Nike case study harvard business review

Nike case study harvard business review

The University of Utah on Instagram: “Since Arts Bash can A version of this article appeared in the January–February issue of Harvard Business Review. Read more on Sustainable business practices or related topic Financial analysis TW Among these are American Express, The Cheesecake Factory, McKinsey, Nike, Chevron, Mars, and Uber. The Cheesecake Factory created its office in response to sexual harassment complaints in

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By now most companies have committed to sustainability efforts—and yet many CFOs still see those efforts as a cost rather than a source of value. That makes it hard to unlock the internal financing needed to scale them up.

The authors—the director and a senior scholar at the NYU Stern Center for Sustainable Business—have developed the Return on Sustainability Investment ROSI analytic tool, which companies can use to measure the financial returns on their sustainability activities.

Implementing ROSI is a five-step process. Companies should 1 identify their current sustainability strategies, 2 identify related changes in operational or management practices, 3 determine the resulting benefits, 4 quantify the benefits, and 5 calculate the monetary value. The savings and growth thus revealed can reach hundreds of millions of dollars; in large companies, it can be billions.

Particularly now, as companies scrutinize budgets threatened by the Covid pandemic, nike case study harvard business review, Nike case study harvard business review analysis can help CFOs improve organizational finances through sustainability investments that create value for investors, employees, customers, and the world at large.

Companies can use an analytic approach called the Return on Sustainability Investment ROSI method to precisely measure the value created by sustainability strategies through those nine factors. ROSI analyses in the automotive, pharmaceutical, and agricultural industries have revealed hundreds of millions of dollars of sustainability-related savings. By now most companies have committed to improving their environmental, social, and governance performance. Such sustainability efforts have increasingly become table stakes.

And yet many CFOs still see them as a cost rather than a source of value. Most recent studies show a correlation between sustainability and financial performance.

Our own research finds that for many companies, nonfinancial metrics such as carbon emissions can reveal hundreds of millions of dollars in sustainability-related savings and growth. In large companies it can be billions. First, they are thrown off by the language and metrics used by their sustainability colleagues. CFOs talk about EBIT and ROI; sustainability people focus on measures such as reductions in wastewater or emissions.

The separate reporting of sustainability and financial metrics both internally and externally exacerbates the problem. There is little clear connection between the two worlds under current management, reporting, and accounting structures.

Second, few companies adequately track the returns on their existing sustainability investments or carefully assess those on future ones. But as the links between sustainability and economic performance become clearer, pressure will mount from investors, boards, and executive leadership to track and report the payoffs. Our work at the NYU Stern Center for Sustainable Business focuses on making those links explicit and providing the tools companies need to monitor and improve the returns on their sustainability investments.

To that end we have identified nine drivers of corporate financial performance that can be bolstered by sustainability strategies: innovation, operational efficiency, sales and marketing, customer loyalty, risk management, employee relations, supplier relations, media coverage, and stakeholder engagement.

We call the drivers mediating factors. Good management of any type can improve financial performance through the mediating factors; however, good management of sustainability risks and opportunities is one of the most powerful ways nike case study harvard business review do so.

Sustainability strategies can contribute to nine mediating factors that drive financial results. A focus on sustainability can spark innovation in design, process, products, and services. In Nike used sustainable design principles to develop Flyknit, a recycled polymer woven into the shoe upper, resulting in nike case study harvard business review lighter, higher-performance athletic shoe. A sustainability strategy can improve operational efficiency, and thus cut costs, by reducing waste and the use of natural resources.

Sustainable products and services can help a brand stand out from the crowd and increase market share and sales. People are more devoted to purpose-led brands that make a positive contribution to society. The CGS U. Consumer Sustainability Survey found that purchasing loyalty is determined first by brand quality, second by brand sustainability and ethical business practices, nike case study harvard business review, and last by brand name and mission.

It also found that brand sustainability is particularly important to Gen Z consumers. Investors and corporate leaders alike are increasingly focused on sustainability-related risks in markets, regulation, reputation, and operations.

Ignoring those risks can have significant negative financial impacts. The Malaysian palm oil producer and refiner IOI illegally cleared forests and peatland and was suspended for several months from the standards-setting Roundtable on Sustainable Palm Oil. Workers identify more strongly with a company if they believe it is socially and environmentally responsible—increasing commitment and improving morale.

Relationships with suppliers are often solely transactional, but a sustainability focus can foster a broader and more fruitful partnership. In studying the automotive sector, for example, we found 16 sustainability strategies and related changes in practices such as reducing carbon emissions that, by boosting one or more of the mediating factors, contribute to astonishing returns by generating new revenue or reducing costs or both.

It can be deployed to look retroactively at the value created by sustainability strategies, to track sustainability-related financial performance in real time, and to assess the potential ROI of future sustainability initiatives at both the firm and the division level.

Nonfinancial metrics such as carbon emissions can reveal hundreds of millions of dollars in sustainability-related savings and growth. In our work with companies, we start by conducting one-on-one interviews with executives, either in person or—especially during the pandemic—online. We use a standard set of questions to learn what benefits the company is seeing from its sustainability activities and, if those activities are not generating measurable financial returns, how they could do so.

The overall ROSI process should be led by a senior executive; the chief sustainability officer would be a good choice, for obvious reasons and also because he or she generally has relationships across the organization. Ideally the CSO is joined by a leader from finance. Each C-suite office should choose a lead to assist the CSO in the process. Surprisingly, in our experience many firms have not clearly articulated their material sustainability strategies: those that address sustainability issues on which the company has a significant impact or that have a significant impact on it, nike case study harvard business review.

