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Sustainability and brands: Topics, Evolution, Opportunities
Federico Brugnoli | 22 March 2016

In my previous post, I tried to explain briefly yet comprehensively the three dimensions of sustainability: a term that is becoming a strategic keyword for many international brands and corporations, active in the leather market. In this new post, I would like to take a step ahead and start explaining why sustainability should be seriously considered while defining future business strategies of tanneries.

Sustainability: a market driver or a risk factor?

As concerns over climate change, loss of biodiversity, pollution, poor living conditions, adverse climatic events, consumption of non-renewable natural resources have been growing, a growing number of consumers are becoming more aware of the potential impact linked to their purchasing habits. In general, when interviewed, consumers declare to be responsible, to care about others and future generations and therefore they also declare to orientate their purchasing habits accordingly. Whether these declarations are actually and concretely transformed into real purchasing choices at the shop is still to be demonstrated though...

It is in any case true that nowadays, brands are under the great scrutiny of a new and demanding generation of consumers: the so-called “Millennials”. 15 to 45 years old, aware, awake, responsive, with access to the internet, Millennials are sensitive to change, have new social values and are rapidly evolving towards a new ethical awareness. “Millennials” are highly connected individuals who frequently use internet and social media to share information with other consumers about any kind of topic, on their life, including purchasing choices, relevant for the leather supply chain… In 2016 we can in my opinion state that consumers (and in particular the more evolved ones) would never knowingly buy a non-sustainable good. We can also state that consumers are already evaluating (and are expected to increasingly look for) “non-technical” information on leather products. A small portion of them is already selecting brands and corporations on the basis of their reputation. Most of this information is already (and will be much more in future) easily available, in particular on the internet, even if in some cases completely wrong and misleading. I could add that in some famous cases, international NGOs gained visibility and consensus by publishing report that emphasised non-sustainable behaviors in Brand’s textile and leather related supply chains. In any case, in my opinion, what “sustainable product” means is debatable and internationally there is not a unique and harmonised definition. Under these conditions, sustainability of products and processes is becoming (and in many cases has already become) an obliged choice for customers of tanneries.

Several dimensions and factors could define a “sustainable” product, as explained in my previous post. As these factors remain uncertain, it is relatively easy for the most important and exposed international brands to see a potential reputational drawback linked to unsustainable behaviors along their supply chains. Reputation is very important for large companies and corporations active in the international Business to Consumer (B2C) market. In other terms, we are describing a situation in which there is a probability of occurrence of a negative event (a non-sustainable behavior along the supply chain) and in which this negative event may have severe consequences on the business of a customer of tanneries. By definition, the mathematical combination of probability and consequences defines a RISK. Concretely, we are therefore talking about the risk of international brands and corporations of loosing market shares, loosing stock value, worsening their reputation, if found sourcing from non-sustainable suppliers.

Sustainability Bag

Photo credit: Lanxess

Sustainability and risk management

It is undeniable that ethical and moral reasons have played a big role in encouraging brands to embrace sustainable behaviors. However, as explained before, risk prevention can be appointed as an important determinant that shapes and drives several initiatives in their leather supply chain. Many international leather related brands, have already set up a “Sustainability Risk Management Strategy” for their supply chains. They have defined specific environmental and social requirements and included them in contracts and / or annexes, asking the suppliers to provide evidence of compliance, auditing, monitoring, and implementing corrective actions. If I were them, I most probably would do the same. Business security is a priority.

I would probably myself require my suppliers to provide me with structured information and evidence on compliance to contractual requirements on environmental, social and product safety issues. The key concept is that sustainability has evolved from being just an ethical add-on (mostly related to communication and marketing) to a new and business related factor requiring risk management procedures designed for globalised supply chains.

Sustainability Risk management

Photo credit: BLC

Tanners: actions and reactions
If you agree with what you have read until now, you would also probably agree that from a tannery perspective, transparency and reliability of sustainability-related information clearly are emerging customer requirements. Tanners should ask themselves 3 questions:

1) Is the trend towards more sustainable products going to be more or less important in the future?
2) Will I be required to systematically provide more or less sustainability-related information to my customer in the future?
3) Will my company be able to establish long term relationship with brands based only on leather price and quality in the future?

My answers are 1) NO, 2) MORE, 3) NO…

Now, imagining myself as an executive or a manager of a tannery, I would consider some very important keywords in the definition of my brand-related business strategy: Proactivity, Anticipation, Innovation, Reliability.

It is possible, cost effective, business wise.

We will go in detail in the next post.