92E7CB07-F15B-4C5B-895C-18B33B55C731@1x Back ARTICLE Sustainability is the new innovation The power of partnerships 29 SEP 2021 — 5 MIN READ Share AUTHORS Fran Soares Arutyun Arutyunyan Sustainability – once deemed a nice company extra to signal a business’ green sensibilities – is now a necessity for commercial success. If you’re not sustainable, you’re not competitive. This isn’t breaking news, as more companies reflect on the question, why is sustainability important? The pressure is coming at businesses from all angles: Consumers: almost 1 in 3 consumers have stopped purchasing from particular brands due to environmental or ethical concerns. Government: governments are taking action to combat climate change. Regulation and tax incentives are being introduced to encourage the manufacturing and purchasing of environmentally friendly products. Economic growth: sustainable practices boost profits; engaged corporate ESG correlates with profitability, enhanced share price performance, and lower operating costs. Faced with the pressure of these sustainability drivers, why are so many businesses lagging behind? They’re neglecting the power of partnerships. Large corporates are missing out on potential accelerants to innovation by not partnering with fast-moving sustainability startups. So why should larger corporations partner with startups? Startups allow large companies to maintain BAU but also engage with an agile team that can move faster than the parent corporation Spinouts / startups allow for multi-party cooperation. This leverages innovation and resources from multiple companies resulting in shared risk The lead time and costs of developing game changing technology is dramatically reduced. Corporations can gain instant access to cutting-edge products without the need to develop from scratch How do we know this? Through example. In this article we’ll explore some key case studies which exemplify what companies should and shouldn’t do to drive their sustainability practice, including the importance and potential of partnership. What not to do – H&M First let’s tell the story of retail giant H&M – the case study of what not to do. H&M made the mistake of using sustainability as marketing strategy alone, positioning themselves as an eco-conscious brand with sustainable practices. They launched a Conscious Collection, where at least 50% of each product was made from sustainable materials such as organic cotton or recycled polyester. They also established in-store recycling bins, encouraging customers to recycle old clothes. It’s a sound growth strategy in theory. Why then did it backfire, with H&M becoming the pin-up for corporate greenwashing? H&M neglected that the sustainable consumer is not like the standard consumer. Sustainable consumers are well-informed and investigate the truth in brands’ eco claims. Consumers discovered that only 1% of the clothes collected from H&M’s recycling bins were made into new clothes. The brand’s reputation suffered even more when it emerged that H&M used child labour in Myanmar. H&M is a key example of the lack of tolerance for half-baked eco policies in today’s market. The power of partnerships – Patagonia Large organisations have a long way to go on embedding sustainability into their business strategy. Some companies are doing a better job than others. Enter outdoor-clothing company Patagonia. Patagonia identified unique business opportunities through leveraging the power of innovative start-ups. In 2013, Patagonia launched venture capital fund $20 Million & Change (now Tin Shed Ventures), offering early-stage investment to environmentally and socially responsible companies. In 2015, Tin Shed Ventures invested in Beyond Surface Technologies (BST). BST work to reduce the impact of textile chemicals on the environment by developing sturdy textiles made with natural raw materials. Part of what makes BST unique is that their effort includes the reduction of PFCs (man-made perfluorinated chemicals), that are commonly used for water-resistant clothing, and are a potent greenhouse gas. In 2017, Patagonia partnered with Trove (a logistics startup) to power their ‘Worn Wear’ website. Worn Wear buys pieces customers no longer want, repairing and cleaning them, before reselling. It only took six months for Patagonia to generate $1 million in sales from this initiative. It has remained profitable since launch. There is clearly much to learn from Patagonia. Its focus on social responsibility has allowed the company to become a market leader in product innovation, increased the brand’s awareness and sales, and created new markets and opportunities to fuel its success. Game changing product innovation – Pulpex Pulpex is a startup spun out by Diageo in 2019, that has since brought together a consortium of companies including Unilever and PepsiCo. Pulpex makes bottles using pulp that are fully recyclable (unlike some of the ‘reusable’ coffee cups that we see on the high-street). These are already being used for alcoholic beverages and laundry detergent, are will soon be adapted for carbonated beverages and car oil. Pulpex’s success lies not only in developing a disruptive product that changes the world, but also in bringing together such big players in the FMCG industry. This highlights the opportunities that present themselves when such partnerships are struck. Likewise, it is evident that no one wants to miss out on being the first-to-market with truly sustainable products. Lessons learnt The above case studies may seem unrelated, but the key reasons for the failure of H&M’s ‘green’ initiative are exactly why Patagonia engaged startups in the first place. Consumers are now better educated than ever before and will put in the leg work to determine whether a company is truly sustainable or not. So now is not the time to run half-hearted initiatives. With the number of truly forward-thinking sustainability startups around, the possibilities for large corporates to drive actual change through their organisations are endless. Elixirr has experience in helping organisations develop innovation partnership capabilities, so please get in touch if you’d like to find out more. We would love to work together. 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