Nike’s Circular Innovation Challenge - an approach to the circular economy

How do giant companies, that are not born sustainable, tackle the issues of resource

depletion, waste management and product innovation?

Current and future generations, acutely aware of market volatility and of just how finite resources really are, demand a transition from the classic “take-make-dispose” value chain to a more “circular economy”. Indeed, we have developed over the years an over-consumer “throwaway” culture where products are not made to last, are discarded by customers when they no longer serve their original purpose and are transformed into waste that just keeps on accumulating; yet we begin to notice just how environmentally impactful this model is. Each year, more than 65 billion tons of raw material are extracted from the Earth and this number is only expected to grow. Yet, many resources are forecasted to run out within a relatively short period, while only few materials are recycled at scale.

Overcoming the limits of the linear economy

Many companies have also understood that the linear model is reaching its potential limit. With higher resource prices (commodity prices have increased by nearly 150% from 2002 to 2010), unprecedented price volatility and increased supply chain disruptions, the business’ exposure to risks has become much more important in the 21st century. Moreover, opportunities for increased efficiency in manufacturing processes still exist but are very rare and not sufficient for companies to create real competitive advantage.
Firms need to rethink, reinvent and reorganize the way they create value in order to keep products, materials and nutrients at their highest possible value for the longest possible time. Such business models will decouple economy activity from the consumption of finite resources, take waste out of the equation and help the earth regenerate its natural systems.
The circular economy is not just a model that helps companies and consumers to get better at recycling which eventually turns products into unuseful waste. In theory, waste will not exist: superior designed products are created for durability, disassembly and reuse, ease of maintenance and repair… And can therefore last and be transformed. Waste is no longer seen as a burden but a resource that can be reinjected into the system.

Why should businesses care? An opportunity worth millions

Eliminating waste from supply chains is not just an environmental concern but also acts as a source of efficiency and innovation for firms. As companies reuse products and materials that are already in the loop, they will save on production as well as waste management costs, be less resource dependent and mitigate the risks in their supply chains.
A report from the World Economic Forum (2015) shows that opportunities for the FCMG at the global level could elevate up to $700 billion per year in materials savings, representing 1.1% of 2010 global GDP, net of all material used in reverse cycles. Those materials savings would represent about 20% of the materials input costs incurred by the consumer goods industry.

Moreover, replacing one-lifetime products with “circular by design” products promised to spur innovation across industries is a strong motivation for entrepreneurs to join this vibrant field. It also seems that a more circular economy has the potential to revive labor markets by creating reverse sectors whose activities focus on reuse, refurbishing, remanufacturing, recycling, composting and advances reserve treatment technologies (e.g. cultivating waste-eating microbes, filtering proteins out of wastewater...). The exact employment opportunity is hard to estimate and will depend on the labor market but according to the report, as of today, the opportunity for job creation in remanufacturing in Europe is already superior to one million jobs. 
The opportunity for businesses is therefore immense and can only be seized through creativity.

The case of Nike
Nike is clear example of a firm in the “take make dispose” age that might not be a “green born” firm; but yet that aims to transition towards a closed loop vision with its bold target for FY2020: zero waste from contract footwear manufacturing going to landfill or incineration without energy recovery.
Nike is trying to create long lasting shoes that are made from materials that can be revived. The company has recycled sneakers since 1990 and has recovered more than 30 million pairs.
They have launched in 2018 the Nike Circular Innovation Challenge: an open and innovative way that focuses on creating new ways to design products and on developing new technologies to recover material. These therefore split into two different challenges with the idea that no product ever goes to waste.
  •   Design with Grind Challenge: Nike is encouraging creative thinkers to prototype products using Nike Grind, a range of premium recycled materials recycled from used footwear and manufacturing scrap. Nike Grind are already used into running tracks, gym floors and other surfaces...
  •   Material Recovery Challenge: Nike is also opening out to designers to help them recover more pure material from recycled products. This is one of the biggest challenges of the circular economy: getting as much materials (fibers, rubber, foam for shoes…) as possible from old products that can be re-used in new products. 

All participants could enter the contest and then 30 shortlisted concepts were be invited from Ideation to Refinement Phase to be built and tested with Nike. Then a winner was chosen and received $30,000, and the four other best concepts received $5,000 and further opportunities for partnerships.
Top idea winner for the Design challenge was YOGO: a new concept to use Nike’s recycled materials with YOGO’s products designed for yoga practitioners who are environmentally conscious, need every day practical innovations and represent the perfect customers that would support a shift to sustainable materials.
The material recovery winner, SuMaRec (plastic recycling consultants), had experience in separating plastic materials and in removing contamination from plastic. They developed new automated technologies such as a coarse material shredding and air classification process, and an elastomer (rubber) separation. These processes allowed to improve the purity of the Nike Grind outputs.

New innovation systems

Nike proves that the new economy is synonym with new innovation systems that bring together competencies from different sources to achieve economic and social development. Companies and startups should tackle together the development of innovative solutions for circularity and no advances will be made by acting solo.
An interesting study shows that the circular economy will be achieved through a Triple Helix concept of innovation between industries, governments and universities, with a strong coordination between the spheres and where each will have a special role in contribution to new innovations. In order to achieve systemic innovation, the model shows that a stronger consensus space is required between the three: as seen in the diagram, currently institutions focus too much on their own role. Discussions and sharing ideas, communication channels, experiences and findings should be promoted in order to better accumulate knowledge.
The need for action is stronger than ever, and as with many other difficult issues, inclusion and collaboration from different perspectives will produce a better outcome when trying to tackle the difficult transition that is the circular economy. Industries, universities and governments have a unique opportunity to work together in order to adopt a more resource efficient approach to value creation and the time to act is now.

Written by Marie Giesler