RESOURCES & FAQ Corporate Responsibility Reporting Reporting is an important means of sharing our understanding of the social and environmental impacts of our business. It also provides an indicator – to us and others – of our ability to succeed and thrive as we systemically address risk management, efficiency, innovation and future-looking efforts – all of which are critical in positioning Nike for long-term growth. Reporting is a primary tool we use to provide important information to our stakeholders about how we manage corporate responsibility issues and impacts, as well as disclose our targets and report progress against them. View FY 14-15 Executive Summary View FY 14-15 Sustainable Business Report View the Letter from our CEO View previous reports: Nike FY 12-13 Corporate Responsibility Report Nike FY 10-11 Sustainable Business Performance Summary Nike FY 07-09 Corporate Responsibility Report Nike China 08 Corporate Responsibility Reporting Supplement Nike FY 05-06 Corporate Responsibility Report Nike FY 04 Corporate Responsibility Report Nike FY01 Corporate Responsibility Report NIKE'S MANUFACTURING MAP Nike was the first company in our industry to publicly disclose our factory base, embodying one of our core beliefs: that progress starts with transparency and collaboration. Nike’s Manufacturing Map is a tool to learn about the independent factories contracted to make Nike, Hurley and Converse products – including the names and location of each factory, the types of product made, the factories that supply our collegiate product, and demographic statistics about the workers at each factory. The interactive map is updated on a quarterly basis to reflect changes in our source base. Nike's Manufacturing Map CODE OF CONDUCT Every supplier factory that makes products for NIKE, Inc. must meet a rigorous set of compliance requirements. Nike’s Code of Conduct lays out the minimum standards we expect each factory or facility to meet. Our Code includes standards related to hiring practices, wages, freedom of association and health and safety. Nike’s Code of Conduct is an integral component to our sourcing strategy and how we determine the suppliers with which Nike will continue to engage and grow our business to create a lean, green and equitable supply chain. We regularly review supplier factories to assess their ability to meet our high standards. These assessments take the form of audit visits, both announced and unannounced, by internal and external parties, who measure against the Code Leadership Standards and our Code of Conduct. Nike Code of Conduct CODE LEADERSHIP STANDARDS Nike’s Code Leadership Standards communicate how supplier factories should implement the Code of Conduct. The document also articulates how we measure factories’ compliance efforts and progress. Code Leadership Standards NIKE RESTRICTED SUBSTANCES LIST NIKE, Inc. is committed to high standards of consumer and environmental safety for all of our products. Nike’s Restricted Substance List (RSL), established in 2001, is a list of chemicals banned or restricted in our products. We update and review the list as new alternatives become available, new regulations are passed and Nike’s corporate commitments expand. Our RSL chemical standards meet or exceed regulatory and legislative requirements from around the world and include substances that we have voluntarily restricted from products. Our suppliers must comply with these restrictions; any material that fails its RSL test is considered defective and prevented from entering production. In addition, Nike works with the industry to address human and environmental exposure further up the value chain, including through the Zero Discharge of Hazardous Chemicals Foundation (ZDHC), which has developed a Manufacturing Restricted Substances List (MRSL) for facilities that process textile materials. NIKE, Inc. has adopted the ZDHC’s MSRL in its supply chain and provides information and training to vendors and suppliers about sourcing, use and discharge of chemicals. Nike Restricted Substance List Nike Code of Ethics NIKE, Inc. has a code of ethics for all employees that defines the standards of conduct we expect employees to follow and includes a range of topics on employee activity, ethical behavior, product safety, legal compliance, competition and use of resources. Each year, all NIKE, Inc. employees are required to verify that they have read and understand the code of ethics. Research and Case Studies The research and case studies below explore Nike’s approach to sustainable innovation and equitable manufacturing. Case studies published by Harvard Business School and the Stanford Graduate School of Business trace Nike’s journey as one of the first companies faced with issues in its global supply chain to one that now actively pursues sustainable innovation as part of the company’s long-term growth. Research published by Greg Distelhorst, Jens Hainmueller and Richard M. Locke analyzes the impact of Nike’s efforts to promote the adoption of lean manufacturing in its apparel supply chain, including reducing noncompliance with labor standards. Governance and Sustainability at Nike (A) (Harvard Business School) Governance and Sustainability at Nike (B) (Harvard Business School) Nike: Sustainability and Labor Practices 1998-2013 (Stanford Graduate School of Business) Does Lean Improve Labor Standards Management and Social Performance in the Nike Supply Chain FREQUENTLY ASKED QUESTIONS Nike has come a long way since it was founded in 1972 on a handshake between an athlete (Phil Knight) and a track coach (Bill Bowerman). Since the early years we have applied many learnings in developing and operating a complex global supply chain. And we’re proud of the important role we can play in helping create an environment of collaboration