Nike's Sustainability Performance Takes a Step Back

November 6, 2012

The Nike - Lance Armstrong relationship has come to a dead stop. After learning about the full extent of Armstrong's doping activities, Nike severed all ties on October 17, firmly stating that "Nike does not condone the use of illegal performance enhancing drugs in any manner."

It remains to be seen if this association will cause any reputational damage, but Nike has survived other image-related crises in the past. Over a decade ago, Nike was accused of running "sweatshop factories" in violation of international agreements having to do with child labor. It responded by cleaning up its supply chain. Nike now provides disclosure of its manufacturing policies in its corporate sustainability report: http://nikeinc.com/pages/manufacturing, By all accounts, it paints a fair and accurate picture of Nike's real performance in this arena.

In recent months, we have noticed a decline in other aspects of Nike's reputation. In our 2012 Sustainability Leadership Report, which measures real vs. perceived performance on environmental, social and governance (ESG) factors for 100 leading global brands, we found that Nike dropped from Leader to Challenger status from 2011 to 2012. A Challenger rating means that Nike's real performance is ahead of the study average, but perceived performance is below the mean. Nike is the only Challenger in its Consumer Discretionary peer group, which includes world-class consumer brands such as McDonald's, Coca-Cola, Starbucks and Adidas. (See the Brandlogic Sustainability Leadership Report for background on how the report was created.)

On the reality side, Nike's sustainability performance increased 9.4 points, just ahead of the average increase for all 100 companies. On the perception side, Nike's perceived sustainability performance dropped 5.3 points, a greater decline than the average drop of 2.8 points year over year.

When looking at the individual findings from the "highly attentive" audiences we surveyed - professional investors, purchasing managers and recent university graduates - some interesting dichotomies appear. Nike experienced a large decline in perceived performance among purchasing managers - on average, 14.3 points. Recent university graduates were more positively inclined towards Nike this year over 2011, giving the company a 4.0-point increase over last year. Professional investor perceptions of Nike's ESG performance declined by over 8 points.

These data were collected in June and July of 2012, so we are unsure if perceptions will change yet again as a result of the Armstrong incident. But we can conclude that as a Challenger, Nike has an opportunity to tell its sustainability story in a much more compelling way than it is doing currently. Simply creating a better sustainability report is necessary but not sufficient - Nike needs to take a comprehensive look at how it can leverage its massive media and PR spending better if it wants to change hearts and minds about its commitments to sustainability.

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