Dawn Vance, Director, Global Logistics, Infrastructure Sustainability, Nike Inc From the 2010 Responsible Supply Chains Conference at Stanford Graduate School of Business: http://www.gsb.stanford.edu/scforum/ser/conference For more resources from previous years: http://www.gsb.stanford.edu/scforum/ser/conference/resources.html

1. Innovate For A Better World
Collaborating for a
Sustainable Supply Chain
Stanford SER Conference
Global Supply Chain Management
April 29, 2010
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2. Agenda
Innovate For A Better World
• Profile of Nike Inc.
– Supply chain size & complexity
• Nike’s sustainability journey
• Risk as opportunity
• Translation to the business – Our North Star
– Product
– Global Logistics (Transportation & Distribution)
• Collaboration models
– Internal
– External
• Summary – Q&A
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3. NIKE, Inc.
Innovate For A Better World
• FY09 Revenue = $19.2B (+3% over PY)
• Over 35,000 Employees Worldwide
• We do business in 160 countries
• We partner with 700 factories in 52 countries
• 1,100 Factories including Affiliates
• These factories employ over 800,000 workers
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4. NIKE Affiliates
4

5. Product Diversity
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6. Premium Consumer Experience
• NIKETown
• NIKE.com
• NIKE.net
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7. From Awareness to Execution
Innovate For A Better World
2005 Nike exceeds WWF target of
2001 (October) Nike
13%reduction - reaches 18%
CO2reduction
joins WWF Climate
Savers. Sets CO2
1997 emissions reduction
targets for owned
operations and business
2006 (June) Nike 2009 Nike develops
1992
(September) completes phase out of all f
Nike first Nike commits travel carbon intensity
gases in Nike branded
to fully phase baselines in distribution
learns about the footwear
operations
2007 (May)
SF6 out of
2003
global warming Inbound Logistics
NIKE
footwear and
potential of SF6 Nike achieves carbon
begins to Nike sets new
transition develops a containment (reductions
public targets in carbon per unit and $
some models baseline of
to Nitrogen inbound logistics Net Revenue)
and subcontracted Nike publishes 3rd CR
manufacturing Report (Jan ‘10)
2009 (June – US) EPA
1997 2001
includes CO2 under the Clean
2007
GLOBAL
air Act (providing the
1988 The
(December)
Kyoto (September) The
opportunity for executive
action without specific
World IPCC releases its (Feb) IPCC further legislation). EPA
Protocol
4th
2005
Meteorological adopted. Third Assessment. outlines proposed reporting
Organization and
the United Nations
1995 The IPCC’s Reaffirms warming
trend and human
(February)
The Kyoto Protocol begins.
assessment requirements for GHG
emissions. Waxman-Markey
Environment Second Climate impact Bill outlining cap & trade for
The United States, refuses CO2 emissions clears House
Program establish Assessment is
to ratify
IPCC published,serving as the
basis for Kyoto Protocol
7

8. 8

9. WHY?
Maxim 0.8 Do the Right Thing
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10. WHY?
The next billion
consumers will not look
like the first billion.
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11. KEY TRENDS ARE ACCELERATING… WHY?
Our current business model is impacted
PLAYERS PLAYING FIELD
School athletic budgets in the Carbon legislation on the horizon
US alone cut by 25% in the past Oil & energy prices continue to rise
year Stricter product legislation
Sport participation in decline underway
(e.g. basketball participation Re-use, Re-cycle becoming
- 18% since 1998)* legislation
Youth obesity and lack of Potential brand impact from
access to sport threatens the factory closures, consolidation,
quality of youth life globally. and shifts in supply chain
Margin erosion from having to internalize the costs of these external events
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*National Sporting Goods Association

12. WHY?
Business Risk <=> Business Opportunity
THREE POSSIBLE SCENARIOS
HITTING THE WALL
OPTIMIZATION
REDESIGN FOR
RESILIENCY
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13. How NIKE looks at Risk
Climate change
Water scarcity The TNS Funnel
Peak soil
Food
Biodiversity
The margin for
action narrows...
Materials
Energy escalation
Consumption
Population growth
PRESENT FUTURE 13

