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Nike Links Exec Compensation to Diversity and Sustainability Goals

Nike Inc. has outlined plans to build a cleaner, greener and more globally diverse business in the next five years.

In its impact report for fiscal 2020, published Wednesday, the athletic wear giant looked back at its achievements over the past five years while plotting not just “aspirations” but rather a “call to action” guiding progress in the half decade to come, president and CEO John Donahoe wrote in the executive summary. The company says its goals align with both science-based targets and the United Nations’ Sustainable Development Goals.

And “[f]or the first time,” he added, “we will tie executive compensation to Nike’s progress in deepening diversity and inclusion, protecting the planet.”

The move echoes recent calls by the British Parliament for scandal-plagued Boohoo to tie its executive bonus structure not to “runaway” growth but to stronger worker rights, underscoring the growing scrutiny of apparel companies’ environmental, social and governance postures.

Diversity

Nike’s top brass has ample opportunity to push progress forward. Though the Oregon giant saw racial and ethnic minorities filling 29 percent of U.S. vice president roles last year (an eight percentage-point improvement), the owner of Nike, Converse and Jordan Brand aims to perk that figure up to 35 percent by 2025 “as our society continues to reckon with systemic racial injustice,” Donahoe wrote.

What’s more, the company recognizes that attracting and retaining diverse talent means instructing executives on how to lead different kinds of employees. To that end, Nike said that by fiscal 2025, it’s shooting for all leaders at the vice president level to “complete and be credentialed on inclusive leadership education.” And pay parity is on its radar, too: Nike has ambitions to achieve 100 percent “pay equity across all employee levels on an annual basis” while ensuring “competitive and equitable benefits.”

It’s already close to meeting goals for women in the workplace, aiming for 50 percent companywide in the coming five years, up from fiscal 2020’s 49.5 percent mark. However, Nike sees female talent representing 45 percent of leadership roles by the middle of the decade and stated goals to double its investments “focused on professional development for racial and ethnic minorities in the U.S. and women globally.”

Materials and manufacturing

On the materials and manufacturing side, Nike reported notable gains while detailing plans for improvement. Suppliers responsible for finishing and dyeing textiles consumed 30 percent less freshwater since fiscal 2016, equivalent to 40 billion liters kept unsullied and out of Nike’s supply chains. It says it plans to further prune that metric by 25 percent by fiscal 2025. Tier 1 suppliers of finished footwear products now funnel nearly all—99.9 percent—of their manufacturing-derived waste from landfills and into alternate uses.

In the next five years, the sports standout is aiming for a tenfold increase in the amount of finished product it can repair, recycle or re-home, it said. Nike has its eye on castoffs, too, striving to curb production waste from sneakers and other shoe products that otherwise would be tossed in the trash heap or fed to the fires. Though no baseline was given for this metric in fiscal 2015, Nike saw a 6.5 percentage point improvement in the ensuing five years. Upward of 47 million kilograms of production leftovers were channeled into new footwear items, it said, much of which shows up as its well-known Nike Grind sneaker soles.

Looking more broadly at whittling down waste, Nike aims to keep all supply-chain refuse out of landfills, striving to redirect “at least” 80 percent into its own products “and other goods” by fiscal 2025.

Though material innovation has gotten considerable attention in fashion as of late, Nike’s work on this front is something of an enigma. While it grew its sustainable apparel inputs from 19 percent to 59 percent since fiscal 2015, it actually took two percentage steps backward with its goal to pour more eco-friendly components into footwear, dipping from 31 percent to 29 percent over the past 60 months. Cotton, however, emerged as a highlight for Nike, which says it sourced 100 percent of the staple fiber more sustainably by last year, up from 24 percent in fiscal 2015. The Better Cotton Initiative pioneer came in at No. 5 on the group’s 2019 leaderboard in recognition of its sourcing efforts.

Supplier support

Nike also noted the ways in which it supports its sprawling supplier community. Its trade finance scheme with the International Finance Corporation has distributed north of $717 million to 46 factories, which may have helped footwear suppliers curtail their per-pair energy consumption by nearly 10 percent since fiscal 2015. In the five years ahead, the athletic firm wants 100 of its  “strategic suppliers” to facilitate access to career advancement and “upward mobility for women employed in their facilities.” It also stated a goal to a cumulative spend of $1 billion on “diverse suppliers.”

Looking ahead to fiscal 2025, the NBA’s official uniform supplier has set its sights on slashing greenhouse-gas emissions by 70 percent—in both owned and operated facilities—while it’s prioritizing “clean chemistry alternatives” for its 10 primary chemical inputs.

Nike succinctly summarized its mindset on sustainability, noting that in “the race toward a better tomorrow, there is no finish line.”

“Our goal is, and always will be, for Nike’s people and purpose to come together for good,” Donahoe wrote. “At Nike, we’ll never stop striving for better. Our purpose will always guide us, and our values will always push us forward—toward that better future we believe in.”

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