Nike Sustainable Manufacturing Excellence Energy and CO2 Program

2 ENERGY / CO2

Total Energy Used

•1,900,000,000 kilowatt hours

Price of Energy

• .00009/watt hour

Total Energy Cost

•$75M

Total Energy Used

•1,900,000,000 kilowatt hours

Carbon Content of Energy

• .000419 pounds of CO2/ watt hour

Total Carbon Footprint

•1,000,000 tCO2

•1,900,000,000 kilowatt hours

Energy Use

•300M pairs

Length of Use

One year

Program Foundation

Energy and CO2 Equation » Understanding energy cost and CO2 emissions

» Reducing energy usage reduces carbon footprint and energy cost

Total Energy Used

3 Energy + CO2

China Steel

Steel

Nike

Annual Energy Use

1,600,000,000 MWh 1,950,000 MWh

Nike Footwear

Energy use equivalent: China Steel: 8 hrs

Nike Footwear: 1 year

4 Energy + CO2

Total Nike Brand Inline FW energy use: 2,000,000 MWh

Above average energy losses from Vietnamese electricity grid: 2,000,000 MWh

Electricity system basics (VN)

5 Energy + CO2

25% of wind turbines in China are not connected to the grid

Greater than Nike inline FW energy use

Electricity system basics (CN)

6 Energy + CO2

Electricity supply and demand (vn)

0

100

200

300

400

500

600

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Maximum energy supply

0

500

1000

1500

2000

2500

3000

3500

4000

4500

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Source: EIA, EVN

7 ENERGY / CO2

Nike CO2 Footprint

1,534,500 CO2 total tonnes

1,059,500 CO2 manufacturing

Manufacturing (69%)

Business Travel 1%

Facilities 2%

Inbound Logistics

10%

Footwear Manufacting

26%

Footwear Materials

28%

Apparel Manufacturing

2%

Apparel Materials

30%

Equipment Manufacturing

1%

3,690,636 CO2 tonnes

3,215,636 CO2 manufacturing

Current State: Only Nike Owned/Leased and Production is measured and included in footprint

Future State: Inclusion of apparel and footwear material vendors will double CO2 footprint

Manufacturing (87%)

Business Travel

3%

Facilities 5%

Inbound Logistics

23%

Footwear Manufacting

62%

Apparel Manufacturing

5%

Equipment Manufacturing

2%

8 ENERGY / CO2

Energy and CO2 Technical Methodology

Toolset: High energy use equipment technical studies

Target the opportunities: shows which equipment to analyze for each factory type

Footwear Factory

Percent of total energy use

Air Compressors (10%)

Boilers (50%)

Motors (30%)

Apparel/Equipment Factory

Percent of total energy use

Air Compressors (5%)

Motors (25%)

Lighting (20%)

Textile Factory

Percent of total energy use

Air Compressors (3%)

Boilers & Dye Tanks (85%)

Boilers (50%)

Primary Focus:

Existing factories

Factory specific

energy toolsets

9 ENERGY / CO2

Energy and CO2 Technical Methodology

Compressor

Air Dryer

Air Storage Tanks

Distribution

Demand

50 Units

Eliminate 10

Units

50% Leakage

Uncontrolled •Realign units with production

schedules

•Replace units + heat

exchangers

•Eliminate 10 units + boiler

capacity

•Install nozzles

•Inline motors/actuators

•25% reduction in usage

•2 month payback

•Replace lines

•Start detection program

•35% reduction in usage

•2 month payback •Relocate next to

high demand processes

Factory specific

energy toolsets

Map the system: essential lean tool used

to develop energy savings roadmap

$1M USD

5-10% savings

1% savings

10 yr payback

$2500 USD

70% Savings

Primary Focus:

Existing factories

10 ENERGY / CO2

Energy and CO2 Technical Methodology

Toolset: Energy Mapping (process)

Map the System: Essential lean tool used to develop energy savings roadmap

1. Use existing process flow chart

2. Study equipment that uses energy

3. Identify opportunities

4. Develop energy saving plan based on best practices

Primary Focus:

Existing factories

Factory specific

energy toolsets

Step 2 (25 min.)

150A (panel)

55kW motor

85°C

Step 1 300A (panel), 150kW motor

Cycle 1

70-75°C

(10 min.)