14. 3 Potential Scenarios
“Hitting the Wall”
The growth strategy comes to an abrupt stop
Forces us to rethink our growth plan
“Optimization/less bad”
Radical resource productivity within existing model
Deceleration, but still need to rethink our growth plan
“Redesign for resiliency”
• Radical redesign of business model •Create diversity
• Pursue a range of options • Allow innovation
• Expect the unexpected
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15. How might this impact the Business?
Impact to the Climate
Business Labor Oil H2 O Energy Food
Cost /
Margin Erosion
Availability
Compliance
Product Flow
Product Quality
On-time Delivery
Brand Reputation
Economy
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16. How does this
translate to Product
and Supply Chain?
16

17. INNOVATE
INNOVATE
17

18. Innovation
Closed
Loop
18

19. W
E T
H20
2
19

20. CONSIDERED INDEX
CONSIDERED INDEX
ENVIRONMENTALLY PREFERRED MATERIALS
WASTE
SOLVENTS
INNOVATION
20

21. CONSIDERED INDEX
CONSIDERED INDEX
ENVIRONMENTALLY PREFERRED MATERIALS
WASTE
SOLVENTS
INNOVATION
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22. HOW DO WE SCORE CONSIDERED PRODUCT?
Community
Compliance Climate Considered
Investment
CATEGORY EVALUATION SCORE
Product chemistry Use of solvents 10 POINTS
Reduce waste Manufacturing process 30 POINTS
Use Considered Materials Average material score
35 POINTS
Change Agents # of problems solved 20 POINTS
TOTAL 95 POINTS
CONSIDERED GOLD
GOLD
GOLD
PINNACLE
PINNACLE
SILVER CONSIDERED SILVER
SILVER
ACHIEVEMENT
ACHIEVEMENT
BRONZE
BRONZE
PARTICIPANT CONSIDERED BRONZE
PARTICIPANT
REDUCE TOXICS REDUCE WASTE USE EPM’S CHANGE AGENTS 22

23. 23

24. RE USE A SHOE:
NIKE GRIND SPORT SURFACING Compliance Climate Considered
Community
Investment
INDOOR WOOD BASKETBALL TENNIS COURTS ATHLETIC TRACKS
COURTS
NIKE GRIND
FOAM
NIKE GRIND
UPPER NIKE GRIND
RUBBER 24

25. Sourcing & Manufacturing
• Sourcing model continuously
assessed
• Optimized network across 7
Brands with 1,100 factories
• Working with Factory Partners:
• LEAN Manufacturing
• Green Factory of the Future
25

26. • Laakdal, Belgium
• Memphis, TN
• Shanghai, China
Nike’s visible commitment to
sustainability - Distribution 26

27. Getting trucks
off the road
27

28. TO GROW* OUR WORLD OF SPORT WE MUST...
PROTECT OUR PLAYING FIELD
WASTE ENERGY WORKERS
PROTECT OUR PLAYERS’ ACCESS TO SPORT
We know there is a direct correlation between:
• Consumption of Resources
$
• Waste
* COACHES
• Operating Expense INSPIRATION
• CO2 Emissions
• Efficiency 28

29. • How does Nike
Collaborate to
achieve business
results?
29

30. SUSTAINABLE BUSINESS AND INNOVATION
WE RESET OUR CAPABILITIES TO DELIVER
LAB INTEGRATE MOBILIZE
Educate, inspire &
Design create innovative
sustainable products
Create lean, green,
Manufacturing empowered and
& Sourcing equitable supply
chain
Expand access to
sport and create a
Marketplace marketplace for
sustainable product
Enterprise & Integrate Amplify &
Industry level sustainability in scale solutions
innovation the DNA of the
business
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31. Internal Collaboration
• Redefine teamwork into
operating networks
• Subject matter expertise found
anywhere / everywhere
• Orient networks around
capabilities for the future
• Reconnect around SME
• Fully leverage COPY/PASTE
– Use technology to
communicate without travel
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32. TRANSLATING CLOSED LOOP FOR LOGISTICS
No product to landfill -
Reduce consumption A shoe becomes a shoe
of oil and energy (Re-Use-A-Shoe X20)
(LEED DC designs,
LOWER CARBON
high output lighting) FOOTPRINT
Shift to LOWER NET ZERO Waste from a
Renewable Energy WATER OPTIMIZE TODAY’S ZERO DC to a landfill
(wind turbines / FOOTPRINT VALUE CHAIN WASTE
solar)
+
INNOVATE
CLOSED-LOOP
NO
Optimize the LEAN & GREEN BUSINESS MODELS TOXICS
Recycle
Existing Logistics or Re-use
MANUFACTURING
Network
(container utilization, & LOGISTICS
EMPOWERED AND
modal shift) Packaging Innovation
EQUITABLE SUPPLY CHAIN
(Package-less Product)
WORKFORCE
100% Transparency Measure
Source of Oil & Electricity & Report
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Emissions

