Digital transformation is critical for sustainability success
In the latest episode of the CSuite Podcast, Circklo’s co-founder, Marco D’Attanasio, Eon’s founder and CEO, Natasha Franck, and Laz Tyrekidis, Founder and CEO of luxury menswear brand Aristocracy London joined Russell Goldsmith to talk about the future of sustainable business models.
This post looks at the main takeaways from the session, focusing on trends in sustainability, the shift in customer behavior, and the impact of the pandemic on digitalization.
1. Sustainable businesses require digital maturity and strong financial performance to thrive.
According to Circklo’s co-founder, Marco D’Attanasio, successful sustainable businesses need to have three core competencies to succeed. In addition to having in-built circularity into business models, First and foremost, the business model needs to have in-built circularity, but in addition, companies must exhibit strong financial performance and have a high degree of digital maturity.
To benchmark success, Circklo created an index, analyzing the fifty largest public consumer companies, by examining these three dimensions in detail.
By investigating these parameters, companies were classified into three groups:
- Gamechangers scored highly in all three categories; these companies are leading the way when it comes to sustainability.
- Change champions scored highly in terms of having a clear sustainability strategy and good execution but had notable gaps in one of the three dimensions.
- Challengers: the most populated group; these organizations had still a long way to go when it came to forming a clear sustainability strategy.
The results highlighted that most companies are just beginning their first steps into their sustainability journey, as Circklo’s Marco D’Attanasio articulated during the podcast:
“The main conclusion of the research was that there is a huge space for improvement when it comes to businesses becoming more sustainable. It's interesting that only one company, L'Oreal, achieved the Game Changer score, while only five only were ranked Change Champions.”
2. Data is critical for powering sustainability.
A logical conclusion of the Circklo index is that a multi-faceted approach must be employed when assessing sustainability. The smart use of data is essential for driving circularity, and businesses that have a strong footing in digital transformation are far more likely to have access to the vast repository of data required to power sustainable business models.
Inditex ranked highly on Circklo’s Sustainability Index, as the fashion group has a high degree of digital maturity together with a deep understanding of its supply chain. Undoubtedly, the company’s strengths in digital transformation will be a key factor in enabling the fashion group to meet its benchmarks for sustainability.
3. Openness and transparency are crucial for sustainable businesses.
At the heart of successful sustainable businesses is a strong commitment to transparency that translates into plugging the gaps in organizational efficiency. Eon is a connected products platform founded by Natasha Franck that works with brands to create a digital footprint for physical products. Eon is working with brands to develop the CircularID protocol, which is the framework in which Eon digitizes products.
Currently, when a product reaches the point-of-sale, identification of the garment disappears as the label is removed. The brand, therefore, has no visibility on the item post-purchase and has no option to further monetize the product through rental, reselling, or recycling. By creating a connected identifier for each garment, Eon’s platform provides the basis for an ongoing relationship between the brand, consumer, and product, post-purchase.
From a sustainability perspective, this means the brand can ensure that products and materials can be managed sustainably, incorporating circularity at the end of a product’s life.
4. Consumers are demanding a greater commitment to sustainability.
Sustainability issues have reached mainstream consciousness partly as a result of the rise of fast-fashion and changing customer behavior. Consumers are buying a lot more clothes than they did previously did; research indicates that the average consumer bought 60 percent more clothes in 2014 than in 2000, but kept each garment for half as long.
This trend is mirrored by growing demand from consumers for businesses to exhibit a greater commitment to sustainable business practices, as Eon’s CEO, Natasha Franck noted:
“We're seeing data that shows that resale and re-commerce will be growing over the next few years, 21 times faster than fast-fashion. And so, there is a lot of business model transformation that is going on within fast-fashion retailers to prepare for this wave of circular business models. So, the customer appetite for new and sustainable business models and higher quality products is really there.”
5. The pandemic will accelerate the path to digitalization.
The pandemic will bolster the pathway to increasing digitalization, as transactions increasingly happen online and it becomes more difficult for consumers to travel to bricks and mortar stores. However, size and fit is an issue that leads to a greater volume of returns. According to RSR Research retail analyst Paula Rosenblum, ecommerce returns result in retailers losing a third of their revenue.
To reduce the volume of returns, luxury suit designer, Aristocracy London partnered with body measurement app, Sizer, to accurately determine customer sizing. As well as minimizing returns, accurately measuring size results in better customer experience, with the bonus of having positive outcomes for sustainability. In effect, it’s a win-win for the customer, the brand, and the environment.
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