Cycle 2

65-70°C

(10 min.)

4 kg/cm2: door & mixing plate actuation

Boiler (shared, remote)

160°C

8kg/cm2

Air

Compressors (shared, remote)

8 kg/cm2

Step 4 (5 min.)

amperage TBD

0.75, 5.5, 3.7, 1.5,

3.7, 1.5kW motors

50°C

Step 3 (5 min.)

150A (panel)

30kW motor

70°C

Chiller 300A (panel)

25°C

Fuel

Source

Cooling

Tower

11 ENERGY / CO2

Energy and CO2 Technical Methodology

2nd

Canteen

Insole

1,000t Press

EVA Roll

Phylon

CMP

1st Canteen

Boiler

Main office

1980 – 2005 Energy & CO2 Program:

Just put solar panels on rooftop

2-3% energy replacement

60 year payback + emissions from manufacturing

100% Solar power for Shoetown FW

Factory:

77,000 kW solar array

$250,000,000 USD

12 ENERGY / CO2

Phylon

2nd

Canteen

Insole

1,000t Press

EVA Roll

CMP

1st Canteen Main office

Boiler

Energy and CO2 Program Methodology

Before After

111mm 98.4mm

Best Methodology (Nike) Energy & CO2 Program:

Complex methodologies and ideas

Eliminate old system (reduce energy loss by 10%)

Project 1: Insulate mold presses

Project 2: Reduce mold mass

Project 3: Install six-sided platen

Project 4: Auto loading mechanism

Project 5: Purchase small boilers

Project 6: Develop energy pull system

Savings of >60% energy & CO2

Extremely fast payback (<1 year). Reduced cycle time.

Saving energy through changing mold

- Changing size of mold : Don’t change X, Y for keeping durability but change Z (Thickness of mold)

Y

Z

Before After

X

111mm 98.4mm

1st Press (Check temperature of

the molds and pre-forms)

Result of 1st Press

(Research suitable forming time)

Result of 2nd Press (Compare temperature with

before)

Prepare molds of before and

after

2nd Press (Apply new forming

time)

- Testing step Measurement temperature

Check gauge and physical properties

14 ENERGY / CO2

Energy and CO2 Program Progression

North Star

100% Sustainable* Energy Use

FY16 FY20-50

10% Reduction 50% Reduction 66% Reduction

100% Green Energy

Energy Waste

(20%)

Fossil

Fuels

Fossil

Fuels Energy

Use

Green

Energy

Energy

Waste

(30%)

Fossil

Fuels

Energy

Use

Program Progression Towards the North Star

Green Energy

<FY08

Energy

Use

Before Energy and CO2 Program:

Energy is a new idea

FY09

Energy

Use

Minimum Energy and CO2 Program:

Elimination of waste using TPM –

Energy best practices

Energy and CO2 Program Progression:

Continuous improvement approach for

energy integrated throughout

organization

Energy and CO2 Continuous

Improvement

Physical

Transformation

Behavioral

Transformation

Learning

Culture

Traditional

Culture

Willing to

change

15 ENERGY / CO2

Energy and CO2 Program Rationale

Excellent Financial Potential

» Average <1 year payback

» Reduce exposure to oil

market prices

Improved operations

» Reduce equipment

downtime

» Improved process integrity

Intangible benefits

» Reduced environmental

impact

» Reduced carbon footprint

Version 3 16

COSTING/

PROFITABILITY

DELIVERY/

PRECISION

CRAFTSMANSHIP/

QUALITY

SUSTAINABLE

MANUFACTURING

MANUFACTURING INDEX

CONSISTENTLY EXCEEDS MINIMUM STANDARDS

MEETS and in some areas may exceed MINIMUM STANDARDS

INCONSISTENT

GLOBAL MANUFACTURING LEADER

DEFINITION: RATING

GOLD

SILVER

BRONZE

YELLOW

RED

Factory performance is rated according to the following definitions:

UNSUCCESSFUL

Energy and Carbon Management System

Rating

C o m p l i a n c e p o i n t s + C o n t i n u o u s I m p r o v e m e n t p o i n t s = S M S I

S c o r e

Energy and Carbon Performance

1 point

Up to 2 points

Up to 5 Energy & Carbon SMSI Points Awarded for: • Successful implementation of a minimum energy management system Improvement in energy use and carbon emissions performance Overall rating of energy and carbon management system

