Nike, Inc. Corporate Responsibility Report FY07-09 DEDICATION We dedicate this report to Neil Kearney, general secretary of the International Textile, Garment & Leather Workers’ Federation and a champion of workers’ rights. Neil died in November of 2009, at the age of 59, in Dhaka, Bangladesh. For the last 15 years, Neil tirelessly represented labor to Nike on global supply chains. He taught us some of our most valuable lessons, sometimes painfully, but always constructively and with fairness. Neil’s career and life will forever reflect the story of globalization and the evolution of corporate social responsibility from unknown practice to mainstream business model redesign. I will give you a talisman. Whenever you are in doubt or when the self becomes too much with you, apply the following test. Recall the face of the poorest and weakest man whom you may have seen and ask yourself, if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to control over his own life and destiny? In other words, will it lead to Swaraj for the hungry and starving millions? Then you will find your doubt and yourself melting away. — Gandhi Neil Kearney’s Facebook profile tells us this was his favorite quote. We’re not surprised. In the 15 years that we knew him, he circled the world perhaps hundreds of times to fight for workers’ rights. The nameless, powerless women workers in Bangladesh, Columbia, Egypt, Honduras, Senegal and Turkey. He was their advocate, their champion, their voice. On their behalf he lectured companies and governments, pushed the ILO and the EU, all from a small office in Brussels when he wasn’t on a plane. In those early days, when codes of conduct were the debate, the Ethical Trading Initiative a dream, CSR a strange fictional name only a few had started to talk about, and CR Reports almost inexistent, Neil’s voice helped shape what we now take for granted. In those early days, Neil harangued us. But from that rocky beginning, we learned to see that his voice was our mirror. Because of that, his was a voice of a true friend: a friend to the worker, but also to those companies struggling to find solutions to the issues he raised. He knew that what he asked of us was difficult. He always gave us recognition when we’d moved something or made a difference. But he never let us forget that his expectations of us were always greater, always focused on a day when no worker in the world would face injustice or be unable to speak their mind. This report is dedicated to Neil — with gratitude. NIKE, Inc. Corporate Responsibility Report FY07-09 2 Table of Contents To access the full NIKE, Inc. FY07-09 CR Report, with additional features including videos and an interactive REPORT ELEMENTS 6 map, please go to www.nikebiz.com/crreport. STRATEGY 20 WORKERS AND FACTORIES 31 ENVIRONMENT 78 COMMUNITIES 127 PEOPLE AND CULTURE 145 PUBLIC POLICY AND ADVOCACY 156 GUIDELINES AND PRINCIPALS INDEX 167 GLOSSARY 168 NIKE, Inc. Corporate Responsibility Report FY07-09 3 Letter from the CEO To everyone, First I was an athlete. Then a designer. Now a CEO. But I’m coach us. In those days the Internet was brand new, but we still an athlete and a designer. Like everyone, I view the world began to see the power of instantaneous information and through the lens of my experiences. And so I’ll talk about a few new communities enabled on a global scale. We suspected things I’ve learned along the way and why I am committed to that a new model was being born – one that would tap into building a more sustainable company and future. the wisdom of diverse contributors, where collaboration was more important than proprietary secrets. We learned to Designers are curious. They scan and observe and notice what view transparency as an asset, not a risk. is unique rather than what is obvious. Their curiosity often shows an object or process to suffer some deficit – a lack of function 2. Another hard lesson came after years of pushing our or performance or style or relevance - and they are compelled suppliers with monitoring and policing tools. We thought to improve it. Just as often, designers see not a flaw but an that we could be a unilateral force for systemic change. opportunity – and they feel compelled to seek solutions. Instead, we learned that meaningful reform was not going to come from external pressure alone. Awareness and Innovators are composers. They see connections where others monitoring of any mandated Code of Conduct had to be see only dots. It’s all about relationships and possibilities. They embraced and enforced at the local level. And it had to be understand that the elements of invention are not the notes of based on real business-based solutions driven by strong the song but rather the spaces in between – new technologies, market signals. If we are to enable systemic change, we unique behaviors and unusual partnerships. And they have can’t do it alone. We need partners. We need collaboration absolutely no fear of failure in exploring these possibilities. from industry, civil society and government. And we need to show the real benefits of lean manufacturing and human Sports created Nike, but design and innovation made it grow. resource management. Our challenge – and our opportunity – is to use all three to help people reach their true potential. 3. For years we used SF6, a global warming gas, in our Air Soles. It was a legacy technology that had to change going We have always obsessed over performance – make it lighter, forward. But it was incredibly difficult to engineer a solution faster, tougher, more relevant – all to enhance the experience of that replaced SF6 with a benign gas without sacrificing the sport for all. In the early days our “systems” consisted of only performance of our products. After much trial and error over those things that helped us build better shoes and shirts, and several years, the Nike R&D team devised a way to replace ads and events. We are, after all, a consumer products company. SF6 with nitrogen, which virtually eliminated the release of CO2 equivalent and actually improved the performance It took us a while, but we finally figured out that we could apply of our Air Soles. It was a moment of clarity that showed these two core competencies – design and innovation – to bring us a risk could become an innovation. It launched us on about environmental, labor and social change. We opened the a continual search for similar advances in sustainable aperture of our lens and discovered our potential to have a technology and performance. positive influence on waste reduction, climate change, managing natural resources, renewable energy and factory conditions. We 4. As we thought about how to reduce the environmental saw that doing the right thing was good for business today – impacts of our products, we realized it had to start with and would be an engine for our growth in the near future. With our design community. So we worked back upstream from each new discovery and partnership, we willingly gave up old the finished product to the earliest stages of design and ideas to shift our thinking toward a better, smarter, faster and development. From the first glimmer of a product concept, ultimately more sustainable future – financially, environmentally we would consider everything involved in bringing a shoe to and socially. market – from raw materials sourcing to transportation – all aimed at minimizing our environmental impact. This gave There were many teachable moments along the way. I’ll offer six: birth to our Considered Index that measures the effective use and management of resources. The focus on design 1. In the early ’90s, we came under intense scrutiny for labor as a key enabler of system change taught us that, while conditions in our supply chain. Our critics were smart (and retrofitting the past or the present yields significant benefits, right) to focus on the industry leader. Our first reaction was prototyping the future can unleash disruptive and scalable to defend the practices prevalent in developing economies. innovation. Soon, however, we learned that the path to change that status quo is paved by collaboration with multiple stakeholders. 5. These successes prove that Nike can be a catalyst with We had a lot to learn, and there were people who could significant ripple effect. We have ambitious goals around NIKE, Inc. Corporate Responsibility Report FY07-09 4 scaling environmental, social and labor-related change. But I believe our work in sustainable business and innovation has we know we can’t do everything, and we can’t do it alone. equal potential to shape our legacy. For that to happen, we have So we decided to focus on a few key areas where we know to focus on the lessons we’ve learned: we can mobilize awareness and commitment - with our employees, our consumers, policy makers, civil society and t Transparency is an asset, not a risk. among members inside and outside of our industry. And t Collaboration enables systemic change. that has made all the difference. t Every challenge and risk is an opportunity. t Design allows you to prototype the future, 6. And we continue to build and upgrade our facilities to rather than retrofit the past. leverage new technologies – solar arrays on the roof of our t To make real change, you have to be a catalyst.