and transparency. We now harness the power of innovation to create opportunities and lead by example in setting sustainability and social goals. While we’ve made significant progress and continue to push ourselves and our industry to do better, we know that some questions still arise about how we work. IS NIKE A RESPONSIBLE COMPANY? Yes. And we’re continuously working to do better. We constantly evaluate the impact of our business and set public targets for improvements. We innovate throughout our entire supply chain and promote responsibility toward workers, the community and the planet. We know that no single organization can solve the social and environmental challenges we all face, which is why we are committed to industry collaboration, transparency and innovation to help foster a better world. For more details, visit our Sustainable Business Performance Report. WHAT IS THE ENVIRONMENTAL IMPACT OF NIKE’S BUSINESS, AND WHAT ARE YOU DOING ABOUT IT? As a global company, our impact is greater than just what happens inside our doors. The majority of Nike’s environmental impact – before products get to the consumer – occurs in the supply chain. The most significant impacts are associated with the materials used in our products – we know that about 60% of the environmental impact in a pair of Nike shoes is in the materials used to make it. To address this, we are focused on our reduction targets in carbon and water – specifically in dyeing and finishing of fabric for apparel and footwear. We also continue to pioneer new ways to manufacture our products and seek materials innovations that enable us to use only what is needed to create the lightest, best-performing products for athletes. One example is Nike Flyknit technology, a revolutionary way to construct a shoe upper out of single strands of yarn, resulting in a strong, lightweight upper that drastically reduces waste and materials. Read more about the innovative ways we’re reducing Nike’s environmental footprint. IS NIKE DOING ANYTHING ABOUT CLIMATE CHANGE? Yes – and more so all the time. Climate change is a global challenge that requires global solutions. We have a responsibility to act and innovate for our business, for athletes and for the future of sport, which is why we are pursuing the use of renewable energy and driving energy efficiency across our business. We have committed to using 100% renewable energy in our owned and operated facilities by the end of fiscal year 2025, and we have already implemented on-site renewable energy generation at some of our largest facilities. We also enable and encourage use of renewable power in our contract factory base – since 2008, footwear manufacturers have cut energy use per unit by around 50%. That means today, it takes about half the energy and generates around half the emissions to make Nike shoes as it did eight years ago. DOES NIKE allow SWEATSHOPS OR CHILD LABOR in the making of your PRODUCTS? No, and we regularly monitor contract factories to remain vigilant. Nike specifically and directly forbids the use of child labor or sweatshop conditions in factories contracted to make Nike products. While Nike does not own or operate the factories that produce Nike product, we require them to comply with Nike’s Code of Conduct and Code Leadership Standards, which are audited by independent monitors as well as Nike’s field teams. Nike's standards meet or exceed international standards set by the ILO conventions. To work on Nike product, employees in contracted factories must be at least 16 years old. In fact, the average age of a worker in a contract factory is 36 years old. We believe that placing the worker at the center of the workplace and having factory management that respects and invests in its workforce will result in lasting positive results for workers, the factory and Nike. Read more about how we’re working with factory owners to improve labor conditions. HOW MUCH DO WORKERS WHO MAKE NIKE PRODUCTS GET PAID? At least the minimum wage in their respective countries, but pay is only one factor that determines workers’ overall compensation Nike is committed to responsible employment practices and we expect the same of our suppliers. In terms of wages, Nike’s Code of Conduct requires our suppliers to pay their employees at least the minimum wage, provide legally mandated benefits, and comply with social insurance regulations required by country law. We are facilitating pilot research studies with factories, in partnership with academic advisors, to test new compensation and incentive models to identify the most effective way to create new, easily understood compensation systems aligned with quality, efficiency and productivity that benefits factory managers, floor supervisors, line leaders and workers. Read more about Nike’s standards on wages in our Code Leadership Standards: Code of Conduct Code Leadership Standards WHERE ARE NIKE PRODUCTS MADE? HOW MANY FACTORIES MAKE YOUR PRODUCTS AND WHO OWNS THE FACTORIES? We are working with fewer, better contract factories. Nike sources product from 655 contract factories that together employ more than 1 million workers across 42 countries. Many of these factories belong to well established factory groups that are multinational companies in their own right. We do not own or operate these factories. To enter and remain in our supply chain, contract factories must meet our cost, quality, delivery, and environmental and labor requirements. These requirements include strict Code of Conduct standards regarding labor and health and safety, as well as environmental performance. In 2005, we were the first company in the industry to disclose the names and locations of our contract factories, and today that information is available on the Nike Manufacturing Map. Note: we do operate two in-house