Nike has relinquished its spot on the board of directors of the U.S. Chamber of Commerce to protest the chamber’s opposition to federal climate-change regulations. The shoemaker is lobbying hard for a cap-and-trade scheme to curb greenhouse gas emissions in the U.S.
Why is Nike joining the parade of Fortune 500 companies backing climate legislation? More than most companies, Nike seems to be acting from true conviction on this issue.
The company put it this way in a recent report: “We believe climate change is a risk to our business and that creative approaches to tackling our footprint will enable our growth.”
This is a standard explanation from corporations lobbying for cap and trade — climate change hurts everybody, including our business. It may be Nike’s true motivation, but it’s also a convenient line to walk. You have to argue the legislation will help the company or you risk a shareholder rebellion. You can’t admit a narrow benefit to your company or you lose your claim to “corporate responsibility.”
While charity compels us to give Nike the benefit of the doubt — that they actually do believe greenhouse gases threaten the planet and that the company has a moral obligation to curb their emissions — it’s still worthwhile to look at the narrower ways in which Nike benefits from its green lobbying, not in order to delegitimize the company’s arguments, but just to cast some suspicion on them.
First, Nike is as much a marketer as a shoemaker. Image isn’t everything for the apparel, equipment and sneaker company, but it may be the biggest thing. So, the Oregon-based company helps its image with a sizable portion of the younger demographic by taking an aggressively green stance.
More importantly, Nike won’t bear most of the costs of a cap-and-trade scheme in the U.S. because Nike doesn’t make stuff in the U.S. Cap and trade adds to manufacturing costs by attaching a price to emissions, which makes energy more expensive. But “a vast majority” of Nike goods are made overseas, a company spokesman told me in an e-mail.
While Nike outsources its manufacturing to factories in Vietnam and other poor countries where greenhouse gases aren’t regulated, some of its competition makes their shoes here in the U.S., where Nike is lobbying to increase costs.
Among serious runners, for instance, Nike lags behind New Balance. New Balance makes running shoes in New England. Cap and trade would drive up the cost of making these shoes, likely cutting into New Balance’s profits and pushing up prices. This would give a competitive advantage to Nike by magnifying its cost advantage over New Balance.
It’s telling to look at Nike’s emissions numbers. The company touts its 80 percent reduction in greenhouse gas emissions from 1998 to 2005, but the fine print tells an interesting story.
Almost all that reduction came from its replacing the air in its Nike Air shoes with a nitrogen gas (it had been sulfur hexafluoride, an extremely potent greenhouse gas). Nike also got a slight reduction by increasing efficiency in the facilities the company owns.
But Nike contracts out its Third World manufacturing. In its manufacturing and logistics, Nike emissions jumped 62 percent in that period. These are largely emissions that a U.S. cap-and-trade measure wouldn’t cover.
Nike (given its arguments that greenhouse emissions threaten the planet) deserves credit for measuring and reporting its offshore manufacturing emissions, and the company pledges to reduce them.
I asked whether Nike supports cap-and-trade regulations in the countries where its shoes are made, and a spokesman wrote, “We are focused on advocating for an international agreement at Copenhagen which will set a level playing field for all countries around the world.”
If Nike succeeds in creating the same mandatory carbon constraints in Vietnam that it’s lobbying to impose on U.S. manufacturers, that would erase the suspicion its climate lobbying is partly an attempt to kneecap its competitors that actually make shoes in the U.S.
In any event, Nike appears to take seriously the need the reduce greenhouse gas emissions. Time will tell if the company’s climate effort is an instance of true corporate responsibility or another case of regulatory robbery.
Timothy P. Carney is The Washington Examiner’s lobbying editor.