Nike's Journey to Sustainability

Oh Since the early 90s, Sotanaki went through that really difficult patch where it had accusations of child labour. Can you just briefly describe what's been the journey since then to now? With the benefit of hindsight, I think it was potentially one of the most important things to have happened to us as a company because it forced such a huge period of introspection. We didn't act the way we should have acted. We basically kind of went defensive and didn't take accountability for... what was happening in the supply chain. And I think that really put fuel onto the flames. It took us till about the mid-90s to begin to get to grips with the fact that there was a new paradigm in the world, and there was a shift. In terms of the expectations on a company. And at that time was when we began to build out a corporate responsibility practice. But it was still frankly very much on the risk mitigation, reputation management side of things. Where we are today is having come through that journey, had to go into looking at our supply chain and really beginning to understand what our environmental and social impact is. It then got us to a place where we realised we needed to partner with civil society to try to solve some of the issues that became much more apparent to us. Today, the function that we have called Sustainable Business and Innovation really sits at the heart of the company's strategy for how we're going to grow and continue to flourish in this century. So it's gone from being a risk management, a reputation management function, to one that's about... Innovation and literally transforming the way we do business. How can you as a company talk about growing and flourishing if not everyone can do that? How can you do that and be sustainable? I think in the past we were much more focused on how do we make today's model better. Now we're focused as much on how do we define what the new model needs to look like. And the new model has to be one of sustainable consumption. How do we decouple our business from scarce and constrained resources? So that we can enable the consumption that people want and need, but that we do it without pulling from the scarce resources. One of the key issues and one of the things that people are feeling is that consumers actually aren't responding and they aren't actually calling for change. So how are you going to actually build that relationship with consumers to actually change that? With us, what we've been doing is thinking very carefully about how do we create a dialogue with our consumer. And how do we create tangible, practical action that they can take? A really simple piece of that is we now, in all of our U.S. stores, have an ability for the consumer to bring back any shoe, not just Nike shoes, and have them recycled and regenerated. I think you're going to see us beginning that conversation with the consumer. And I think you have to be very transparent that there continue to be challenges in today's model whilst trying to make it better and move to the future. And if you have that as an intelligent dialogue with the consumer, I think that's going to be a much more rich and interesting conversation. But there are so many companies on the retail side that are not doing what you're doing. At what point is that going to change? I mean, can we continue like that, or are we going to get this separation where you get a few companies who are leading the way, but actually everyone else continues to do very well just by continuing to sell as much as they can and not actually bothering with anything else? You say we need this radical collaborative systems change, but actually we don't see it. It's a huge issue. So what we've been doing is looking at how do we take mobilization of coalitions of the willing to a whole other level. I think in the absence of strong policy we need market forces, we need innovation, we need flows of capital to go to innovation and we need to move collaboration to a place where it's not just these small niche groups of one or two industry players but it's actually Really big coalitions of NGOs, trade unions and industry coming together to push the change. But what I don't see is companies like Nike getting together with the ten biggest brands in the world who do take this serious, who do recognise the challenge. You have the power, you have the finances, you have the resources and you have the direct in. Why is that not happening? Actually it is. Actually it is and I can give you three examples right now of how that's happening. First is we helped to create a group called BICYCLE. Business for Innovative Climate and Energy Policy in the USA with the specific objective of influencing the US legislation on climate and energy policy and we brought together over 30 brands from across the USA from all different sectors with NGOs to create a powerful force for good lobbying in the USA. Example number two is we're working very strongly actually in the World Economic Forum to drive the whole sustainable consumption. agenda at the World Economic Forum and we've managed to take it by creating cross-industry groups again with NGOs. We've taken sustainability from being a very small and minor part of the Davos agenda to being really front and center now at the Davos agenda and really galvanizing it around what the common vision for good could look like and what a roadmap should look like. And the third is right now as we speak we actually have a whole group of the industry meeting in Amsterdam. To work collaboratively on how we get to eliminating chemicals and toxic discharge from the entire manufacturing process. So I'm just wondering, if you look at a scale of 100, from 0 to 100, where 100 is a truly sustainable company, how far do you think on a scale of 1 to 100 you are? 20 to 30 percent. And I would say that I think the first 20 to 30 percent... has been some of the most crucial work for the industry as a whole and for Nike as a whole. I think that looking forward, the things that are going to have some of the most powerful triggers for speed and getting to that end state are innovation, just simply by creating something that delights in a new way and shows what good could look like. I see you're wearing a pair of fairly vintage Nikes. I mean, is innovation just about fantastic new materials or is it actually about saying actually Nike shoes you could resell them you could have a second I mean what I can't describe the levels of innovation and what it might look like so I think you have five different levels of innovation you have product innovation you have process innovation Then you have revenue generation innovation, so how we create new models that generate revenue not just from products but from services is one key element of our strategy. And then you have enterprise innovation, which is really how you rethink the entire model of the enterprise. And then you have industry innovation, where you really change the entire industry. World Finance Minister John Bolton And what do you think is going to happen, let's say if you look five, ten years ahead? Nike doing all this and another similar company not doing this. They're going to be at a massive disadvantage. The inputs to a business like ours, all of them are increasing in cost. It is materials, it is labour, and all of those materials today in most companies are materials that come from resources that are at risk or becoming increasingly constrained. So put very simply, any company today that is not thinking now about how to invest in thinking about sustainable alternatives, is going to... literally find this to be a financial issue in the very near future. World Finance Minister John Bolton So why don't you think companies are doing that? Professor Anneke Vandenbroek I suspect that what a number of companies fall foul of is an over focus on the short term versus the long term. And I think that the issue of sustainability is an interesting insight into how sophisticated, how experienced the management is. World Finance Minister John Bolton What's the biggest risk you feel you're taking as a company in this area? What we end up doing around open data makes some people nervous and I think has massive opportunity. But it definitely hovers on the edge of what is intuitive. to big consumer brands who have been brought up with an approach to the competitive nature of information. World Finance Minister David Morgan And what do you think is holding you back, stopping you from really sort of shifting the speed? Sarah Dupre It is the scale of the change. World Finance Minister David Morgan change and the importance of bringing people along with you on that journey and making it something that will last, not something that will be niche, not something that will be temporary, but something that will be a long-lasting, really embedded change. World Finance Minister John Bolton How do you see the relationship between business and government changing? Professor Anneke Vandenbroek I think it's enormously difficult. I think that there is a large element of business, progressive business. business that is finding the discussion with policy makers very concerning and very difficult to get traction on. And so I'm not convinced that's going to change in the near future. While you have some progressive companies, you have this enormous long tail of companies either that are energy companies or energy intensive companies who are active. ...seeking to stop any change. So what can you do within your sphere to sort of actually either out them or to actually do something to fight that? Well I think at the moment the best we can do is put a wedge in the door. What's your fear around that? Because you know there's all this change that needs to happen. You see what needs to be done, you see the pace of change being so slow, you see the complexity and you see that time is running out. How do you deal with that personally? How do you experience that? Well, on my good days, I'm the eternal optimist, and on my bad days, I'm very deeply, deeply profoundly concerned by the scale of the challenge in front of us and the ticking clock. And I think you have to hold both, because they create the urgency that gets you up every day. What is the essential difference that allows Nike... To be talking about this publicly in the way you do. I think there's a culture of humility from having learnt the hard way what it is to have really messed up. I think that was a searing experience for us and an experience that we never want to repeat. And I think there's a profound sense in Nike of wanting to lead on this, not just be on the defence, but to actually shape what that future could look like when it comes to sustainability and working conditions. Thank you very much, Hannah. Pleasure. Thank you.

