Introduction
Many businesses across all industries face the key challenge of pursuing and improving sustainability. The concept of sustainable development has been developed to express the desire for better business practices that can achieve a balance between profitability, care for the environment, and consideration for society. The triple bottom line of sustainability is a framework developed in 1997 by Elkington to help firms establish long-term strategies for their transition to sustainable practices (Correia, 2019, p. 30). The model comprises three elements: people, planet, and profit. Therefore, it can be argued that social equity, environmental sustainability, and economic fairness are all primary targets and goals for sustainable development. Several initiatives have been explored by businesses as they attempt to demonstrate their concerns for society and the environment. However, sustainability is not easy to achieve considering such aspects as limited and scarce resources and the need for companies to maximize wealth for their shareholders. The nature of conflicting interests across stakeholders, including the government and society, makes it imperative for businesses to find viable solutions to the need for sustainability.
The primary purpose of this report is to explore the sustainability challenges faced by a company in the footwear industry. Nike is one of the world’s largest manufacturers, which makes it possible to explore the real extent of sustainability challenges. Such multinational corporations have large supply chains, which means that their scope for sustainability initiatives massively broadens. The report begins by presenting a brief background of the company, after which a plethora of sustainability issues are examined. Other key areas that will be explored in this report include consumer engagement, where the aspects of sustainable consumption are outlined. Lastly, the sustainability strategies pursued by the company are highlighted to help clarify how Nike deals with sustainability challenges.
Background to Nike Footwear
Nike is a shoe and apparel manufacturer involved in the design, development, and sale of products used in a variety of sports. The company’s niche markets are the sports industry, including soccer or football, training, basketball, and athletics. Nike footwear is the leading product line for the company, which accounts for over 60% of the total sales (Vault, n.d.). Such iconic figures as the Jordan brand and other collections are a key part of the company. The apparel segments contribute an estimated 30% of the sales, while Nike Equipment, including bags, eyewear, socks, bats, digital devices, and protective equipment, account for about 5% of the sales (Vault, n.d.). The diversification of products allows Nike to serve several segments, but the footwear industry can be deemed as its main product offering.
The historical background of the company can be used to inform how the company has progressed over time and the issues it has faced. Nike was founded in 1962 by Phil Knight and Bill Bowerman, who were good miler and track coaches, respectively (Vault, n.d.). The initial firm was named Blue Ribbon Sports, which was created to develop quality running shoes for the American market. By the following year, the two founders had started selling Tiger shoes, which were made by Onitsuka Tiger, a Japanese shoe manufacturer. In 1972, the firm was rebranded NIKE, which alluded to the Greek goddess of victory. The new entity used a swoosh logo at the time and went public in 1980 (Vault, n.d.). From this point, Nike has grown to become one of the world’s largest shoe and apparel manufacturers in the world.
The company’s operations are vast, both in American and international markets. Nike-branded products contribute approximately 95% of the total revenues and fall into six primary categories: Nike Basketball, the Jordan Brand, Running, Training, Sportswear, and Football (Soccer) (Vault, n.d.). 60% of the sales are from outside the United States through over 1090 owned retail stores and an e-commerce site. Additionally, thousands of retail accounts, licensees, independent distributors, and sales representatives present Nike with other channels for its products.
In terms of geographic reach, Nike’s outreach spans several countries across North America, Europe, Asia, and Africa. The company is headquartered in Beaverton, Oregon, where it has over 40 buildings. Regional headquarters are located in Hilversum, the Netherlands for Europe, the Middle East, and Africa (EMEA) region, and Shanghai, China, for the Greater China region. Subsidiaries and branch offices are also found in 50 other countries across the world (Vault, n.d.). Nike also owns and operates major distribution centers in the United States, including four in Memphis and one in Dayton, Tennessee. The company also has one distribution center in Indianapolis, Indiana. Outside the country, Nike’s facilities include Taicang, China; Incheon, Korea; Tomisato, Japan; and Laakdal, Belgium.
