Putting Sustainability Ahead of Fast Growth

These two key strategies will help businesses shift the way they approach growth, focus on sustainable development and enable them to move in the right direction.

Historically, companies across all industries have aspired to stay lean and keep profits high. Up until millennials and Gen Zs became the leading consumer force, very few wanted inventory sitting in their warehouse. For example, outdoor retailer Patagonia was early in embracing the great inefficiency in its behaviors, largely as a reflection of founder Yvon Chouinard’s personal ethos — but this is the case of a trailblazer. Back in 1973, degrowth was not the consumer-driven priority that it is today.

Whether a company is reticent to degrowth or not, market success in the current climate will depend on each company’s ability to align itself with how consumers think and live. According to a recent study on sustainability and consumer behavior, the sustainability expectations of consumers are increasingly gearing in the direction of solutions that tackle the root cause of problems.

Sustainable-branded product editions and offsetting carbon emissions are now considered the bare minimum. Herein lies degrowth. From a business standpoint, degrowth reorganizes market dynamics within and across industries and offers new opportunities for competitive advantage.

So where do we stand on growth, degrowth and the collective aspiration of sustainable development?

While growth is a legitimate economic conduit necessary for social development, degrowth is unquestionably positive for the environment. We need a shift in how we approach growth, not less of it. If well-executed, business growth can drive meaningful social mobility and environmental preservation outcomes. Here are two degrowth strategies that support this shift.

Product design demassification

From my conversations with company founders and executives alike, creating products that have longer lifespans and are locally produced is the most appealing (and used) degrowth strategy as of late. The value versus volume principle revolves around the notion of time. Time spent in producing excellence (by means of materials and designs) and time spent in creating desire (a derivative of the basic economic problem principle of scarcity).

While craftsmanship is the epitome of demassification, new production and consumption models ultimately determine the success of this strategy. Transparency-forward brand Attire has proven successful at using the drop model to reportedly grow its revenue to $1.2 million less than two years after its 2019 launch. On the one hand, Attire’s vertically integrated production and local sourcing are the core pillars of its ethos. On the other hand, its (relatively) affordable exclusivity remains the core pillar of its branding. By keeping its ethos separate from marketing assets, Attire embraces the responsible-by-default narrative that established brands such as GANNI are leading with. Other companies choose to deliberately create production bottlenecks. Luxury design house Hermès maintains approximately 200 000 Birkin bags in circulation. It takes a craftsperson upwards of 18 hours to make one bag. Besides, Hermès provides professional training for craftspeople, including next-gen makers. Capitalizing on the notion of craftsmanship as degrowth has proven successful even amidst a global crisis. In the early stages of the pandemic in 2020, Hermès revenue was down only 6.5%, while competitor Kering’s fell 14%.

Rental companies are also part of the demassification equation. The rental movement, first started by Rent the Runway in 2009, has inspired several iterations of the model. From occasion wear to everyday curated outfits. Swedish startup Hack Your Closet (HYC) operates a growth model determined by the commitment of its customers to slow down the consumption-production cycle. The company works alongside retail partners to rent out overstocks, thus helping extend the life cycle of garments that would otherwise go to waste. By curating outfits suited to each customer’s preferences and lifestyles, HYC is creating new forms of social, cultural and economic capital. This approach pays off. As of Q3 2021, HYC had circulated close to 35,000 items. They opened their second hub in France last year and are quickly expanding across Europe. An additional collective benefit of product design demassification is that it promotes a shift in how customers, retail partners and competitors think about consumption.

Value-chain decentralization

Companies that use this strategy engage business partners and customers in their operations, strengthen their brand value across different consumer segments and create new ways to consume without exceeding production limits. The main principle of value-chain decentralization is to exit from specific stages of the value chain and delegate tasks such as trade-in and upcycle processes to local partners. Apple and Levi’s have used this model to create new designs or trade used products in exchange for credit.

An often overlooked benefit of value-chain decentralization is community. In mass production, growth requires short-term interactions. The value of products is in direct correlation to availability. By decentralizing their value chains, companies form long-term connections between people who source materials, redesign products and sell or resell them. The value of products is enriched by the contribution of everyone involved in bringing each product to market. This positions each product as the result of a community effort and the sales process becomes a differentiated experience.

Original publication available here.