Laboratory for Sustainable Business

Laboratory for Sustainable Business Laboratory for Sustainable Business Agenda ƒ ƒ ƒ ƒ Introductions Goals of Course Illustration: Nike Case Requirements, Course Overview, Key Themes, Important Dates Course Goals ƒ Introduction to key issues and opportunities for Sustainable Business What Can Companies Do? Business. ƒ Tools / Frameworks for understanding & responding to those Challenges / Opportunities. Operations. Supply Chains. New Products/Markets. ƒ Action Learning. Mini-Internships with Organizations seeking to promote more sustainable business practices (either through new start-ups t t or redesigned d i d existing i ti practices) ti ) ƒ Demonstrate that there is a lot that business / you can do to regenerate our planet and build a more sustainable economy Why Nike? 1. What is Nike doing? 2. Why is it pursuing these strategies? 3. How do they measure success / impact? 4. What do you think? Why Nike?: Success Through Global Sourcing Total Revenue Net Income (Million US$'s) Figure 1 - Net Income Sources: a) 1978-97: HBS Case #9-299-084 "Nike, Inc.: Entering the Millennium," March 31, 1999. b) 1998-2001: Company financial information 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 1978 Million US$ Total Revenue - Net Income 1978 - 2001 Why Nike?: Suppliers Engaged in “Poor” Working Conditions Images of Nike workers removed due to copyright restrictions. Why Nike? Unfavorable media mentions Major World new spapers 180 160 120 100 80 60 40 20 Sw eatshop Child Labor Exploitation 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 0 1992 # of mentions 140 Factory Conditions Vary Across Sectors & Countries First M-Audit Scores across all factories (Nov. 2002 to Jan. 2005) Histogram: 0 1 Density 2 3 First Maudit score .2 .4 .6 Maudit score Density .8 1 kdensity maudit Number of Observations: 575 Average M-Audit Score: 65% Similar patterns of variation within sectors (footwear, apparel, equipment) and within countries. Are Things Getting Better? Change in Compliance Rating Inspections Change in CR Rating -3 (Down by 3 degrees) Freq. Percent 20 2.62 -2 (Down by 2 degrees) 74 9.70 -1 (Down by 1 degree) 181 23.72 0 (No change) 323 42.33 1 (Up by 1 degree) 116 15.20 2 (Up by 2 degrees) 42 5.50 3 (Up by 3 degrees) 7 0.92 763 100 Total Note: A is 4, B is 3, C is 2, and D is 1, and the change in CR rating is the score in the most recent audit minus the score from the earliest audit, ranging from –3 to 3. For example, if a factory has a score C in the earliest audit and a score A in the most recent audit, then it has a change of +2. Qualitative Analysis – A Tale of 2 Factories Workplace Characteristics Average Weekly Wage Team Work Plant A Plant B $ 86.00 USD $ 67.80 USD Yes No Multi-Tasks Single Task Job Rotation Yes No Worker Participation in Work-Related Decisions Yes No Chinese Job Description Nationality y Managers Mexican Supervisors Mexican Chinese Production Workers Mexican Mostly Mexican Voluntary and Within Limit Mandatory and Over Limit Overtime Qualitative Analysis – A Tale of 2 Factories continued Comparison of Production Systems Total # of Workers in one line or cell T-Shirts per Day per line or cell Daily Wage per Worker (Fixed Salary + Bonuses) T-Shirts per Worker Cost per T-Shirt Plant A Plant B 6 10 900 800 $ 17.20 USD $ 13.60 USD 150 80 $ 0.11 USD $ 0.18 USD Qualitative Analysis – A Tale of 2 Factories continued Comparison between Old and New System of Production in Plant A Old System (module) New System (cell) Total # of Workers 10 6 T-Shirts per Day per module or cell 1200 900 Productivity per Worker 120 150 Average Weekly Salary $ 67.80 USD $ 86.00 USD GEN III: Evolution FROM: GEN I & II TO: GEN III 1. Firefighting. 1. Coaching. 2. Policing. 2. Capacity Building. 3. Providing ‘Answers’. 3. Providing data for the factory to provide answers. 4. Giving g Specific p Solutions. 5. Informing BU’s of progress. 6. Focus on Issues. 4. Giving guidance. 5. Engaging BU’s for leverage. 6. Focus on systems & root causes. 2001 MOU with WWF WHERE WE WORK & MOVING PEOPLE: • Reduce carbon dioxide (CO2) emissions 13% below 1998 levels by 2005. • Includes: – CO2 from Nike-owned facilities and business travel – Conserving energy, buying green power, and investing in community energy-efficiency projects MAKING PRODUCT & MOVING PRODUCT: • • Supply Chain CO2 baseline—2003 – Footwear and Apparel contracted manufacturing – Logistics Remove GHG from Products (pre-existing commitment) Achieved Goal COMMITMENT: Reduce carbon dioxide (CO2) emissions 13% below 1998 levels by 2005. FACILITY AND TRAVEL CO2 SUMMARY Facility Electricity TCO2 Facility Gas TCO2 Green Power Total Facilities GHG TCO2 1998 84,597 12,364 0 96,961 30,177 1999 85,791 12,585 (450) 97,926 2000 90,152 13,157 (771) 2001 87,895 12,610 (771) 2002 89, 69 89,269 12,493 , 93 2003 89,234 2004 2005 YEAR GOAL BETC Projects TCO2 Total travel TCO2 TOTAL CO2 0 0 30,177 127,138 29,648 0 0 29,648 127,575 102,539 30,618 (4,341) 0 26,277 128,816 99,734 30,234 (5,067) 0 25,167 124,901 (8 6) (846) 100,916 00,9 6 36, 83 36,283 0 ( 5,33 ) (15,331) 20,952 0,95 121,868 ,868 12,370 (3,637) 97,966 38,109 0 (46,263) (8,154) 89,812 86,212 10,740 (8,259) 88,693 50,795 (4,000) (15,040) 31,755 120,448 84,409 10,750 (17,475) 77,684 47,754 (8,143) (13,299) 26,312 103,996 96,961 Travel Travel TCO2 Offset TCO2 110,610 SF6 Elimination from Product ƒBegan R&D in 1995, Completed phase out in 2005 ƒMeasured and verified byy ERT Emission estimates include both SF6 and C3F8. 7,000 Ann nual Emissions ((Gg CO2-eq) 6,000 5,000 4,000 Baseline 3,000 2,000 1,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Our Climate Goals WHERE WE WORK Nike Brand Climate Neutral Facilities by 2011 Nike, Inc. Climate Neutral Facilities by 2015 MOVING PRODUCT (Logistics to first point of distribution) 30% Absolute Reduction in CO2 footprint from 2003 Baseline by 2020 MOVING PEOPLE Climate Neutral Business Travel by 2011 5.7% 1.9% 24.6% MAKING PRODUCT (Footwear contracted manufacturing) Reduction Target TBA 59.3% MAKING PRODUCT 2.9% (Equipment contracted manufacturing) MAKING PRODUCT (Apparel contracted manufacturing) 5.6% Nike Footprint: 1.36 m metric tons Course Overview 1. Systems Approach. Not Silos 2. What Can Companies Do? – – – – Get House in Order (Operations) Supply Chain Redesign Launch New Products / Markets Engage with other Firms, NGOs, Governments 3. Cases. Simulations. Speakers. Action-Learning. DISCUSSIONS Review Syllabus 1. Requirements: – – – – Class Participation & Attendance Project Work Plan Intermediate Report Final Report 2. Read Syllabus. Due Dates 3. Visit Course Website 30 % 5% 20 % 45 %