With this background to the company, it can be understood that Nike’s operations span across the world, which means that its business activities affect the environment and society on a global scale. The selection of Nike for this case study is based on the rationale that the firm operates in one of the industries where waste and pollution, as well as poor working conditions, are a common phenomenon. As will be illustrated in the following sections, the footwear and apparel industries have outsourced manufacturing activities to poorer countries where labor and materials are cheap. Therefore, the employees in these facilities are exploited and work in inhumane conditions to allow companies to maximize profits. Some companies, including Nike, are reversing this trend and are attempting to become more sustainable. Therefore, Nike presents an ideal case to examine how businesses deal with the challenges of sustainability.
Sustainability Challenges
The footwear industry is part of the broader fashion industry, which has been labeled as one of the most unsustainable. The issues faced by such industries include high amounts of waste and pollutants produced through manufacturing activities. Therefore, such scholars as Ciasullo, Cardinali, and Cosimato (2017, p. 143) have expressed that the path towards sustainability for the footwear industry is strenuous because of the complexity of the sector. Additionally, the consumption patterns and product lifespan means that footwear and apparel manufacturers are always seeking to produce more and better products. Most importantly, stiff competition means that the firms have to engage in activities that give them an edge over others in the market. As mentioned above, such activities as offshoring manufacturing operations allow companies to obtain cheaper labor, which in turn boosts profitability. Most importantly, modern consumers are becoming aware and, despite seeking better quality and affordable prices, are also keen to align themselves with those businesses that are sustainable (Ciasullo, Cardinali, and Cosimato, 2017, p. 145). Therefore, it can be argued that Nike experiences all three forces of the triple bottom line framework.
Nike has faced mounting pressure to become more sustainable to appeal to both the governments and the consumers, who are the key stakeholders. The concept of sustainability has largely been associated with care for the environment. However, it is important to emphasize that several other elements also play a vital role. Most importantly, the resource-capability theory suggests that a firm pursuing the goals of growth and profitability encounters environmental constraints, which include the scarcity of resources (Mohr, Price, and Rindfleisch, 2016, p. 34). Many resources are obtained from the biophysical or natural environment, where firms deemed to be unsustainable tend to ignore the limitations presented by the environment. Therefore, sustainability can be perceived as pursuing profitability while at the same time conserving the environment. As per the triple bottom line mode, people or society become an integral part, majorly because they can be used as a resource in terms of labor or as part of the environment. As a resource, exploiting people becomes unsustainable and, as part of the environment, the safety, health, and other hazards they get subjected to by business activities become a major sustainability concern.
Therefore, the question of how Nike deals with sustainability challenges becomes an interesting one. The challenges often faced by many businesses include the fact that dealing with sustainability issues can be costly. For example, requiring organizations to pay higher wages and improve working conditions to end human labor exploitation or cleaning waste and recycling to reduce pollution are all costly undertakings, which have direct implications on profitability. Footwear companies have had to address such concerns as sweatshops, waste, and pollution, monitor the supply chain and communicate sustainability initiatives. Each of these challenges is explored herein as they currently affect Nike and its global footwear operations.
Sweatshops
The term ‘sweatshop’ can be used to describe a situation where factory workers are offered low wages and required to work under poor conditions and for long hours. Nike’s sweatshops were popularized by a blogger named Peretti, who tried to convince Nike’s lawyers to customize his pair of shoes using the term ‘sweatshop’ (Watson and Revers, 2018, p. 29). His intentions were meant to create satire and to draw attention to the fact that Nike had poor factory working conditions. He created the logo “Nike Sweatshop,” which went viral in 2005 and attracted massive media attention. The rise of the internet, it can be argued, has made it possible to expose companies with similar practices that are deemed unsustainable.
The main point is that Nike has faced public criticism because of engaging in unsustainable conditions. As per the triple bottom line framework, Nike had failed to achieve a balance between people and profit, in which case the company becomes inequitable. The labor practices are exploitative, which has seen Nike receive global disapproval. According to Yusoof et al. (2017), Nike has operated in Indonesia for several years and has faced pressure and criticism from multiple NGOs due to low wages. Labor discrimination, therefore, becomes another ill practice for which the company has had to make amends. The real challenge for Nike is how to address the issue of sweatshops while maintaining its profitability. Most importantly, pressure from society and an enlightened consumer base that embraces sustainable businesses means that Nike’s survival depends on the ability to develop clear paths for sustainability.
