Why does Nike have a positive impact score?

This week’s read time: 6 minutes

You are reading Green Digest Impact, a weekly newsletter that provides in-depth analyses of companies’ environmental and social impact.

OUR APPROACH

Central to our narrative is the principle of double-materiality, which recognizes that a company's impact is twofold: it affects both the environment and society at large, and in turn, these external factors influence the company's financial and operational performance.

While traditional ESG assessments focus on the latter, we aim to examine companies' direct impacts on these factors. In pursuit of this, we introduce a unique scoring system that quantifies a company's impact.

The insights and analyses presented in Green Digest Impact are brought to you by a partnership between Green Digest and Impaakt, a Swiss-based impact data provider. Contact Impaakt here to explore how they can assist you.

THIS WEEK’S COMPANY

Nike

This week we dive deep into Nike’s environmental and social impact.

Nike is a leading global designer, marketer, and distributor of athletic footwear, apparel, equipment, and accessories.

Some interesting facts:

• Nike’s Swoosh logo was designed by graphic design student Carolyn Davidson in 1971. She was initially paid $35 for her work but later received Nike stock which is now worth a significant amount.

• The company’s famous slogan “Just Do It” was inspired by the last words of convicted murderer Gary Gilmore: “Let’s do it.” The slogan was introduced in 1988 and has since become one of the most recognized taglines in advertising history.

• Nike revolutionized athletic footwear with the introduction of Nike Air technology for the first time in 1979, featuring air-filled bags in the soles of shoes for added cushioning and comfort.

COMPANY’S IMPACT

Nike’s overall impact score

Nike has a general impact score of +0.58 (on a scale from -5 to +5). Its impact is spread across 10 UN Sustainable Development Goals (SDGs) and 13 topics, split between positive and negative analyses.

In the socio-economic sphere,

the company holds a 38.7% market share in the global footwear market and sells over 900 million products annually. As a sports industry pioneer, Nike has consistently addressed physical inactivity and played a key role in shaping the global ‘fitness culture’. The company promotes inclusivity through various initiatives, including designing products for people with disabilities, creating maternity sportswear for all stages of pregnancy and post-birth, pioneering the sales of sports hijabs for female athletes, and spending millions on advertisements to increase women’s access to sports participation. It has also helped more than 20 million kids over the last four years to engage in physical activity and play through campaigns such as ‘Made to Play’, based on the maxim that sports should be safe, fun, and designed for all kids.

Nike employs roughly 83,700 people and provides salaries above the industry average. The company has also achieved gender parity at all levels except for the board of directors. Furthermore, it indirectly employs over 1.3 million workers in its supply chain (most of which are in developing countries). However, it received a complaint from 20 unions in the garment industry for violating OECD guidelines in its treatment of 450,000 garment supply chain workers in 94 factories in Cambodia, India, Indonesia, Pakistan, and Sri Lanka.

Environmentally,

Nike emits 16.7 million tonnes of CO₂ equivalent annually (2023), including indirect emissions (equal to over 3.2 million homes’ energy use for a year). Annually, the company consumes 18.5 million m³ of water (2023), with 42% of it being in water-stressed areas. Nike also generates approximately 200,000 tonnes of waste every year, 97.5% of which it sustainably manages in the form of recycling, waste to energy, and composting. Despite 100% of Nike's leather being certified sustainable by the Leather Working Group, some of its suppliers have been linked to Amazon rainforest deforestation. The company sources over 500,000 tonnes of raw materials annually, which require hundreds of thousands of hectares of land.

_{*The impact score is current as of May 2024 and may be subject to changes as it is continuously updated.
**You can find details about the scoring methodology at the end of this email.}

ESG VS IMPACT SCORE

What is Nike’s ESG rating?

For comparison, Nike has a BB rating in MSCI's ESG evaluation.

However, ESG Ratings from MSCI ESG Research are designed to measure a company’s resilience to financially material ESG risks and they provide a window into one facet of risk to financial performance. They measure how effectively companies manage ESG risks, not their impact on these factors.

SCORES BY SDG

Nike’s impact scores by SDG

Now, back to Nike’s impact score:

Positively (and by weight), the company scores the highest in Good Health and Well-being SDG (+3.33), followed by Partnership for the Goals (+3.19), and Reduced Inequalities (+2.18).

Negatively, the company scores the worst in Responsible Consumption and Production SDG (-1.93), followed by Decent Work and Economic Growth (-2.42), and Climate Action (-3.79).

*the analysis takes into account the weight of the SDGs

The company also positively and negatively influences one SDG (1 - No Poverty), which effectively balances each other out. Negatively, because its products are more expensive than its competitors. Positively, because it employs more than 1.3 million workers in its supply chain (most of which are in developing countries).

PEER GROUP COMPARISON

Nike’s scores by ILG Theme and compared to its competitors

The Investment Leaders Group (ILG) is a global network of pension funds, insurers, and asset managers, with over $12 trillion under management. They came up with a framework to analyze impact that uses the SDGs as a reference point but with 6 broader themes, 3 of them related to Social (Basic Needs, Decent Work, Well-being), and the 3 others to Environmental (Climate Stability, Healthy Ecosystems, Resource Security). Each analysis is linked to one particular ILG Theme.

Nike scores positively in two out of the six themes. However, these two themes carry the most weight in the analysis in the case of Nike (Well-being and Basic Needs). Compared to its competitors, Nike performs better in four of the six themes, when considering the peer group average. When compared to Adidas only, it performs better on three of the six themes.

CONCLUSION

Final words

So, Nike’s key social and environmental impact lies in …

its essential role in enabling hundreds of millions of people worldwide to engage in physical activities and express themselves through its products. The company also contributes to economic growth and social stability by employing millions of people directly and indirectly and contributing billions of dollars in taxes.

Conversely, Nike has a negative impact through its substantial emissions, water usage, materials sourcing, and waste production. The company has also been criticized for the quality of the jobs in its supply chain, many of which don’t meet labor standards and could be involved in forced labor.

Its positive +0.58 score is a balance of all of these factors and topics.

If you want to delve deeper into Nike’s impact, you can explore it here.

Next week, we will analyze the impact of the company that has been at the forefront of digital payment solutions, Visa. 💳

Do you have a specific company you'd like us to cover? Send your suggestions to [email protected]

METHODOLOGY & SCORES

Crafted from rigorous, fact-based data, our impact scores are powered by Impaakt, a pioneering Swiss-based financial data provider focused on tangible impact over mere intentions. Impaakt scores are powered by stakeholders, ensuring corporates, investors and consumers receive robust, impartial insights to make informed decisions on where to allocate their resources.

Key Features of Our Impact Analysis:

• Comprehensive Research: Our analyses span thousands of companies across various sectors, focusing on the tangible impacts of their business operations, products, processes, and innovations.

• Live, Dynamic Scores: Reflecting the latest in reports and research, our impact scores are continually updated, providing a current view of each company's footprint.

• Zero Tolerance for Greenwashing: By including stakeholders in assessing actions only once the impact occurs, we ensure our assessments reflect the voice of global society, free from greenwashing, and from empty promises and intentions.