SUSTAINABLE INNOVATION IS A POWERFUL ENGINE FOR GROWTH FY14/15 NIKE, INC. SUSTAINABLE BUSINESS REPORT CONTENTS INTRODUCTION LETTER FROM OUR CEO 2 PERFORMANCE AND DISCLOSURE STATEMENT 4 OUR STRATEGY OUR AMBITION 5 A LOW-CARBON GROWTH ECONOMY 6 THE INNOVATION IMPERATIVE 7 THE FUTURE WILL BE CIRCULAR 8 WHEN TO COMPETE AND WHEN TO COLLABORATE 10 OUR APPROACH BUSINESS OVERVIEW 12 OUR IMPACTS 14 OUR AIMS 17 MINIMIZE ENVIRONMENTAL FOOTPRINT 21 PRODUCT DESIGN AND MATERIALS 24 CARBON AND ENERGY 32 WASTE 38 WATER 42 CHEMISTRY 46 TRANSFORM MANUFACTURING 50 INNOVATING THE ROLE OF THE WORKER 54 INNOVATING THE ROLE OF TECHNOLOGY 57 TRANSPARENCY AND COMPLIANCE 58 UNLEASH HUMAN POTENTIAL 66 OUR WORKFORCE 68 COMMUNITY IMPACT 73 GOVERNANCE AND POLICY GOVERNANCE, INTEGRATION AND STRATEGIC PARTNERSHIPS 78 PUBLIC POLICY 81 ABOUT THIS REPORT REPORTING AT NIKE 84 STAKEHOLDER ENGAGEMENT 87 VALIDITY OF DATA 89 APPENDIX 90 ADDITIONAL DATA 91 ADDITIONAL FY15 TARGETS PERFORMANCE 102 GRI INDEX 104 NOTE: The information in this report and NIKE, Inc.’s corporate responsibility/sustainability reporting and website, inclusive of charts, graphs and discussion, and all other information presented, may contain forward-looking statements, estimates or projections based on expectations as of the original date of those materials. Those statements, estimates and projections are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our reports filed with the U.S. Securities and Exchange Commission, including Forms 8-K, 10-K and 10-Q. Presented information may also discuss non-public financial and statistical information and non-GAAP financial measures. All information was current only as of the date originally presented. We do not update or delete outdated information contained in website materials, and we disclaim any obligation to do so. All content is the property of NIKE, Inc. IN THIS SECTION LETTER FROM OUR CEO 2 PERFORMANCE AND DISCLOSURE STATEMENT 4 LETTER FROM OUR CEO We live in a time of unlimited opportunity and There is much to be proud of. relentless change. We’ve worked for over 15 years to understand, track and decrease carbon across our value chain. Since The connection between the digital and physical worlds 2008, our revenues have increased by 64% and we’ve is closer than ever. The design process is faster and limited our absolute emissions to only 20% growth more personal. And the challenge of climate change across product manufacturing, logistics and our owned demands everyone’s ingenuity. facilities. This represents a decrease of our per-unit At NIKE, we unite these forces through sustainable carbon emissions by 19%. innovation – a powerful strategy that drives us to dream We continue to work with fewer and better factories bigger and get better. But to achieve the impossible, that are committed to moving beyond compliance. we have to rethink the fundamentals. Every day I We’re investing in green, equitable and empowered challenge my team to do just that, guided by a single, workplaces – even as our business grows. And we’re moonshot question: “Can we double our business, sharing the lessons we’ve learned across the industry, while halving our environmental impact?” so everyone can work together to advance change. Getting there means strengthening every aspect of our We have continued our focus on decreasing waste business. It means inventing closed-loop products; dramatically. Today, Nike Grind – a palette of premium moving to 100% renewable energy; pioneering a recycled materials – is used in 71% of NIKE footwear manufacturing revolution that puts workers’ voices and apparel products, in everything from yarns and at the heart of the business model; and fostering a trims, to soccer kits and basketball shoes. diverse workplace and an inclusive culture that unleashes innovation. This work is challenging and we don’t have all of the answers. But, it starts with focusing on where we can Incremental change won’t get us there fast enough. drive change. We have embraced sustainable innovation as a powerful engine for growth and a catalyst for change – not only From an impact standpoint, materials matter the for our own business, but across industries. most. In fact, in one pair of NIKE shoes, 60% of the environmental impact comes from materials. One of That’s why we’re partnering with innovators who help us the keys to our success will be to develop a new palette accelerate systemic change at scale. With Flex, we’re of sustainable materials. To do that, we’re innovating taking a fresh approach to footwear manufacturing. With with others, such as the Sustainable Apparel Coalition DreamWorks and their technology company NOVA, we’re and LAUNCH – a partnership with NASA, the U.S. building a 3D digital design system to transform our Agency for International Development and the U.S. product creation process. And with the Ellen MacArthur Department