#EarthDay2021 — Scaling Sustainability as a Business Model

 

In my #EarthDay2020 blog last April 22nd, I cast a vision of a future where sustainability initiatives held a key seat at the table, central to the way global brands would do business. Now on #EarthDay2021 we’ve experienced over a year of  wholesale disruption of the global supply system. As Bill Gates laments in his recently published ‘How To Avoid A Climate Disaster’ (which by the way should be required reading for everyone), what we’ve experienced with the pandemic is but a taste of the disruption to come on a sustained basis unless net zero can be achieved by mid century. So while much discussion during the pandemic has highlighted the importance of data intelligence, from real time and end-to-end traceability, to improve supply systems resilience and agility, I feel #EarthDay2021 should be a call to action. We need to come together globally to transform business models — making the elimination of emissions a central value driver — shifting away from the current trajectory toward a catastrophic climate future.

 

In a recent Forbes article I shared a 2018 quote from former CEO of H&M, Karl-Johan Persson at the Fashion Summit that year:“Without the transformation of the fashion industry, the planet will not be able to cope. We definitely have to speed up the shift towards waste-free models, towards a circular economy, and we also need to start to think in new ways and start to collaborate with new partners – because no one can do this on their own.” The Persson’s statement recognised that change requires both the industry and the consumer ecosystem surrounding it to transform. 

 

We’ve been fortunate to be able to work in collaboration with many industry partners to contribute to this transformation, both as a World Economic Forum Global Innovator and with standards groups like GS1. Our focus being on the key building blocks to ease end-to-end data sharing across supply supply chains, item authentication for reCommerce, and standards and protocols to more efficiently gather and connect data from physical goods. We’ve also had the privilege of working with thought leaders and market leading brands who are pioneering new sustainable business models that point the way.  

 

Recognising that scaling new, sustainability centric business models is how we will deliver on ESG goals, I’d like to share some learnings I’ve gathered on our journey over the last year. My hope is that my learnings will provide indicators for the creation of scalable solutions moving forward.

 

Learning #1 – Transparency wins customers

 

Sustainable apparel brand Another Tomorrow has digitized its entire clothing line to provide the highest level of transparency. Gathering end-to-end data gives Another Tomorrow the tools to measure and manage its environmental impact, while also makint the information accessible to its customers. The honesty and trust Another Tomorrow’s transparency delivers consumers is proving a differentiator for the brand, and drawing a growing customer base as a result. Interestingly, a “self-selecting” consumer base focused on reducing its environmental footprint. In turn these consumers are proactive in embracing the upcycle, recycle and resell initiatives Another Tomorrow is layering into its business model. 

 

This strategy is not limited to apparel and luxury. Just look at what seafood brand MOWI has been able to achieve with transparency serving up provenance for consumers on each piece of fish it sells in the supermarket. Consumers are voting with their wallets, shifting their consumption to MOWI because the brand can tangibly demonstrate its sustainability credentials literally at an item level — at the moment of truth at the point of purchase. This in turn is drawing more retailer demand, and raising the bar for the industry as a whole.

 

It’s a fact that scaling circularity of the world’s supply chains is a tough nut to crack if the items we make can’t be traced through the value chain, and if the information about where each item comes from and what each item is made of isn’t easily accessible. Transparency is important to an increasing volume of consumers, and it is a by-product of the traceability infrastructures that are fundamental to scaling circularity. According to Label Insight, 78% of consumers say it is important for a brand to be transparent, while a 2021 Cowen Equity Research study found 33%+ of 18-34-year-olds perceive a brand’s social impact and sustainability as “very important” to their purchase decisions, increasing to 74%+ when including “somewhat important.”  Winning customers from brands who can’t provide transparency seems a sensible way to drive a return on investment.