Earning Energy and Carbon SMSI Points

Up to 2 points

Minimum Energy

Program

19 ENERGY / CO2

Energy and Carbon Continuous Improvement

Measured by Energy and Carbon Assessment Tool

(Based on Lean Assessment Tool (LAT))

Kaizen Mindset

•Long Term Energy/CO2 Plan

•Annual Energy/CO2 Policy & Activity

•Energy/CO2 Performance Metrics

Built in Quality

•Energy/CO2 PDCA

Just in Time

•New Equipment Introduction

•Energy Pull Systems/Kanban

Operational Stability

•Total Productive Maintenance - Energy

Culture of Empowerment

•Energy Teamwork and Work Teams

•Energy Savings Skill development

Kaizen Mindset

• Energy/CO2 Performance Metrics

Operation Stability

• Total Productive Maintenance - Energy

Culture of Empowerment

• Energy Teamwork and Work Teams

Proliferation – Minimum energy management definition

» Provides a guide for factories to follow to develop an energy program

» Method for Nike to evaluate the progress of development of factory energy programs

Factory specific

energy toolsets Primary Focus:

Existing factories

20 ENERGY / CO2

Energy and Carbon Continuous Improvement

Kaizen Mindset

• Energy/CO2 Performance Metrics

Operation Stability

• Total Productive Maintenance - Energy

Culture of Empowerment

• Energy Teamwork and Work Teams

Proliferation – Minimum energy management definition

Consists of three activities

Provides a robust starting point for continuous improvement efforts

Report energy data into Nike’s One Tool

One Tool automatically calculates total energy use, carbon emissions, and energy

and CO2 KPIs. Used for minimum energy program, SM KPIs, and Nike carbon

footprint calculations. Establishes baseline for factory energy and carbon program.

Include key energy saving procedures into existing TPM program

Results in substantial energy savings and prevents energy waste

Establish a team to develop and deploy energy saving activities

Team is the foundation of the continuous improvement efforts

SM Factory Engagement Opportunities

Community Events

Consulting/Assessments

Training

Calibration/Coaching

Proliferation/Minimum

Standard

Support continuous

improvement efforts of

factories by:

Align energy and CO2 program efforts with sustainable

manufacturing index

199,606,884

8,784,071 4,943,530

110,124,463

91,825,587

8,157,358

71,538,845

229,393,639

128,899,112

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000

FW AP EQ

Manufacturing Energy and Carbon Proliferation Report

Nike Brand (FY12)

Not Yet Started

Basic Activity

Minimum Program

3% 3%

52%

81%

30%

9%

23 ENERGY / CO2

Cumulative savings of 2.5B kWhe 220,116 U.S. Homes Nicaragua for one year

24 ENERGY / CO2

New Factory Design Process

Best Practices:

Greenfield factories

Rainwater Harvesting

Solar Exterior Lights

Eco-Pond

25 ENERGY / CO2

Best Practices: Greenfield Factories

Design Charrette: A Design Charrette is an intensive, hands-on workshop that brings people from different disciplines and backgrounds together to explore design options for a particular area or site.

Nike Design Charrette Goal: Integrate best practices into all aspects of factory design

» Building Layout Optimization

» NOS Layout

» Green Architecture

Best Practices:

Greenfield factories

26 ENERGY / CO2

Best Practices: Greenfield Factories

Building layout

optimization NOS layout

Current State Factory Layout (before design charrette)

Analyze and optimize:

» how workers move on the site – to and from parking lots and canteens

» raw material and finished good movement through production buildings

Zones: 1. Worker

2. Operations

3. Transportation

Best Practices:

Greenfield factories

27 ENERGY / CO2

Best Practices: Greenfield Factories

Complete optimization of material and worker movement(after design charrette)

Optimization results:

» Improvement of material flows through relocation of buildings

» Improvement of worker movement through additional parking lot

Zones: 1. Worker

2. Operations

3. Transportation

28 ENERGY / CO2

Best Practices: Greenfield Factories

Integration of Green Design Strategies

Correct integration improves:

» Indoor air temperature

» Worker comfort

» Energy and Water savings

Incorrect integration can:

» Increase construction cost

» Reduced worker comfort

» Increase energy and water use

Green

Architecture

Best Practices:

Greenfield factories