33. External Collaboration
• Launched at DAVOS in Jan 2010
• The GX is Nike’s new web-based
innovation marketplace
• Participating Members:
• Best Buy
• Creative Commons
• IDEO
• Mountain Equipment Co-Op
• nGenera Insight
• Nike
• Outdoor Industry Association
• salesforce.com
• 2Degrees and Yahoo!
• Nike will place 400 patents in the GX for
research purposes
THEGREENXCHANGE
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34. Global Logistics Infrastructure
Sustainability Partner Field of Play
CERES Coalition BSR VALUE to Nike
Carbon Disclosure Project Carbon Trust SB&I Manages these Advocacy / Policy / Risk
WWF TCG Corporate Relationships
Clean Climate PEW Center
Deloitte • Risk Assessment
2020 • Policy Issue Leadership
World Resources Institute (WRI) (GHG Protocols) • Early Access to Regulatory Requirements
• Stakeholder Feedback
World Economic Forum (WEF) (Emissions Modeling) • External Reporting
• Alignment of risk & opportunity w/SB&I
Carbon War Room (Logistics Retrofits)
Collaborative Partnerships
H JITI Consumer Climate • Facilitate Transparent Dialog w/Partners
V O
Sterling Planet
Counts • Insight to long range goals & strat plans
• Innovation roadmap (5-10 yrs)
A R AMR Research RILA
• External Benchmarking (Best in Class)
L I Euro Centric BSR Clean Cargo EPA SmartWay WFSGII
• Consulting for competencies we lack
Working Group • Carbon Footprint Metrics & Reporting
U Z • Joint Ownership of reduction goals
• Community Partnerships (i.e. TN)
E O Wal-Mart
IKEA
Pepsi-Co
Starbucks
Dell
J&J
N
Business Results
Casella / SOEX
WM • Key Sustainability Initiatives Drive
Retail Partners
Reductions in Operating Expense and CO2
IDS
Prologis JCPenney • Proving the Business Case - ROI2
Menlo Kohl’s • Business Results supported by contract
Maersk UPS FinishLine
APL
DHL
FedEx
agreements with key Partners
Dick’s
Schenker YRC
2010 NYKLine Interstate All Partners MUST have
• Global Credibility
Design Sourcing & Mfg Logistics Infrastructure Retail Consumer • Ability to address the Gaps
• Defined Deliverables 34
Waste VOCs Energy Fuel Packaging • Direct Business Benefit to Nike

35. Industry Collaboration
BSR Clean Cargo Working Group
Fall Meeting 2008 New York, NY
Environmental Performance Assessment
• Tools for inputting and analyzing data
• Agreed upon measures
• Evaluation methodology (Point system)
• Analysis and reporting of data (scorecard)
• Commitment to report
• 100% owned fleet for CY 2008
• 100% owned & chartered fleet CY 2009
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36. Business Partner Collaboration
Innovate For A Better World
• Apparel Magazine Sustainability All-Star
awarded to Nike – March 2010
– Measuring the company’s environmental footprint
“and then doing something about it”
– The innovative Sustainability Collaboratory
– The Northridge DC and the Laakdal DC were cited
for their sustainability initiatives
– The Considered product line and its steps toward
waste reduction and materials reuse
– The efforts to reduce the carbon footprint of your
transportation and logistics operations through
work with the BSR Clean Cargo Working Group
• Nike was nominated by one of our key
logistics service providers - Maersk
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37. Inbound Transportation 2020 Modeling
Absolute CO2 Emissions
2020 Modeling Inbound Emissions vs. Units Shipped (000's)
450,000 1,200,000
Absolute Measure
CO 2 E m issio n s (M etric T o n n es)
400,000
1,000,000
350,000
Un its S h ip p ed (000s)
300,000 800,000
250,000
600,000
200,000
150,000 400,000
100,000
200,000
50,000
0 0
FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY20 Goal of 30% Absolute
Reduction from 2003
Baseline
CO2 Emissions Units Shipped
• 12% emissions reduction in FY09
• Largely due to a 39% reduction in air freight (47k tCO2) and reduction in volume 37
• Small reductions from all other projects combined (<15k tCO2 total)