We didn't act the way we should have acted. We basically kind of went defensive and didn't take accountability for... what was happening in the supply chain.

And I think that really put fuel onto the flames. It took us till about the mid-90s to begin to get to grips with the fact that there was a new paradigm in the world, and there was a shift. In terms of the expectations on a company. And at that time was when we began to build out a corporate responsibility practice. But it was still frankly very much on the risk mitigation, reputation management side of things.

Where we are today is having come through that journey, had to go into looking at our supply chain and really beginning to understand what our environmental and social impact is. It then got us to a place where we realised we needed to partner with civil society to try to solve some of the issues that became much more apparent to us. Today, the function that we have called Sustainable Business and Innovation really sits at the heart of the company's strategy for how we're going to grow and continue to flourish in this century.

So it's gone from being a risk management, a reputation management function, to one that's about... Innovation and literally transforming the way we do business. How can you as a company talk about growing and flourishing if not everyone can do that?

How can you do that and be sustainable? I think in the past we were much more focused on how do we make today's model better. Now we're focused as much on how do we define what the new model needs to look like.

And the new model has to be one of sustainable consumption. How do we decouple our business from scarce and constrained resources? So that we can enable the consumption that people want and need, but that we do it without pulling from the scarce resources. One of the key issues and one of the things that people are feeling is that consumers actually aren't responding and they aren't actually calling for change.

So how are you going to actually build that relationship with consumers to actually change that? With us, what we've been doing is thinking very carefully about how do we create a dialogue with our consumer. And how do we create tangible, practical action that they can take?

A really simple piece of that is we now, in all of our U.S. stores, have an ability for the consumer to bring back any shoe, not just Nike shoes, and have them recycled and regenerated. I think you're going to see us beginning that conversation with the consumer. And I think you have to be very transparent that there continue to be challenges in today's model whilst trying to make it better and move to the future.

And if you have that as an intelligent dialogue with the consumer, I think that's going to be a much more rich and interesting conversation. But there are so many companies on the retail side that are not doing what you're doing. At what point is that going to change?

I mean, can we continue like that, or are we going to get this separation where you get a few companies who are leading the way, but actually everyone else continues to do very well just by continuing to sell as much as they can and not actually bothering with anything else? You say we need this radical collaborative systems change, but actually we don't see it. It's a huge issue.