 

Learning #2 – Designed for sustainability

 

Turning around the conventional one-way model of make-sell-consume-dispose to a circular one is not only a business model and logistics challenge, but a design challenge too. How does the design of a product itself positively support a circular model?  Unilever’s CIF detergent is a good example of a habitual purchase. So instead of having the consumer purchase a new bottle each time, an alternative approach is to have the consumer ask the dispensing bottle to order its own refill by pointing their phone at it when the need arises. It’s a simple, yet powerful, illustration of how product design can pair with business model design to create a whole new opportunity, with new value for brand and consumer alike.

 

Hong Kong-based The R Collective’s core concept as a brand is to provide products exclusively made from upcycled and ‘waste’ textiles. Early last year, the brand partnered with Levi’s to launch an apparel collection created from old inventory and leftover samples. Consumers can directly access this provenance through the QR code and digital identity carried by each Denim Reimagined item.

 

The Sustainable Apparel Commission estimates that product designers can determine 80% or more of a product’s environmental impact. The creative process is as fundamental to the great rethink as any other intervention.

 

Learning #3 – Recycling & reCommerce is all about customer relationships

 

Two keywords that have jumped to the forefront in the past 12 months are eCommerce and reCommerce. As we know the pandemic has driven people’s shopping experiences online. At the same time growth in reCommerce is unprecedented, driven in part by economic hardship and by millennial and Gen-Z consumers actively engaging in more sustainable consumption behaviours. As the advertising mad men of the ‘60s and ‘70s knew all too well, ‘new’ was the critical keyword for drawing an audience, and the very definition of a product brand has centered around the production of ‘new’ products. The rapid growth of reCommerce in apparel clearly challenges that notion.  The smartest brands are recognising the differentiation between their brand relationship with consumers, and the manifestation of that relationship in the sale of a ‘new’ product.  The ‘serviceisation’ of the brand-consumer relationship is a rich area for new business models that offers the opportunity for brands to extend and monetise their audience relationships, while at the same time potentially reduce the volume of ‘new’ things they make.  What’s wrong with selling the same thing three times vs making three new things?  Or with renting products to consumers rather than selling each one a new one?

 

Levis, Patagonia, Lululemon and other cutting edge brands are leaning into the reCommerce market in apparel, recognising that they can profit from both recovering materials and from participating in the resale of products.  It turns out that reCommerce offers a cost effective way to acquire new customer relationships. The biggest friction and value driver in scaling this model is authentication. Consumers clearly want to know they are buying a genuine branded product, and the ability to provide that verification of authenticity is really only something the brand can do. We’ve been working in collaboration with the World Economic Forum and a consortium of brands and secondary marketplaces to validate a scalable methodology for digital identity to help solve this authentication problem. The goal: give brands the ability to participate in secondary market transactions through third party marketplaces, and allow marketplaces and consumers to benefit with the confidence and value of an authenticated item.  Watch this space for more news on this soon.  It’s exciting because it points the way for brands to extend their monetisation across the lifecycle of a product item post its original purchase.

 

The ‘serviceisation’ of products is made possible by digital traceability. As recycling requirements become more mandatory, such as with bottle deposit-return, brands need to look for ways to shift this from being a cost to becoming a benefit. Just as Uber has servicised transportation, traceability on everyday items and the containers that carry the contents we want to consume, provides a powerful opportunity to reduce packaging waste and keep items or items containers in circulation longer.

 

The Most Important Journey

We founded EVRYTHNG with the belief that we could help create a smarter, more sustainable, resilient, efficient and accountable world with real time, trusted information about every physical product made, sold & used, at every point in its lifecycle. #EarthDay2021 reminds us how important accomplishing this is. The challenge and the opportunity is to solve how to make sustainability itself sustainable and indeed profitable as a business model. Digitisation of the world’s products, and the data that can be generated from each item as it moves through the global supply chain, is a powerful enabler and provides the ‘Lego-kit’ for business model innovation.  It’s a privilege to be a part of the process. Please reach out to me via LinkedIn.

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