Making Retail Sustainable — The Innovation Opportunities
The problem
At current rates, there will be more plastic than fish in the sea by 2050. This is just one of the staggering facts that demonstrates the deep environmental crisis our planet faces. And the retail industry has been a major contributor to the waste problem. But the tides are shifting and businesses and consumers alike are taking action.
And True, with its many retail industry stakeholders, can play an integral role in helping new sustainability-focused businesses to grow, and in encouraging global retailers and consumer groups to take action, through our Partnership programme.
The resistance
When someone mentions unsustainable materials, it’s easy to simply think about Sir David Attenborough and the unsettling images of plastic pollution that he and the BBC conveyed to the nation through Blue Planet II in late 2017. Indeed, many speak of the ‘Blue Planet Effect’ as the catalyst for an explosion of consumer consciousness around the subject.
However, the resistance against unsustainable materials runs much deeper than it would initially appear. Since 2015, a growing body of research has shown that sustainability-focused companies have, over the long term, significantly outperformed their peers in terms of stock price, which suggests that the relative importance of sustainability within consumer consciousness is not just at the whim of the latest hit TV show. Sir David is merely the tip of an iceberg of influencers who have all played a part in augmenting the importance of sustainability and sustainable materials within the public psyche. These influencers range from politicians, to big brands and innovative startups.
A complex challenge for retailers
As well as the deep-rootedness of the concept in public consciousness, it’s important to stress that sustainability is a heterogeneous issue which poses a unique challenge for retailers. It is made up of several intertwined issues, including employment practices, animal welfare and public health, as well as the environmental impact. Moreover, these elements do not always cohere, as shown by the aftermath of ASOS’s announcement that they were banning several animal-based materials in 2018. Following this announcement, vegans (who supported the move) clashed with environmentalists (who feared that these animal-based products would be replaced with plastic alternatives). Retailers must therefore approach the issue of sustainable materials in a thoughtful and nuanced way as there is no quick fix.
It is vitally important that retailers, investors and startups alike look to innovate throughout the entire retail value chain, from the extraction of materials right through to disposal or reuse. Even though many of these stages do not have a consumer-facing element, they are an integral part of the detrimental impact that the retail sector is having on the world.
Where can True play its part?
As an investor looking at the future of the retail and consumer industry, we know that the challenge to find sustainable sources and processes is not going to go away — and it’s something we want to help promote, and not just because the numbers say we should.
As part of our look at sustainable materials within the retail and consumer goods space, we have focused on four materials that the sector treats with the most profligacy; wood (including paper and bi-products like palm oil), leather, cotton and, of course, plastic.
Here’s a quick summary of what we see as the most exciting investment and innovation opportunity for each:
1. Wood
Deforestation is a massive issue, with half of existing tropical forests cleared to date and consumer goods accounting for two thirds of deforestation globally. Large retailers are slowly cottoning onto this problem and startups such as Land Life Company are enabling retailers’ reforestation programmes. This particular space is still relatively new and unsaturated with capital; which is why we believe there is a significant opportunity here.
2. Leather
Leather receives less media attention than some of the other materials covered here but the use of leather has several harmful effects. For example, the leather production process emits significant levels of toxic waste and the cancer risk for leather tanning workers is consequently 20% to 50% above average. As such, leather alternatives make for an exciting opportunity. Although a startup/brand is yet to really own this space, a plethora of leather alternatives have emerged over the last few years, from pineapple leaf fibre, to excess leather from the leather production process. These burgeoning innovations, combined with a relatively underdeveloped competitive set, make leather alternatives an attractive proposition for an early stage investor.
3. Cotton
Cotton may appear to be a clean ‘natural’ material, however, it is in fact widely condemned as ‘the world’s dirtiest crop’ with many shocking statistics associated with cotton production and consumption. For example, producing 1kg of cotton requires 10,000 litres of water. Another is that cotton is grown on 2% of the world’s agricultural land but consumes 24% of all insecticides and 11% of all pesticides. As a result, startups exploring crop yield innovation are worth keeping a close eye on. Although this space is already quite saturated with capital (US-based Indigo, which makes use of digital technology and microbiology, raised a $250m Series E in 2018), there are many ways to tackle yield innovation. Therefore, we believe pockets of opportunity are still out there for seed funds like ours. Moreover, crop yield innovation has the potential to massively decrease the footprint of the retail and consumer industry, while not forcing a shift in consumption patterns, making it easier to implement in the short term.
4. Plastic
So, the big one, plastics. The material that loves to be hated. There has been huge innovation in this space over the last few years as the public discourse on the topic of plastics has swelled. Adidas has been one of the leaders of this trend in many respects with the incredibly successful ocean plastic range that it launched in 2017. But there are many startups following a similar strategy, creating everything from roads to skateboards with recycled plastics.
Our view
The problem of unsustainable materials appears to be a monumental challenge for all retail stakeholders, but it is one that can be addressed. We believe that startups focused on promoting sustainable materials and production methods can be the catalyst for change and can certainly increase the rate of change achieved by often slow-moving corporates. It’s one of the reasons we recently invested in Shameless Pets, which creates dog treats from waste ingredients sourced from the human food manufacturing process.
True is not simply concerned with the consumer-facing piece of the retail puzzle, we also want to drive change throughout the retail value chain, from initial extraction of materials right up to disposal or reuse. If you are a young business operating in this area, we’d welcome you to get in touch with a business plan, via our website: https://true.global/investment/early-stage/.