Waste and Pollution
Environmental conservation is a critical subject since the issues of global warming have emerged. Waste and pollution are some of the main challenges facing such companies as Nike and apparel manufacturers across the world. The major pollutants from these firms are plastic, which is non-biodegradable. Plastic pollution emanates from plastic waste and other plastic materials created through several activities, including cleaning plastic products and equipment. According to Almiya et al. (2020), polyester contributes approximately 55% of the fiber business globally, from which over 76 million tons of products are manufactured. When the use of these products is over, they are taken to dumpsites and landfills, where they contribute to both waste and land pollution.
The main idea is that Nike is a major polluter of the environment, either through emissions of greenhouse gases or plastics that end up in seas, rivers, and other water bodies across the world. Global warming has emerged as a pressing issue for governments and businesses, and companies are left with only one option: to find sustainable alternatives and practices to help reverse environmental degradation. Therefore, Nike has to re-think its products and manufacturing to ensure waste is minimized or recycled and that the greenhouse gases are minimized.
Supply Chain
The topic of the supply chain is regarded as a challenge facing Nike because a company can also be held responsible for the activities of suppliers and other players in its supply chain. The argument is that a company can provide facilities with proper working conditions, employees with decent wages, and a low carbon footprint, which make it considerably sustainable. However, the firm is supplied by companies that exploit workers and pollute the environment. Therefore, such a supply chain becomes highly unsustainable, and the company’s demand for such supplies makes it responsible. The same case may apply to distributors and their level of sustainability. Jiang (2019, p. 87) expresses that green operations have increasingly become a major consideration for the footwear industry, a concept that simply means re-thinking and being more mindful of how organizations affect the environment.
Therefore, Nike is under pressure to achieve sustainability throughout its supply chains. Sustainable sourcing can be described as an approach where a company selects those suppliers whose sustainability policies align with those of the sourcing company. Scholars have made several recommendations for achieving these goals across the entire supply chain; for example, Jiang (2019, p. 87) examines the viability of the closed-loop supply chain. Such a solution involves companies striving to achieve minimal purchases, transportation, operational costs, and renovations. Additionally, such elements as proper disposal and minimum waste materials in packaging and logistics are integrated into this framework. The challenge for Nike is the fact that it can only be perceived as fully sustainable when it engages other firms that are also sustainable.
Communicating Sustainability Initiatives
The challenges of sustainability are not confined to the activities and practices deemed unsustainable. In other words, a company that has to develop sustainable initiatives has not fully achieved goals if it has failed to properly communicate the sustainability initiatives. The main reason for companies pursuing sustainability is that they want to appease all the stakeholders from whom they have received criticism and pressure. Most importantly, sustainability activism or fashion activism, as described by Mazzarella, Storey, and Williams (2019, p. 822), means that the external pressure can only be addressed through effectively communicating a company’s efforts to achieve sustainability. Many firms lack a comprehensive sustainability strategy, which means that their products and services, as well as activities, fail to convince the consumers regarding their sustainability efforts. Therefore, a company must develop an effective communication framework and strategy for the sustainability plan. Nike’s issues can ruin its profitability and reputation. Communicating how it is addressing the issues can help reverse these effects.
Consumer Engagement
Consumer engagement is a critical subject in the broader field of sustainability. It has been expressed earlier that modern consumers are enlightened and aware of the need for businesses to become sustainable (Ciasullo, Cardinali, and Cosimato, 2017, p. 145). Additionally, the challenge of communicating sustainability initiatives described above outlines how critical it is for a business to inform the stakeholders that the company is actively seeking to become sustainable. Consumers are among the primary stakeholders, primarily because all businesses’ activities are geared towards addressing consumer needs. When customers state that they want sustainable products, then it becomes imperative for the marketers to understand the acceptable levels of sustainability from the buyers’ perspectives. The extent to which the company pursues sustainability and the level of investments involved depend on what the consumers are willing to accept. Consumer engagement, therefore, becomes critical because it helps firms pursue a balance between people, planet, and profits as per the triple bottom line suitability framework.
