Describe who the relevant market and non-market stakeholders are in this situation

Section:

Environment

Cleanups: GREEN BIZ

After 14 years, it figures out how to get greenhouse gas out of its sneakers

To Tom Hartge, the fax that inched out of the machine in Nike’s Inc.’s Beaverton (Ore.) headquarters back in 1992 came like a kick to the gut. As the product manager for the company’s running-shoe division, Hartge had devoted much of his career to perfecting Nike Air, a lightweight plastic air pocket attached to the heel that had kept the company’s sneakers at the front of the pack for more than a decade. Now a German environmental magazine was attacking companies that used a super-potent greenhouse gas called sulfur hexafluoride, or SF6. Makers of refrigerators and air conditioners bore the brunt, but the magazine pointed out that Nike’s air pockets contained not just air but SF6, too. The accusation stung all the more, coming right as other critics had begun to slam Nike for using sweatshop labor in its contract factories in Asia and elsewhere.

It took Nike nearly 14 years to overcome the SF6 problem. This summer, after quietly devoting tens of millions of dollars and countless frustrating days to research that went nowhere, Nike finally perfected a way to create SF6-free air pockets. The technology now cushions fully half the 200 million shoes it sells each year. Although Hartge and researchers worked closely over the years with several green groups, they chose not to brag about their environmental victory to consumers or the public. Instead, Nike sees the effort as part of a broader strategy to embrace social responsibility without compromising profits or product performance.

The new technology that Nike researchers developed, which uses nitrogen instead of SF6, has even paid off commercially. How? It allowed Nike to create the Air Max 360, the first sneaker to cushion the entire sole with a bed of air. Launched last January, the $160 shoe has become a hit, and Nike recently rolled out a basketball version. “We wanted to do the right thing for the environment and for the athlete, but we wondered if the two could ever be harmonious,” says Hartge, 50, now Nike’s creative director for advanced research.

Hartge and his colleagues might have been forgiven for dismissing the original complaint as a joke: How could a mere sneaker contribute to global warming? But it didn’t take them long to recognize the reality of the accusation. Because SF6 breaks up slowly in the atmosphere, it has an outsize impact when the shoes are finally destroyed and the gas is released from millions of little air pockets. At the peak of SF6 production in 1997, Nike Air footwear carried a greenhouse effect equivalent to an astonishing 7 million metric tons of carbon dioxide — about as much as the tailpipes of 1 million cars.

Still, there was no way Nike could give up on air cushioning, an innovation it had first introduced as far back as 1978. Those precious few ounces of gas, it turned out, were much better than foam or other heel fillers at absorbing the impact of a foot slamming against the ground. Air — or gas, in this case — also keeps its spring longer. What’s more, it’s lighter than a solid material, crucial to runners worried about heavy shoes slowing them down.

MISSED TARGETSUnfortunately for Nike’s team of about 60 designers and scientists, SF6 was the ideal gas for all this. Its large, tightly bound molecules rarely leaked after being injected into the plastic pocket attached to a heel. Early on, the group settled on nitrogen as a substitute. But its smaller molecules broke apart more easily than those of SF6 and leaked.

Overcoming the problem bedeviled the team for years as one possible remedy after another led to dead ends. Hartge, who joined Nike in 1981 because of his passion for running, brought a marathoner’s tenacity to the task.

The steady setbacks bred inevitable tensions. As the team hunkered down in the Mia Hamm building on Nike’s bucolic corporate campus, some worried about getting boxed into a solution that would compromise shoe performance. Others insisted that Nike had to soldier on, both to help the environment and to avoid another sweatshop-type image meltdown.

Meanwhile, Nike’s 120-person social responsibility unit had the awkward task of explaining one missed deadline after another to the environmental groups the company had sought out for advice. Nike missed its first target in 2000, then the second three years later. Still, Nike and the groups maintained good relations, in part because Nike was one of the few U.S. companies to back new European global-warming regulations. “Most of the time we were [siding with the greens] and against the trade and industry groups,” says Hannah Jones, Nike’s vice-president for social responsibility.

The solution to SF6 finally emerged not in a single breakthrough but in smaller, unconnected victories. After much experimentation, the team was able to hold in nitrogen by sandwiching together 65 wafer-thin layers of plastic film (illustration). Even that wasn’t enough, since the old blow-molding manufacturing system wouldn’t work with so many layers. Instead, the group refined a technique called thermoforming, which melts the plastic into the right shape. “We knew this would be difficult, but we underestimated the challenge,” Hartge recalls.

The eureka moment came when the research team realized that thermoforming produced an even tighter seal than blow-molding — one that could hold up across a shoe’s entire sole. The result: the Air Max 360, which offers runners more comfort with less weight. “Thermoforming allows us to shape and cradle the air sole to the contour of the foot,” Hartge says. “We’re ecstatic about the sales” so far.

Nike’s 14-year odyssey came to an end this past June, when Hartge and Jones proudly informed the environmental watchdog groups that every Nike product line was entirely free of SF6. “They met their goal,” agrees Matt Banks, senior program officer for the World Wildlife Fund, which monitored Nike’s efforts under a “climate savers” agreement. “This is significant, because [Nike] saw huge cost savings from doing well for the environment.”

There are no regulations forcing companies to reduce greenhouse gas, points out Joseph J. Romm, a former Energy Dept. climatologist and the author of Cool Companies, a book on major corporations’ environmental best practices. “Nike nonetheless decided to take voluntary measures,” he says. Just as sweet: Nike now gets raves for the Air Max 360 from runners and greens alike.

A GREENER SOLENike sees its low-profile victory as a way to avoid the poisonous publicity that accompanied its sweatshop episode

AFTER Layered plastic traps nitrogen’s smaller molecules, which break up easily but aren’t harmful

BEFORE SF6’s large molecules rarely leaked but hurt the atmosphere when shoes were discarded

Copyright The McGraw-Hill Companies, Copyright 2006

By Stanley Holmes

BusinessWeek. 9/25/2006, Issue 4002, p106-108. 2p. 4 Color Photographs.