Recently, the CEO of an established french luxury skincare brand discussed with me the overarching strategy behind his company’s exceptional sustainability performance. The sustainability challenge, we agreed, is both structural and one of communications. Suppliers are not innovating fast enough, obtaining certifications has become a box-ticking exercise only reserved for the few that can afford them, and contrary to popular belief, consumption patterns are not evolving for the better. At least, not at the scale and pace needed to drive meaningful change.
As stated by the World Business Council for Sustainable Development in its latest report on sustainable conumption, current approaches to sustainability do not commercially bond well with the growth goals of most retail companies, although sustainability initiatives have proven to increase brand value. At the same time, until the moment a brand’s sustainability efforts are announced on social media, consumers are in the dark about what goes into making sustainability logistically and commercially viable.
Herein lies the challenge of sustainability innovation: The entire supply chain needs to operate in alignment with a brand’s social and environmental narratives. A brand cannot innovate if its suppliers, manufacturing partners, distributors and packaging partners are lagging. What’s more, no innovation will succeed if the people in charge of marketing have but a limited understanding of what goes down in the supply chain. CEOs have the authority to innovate, as their roles encompass the entire supply chain. But innovation is a growth engine, not a project — and in today’s environmentally challenged markets, it’s more urgent than ever.
Understanding the canons of sustainability innovation can help. These principles are typically consistent and focus in four areas:
- Practicing impact-driven decision making
There is growing interest in circular economy models among luxury entrepreneurs and executives today, largely because many fashion and beauty brands are seeking to go beyond the conventional conscious collection and recycling program, and leverage the commercial opportunity of rental, repair and refill services. At the same time, their distribution is set up for one-off consumption, and while slowly declining in favor of circular models, the majority of their revenue still comes from their non-circular products. Effective prioritisation in this context means first understanding the potential for impact of each sustainability initiative under consideration. Two questions worth asking at this stage are:
- Can the impacts of this initiative be quantitatively and qualitatively measured?
- If so, what is the scalability potential of this initiative?
Effective prioritisation also requires considering the level of difficulty at implementation. Persistence is important, but on the grounds of efficiency, if a sustainability initiative cannot realistically be put into action over the next quarter, the best course of action is to move on.
2. Evolving from traditional, corporate-style transparency
Several retail CEOs and COOs across luxury fashion and beauty have told me the biggest challenge they face is lacking the bandwidth to issue customer-facing sustainability reports, despite their suppliers having social and environmental compliance reports sitting atop their siloed organisations. Outdated organisational structures are not to be emulated. They cannot support the communicational needs of a generation of consumers with the shortest attention span in history. Instead of aiming to issue corporate-style sustainability reports, making transparency a daily priority (like social media) will create better results. For instance, it will get the customer feedback loop started, an essential component of any innovation process. In sum, for sustainability reporting to be mutually beneficial, gathering, analysing and simplifying compliance reports into customer-centric content is the way to go.
3. Turning supplier relations into strategic partnerships
Demand volatility is pushing brands towards a more environmentally efficient and demand-driven sourcing model. In the context of ever-evolving consumer sentiment, supply chain innovation will require brands to gain a deeper understanding of consumer trends and needs by leveraging analytics, segmenting assortments with smaller batch sizes, and using dual sourcing and nearshoring to create environmental efficiencies in the entire product development process. Realistically, this can only be accomplished by building genuinely collaborative relationships with suppliers. The goal is to create knowledge-transfer relationship dynamics with suppliers whereby innovation is always part of the equation.
4. Leveraging social listening to create an enhanced customer experience
Customer experience (CX) and social listening are the buzzwords of the moment. Companies from Selfridges to HURR collective are implementing experiential consumption by capturing value from frictionless and memorable customer experience. Meanwhile, social listening is providing luxury retailers like Farfetch with a vast dataset of often-overlooked customer input including experiences, viewpoints and personal perspectives on social justice and climate change.
By understanding the model of influence of its sustainability message, a brand has the potential for positive impact beyond increased revenue figures. Promoting better consumption patterns among customers and influencing lifestyle shifts are some of these impact outcomes. Customer-centred brands such as Stella McCartney and Gabriela Hearst understand that in the social commerce era, there are opportunities to add sustainability-based value at each customer touchpoint, online or in-store. All of those touchpoints form a relationship that modern brands need to nurture.
This article was originally published on Entrepreneur.com. Available here.