The relationships between businesses and consumers have been a major scholarly subject. According to Caputo, Carrubbo, and Sarno (2018, p. 1), several socioeconomic trends have influenced these relationships, including new information technologies, globalization, and growing environmental sensitivity. In this case, sustainability is considered to be one of the emergent trends which have required corporations to continuously improve customer interactions. An argument can be made that the best way to address consumer concerns is by understanding them and their opinions. For a company such as Nike, the buyers need both high-quality products, which should not be made at the expense of environmental degradation. Engaging the customer would allow Nike to understand how its buyers define and comprehend the concept of sustainability and which practices are deemed sustainable. As expressed by Caputo, Carrubbo, and Sarno (2018, p. 1), a shared framework can be used, which incorporates the cognitive dimensions of the buyers to explain the factors affecting their behavior and reactions towards sustainable strategies and behaviors. Nike lacks this framework, which implies that the company’s consumer engagement is ineffective.
Sustainable Consumption
The main aim of consumer engagement is to understand their perspectives, needs, and preferences regarding various business activities and products. In sustainability, consumer engagement is majorly intended to inform corporate strategies undertaken to appease consumers seeking to purchase products from firms with a proven sustainability record. However, pursuing sustainability could cause major challenges, including re-designing products with more sustainable materials or becoming minimalists in the use of resources. Such approaches could have a detrimental effect on the quality and nature of the products. Therefore, sustainable consumption is necessitated by the fact that organizations strive to meet consumer demands. Consumer engagement can be used as a strategy to compel buyers to reciprocate the efforts of manufacturers in pursuing sustainability. Many researchers, including Piligrimiene et al. (2020, p. 1), agree that it is unsustainable consumption behaviors that are responsible for environmental degradation. Therefore, it can be argued that sustainability begins with how people consume goods and services, which makes it imperative for firms to sensitize their consumers. The main point is that consumers pushing for sustainability should become sustainable themselves. Nike and other footwear manufacturers should take advantage of consumer awareness to commercialize green alternatives to pursue a competitive edge in the market.
The concept of sustainable consumption is discussed under consumer engagement because corporations can also change consumer behavior. Pursuing sustainability may mean designing and developing alternative products and services, which will require the consumers to make the necessary adjustments. In other words, companies can use consumer engagement strategies as a means of promoting sustainable consumption by changing the social environment in which they operate. In the case of Nike, the challenge would be to ensure that the buyers accept the compromises they make in the pursuit of sustainability. Currently, there is ample evidence of Nike’s initiatives in consumer engagement. For example, the company uses social media to build personal connections with buyers (Jin and Cedrola, 2018). However, it is not clear how the company uses this strategy as a means of promoting sustainable consumption. An argument can be made that Nike’s use of new technologies focuses majorly on marketing functions, in which consumer engagement becomes critical. Therefore, a recommendation can be made that Nike needs to start taking advantage of the extensive consumer networks to promote sustainable consumption.
Sustainability Strategy
The sections above have explored the nature of the challenges facing Nike in the context of sustainability. It has been expressed that Nike has addressed the issues of sweatshops by improving the working conditions in its facilities. Additionally, pollution and waste have been shown to cause the company to undertake several initiatives toward reducing plastic waste and the emission of greenhouse gases. Therefore, it is important to examine the overall strategy and its effectiveness in helping the company overcome the challenges. In this section, the strategic elements and initiatives are discussed in individual subsections where the efficacy of each is assessed.
Recycling
Recycling has been touted as one of the most effective ways in which businesses can reduce solid waste in landfills, which comprise the greatest polluting elements in land and water. The closed-loop supply chain recommended by Jiang (2019, p. 90) has included the requirement for Nike and its suppliers, as well as other players in the supply chain, to recycle. Other similar approaches include direct re-use, repair, and re-manufacturing items, which all contribute to ensuring minimal solid waste is produced in the manufacturing processes. Nike is a company that has recently undertaken several measures to ensure that it reduces solid waste. Recycling has become a major activity through such programs as the grind and reuse-a-shoe program. The focus of these programs is to help the company pursue environmental performance.
