Nike, Inc. is one of the world’s largest manufacturers and brands of athletic apparel, shoes, and equipment. The company has undergone a revolution in the past decade. They have gone from a risk management, philanthropic and compliance model to a long-term strategy focused on innovation, collaboration, transparency, and advocacy. This paper discusses the goals of Nike’s sustainability program, the paradigm shift, and the business case for sustainability. The six levels of paradigm shift are discussed as well as the motivations behind implementing a sustainable program, the risks, and rewards.
Corporate Sustainability is Attainable: Nike Case Study Nike, Inc. is one of the world’s largest manufacturers and brands of athletic apparel, shoes, and equipment. The company has undergone a revolution in the past decade. They have gone from a risk management, philanthropic and compliance model to a long-term strategy focused on innovation, collaboration, transparency, and advocacy. They seek to thrive and lead in a sustainable economy. This paper will explore the goals of Nike’s sustainability program, the paradigm shift experienced by this company, and what business case can be construed from their efforts.
The purpose is to understand the process of implementing a sustainable program, the risks, and rewards. Goals of Sustainability Program Mark Parker, CEO of Nike, Inc. , stated that “corporate responsibility must evolve from being seen as an unwanted cost to being recognized as an intrinsic part of a healthy business model, an investment that creates competitive advantage and helps a company achieve profitable, sustainable growth” (McKrael, 2009). Nike’s vision started to become a reality with the creation in 1993 of the Nike Environmental Action Team (NEAT).
The purpose of this team was to serve as the controller of the environmental staff and functions of the company. Their main course of action was to find answers to the environmental problems created by Nike’s production. In addition, NEAT was charged with integrating solutions into the company’s business practices (McKrael, 2009). One of the initial goals was to make sustainability a strategic opportunity, central to the company’s business, and a key player in all major organizational decisions.
Nike’s sustainability program consisted of two phases. During phase one Nike undertook a series of initiatives addressing the environmental life cycle of its products, integrating all aspects of their manufacturing including design, marketing, and the product life cycle. During phase two, new goals were formulated taking into consideration the improvements made by phase one. Phase two goals aimed to integrate Nike as a whole – all aspects of their business along with innovation in design and manufacturing.
Some of these goals included closing the loop – reducing costs and improving margins while reducing environmental footprint, use of sustainable materials in production and consumption, climate stability, water stewardship, supporting and creating thriving communities, and using athletes as change agents. As a result, Nike has an extensive line of athletic shoes made with reused materials, many of their spokespersons or athletes are involved in the design and sponsorship process of environmental-friendly products, and they have addressed issues involving the use of chemicals and water stewardship.
All in all, Nike’s sustainability goals serve as the “guiding light that makes them stay on track” (McKrael, 2009). Paradigm Shifts At its core, a paradigm shift is a change from one way of thinking to another. In many cases the shift involves a revolution, a transformation, or a metamorphosis driven by agents of change. Paradigm shifts occur from time to time in business as well as in science. Shifts are often hard fought and the ideas underlying them not widely accepted until long after they were first introduced (O’Reilly, 2004).
When Nike announced their re-commitment to sustainability, Mike Parker, Nike Inc. ’s CEO, proclaimed: All companies face a direct impact from decreasing natural resources, rising populations and disruption from climate change. And what may be a subtle effect now will only become more intense over the next five to ten years. Never has business had a more crucial call to innovate not just for the health and growth opportunities for our companies, but for the good of the world (Abound Global, 2010).
The real paradigm shift for this company is a change in approach from “me” to “we”. Nevertheless, sustainability is not always sustainable. Organizations do and describe what they do as sustainable, but that does not make it so. The Capacity Evolution Blog (2009) describes six levels that measure how organizations engage in sustainability, including compliance, conformity, cooperation, collaboration, coherence, and constellation. Nike’s paradigm shift started with compliance. At the compliance level, sustainability was externally mandated and internally enforced.
During phase one Nike was able to set high levels of internal compliance enforced through education and motivation. Following compliance, at the conformity level, the organization realized the importance of reputation, brand name, and the need to protect both. In this level, sustainability was externally mandated and harvested for public relations (The Capacity Evolution Blog, 2009). Nike has been successful in maintaining and growing brand equity while improving their competitive advantage. They have done it by promoting their efforts through diverse media.
At the next level, cooperation, sustainability focused on a mix of internal and external drivers calling for “giving” and “helping out” (The Capacity Evolution Blog, 2009), as demonstrated by Parker’s proclamation as well as the company’s corporate sustainable mission. Also, at this level, the organization engaged in transactional rewards, in which by helping the environment, the company helped themselves. At the coherence level, sustainability generated from clearly articulated and realized principles and purpose.
In other words, Nike “walked the talk”. More than likely, this is the present state of the organization’s paradigm shift. At this level there is excellent risk management and long-term stability; however, in order to remain or advance from this level the organization must have proactive leadership, high levels of awareness, communication, innovation, and resiliency (The Capacity Evolution Blog, 2009). Business Case According to a study published in the Harvard Business Review, when companies pursue sustainability, they aim to demonstrate that they are ocially responsible; however, it can also provide both top-line and bottom-line rewards (Nidumolu, Prahalad, & Rangaswami, 2009). Furthermore, sustainability lowers costs because it reduces the inputs used, generates new opportunities, and increases a company’s competitive advantage. Nike certainly discovered this early on, as their financial investments have had quick and high returns. Nike has redesigned their products, technologies, processes, and business models. These efforts have placed them at the forefront.
They have the largest market share in their industry, therefore, other companies look up to Nike and follow their lead. As government regulation increases and companies are faced with compliance, rewards, and punishments the question may be asked whether a sustainability program starts from an altruistic or a profitability motivation. The magnitude of Nike’s sustainability program and its outreach has certainly broken many barriers. At onset, Nike’s motivations may not have been purely altruistic. At the time, the company was facing backlash from their manufacturing practices and was in need of rescuing their brand image.
Sustainability walked hand in hand with improving working conditions and protecting human rights. However, it seems that the rewards driven by sustainability not only motivated them to innovate, but inspired them to change their thinking from “me” to “we”. The impact sustainability has on innovation and business can no longer be ignored. Whether the motivation is altruistic, profit potential, competitive advantage, or innovation, the bottom line is that it is a situation in which everyone involved wins. Conclusion
Nike sees sustainable business and innovation as an integral part of their modern business model. They have experienced how the power of their brand can create meaningful change, generate bottom line returns, and increase their competitive advantage. They see new opportunities for sustainable practices and principles as the way to become a driver of growth and innovation, build consumer and community connections, and create a positive social and environmental impact (Nike, 2010). This paper presented the goals of Nike’s sustainability program, the paradigm shift, and the business case for sustainability.
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