Burgess COMMENTARY

Peter Burgess

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Review of Nike Considered Index and Support Tools 1

1 Introduction

Nike hasinvited TheNatural Step to provide external assessment and advice on the Considered Index froma strategic sustainable development perspective. Thisreview coversthe overall Index approach,recognizing thatthere are variations ofthe Index (e.g.for apparel and footwear). The assessmentmethod is explained below.

We referto different aspects ofthe Index in thisreview,so a description ofthe approach and its partsis provided. We then give an overall assessment,followed by technical examination of different parts ofthe Index and commentary on its public release.

Assessment Method –Backcasting from Success

The assessment has been conducted using both the sustainability principles and backcasting planningmethod ofthe unifying Framework for Strategic Sustainable Development, promoted by The Natural Step in collaboration with itsinternationalresearch and practitioner networks. Fourscience‐based sustainability principles fromthe framework describe successin terms ofthe conditions needed for a sustainable society, providing an operational definition ofsustainability that allowsfor a gap analysis between where we are today and where we need to arrive atin the future.

Fromthis‘whole systems’ perspective, it needsto be clearly stated thatthere is no such thing as a sustainable or an unsustainable material or product;there are only sustainablematerial and resource management practices. Product andmaterialsustainability claims therefore need to be viewed carefully, and as part of a journey toward sustainability – one that hasmany possible pathways.

UnderstandingPurpose and Contextfor the Index

Alltoolsserve a purpose. They need to be examined with their purpose inmind, and understood within the contextin which they are used. To judge ifthisIndex is a good toolforsupportingNike’s movementtoward sustainability,Nike’s overall approach to sustainabilitymust be understood:

• • The Index has been developed to aid design andmaterial choices as part ofNike’s Considered design ethos, which is part of an overall company sustainability agenda.
• • Nike haslong‐standing commitmentsto sustainability in place.
• • The tool isintegrated intoNike’sinnovation process.
• • Dedicated personnelsupportthe tool’s development and integration acrossthe organization.
• • The Index connects with, drawsfromand supportsmany other aspects ofNike’ssustainable business and innovation agenda (for example, procurementsustainability and audit programs,
• restricted substanceslists, company targets and policies etc).

Description ofthe Considered IndexApproach

The Considered Index approach can be described as a set ofstrategic design innovation tools providing:

1. 1)Insightinto the environmental impacts ofmaterials used in product creation (materialscores).
2. 2)IncentivesforNike tomakemore sustainable products, in line with the company’s priorities and goals(productscores).
3. 3) Communication ofthe performance results usingNike’s internalstandards(Considered benchmarks e.g.Gold standard).
4. 4) Company targetsfor continual improvement(stretch goalsfor meeting company‐wide benchmarks of product performance by a given year e.g. allfootwearto be Considered Bronze by 2011).

1. MaterialAssessment Tool(MAT). Thistoolscores and ranksthe materialtypes used tomanufactureNike productsfromleastto most preferred. The scoring is based on:

• ‐ Major, known supply chain environmental issues within defined impact categories.
• ‐ A life cycle perspective,from‘cradle to gate’.
• ‐ Publicly available data thatis compiled and aggregated for generalmaterialtypes and typicalsupply chain scenarios.
• ‐ Third party inputfromspecialistsinmaterials environmental impact assessmentmethods.
• ‐ Weightings are assigned to impact categories, based on Nike priorities.

2. The Considered Index. The Index rewards design innovation choicesrelated to product creation by assigning scoresto products. It encouragesthe selection of environmentally preferredmaterials(asscored in the Material Assessment Tool) as well as other practices where the designer can improve the environmental profile ofthe product, i.e. less waste generation, use of desired chemistry and an innovation bonusfor breakthroughsthat can be transferred acrossmodels.

Nike usesthese toolsin a number of ways ‐ for example, aiding procurement decisions,setting ofinternalstandards andmore broadly for defining sustainable design performance. Nike has chosen to externally label Silver andGold standard products,sending a signalto the consumer aboutNike’s Considered design ethos.