manufacturing centers in the U.S. where we make patented parts. * Current as of April 2016 HOW DOES NIKE KNOW ITS SUPPLIERS ARE DOING THE RIGHT THING? We start with sourcing from responsible supplier manufacturers, and we continually assess, verify and incentivize their performance. We are focused on working with long-term, strategic suppliers that demonstrate a commitment to engaging their workers, environmental responsibility and providing safe working conditions. We expect factories to comply with all requirements in our Code of Conduct and we provide strong incentives for improving their environmental and labor performance. In FY13, we launched the Sourcing & Manufacturing index, which scores factories on sustainability, putting labor and environmental practices on par with traditional metrics of cost, quality and on-time delivery. The index is a critical tool in encouraging performance improvement in factories and driving more business to those factories with the best performance. Based on this index, we have seen a steady improvement in factory performance with 86% of Nike’s contract factory base reaching a performance rating that demonstrates their commitment to valuing workers and improving environmental standards. By 2020 Nike’s aim is for 100% of contract factories reach this level. Read more about how we’re working to incentivize improved factory conditions. ARE YOU STILL WORKING ON ISSUES IN YOUR SUPPLY CHAIN? Yes and this work will be ongoing. While we’ve worked to root out systemic issues, we continue to monitor and engage with contract factories to drive continuous improvement. Nike has worked to improve labor conditions in our footwear, apparel and equipment supply chains for more than 20 years. We’ve made significant improvements, driving positive change for workers in contract factories and across the industry. Nike’s ongoing contract factory partners will be those that transform their business by investing and building capabilities to engage and value workers. As a company working with 655 contract factories that employ more than 1 million workers in 42 countries*, we recognize that issues do occur – and we take immediate action upon learning of any issues. We investigate what happened and work with the contract factory to address the issue and improve the process to help prevent problems from recurring. Read more about how we’re working to create a more sustainable supply chain. * Current as of April 2016 WHAT IS Nike’s commitment to transparency and independent factory monitoring? Nike’s growth and future success is dependent on building a sustainable supply chain, which means working with long-term strategic suppliers that demonstrate a commitment to engaging their workers, safe working conditions and environmental responsibility. We also firmly believe that responsibility must be shared by governments, manufacturers, non-governmental organizations (NGOs), academics, brands, unions and factory workers to enact long-lasting, systemic change. We know that it is critically important to have multiple levels of checks and balances so that factories comply with our Code of Conduct and local laws. We have long believed that a combination of internal, external and independent audits and investigations, alongside government bodies enforcing the rule of law, together with watchdog institutions are crucial to enabling a robust system of industry oversight. In addition, we request that contract factories provide open access to accredited, independent organizations such as the Fair Labor Association and ILO Better Work to carry out audits and help in remediation efforts where needed. HOW CAN THE INDUSTRY MOVE WORKERS’ RIGHTS AHEAD? There’s a critical need for convergence of industry standards and a common Code of Conduct to drive positive change for workers and accelerate impact. The industry, NGOs, governments and universities need to come together and converge on a common set of standards so systemic change can take place across the industry. DO NIKE PRODUCTS CONTAIN HAZARDOUS SUBSTANCES? We use a Restricted Substance List with the aim of keeping harmful chemicals out of our products. We are committed to the safety of our products, contract factory workers, consumers and the environment. We maintain a stringent Restricted Substances and Manufacturing Restricted Substance Lists, which prohibit the use of certain hazardous chemicals, and encourage our vendors and contract factories to embrace green chemistry and other ways to eliminate, reduce and responsibly manage chemicals used in both materials and in processes to make products. Through innovations like the use of water-based solvents and our environmentally preferred rubber, which contains 96% fewer toxins by weight compared to the original formula, we aim to reach zero discharge of hazardous chemicals by 2020. Read more about our efforts to innovate and reduce the use and discharge of hazardous chemicals in our supply chain. DOES NIKE GIVE TO COMMUNITY ORGANIZATIONS? WHAT ARE NIKE’S CHARITABLE GIVING POLICIES? Nike’s community impact priorities focus on getting more kids active through early positive experiences with youth sports and schools. We invest in programs that prioritize youth sports and physical activity and help kids develop active lifestyles. We also support local community organizations unrelated to sport and physical activity when it’s the right thing to do. As a company, we support disaster relief and have strategic partnerships with non-profit organizations in other philanthropic areas. See how we’re making a difference in communities around the world. HOW CAN I LEARN MORE? We voluntarily publish a bi-annual Sustainable Business Report that provides in-depth information on a wide range of our initiatives and progress against our sustainability targets.