If your firm has a materiality matrix—a map of sustainability issues laid out according to their importance to the business and its stakeholders—you will find it helpful. With a matrix for reference, you can more easily identify existing activities that address relevant but not immediately obvious sustainability issues. The Sustainability Accounting Standards Board and the Global Reporting Initiative, which have identified material sustainability metrics by industry, can help you get started.

As mentioned earlier, applying ROSI in the automotive sector case, we identified 16 strategies that address material sustainability issues; they include waste management, a focus on innovative products such as electric vehiclesand water conservation. Broad strategies like these tend to encompass many activities that have not been formally identified as components of them but should be included in the ROSI accounting that will follow, nike case study harvard business review. In the auto industry many activities contribute to the waste management strategy, such as hazardous materials disposal, wastewater management, and product end-of-life management.

In many companies the practices associated with a given strategy were implemented organically over time—and nobody has a full view of what has changed. If your company has emissions-reduction targets, for example, what nike case study harvard business review practices has management changed in order to meet them?

Is it shifting the energy mix to include more renewables? Installing energy conservation technologies? Changing manufacturing processes? You may not be able to immediately identify which changed practices will generate financial returns. In that case, identify as many changed practices as you can for each strategy without regard to their financial impact. In our study of the automotive sector, we identified changed practices.

One, under the waste nike case study harvard business review strategy, reduces volatile organic compound VOC emissions nike case study harvard business review recycling paint and solvents. In a study of sustainable ranching practices, we identified dozens of changes, including increasing the number of cattle per hectare, rotating pastures, and stopping deforestation.

Your cross-divisional team will be essential to the tallying. Small groups in each division should review actions taken in their areas to implement sustainability strategies. For example, better waste, energy, and water management generally improves operational efficiency. Some of the benefits you find may not be obvious.

For instance, mining companies are notoriously bad neighbors—often polluting the environment, exploiting local labor, and placing demands on water supplies and other community infrastructure.

But by creating goodwill, a robust community-engagement effort which falls under the stakeholder relations mediating factor can speed regulatory approval and reduce the time needed to move projects forward. Having identified your nonmonetary benefits, next determine how to assess their financial worth.

You can often do so by comparing a new practice with an established benchmark. To measure the value of recycling solvents in the auto industry, a team collected data on kilograms of solvent reclaimed and recycled, the unit cost nike case study harvard business review virgin solvent, the unit cost of reclaiming and recycling solvents, and the cost of water-based substitute solvents—information that was readily nike case study harvard business review but had never previously been collected for analysis.

To measure the value of sustainable ranching practices, another team gathered data on factors including the reduced acreage needed, the change in the cost of renting land, the amount of beef sold before and after the introduction of sustainable practices, nike case study harvard business review, and the difference in price between conventional and sustainable beef.

By totaling the financial value created or lost by each of the practices in a strategy, you can identify which strategies generate the most value and where you might want to focus resources. We collected data at one auto company on the impact of reducing VOC emissions, including by improving filtration systems and implementing the solvent reuse and substitution described above. And to gauge the value of using more-sustainable water-based solvents, we compared the unit cost of the substitutes to the unit cost of traditional virgin solvents and multiplied the difference by the quantity of substitutes used.

Reducing VOC emissions also creates intangible benefits that have a financial impact. Consider regulations addressing pollution and employee safety, nike case study harvard business review, which can increase costs. The potential value of abiding by them can be estimated by tallying the annual average number of incidents over five years that resulted in VOC-related fines and multiplying that by the average size of fines.

As the links between sustainability and economic performance become clearer, pressure will mount from investors, boards, and executive leaders to track and report the payoffs. Finally, we estimated the total return on investment in these new VOC practices. And the company retained a larger-than-usual share of revenue in markets where it had lost exclusivity. The CSO asked us to work with her and the CFO on a ROSI analysis of making the shift sooner.

We began by holding a two-day workshop with a cross-functional team to determine where to focus and to develop the relationships needed to flesh out the analysis.

Through this we identified potential benefits such as improved employee relations and a lower cost of debt and equity and calculated their value using a mix of company data and assumptions built on the academic and industry literature. The CFO found the analysis compelling enough to engage his team in tightening up the starting assumptions and the resulting performance projections. The expected reduction in the cost of debt and equity soon emerged as a major benefit, amounting to 3 million Canadian dollars annually.

There are few limits to how your organization can use ROSI to better understand the returns on its sustainability investments and drive smarter decision-making.

You have 1 free article s left this month. You are reading your last free article for this month. Subscribe for unlimited access. Create an account to read 2 more. Sustainable business practices. How to Talk to Your CFO About Sustainability, nike case study harvard business review. Use this tool for measuring the financial return on ESG activities. by Tensie Whelan and Elyse Douglas.

The Solution Companies can use an analytic approach called the Return on Sustainability Investment ROSI method to precisely measure the value created by sustainability strategies through those nine factors.

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Starbucks Coffee Five Forces Analysis (Porter’s Model) & Recommendations - Panmore Institute

The University of Utah on Instagram: “Since Arts Bash can Feb 21,  · A Starbucks café at Beijing Capital International Airport. A Porter’s Five Forces analysis of Starbucks Corporation reveals that competition, customers, and substitutes are major strategic concerns among the external factors that impact the coffee and coffeehouse chain industry environment A version of this article appeared in the January–February issue of Harvard Business Review. Read more on Sustainable business practices or related topic Financial analysis TW