of State. Foundation we’re exploring new business models that keep materials in play through reuse and regeneration. By creating low-impact and regenerative materials, we can continue to move toward a high-performance, closed- These partnerships help us realize our own potential – loop model that uses reclaimed materials from the start. because if we dare to design the future, we must do Coupled with smarter designs, we can create products it together. that maximize performance, lighten our environmental The NIKE, Inc. FY14/15 Sustainable Business Report, impact and can be disassembled and easily reused. which details NIKE’s progress in multiple areas, shows We plan to take the next step in our closed-loop where we exceeded expectations, and where we came vision with a bold target for FY2020: zero waste from up short. contract footwear manufacturing going to landfill or incineration without energy recovery. FY14/15 SUSTAINABLE BUSINESS REPORT 2 IN THIS SECTION LETTER FROM OUR CEO 2 PERFORMANCE AND DISCLOSURE STATEMENT 4 But that’s just the start. We know that the transition We have ambitious business targets for the future. to a low-carbon growth economy will be driven by a To make them happen, we know it’s going to take mix of business innovation, industry collaboration creativity, passion and leadership from our own people. and government policies. That’s why we are reducing At NIKE, we believe that diversity fosters creativity carbon emissions through increased efficiency and and accelerates innovation. We value the unique renewable energy. To support smart policies, we signed backgrounds and experiences everyone brings, and want onto the American Business Act on Climate Pledge and all who join us to realize their full potential. Because co-founded We Mean Business – representing the voice different perspectives can fuel the best ideas, we are of businesses at the global climate negotiations. committed to a workplace that is increasingly diverse Over time, an impressive story has unfolded: as we and inclusive. We are strengthening our recruitment, reduce our carbon footprint, we continue to drive promotion and retention of diverse talent throughout amazing growth. Looking ahead, we’re setting a target the world, with the goal of reflecting the diversity of the to reach 100% renewable energy in owned or operated consumers we serve and the communities where we live facilities by the end of FY25. and work. While we’ve made progress, we will accelerate our efforts by expanding representation of women and But we’re not stopping there. One of NIKE’s most people of color to start, while continuing to increase profound transformations is in how our products are diversity of all dimensions across our business long made. We call it a manufacturing revolution. term. And we’re advancing inclusion in the U.S. through It starts with our customers’ rising expectations. a new Family Care benefit that will support all new Powered by mobile, they want every experience to parents, and also those caring for sick family members. be personalized and at their fingertips. Meanwhile, I’m proud of what we have achieved and, in many areas, technology is accelerating. New tools, such as digital we’ve made major transformations in our business. In knitting and 3D printing, are rewriting the rules of others, we’re still at the starting line. No matter if we performance engineering and manufacturing. This miss, hit or surpass our targets, we will never stop trying promises to increase efficiency, customization and to achieve our ultimate vision of the future. speed to market for consumers everywhere. A future where we produce closed-loop products – While NIKE’s manufacturing model is rapidly evolving, created with renewable energy and recyclable materials. our fundamental principles remain the same. None is more important than contract factory workers who are A future where supply chains are fueled by skilled and valued and engaged. valued workers – all of them supported by industry’s unified standards. We have worked alongside others for over 20 years to improve labor standards in contract factories. We’ve And a future where NIKE’s creative, driven and diverse learned a lot in that time. And we’ve seen the limitations teams continue to push the boundaries of what’s possible of the existing system. Compliance to our Code of – while engaging deeply with local communities. Conduct is a foundational requirement, but it can’t end This represents a new business model, driven by there. We expect any contract factory partner we work sustainable innovation. I believe it will accelerate with to understand that an empowered and engaged change like the world has never seen. It means workplace is a productive and profitable business model. leveraging all of our talents. It means taking the long The factories that make these investments will be the view.