike has less influence over its material suppliers for the equipment production.

Auditing and management

Nike's internal compliance team made up of 30 staff members is responsible for S.H.A.P.E. (Safety Health Attitude, People and Environment). The team continuously monitors and supervises Nike's sites and works with the ones that are not in compliance to improve operations.

In cases when contractors are not in compliance, i.e. when contractors are not meeting the specific requirements of Nike's code of conduct, the environmental team comes into play and manages remediation processes. Nike takes steps to work with non-compliant owners and managers to improve standards and change practices. Nike works together with the factory to create steps that will bring the factory into compliance, incorporating training, education and consultation. If the factory continues to violate policy, Nike can impose fines. If the problem persists, the factory can be put the site on formal probation, resulting in termination of its contract.

III. Overseas Environmental Issues

This section looks at the environmental conditions in two of the countries, Vietnam and Thailand, that Nike maintains subcontractor relationships for footwear production:

VIETNAM: Vietnam is one of the world's 10 top biodiversity centers, with 13,770 species of plants, more than 5,000 insects and 1,6000 species of other invertebrates. However,