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Sustainability as a source of growth

Sustainability as a source of growth

Eric Kramer

WPP Country Manager Netherlands

CEO GroupM

Eric.Kramer@wpp.com 

 “You never actually own a Patek Philippe, you merely look after it for the next generation.”

The iconic campaign for the luxury watch brand Patek Philippe is based on a deep human insight, and has touched the hearts and minds of many for the past 25 years. It is not only a brilliant brand campaign, but also perfectly represents 21st century sustainability objectives: it relates to current and coming generations, presents high quality and long-lasting products, adds value to consumers’ lives, and ensures brand growth.

This notion of sustainability as a source of growth is often underestimated. While we see a rise in consumer demand to take serious action on climate change - and while superficial “greenwashing” is facing stronger consumer pushback – many organizations still lack the dedication to make sustainability a priority. This despite the fact that countless research has proven the positive effect of sustainable activities on top-line growth, as well as increased attractiveness to investors and talent. Whereas consumers and talent are increasingly inclined to spend time and money elsewhere, when brands fail to meet these expectations. These are reasons enough to invest in building a strong reputation for sustainability – but how are you going to carry out this strategic responsibility?

First of all, do not treat sustainability lightly. This is a complex topic, and the question of “How to incorporate it?” is a strategic discussion that should take place at the C-suite level. It is crucial to consider the right sustainable objectives to ensure a proper fit with your brand and business model. Consumers are increasingly critical of corporate sustainability activities, and shareholders will also approach the subject with caution, for fear of its impact on financial results. Therefore, taking the time to ensure that all stakeholders commit to redefined objectives is crucial. Based on these considerations, we can broadly define three strategies: sustainability at the heart of your brand; choose and build; and achieving scale through acquisition.

The first, and most rigorous, approach involves placing sustainability at the heart of your business. With an often fully sustainable supply chain, this approach puts sustainability at the core of all activities and strategic objectives, while enabling your brand to share a compelling and credible message. Take Tony’s Chocolonely for example, a Dutch brand on a social mission towards a 100 percent slave-free chocolate industry – which it pursues while simultaneously creating high-quality and innovative chocolate products. Or Swedish oat milk brand Oatly: recently valued at $2bn, Oatly’s goal is to provide a future-proof alternative to dairy milk.

The second strategy, “choose and build,” is aimed at finding the right fit between your brand and sustainability, and building from there. In this approach, your strategic focus is key in deciding which sustainable route your brand will take. Here the right fit with your brand is essential in order to protect credibility, establish commitment, and avoid greenwashing. The alignment between your strategic and sustainable ambitions will create focus, and provides a platform on which you can start building. Once determined, these objectives should be paired with clear internal and external communications. This is needed to avoid confusion, which could limit the impact you plan to make. One example of this strategy is Mattel’s Barbie – a brand some people might not historically associate with inclusion and diversity. However, upon realizing the potential and impact of a more diverse range of dolls, Mattel has pursued a continuously updated collection of toys that includes different body types, skin tones, hairstyles, disabilities, and other physical appearances that significantly differ from the traditional tall and blonde Barbie doll.

Lastly, in order to quickly create scale, acquiring a brand that is at the forefront of sustainability remains a viable option. This approach offers multiple opportunities towards top-line growth as you may be growing your size of the pie, eliminating a competitor, and entering a new market - all of this, while also gaining an opportunity to transform your way of working towards a more sustainable form. One example of this direction would be Unilever’s acquisition of the Vegetarische Slager (Vegetarian Butcher). Unilever saw an opportunity in the small but growing category of “meatless meat,” and now has the opportunity to expand this brand rapidly across different geographical markets. The purpose-driven message from the Vegetarische Slager, combined with Unilever’s scale, is therefore a match made in heaven. Needless to say, the success rate of such an acquisition will highly depend on the brand fit between the acquiring company and the to-be acquired brand.

All three of these strategies imply a sustainable transformation, whether you’re building this ambition from the ground up or acquiring to create scale. They are all aimed at making sustainability a top strategic priority. Because in the end, there is no denying that companies must take responsibility and respond to societal and environmental issues just as much as consumers do.

No matter which strategic plan you’re going to follow, your decision has the potential to make a difference. Not solely from a growth perspective, but also from the intrinsic motivation to carry out a brand’s sustainable responsibility within society, and thereby giving it a credible and compelling voice. However, time is ticking, and sustainability is literally and figuratively the only way to think about the next generation.