2 OverallAssessment

Using Sustainability as aDriver ofInnovation

Many traditionaltools and approachesformeasuring product or materialsustainability take a static perspective, attempting to measure and assessthe scale and severity of known issues and impactstoday (primarily a risk avoidance approach).On their own these life cycle assessment approaches have limitationsin terms of guiding strategic decision‐making toward 1)sustainable resource management and 2)related business opportunities.2

Itistherefore refreshing to see the approachNike hastaken – combining quantitativematerial assessment with qualitatively‐ derived scoresrewarding improvementsin product creation. This approach highlights an evolution in thinking onmeasuring sustainability away fromsolely ‘impactminimization’ andmovement toward an ‘innovation enabling’strategic perspective. We believe this Index is a powerful demonstration of an overall ’backcasting’ approach for enabling sustainable design innovation, notsimply a set oftoolsformeasuringmovement away fromenvironmental impacts.

DrivingProgress toward a ‘NorthStar’Vision

Forinnovation toolsto really drive progresstoward sustainability,the definition ofsustainability itselfmust be clear – what are we trying to achieve? Companies committed to sustainabilitymust ultimately assess and align their corporate businessmodel and goals with the needs and principles ofthe sustainable society we are trying to create. Although the Considered Index tools were first created to address a sub‐set of known environmentalsustainability issues,Nike hassince defined itslong terminnovation goals using sustainability principlesthat provide full awareness ofthe sustainability challenge in both social and environmental dimensions.

This’ConsideredNorth Star’ vision establishes an ambitiousscope of action based on whatscience saysis needed forsustainability and whatisrelevantforNike’s business. While the Index does not currently address all ofNike’s aspirations, we have observed thatthe goalsthemselves are now driving further evolution ofthe Index. This guarantees a living ratherthan staticmethod of evaluation that can continue to grow overtime.

The lesson for other organizationsisthatthe use ofsuch tools can onlymake sense when they are linked to a clear and comprehensive definition ofsustainability in combination with relevant company commitmentsfor helping society to achieve this desired state.

Evaluating the Impact ofthe Index

Recognizing thatNike needs a pragmatic approach relevantto designers,the utility ofthe Index is best assessed by looking atthe way designers use it and the outcomes oftheir work.Designers interviewed in thisreview noted thatthe approach helpsthem:

• • Achieve a good overview ofthe environmentalsustainability profile of a productstyle.
• • Identify ‘low hanging fruit’; quick easy changes become obvious.
• • Strategically develop a style with sustainability issuesinmind.
• • Creatively explore design choices, analyzing pricing and testing scenariosforimprovementsthat are cost‐neutral.

Nike staff also noted outcomesfromthe Considered Index asfollows:

• • Built commitmentforNike Considered’s approach to sustainable productinnovation.
• • Provided a broader perspective on what designers can do to make a difference.
• • Raised enthusiasmand excitement aboutsustainability by making ittangible.
• • Overcame perception thatsustainability costs extra by showing cost‐neutral improvement possibilities.
• • Informed procurement decision‐making.
• • Challenged designersto compete between productlines.

AnecdotalreportsfromNike affiliates who are beginning to use the Index also suggestthatitis prompting new questionsto be asked of suppliers. Furthermeasurement ofthe impact attributed to the Index is explained inNike’s Corporate Responsibility Reports and studies such asthe MIT Sloan Managementstudy “Nike Considered:Getting Traction on Sustainability” (Henderson&Locke 2009). The impact on the end consumer has not been evaluated,thoughmuch has been publicly written aboutthe evolution ofNike’s Considered approach and the high profile athletes who wear Considered product.

3 GettingTechnical:Index Structure

Here we comment on certain aspects ofthe Index construction. As the Index and Material Assessment Tool use differentscoring approaches we discussthe two toolsseparately. Assessment ofthe MAT isincluded in the nextsection.

HowComprehensive is the Index?

The Index needsto be acknowledged as a sophisticated tool covering a significantscope of environmental issuesrelevanttoNike. Looking through the lens ofthe foursustainability principles we can explore the Index’sstrengths and gapsin relation to the fullscope of sustainability:

• • Key environmentalsustainability impact categories(energy, chemistry, waste, and water) have been chosen in orderto balance practicality with comprehensiveness. The impact categories coversome issuesrelated to the firstthree sustainability principlesthat cover problems associated with minedmaterials,man‐made substances and physical degradation of nature. The approach identifiesthe least number of variablesthat can be used to have fairly high confidence that Nike ismoving in the right direction toward sustainability. It does notseek to cover everything.
• • Socialsustainability issues(related to the fourth sustainability principle) are not directly included. Some implications are addressed indirectly (e.g. health effects on workersfrom chemistry,sourcing fromwater‐scarce regions). Social issues and environmentalsustainability issues are inherently connected issuesso ideally they should not be addressed in isolation.

