Selling Sustainability: Shhhhh, don’t use the ‘S-word’!!

There are a variety of forces driving large manufacturing organisations towards sustainable innovation. These include customer demand, regulatory changes, new reporting requirements, investor pressure, and the need to achieve (often highly ambitious) Corporate Social Responsibility (CSR) targets.

New product development programs are increasingly prioritising carbon reduction in order to generate more sustainable offerings for corporate customers facing similar pressures. However, demand for such products is often overestimated, and many sustainably marketed offerings fail to gain the market share needed to ensure financial viability in the longer term. Why is this?

At a recent Innovation Roundtable event at Evonik’s headquarters in Germany, Strategic Allies Limited (SAL) hosted a workshop designed to explore this particular question. The session was attended by sustainability directors, supply chain executives and procurement specialists, all with very valuable and insightful viewpoints. Some of the key take-aways from this session are summarised below.

What do we mean by sustainability?

There is often confusion and conflicting opinions on how to define ‘sustainability’, even within an organisation. If the end-goal isn’t clear, then creating an actionable sustainability strategy with well-defined metrics to evaluate progress is impossible. An agreed framework, or action plan, was deemed essential for justifying internal investment and driving performance. Those companies that had developed and implemented a clear CSR agenda with measurable and attainable KPIs consistently demonstrated greater innovation success.

How do we avoid cannibalising our own market share?

Many of the multinationals represented at the workshop are at the forefront of their industry, with products dominating within their respective markets. ?There is therefore a risk that the launch of novel, sustainable offerings will result in an erosion of existing product sales. ?One participant also noted that “we will always be compared to ourselves” – by promoting the positive environmental attributes of a new product, do you inadvertently highlight the shortcomings of legacy products? ?These are legitimate risks, but should they stop organisations from ‘doing the right thing’? ?The consensus at the workshop was ‘no’, the development of lower carbon products should continue. However, to do this requires a shift in corporate culture, and an ability to acknowledge the longer-term gains of offering eco-friendly alternatives which it was unanimously agreed is “easier said than done”. ?Sustainability often requires us to redefine success, financial return on investment may take a very long time but alignment with incoming regulations and catering for future thinking customers could set soon your business apart from the competition. ?Sadly, many felt innovation was still being stifled by a lack of vision among internal customers.

Is it time to rethink revenue streams?

So to date, your business has successfully been based on a straightforward B2B sales model. ?But now you have a product which (for now) won’t achieve the same high volume sales as the rest of your portfolio, in part because the price point is significantly higher, and perhaps because your customers fail to understand the value. Does the B2B business model still work, or should consideration be given to other approaches? Is it time to reimagine how businesses create profit in order to sell sustainability? Depending on your market, leasing products or pay-per-use models may be alternative ways to generate income. Such models may also support circularity as products are more likely to be returned at end of life. However, participants in the workshop urged caution – new business models can be very disruptive and costly to a business. ??“It’s not just about the product, you often need whole new systems, new stock management software, new partners, it’s a significant financial commitment as it soon becomes horribly big”. ?Few companies represented at the workshop had experimented with business models and most did not anticipate doing so in the near term. Change is difficult.

Is the best way to sell sustainability, to not mention sustainability?

So what is the solution? Even if we’re able to define what we mean by sustainability and are able to show the merits of our eco-friendly product, it’s still likely to be significantly more expensive than the competition. ?It’s true that if you can identify the right target market, and develop the right offering that will resonate with those customers then it’s possible to be successful. The group discussed the latest products from Playmobil, the Wiltopia range, a range of wild animal figures manufactured from 80% recycled plastic with a more natural look and feel. The products were designed to appeal to eco-conscious parents wanting to demonstrate to their children the importance of making more sustainable choices. The decision to launch these products was based on research showing parents around the world attach?great importance to the sustainability and quality?of the toys their children play with.? 80% of parents stated that the use of sustainable raw materials would positively influence their purchasing decisions. ?But B2B sales are a far cry from sales to eco-conscious parents. “Cash is king” and sadly right now, sustainability doesn’t sell. But it’s not all doom and gloom, customers will often pay a premium for a ‘better’ product. So how do we define better. Usually, superior performance over the competition. When Tesla launched its first car, it was marketed specifically as a performance, luxury car (which, by the way, just happened to be electric!). The fact it was battery powered was not the USP. ?Elon Musk explained why this was the case: “Our first product was going to be expensive no matter what it looked like, so we decided to build a sports car, as that seemed like it had the best chance of being competitive with its gasoline alternatives”. Once established as a brand, Tesla could then look to increase sales volume. Our workshop participants agreed that this might just be the best approach for others to replicate – to sell sustainability under the guise of a ‘better product’, rather than mentioning the S-word from the get-go.

Our participants concluded that getting sustainable products into the market, by whatever means, is important, and if the only way to do that for now is by selling the other attributes of the product then so be it. At least until regulations catch up and make sustainability essential, rather than just a ‘nice to have’. ?It’s crucial not to lose focus on sustainability just because it is hard. ?By sharing ideas on how to overcome some of the barriers discussed here, and by learning from other successes (and failures), there was certainty that more products would reach the market and start to gain market share.

At Strategic Allies, we support clients across all sectors on their mission to develop, launch and sell better, more eco-friendly products. Preparing and hosting workshops like this one is just one of our key offerings. ??These workshops are designed to inspire creativity and drive innovation within your team, whether you’re looking to explore new technologies, materials, business models, or entirely new markets.

The path to success, whereby a company can be profitable and competitive with others in their industry, but also sustainable, may seem impossible. ?However, in almost all cases, it is through incremental innovative steps that this can and will be achieved. Strategic Allies will continue to help clients move towards a sustainable future and are proud to say that 70% of the projects undertaken in the last 12 months were sustainability-focused. If you would like to hear more about our approach, please contact John Allies – [email protected]. We are always happy to send you more details or schedule a call to discuss challenges, opportunities, and how we may be able to support you using our experience, knowledge and network.