The efficacy of recycling cannot be understated, considering that the manufacturing processes are the major polluters and contributors to solid waste. When shoes by Nike are recycled, it means that the company uses the available shoes for parts and sources of materials, which eliminates the need for sourcing afresh from the suppliers. Depending on the nature of materials, it means that less environmental exploitation of resources is required. Recycling is particularly effective in reducing plastic pollution, which is the primary concern for many stakeholders. Plastic is a highly recyclable material and, even though such a strategy may not fully eliminate plastic in the environment, it prevents further pollution and facilitates clean-up activities. Therefore, Nike’s recycling programs can be hailed as one of the most important aspects of the company’s sustainability strategy.
Social Responsibility
Social responsibility is a particularly interesting subject in the context of sustainability. The rationale for this statement is that socially responsible businesses take into account the interests of the community, which includes taking care of the environment. Therefore, social responsibility can be perceived as part of the broader sustainability strategy because businesses pursue such sustainability goals as social equity and environmental viability. By definition, the concept of corporate social responsibility (CSR) implies that businesses become responsible for society beyond the legal and economic requirements. In other words, responsibility starts where the law ends, as described by Yan and Zhang (2020, p. 43). In the case of Nike, social responsibility can be perceived as controversial because, despite the company claiming to be responsible, evidence shows that there are huge gaps left. Yan and Zhang (2020, p. 51) find that the company had been writing messages to multiple stakeholders to inform them of their CSR, but leaked documents indicated that sweatshops existed in Southeast Asia. Therefore, misleading or false communication regarding the commitment to CSR is a huge blow to the company’s overall sustainability strategy.
Accountability
The issue of CSR described above demonstrates that Nike’s efforts to incorporate social responsibility in its sustainability strategy have not been genuine. Therefore, Yan and Zhang (2020, p. 53) explain that many businesses can only achieve responsibility if the law requires them to do so. The problem of accountability can also be approached from a legal perspective. For Nike, the fact that it was not fully accountable in its communication regarding CSR means that the law can force the company to fully disclose its sustainability strategies. However, the main concern is that the consumer engagement aspect discussed earlier also requires the company to be truthful and accountable if it is to successfully convince the buyers that it is a sustainable business. An argument can be made that a business entity should be held accountable for all actions that have a direct or indirect impact on society and the environment. Such a legal requirement becomes necessary because of the inability of entities to accept it on their own. Nike can hardly be regarded as accountable, which also works to negate the efficacy of the company’s overall sustainability strategy.
Innovation
Pursuing sustainability has been expressed as an undertaking that could cause businesses to deviate from their normal products and operations. Innovation has been touted as one of the key means by which corporations can address the challenges of sustainability. For Nike, several forms of innovation have been explored by Jiang (2019, p. 88), including process, product, and administration innovation. In product innovation, ‘Nike Flyknit’ is seen as a deviation in the company’s footwear design that uses wear-resistant material and technologies. The effect of such a strategy is that shoes will last longer, and parts can be easily recycled to reduce waste.
In terms of administration innovation, Nike’s focus turns to measure sustainability in both the design and production of footwear. According to Jiang (2019, p, 88), Nike uses the Higg Index for this purpose, which allows the entity to make such key decisions as the selection of the most sustainable materials and the lowest impact on the natural environment. Lastly, process innovation has been extensively deployed by Nike as part of its sustainability strategy. Jiang (2019, p. 88) explains that process innovation has changed the company’s operations across the entire supply chain. High-tech manufacturing initiatives have been used to increase automation and reduce the need to utilize people in manufacturing facilities. While such a strategy replaced the labor-intensive processes, it is also important to acknowledge that social equity is not achieved through displacing people from their jobs.
Conclusion
Nike is one of the world’s largest footwear manufacturers operating in multiple countries across the planet. Therefore, its environmental effects are felt on a global scale, which means that its sustainable solutions should be felt to the same extent. This report finds that Nike faces multiple challenges, most of which emanate from the fact that the manufacturing activities are dangerous for both people and the environment. The question of how it deals with these challenges has been explored, including how it addresses the claims of sweatshops and how it communicates its sustainability initiatives. However, it can be found that Nike excels in some areas and fails in others and that there are huge gaps that should be filled. Better sustainability strategies and initiatives are needed to help Nike become fully sustainable.
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