38. Opportunities to Reduce Carbon
In the Supply Chain
Innovate For A Better World
Emissions Emissions
Potential Feasibility Reduction
Reduction
Things we can do Opportunity
Abatement Index (1-10) Potential
(% of total)
1. Clean vehicle technologies H 8 18%
Potential Focus Areas
1. Enable cleaner sourcing/manufacturing 2. De-speeding the Supply Chain H 8 18%
2. Lower emissions in transit 3. Optimized networks H 8 13%
3. Enable cleaner warehouse operations
4. Reduce transit distances 4. Energy efficient buildings M 9
5. Remove nodes / legs 5. Packaging reduction H 7 14%
6. Reduce total volume and/or mass shipped
7. Consolidate Movements 6. Low carbon sourcing – 16%
H 6
8. Contribute to reductions elsewhere manufacturing
9. Increase recycling/re-use 7. Training * communication M 8
8. Modal switches M 7 12%
9. Reverse logistics / recycling M 6 9%
10. Nearshoring L 7 <1%
11. Increase home delivery L 5
12. Reduce congestion L 3
World Economic Forum – Supply Chain Decarbonization – the Role of
Logistics and Transport in Reducing Supply Chain Carbon Emissions
Also Adopted by US EPA SmartWay Program 38

39. Prioritizing the Sustainability Portfolio
Global Logistics Infrastructure
Innovate For A Better World
High
1. LEVERAGE MORE De-speeding
the Supply Chain
Clean Vehicle (18%)
Technologies
Energy Packaging Reduction (18%) 1. Maersk (N. Am)
Efficient (14%)
2. INVEST TO SAVE & ENABLE Buildings
(tbd %)
Optimized
Networks
FEASIBILITY INDEX
Systems & Tool Low (13%)
Collaboration Reverse Carbon
w/Logistics Logistics Modal Switches Sourcing & Manufacturing
Delivery
Partners Logistics
(9%) (12%) (16%)
CR Scenario
1. Factory of the Future
Reporting Planning 1. Scale RAS to 20X
& Tools
transparency Near Shoring
(?%) 1. West Coast Transload (NA) add Apparel FY10
2. Geography Deconsolidation (NA)
3. Zone Skipping (NA)
4. Northridge Re-location (NA)
1. Design, Build Operate LEED Equivalent DCs 5. Pool Distribution (NA Retail)
2. Retrofit LEED designs to existing DCs 6. Increase Container Fill Rate (NA/Europe)
(including LSPs) 7. Shift to larger containers (NA/Europe)
3. Eliminate Waste from DC operations 8. Deep water port Vietnam
1. Lightweight FW cartons
----------------------------------- ------------------------------------------------------------------
2. Redesign FW inner carton
4. Shift to renewable energy (as % of total) 9. X-Brand delivery (co-loading)
1. Carbon Check Pilot Global Roll-out (In & Outbound) 3. Recycle/Reuse cartons in DCs
** SEE LIST **
2. Enablon Emissions for DC Energy, Waste & Water 4. Reduction of Dunnage
---------------------------------------------------------------- ------------------------------------- Retrofits to existing fleets (38-56%)
3. SAP Integrated Carbon Accounting (Future) 5. Carton-less delivery 1. LNG Trucks (N. Am.)
4. Traceability Scope 1,2,3 2. Wind power (sails/kites) (<20%)
3. Air Lubrication (<15%)
4. CRP Propulsion (<12%)
1. Air Freight Reduction (All GEOs) 5. Waste Heat Recovery (<10%)
2. Rail Optimization (Europe) 6. Efficiency of Scale (<4%)
Tonnes CO2 e FY09 3. Inbound Barge (Europe) 7. Propeller Tip Winglets (<4%)
Inbound Transportation = 355,800 --------------------------------------------------------
Distribution Operations = 47,296 8. Ocean Vessel 2030 (70% emissions) reduction
Low
Low ABATEMENT POTENTIAL High
World Economic Forum – Supply Chain Decarbonization – the Role of Logistics and
39
Transport in Reducing Supply Chain Carbon Emissions

40. What Challenges our
Current Business Model?
Innovate For A Better World
• Our business model is built upon consumption of non-renewable resources
• Our success is tied to material consumption
• We will be forced to internalize growing amounts of external cost & risk
• An inflexible supply chain does not satisfy customer needs
• Where and when they want it
We will optimize our existing network
While simultaneously creating
disruptive innovation
With trusted business partners to create a
collaborative future
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41. Innovate For A Better World
Thank You
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