So what we've been doing is looking at how do we take mobilization of coalitions of the willing to a whole other level. I think in the absence of strong policy we need market forces, we need innovation, we need flows of capital to go to innovation and we need to move collaboration to a place where it's not just these small niche groups of one or two industry players but it's actually Really big coalitions of NGOs, trade unions and industry coming together to push the change. But what I don't see is companies like Nike getting together with the ten biggest brands in the world who do take this serious, who do recognise the challenge.

You have the power, you have the finances, you have the resources and you have the direct in. Why is that not happening? Actually it is. Actually it is and I can give you three examples right now of how that's happening. First is we helped to create a group called BICYCLE.

Business for Innovative Climate and Energy Policy in the USA with the specific objective of influencing the US legislation on climate and energy policy and we brought together over 30 brands from across the USA from all different sectors with NGOs to create a powerful force for good lobbying in the USA. Example number two is we're working very strongly actually in the World Economic Forum to drive the whole sustainable consumption. agenda at the World Economic Forum and we've managed to take it by creating cross-industry groups again with NGOs. We've taken sustainability from being a very small and minor part of the Davos agenda to being really front and center now at the Davos agenda and really galvanizing it around what the common vision for good could look like and what a roadmap should look like. And the third is right now as we speak we actually have a whole group of the industry meeting in Amsterdam.

To work collaboratively on how we get to eliminating chemicals and toxic discharge from the entire manufacturing process. So I'm just wondering, if you look at a scale of 100, from 0 to 100, where 100 is a truly sustainable company, how far do you think on a scale of 1 to 100 you are? 20 to 30 percent. And I would say that I think the first 20 to 30 percent...

has been some of the most crucial work for the industry as a whole and for Nike as a whole. I think that looking forward, the things that are going to have some of the most powerful triggers for speed and getting to that end state are innovation, just simply by creating something that delights in a new way and shows what good could look like. I see you're wearing a pair of fairly vintage Nikes.

I mean, is innovation just about fantastic new materials or is it actually about saying actually Nike shoes you could resell them you could have a second I mean what I can't describe the levels of innovation and what it might look like so I think you have five different levels of innovation you have product innovation you have process innovation Then you have revenue generation innovation, so how we create new models that generate revenue not just from products but from services is one key element of our strategy. And then you have enterprise innovation, which is really how you rethink the entire model of the enterprise. And then you have industry innovation, where you really change the entire industry.

World Finance Minister John Bolton And what do you think is going to happen, let's say if you look five, ten years ahead? Nike doing all this and another similar company not doing this. They're going to be at a massive disadvantage.

The inputs to a business like ours, all of them are increasing in cost. It is materials, it is labour, and all of those materials today in most companies are materials that come from resources that are at risk or becoming increasingly constrained. So put very simply, any company today that is not thinking now about how to invest in thinking about sustainable alternatives, is going to...

literally find this to be a financial issue in the very near future. World Finance Minister John Bolton So why don't you think companies are doing that? Professor Anneke Vandenbroek I suspect that what a number of companies fall foul of is an over focus on the short term versus the long term.

And I think that the issue of sustainability is an interesting insight into how sophisticated, how experienced the management is. World Finance Minister John Bolton What's the biggest risk you feel you're taking as a company in this area? What we end up doing around open data makes some people nervous and I think has massive opportunity. But it definitely hovers on the edge of what is intuitive.

to big consumer brands who have been brought up with an approach to the competitive nature of information. World Finance Minister David Morgan And what do you think is holding you back, stopping you from really sort of shifting the speed? Sarah Dupre It is the scale of the change. World Finance Minister David Morgan change and the importance of bringing people along with you on that journey and making it something that will last, not something that will be niche, not something that will be temporary, but something that will be a long-lasting, really embedded change. World Finance Minister John Bolton How do you see the relationship between business and government changing?

Professor Anneke Vandenbroek I think it's enormously difficult. I think that there is a large element of business, progressive business. business that is finding the discussion with policy makers very concerning and very difficult to get traction on. And so I'm not convinced that's going to change in the near future. While you have some progressive companies, you have this enormous long tail of companies either that are energy companies or energy intensive companies who are active.

...seeking to stop any change. So what can you do within your sphere to sort of actually either out them or to actually do something to fight that? Well I think at the moment the best we can do is put a wedge in the door.

What's your fear around that? Because you know there's all this change that needs to happen. You see what needs to be done, you see the pace of change being so slow, you see the complexity and you see that time is running out. How do you deal with that personally? How do you experience that?

Well, on my good days, I'm the eternal optimist, and on my bad days, I'm very deeply, deeply profoundly concerned by the scale of the challenge in front of us and the ticking clock. And I think you have to hold both, because they create the urgency that gets you up every day. What is the essential difference that allows Nike...

To be talking about this publicly in the way you do. I think there's a culture of humility from having learnt the hard way what it is to have really messed up. I think that was a searing experience for us and an experience that we never want to repeat. And I think there's a profound sense in Nike of wanting to lead on this, not just be on the defence, but to actually shape what that future could look like when it comes to sustainability and working conditions.

Thank you very much, Hannah. Pleasure. Thank you.

Transcript for:Nike's Journey to Sustainability

Transcript for:
Nike's Journey to Sustainability