We read a series of mini-case-studies (UVA-ENT-0100) put together by Andrea Larson of The Darden School at UVA, guest professor at BGI this quarter. As I read through the cases a few themes emerged for me: First, in product reformulation, supply chain collaboration is key. Several cases are about premium products standing out in commodity categories. Branding matters, and creating a technical metabolism (wherein materials are truly recycled to become new of what they were old, instead of being downcycled to a different, less recyclable product) is key to true sustainability. Another theme that emerged is that goal setting is everything – if you believe that it’s not possible to be both cost efficient and green then you won’t get there – you have to set it as a goal. Finally, when working to be green – don’t just think about the product, think about the whole product lifecycle.
Supply Chain collaboration is key – several of the cases talked about the need to work with all members of the supply chain to design a new product. Climatex Fabric was an example of a company needing to find mill partners and yarn twisters that would work with a new process. NatureWorks PLA plastics a product that is challenged by as-yet not having deep enough supply chain relationships and control to allow it to ensure GMO-free product. Without control of the supply chain, they have limited control of the product. In the Nike case, they are described as essentially a “complex global supply chain” management company. To protect their brand, they had to develop “a new dimension to supply chain management.” Not only are they setting standards for their suppliers to meet, they’re supporting NGOs to develop the organic cotton industry – investing to create supply chain partners for the future.
Standing out in a commodity category – interestingly from the case studies I see two slants on this – Method (household cleaners – available at Target) is an example of a company that used their sustainability plus sexy branding to stand out from a commodity category and be visible to the customer. They used brand identity to create a premium product, so they could command a premium price, so they could be environmental without making their environmentalism their primary selling point. This way they could reach out to mass market instead of just the environmental niche. Coastwide Labs, making cleaners for commercial janitorial settings, is an example of an environmental product that stands out from a commodity market, but it seems slightly reversed in that they designed to be an environmental product and their sales are driven by customer demand (one example: municipalities passing Precautionary Principle purchasing ordinances), thus allowing them to command a premium. So in one case, they’re using sexy branding to drive demand to pay for sustainability, in the latter case demand is driving sales and allowing them to command a premium for sustainability. I wonder what their relative volumes and margins are, I’d guess Method is higher volume/lower margin than Coastwide, compensating for age of the company. EcoWorx carpeting is described as breaking out in a commodity category, but their case is almost one of being forced to play catch up when a competitor (Interface) takes a successful lead with sustainable product, as well as being driven from behind by the kinds of industry voluntary agreements that form to avoid regulation.
Goal Setting – Shaw Industries, makers of EcoWorx, is an example of setting a goal to become infinitely recyclable and getting there because of the set objective, though it took them many years and almost a million dollars in research. The Coastwide labs example is a particularly good one – they lowered costs overall not by making the product itself (cleaning solutions) cheaper as they made it less toxic, but by making the packaging cheaper & the dispensing more efficient. Those two improvements were most likely available to them independent of making the product environmentally friendly. Business is all about priorities, and those priorities stayed low on the list until the goal of making environmentally friendly products raised the need for lowering costs which raised the priority of those cost reduction options. It was the setting of the goal that made the difference. NatureWorks PLA is another product that was created by first setting a goal to create it.
Nike has also set long term goals and developed metrics that lead them to explore all areas of their product supply chain and internal corporate operations.
The whole lifecycle – Method standing out in their commodity category with sexy packaging, Coastwide cutting packing costs as part of cutting overall costs to support their price point – both are examples of how the packaging is just as important as the product in forming the whole proposition. The textile examples of EcoWorx and Climatex are cases where the end-of-life for the product was a key part of the proposition, and the supply chain examples show how the pre-life of the product is a key part. When going sustainable, taking a total lifecycle approach is essential.