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Will a New Supply Chain Company Shrink Nike’s Carbon Footprint?

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Supply chains are responsible for up to four times the greenhouse gas emissions of a company’s direct operations. So it makes sense that environmental managers wanting to improve their sustainability performance are looking beyond the factory walls to shrink their carbon footprint.

Lately we’ve seen progress from major companies including Apple and Nike in their sustainable supply chain efforts. Apple earlier this week announced that all of its final assembly site in China are compliant with UL’s Zero Waste to Landfill validation and major supplier Lens Technology has committed to powering all of its glass production for Apple with 100 percent renewable energy by the end of 2018.

In May, Nike, in an effort to reduce the carbon footprint of its global supply chain, said its expanded European Logistics Campus in Belgium would include several sustainability features including using 100 percent renewable energy, recycling 95 percent of the onsite waste, and optimizing transportation routes to reduce emissions by 30 percent.

Just last week the athletic equipment and apparel giant made another supply chain announcement that hits closer to home.

Nike said it has partnered with Apollo Global Management and that the private equity firm will create a new apparel supply chain company that will “revolutionize apparel manufacturing in the Americas,” according to Nike chief operating officer, Eric Sprunk.

“The new company, under Apollo’s leadership, is committed to embedding sustainability and transparency into the business, investing in new technology, vertically integrating critical elements of the supply chain and delivering the best Nike performance product to our retail and sports partners,” Sprunk said in a statement.

Financial terms were not disclosed, but Nike said is has not made a capital investment in the supply chain company. Additionally, Apollo said the new company has acquired two businesses to form the cornerstone of its vertically-integrated supply chain strategy: apparel manufacturer New Holland and embellishment, warehousing and logistics operator ArtFX.

Nike communications senior director Kate Meyers told Environmental Leader that the partnership will make Nike’s supply chain more sustainable by allowing the company to partner with fewer, better factories in the Americas committed to sustainability.

“There is a strong commitment by Apollo that the new company management will place a strong focus on sustainable innovation that includes health and safety, environment and labor,” Meyers said. “In addition, Nike will have an advisory role to provide guidance and expertise in these areas.”

“The current apparel supply chain in the Americas is fragmented and underdeveloped which doesn’t enable investment in technology and innovation to be responsive to consumer demands,” she continued. “A more vertically integrated, better funded company business model will allow for greater efficiencies and responsiveness.”

In addition to cutting the company’s travel emissions because products won’t have to ship as far to reach retail customers, manufacturing closer to home will help Nike address logistics issues, the Wall Street Journal reports. These include complaints by some US retailers of product delays last year.

When asked about the timeframe for acquiring additional textile and apparel suppliers, Apollo’s Gary Stein, head of corporate communications, said: “This is just the beginning of building a new supply chain model and as the business grows over time the new company may consider further acquisitions.”

CDP’s head of supply chain Dexter Galvin said he welcomed the Nike initiative — but now the new company has to be held accountable to its sustainability and transparency commitments.

“Increased vertical integration in global supply chains is a good thing for sustainability because it leads to higher standards and greater accountability,” Galvin told Environmental Leader. “The question for companies taking this kind of action is: what requirements will they make of the new business on sustainability, and what external accountability will it be subjected to? Will they respond to CDP for example? There can be risks in passing responsibility for sustainability from big consumer facing brands to a supplier with less recognition and exposure.”

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