Design Parameterswithin the Index

The overallscoring scheme developed byNike to reward design choices has been given considerable thought and sensitivity testing to ensure that differentiation between design optionsis possible. We expectthatthe scoring reflects a good range of options(bestto worst options)forthe designerfroma sustainability perspective.

Although we cannot commentin detail on the suitability ofthe design variablesin the Index (pointsrewarded formaterialselection, waste generation, chemistry and innovation) we believe they strike a good balance of whatthe designer has control over. Theremay, however, be scope to expand the scoring to look atthe fate ofthe product, e.g. isit designed for closed loop, durability, orfor cold water washing?

Finally, it needsto be noted thatthe scoring has been developed directly byNike who does not claimthisto be a third party eco‐label. External input on the approach is now being sought.

4 GettingTechnical: MaterialAssessmentTool

In thissection we commentspecifically on thematerials assessment approach in the Material Assessment Tool underpinning the Index.

MATImpact Categories,Weightings andAggregation

We note the following: • Nike has used external input and guidance frommaterials environmental impact assessment expertsto create a 100‐point scoring systemfromthematerials assessment data (the details ofthe approach are notincluded in the scope ofthisreview). The impact categoriesincluded in the scoring reflectNike’s priorities. Weightings are applied to the impact categoriesso thatscores generated in each category can be aggregated into overallmaterialscores. • In our view, deciding on the importance orsignificance of particularimpact categories over one another(e.g.toxicity vs. climate change)is an impossible task and should not be attempted. They are simply different dimensions of un‐ sustainability to be tackled. The dangerin this aggregation isthe perception thatthe bestscoringmaterials are viewed asthe ‘mostsustainable’ratherthan ‘most preferred, based on current priorities’. This needsto bemore closely examined, asthe potential(and cost) of amaterialto bemanaged sustainability can change overtime, be region and scale‐specific or be heavily affected by only one parameter. Recognizing thatNike has consulted external partiesto develop itsscoring approach we simply wish to note the interpretation risk in scoring ‘apples’ and ‘oranges’together. • With the above caution noted, other companies who wish to aggregate data fromthe differentimpact categoriesin the MAT and Indexmay choose to assign different prioritiesto them. In orderforthe toolsto retain theirintegrity,the company prioritiesmust be included in a transparent way. The rationale forsetting prioritiesshould also be outlined e.g. perceived importance or urgency ofsustainability issues, business priorities, ability to influence etc. DataQuality andValidity All organizations working on sustainability willrecognize lack of supply chain transparency and accesstomeaningful data as key challenges. The MAT employs a somewhat pragmatic approach, working on available information and proxies. The assumptions and data quality used to generatematerial and productscores need to be understood so thatresults ‐ the basisfor decision‐making ‐ are interpreted correctly: • Publicly‐available data has been used. • Data is not consistently available and expertinput has been used tomake educated decisionsin orderto generate scoresfrom multiple sources. • The scores are also base scenariosfor genericmaterialtypes with significant aggregation. This does not accountforthe differences between supply chains and suppliers, which are likely to be significant. • Ensuring that data is accurate and stays currentis a key challenge. A clearmechanismfor updating the assumptionsin the Material Assessment Tool is not apparent but will be essentialmoving forward.

In the future, industries will need increasingly sophisticated toolsto understand the consequences oftheir activities and plan solutions. Lack of data will need to be addressed.Given this, we would like to seeNike and the industry atlarge aiming forfulltransparency in the supply chain on sustainability issues. Ifthis ambitiouslong‐termgoal were agreed,ratherthan create only the genericmaterialscorecards, a furtherstep would be to quantify the uncertainty range and incentivize suppliersto demonstrate where they lie within it. The use of web‐based technologiesmay also be ameansfor building transparency by crowd‐sourcing of data.

Overall,the MAT illustratesthe challenge of getting reliable normalized data frommanufacturers and suppliers and suggests a requirementfor a sea change in industrial practices. Nike’s effortto share itsresearch findings on supply chain impacts needsto be commended forraising thisissue to industry attention.

5 PublicRelease ofthe Index

Itis a hallmark ofleadership thatNike issharing itslessonslearned with the industry and opening up for public scrutiny a generic version ofthe approach – theNike EnvironmentalDesign Tool. Thisshould be seen as a significant contribution to the industry dialogue on sustainability performance and itshould supportthe development and convergence on approachesthat can be universally applied acrossthe industry.

We suggestthatmetric tools alone are not enough forindustry alignment on sustainability. Capacity building toolsshould accompany any Index to bring people on board with a shared story of whatsustainabilitymeansforthe industry, using a robust definition. In this way each actor can assessthe inherent problemsin their own activities and work to generate and evaluate possible solutions.4

Knowing the ultimate aimsthatNike and otherindustry leaders are seeking to achieve with theirtoolsis helpfulregardless of current demands,the state oftools or available information. Such an approach would help revise currenttools by identifying gaps and continually liftthe bar asthe industrymakes progress.

6 Conclusion

We really like thistool asittakes a pragmatic,strategic life cycle management approach where sustainability is viewed as a journey ratherthan a staticmeasurement ofimpacts. The use of product scores and labelssuch asGold, Silver and Bronze forscoring and communication helpsto simplify a complex task,making sustainability concrete enough to bring designers on board, giving themthe information and incentivestomake a real impactthrough design choices.Digging deeper one can see the depth of analysis as well asthe scope limitations and challenges with data availability and aggregationmethods.

ThisIndex is a very sophisticated tool and a powerful demonstration of an overall ’backcasting’ approach for enabling sustainable design innovation. WhatsetsNike apartisthatit has used scientific principles ofsustainability to setthe scope forits vision ofsuccessfor productsustainability.Nike is now using itstoolstomake progress toward these goals.

Itis a hallmark ofleadership thatNike issharing itslessonslearned with the industry and opening it up for public scrutiny. We look forward to seeing how Nike continuesto evolve itstoolstomake progresstoward sustainability.

7 AboutthisReview

TheNatural Step

TheNatural Step is an international notfor profit organization dedicated to sustainable development. TheNatural Step acts as a catalystforsociety, bringing aboutsystemic change by giving decision‐makers a common,science‐based understanding of sustainability, and a framework tomake decisionsin a genuinely sustainable way.

www.thenaturalstep.org

The Framework for Strategic SustainableDevelopment

The Framework for Strategic Sustainable Development ‐ commonly called TheNatural Step Framework afterthe organizations promoting its development, application and dissemination ‐ has been developed,tested and applied together with researchers, business and political leaders and practitioners all around the world overthe last 20 years. It underpins and hasinspiredmany ofthe world’s pioneering sustainability initiatives and is openly published and freely available for use by all.

The Framework as the Lens for thisReview

Whatmakesthe framework unique isthatitis proven on 3 arenas:

• • Itis built on scientific consensus, with PhDs, peer‐reviewed articles, and internationalscientific recognition.
• • It has been used by practitioners all overthe world in organizations of allfields and scales.
• • It can be used to analyze and relate allsustainability tools and conceptsto one another and to the goal ofsustainability.

Scope ofReview

This assessmentismade drawing on insights by advisorsfamiliar with Nike’s business. It has been reviewed byDr Karl‐Henrik Robèrt within the scope ofthe internationalresearch programReal Change, in which TheNatural Step is a founding partner. The review was conducted betweenDecember 2009 and July 2010 through interviews withNike’s Considered Teamand Index users,training on Considered Index, documentreview and participation in anNGO stakeholdersession. It builds upon TheNatural Step’s prior understanding and collaboration withNike’s Considered innovation teamthroughout 2008 to supportthe development ofNike’sNorth Star Vision.

ContributingAuthors

Thisreport has been compiled using inputfroma number of TNS staff drawn from The Natural Step International, The Natural Step Network USA and The Natural Step Canada. Regina Hauser ExecutiveDirector The Natural Step Network USA Richard Blume Senior Advisor The Natural Step International

Latest Revision 12/8/10