By the Sequoia Lab Team
If you could reduce your product packaging costs by 38% while offering a more sustainable solution to your customers, would you think twice? Many companies are taking bold steps to incorporate sustainability into their core business strategy, reaping not only brand and customer benefits, but bottom line benefits as well.
In a recent example, the outdoor industry, whose customers are known for their environmental savvy, is embracing sustainability through industry wide collaboration. A sub-group of the Outdoor Industry Association called the Eco Working Group spent the past four years creating the Eco Index – an environmental assessment software tool designed to advance sustainability practices among the apparel, footwear and equipment manufacturers.
Launched in the summer of 2010 and backed by supporters like REI, Target, Timberland, Patagonia, Brooks, Levi’s and Nike, the Eco Index is quickly earning credibility and has the potential to drive major changes in the apparel industry. The Eco Index addresses two of the biggest challenges companies face in making a case for socially responsible business practices – quantifying the costs and savings and standardizing performance metrics that can be easily communicated to customers.
According to their website, the Eco Index “provides companies throughout the supply chain a way to benchmark and measure their environmental footprint, allowing them to identify areas for improvement and make informed sourcing and product life cycle decisions.” Furthermore, the index seeks to create “common language” around sustainability for consumers and retailers alike that will allow for more informed decisions.
The Eco Index is similar to Energy Star, the EPA’s rating program that ranks the energy efficiency of appliances such as refrigerators, which has become the international standard in measuring appliance energy efficiency. In the Eco-Index, products are ranked based on suppliers’ answers to survey questions and then assigned a score that is some percentage of “perfect” in each of 7 “lenses”: Land Use Intensity, Water, Waste, Biodiversity, Chemistry/Toxics – People, Chemistry/Toxics – Environment, and Energy Use and Green House Gas Emissions.
Unlike the Energy Star program, the Eco Index is currently only an internal supply chain tool and is not a consumer-facing label. In order for the Eco Index to reach such a level of adoption, it would have to be made available at the point of sale. For now, “it’s a tool for a company to use to make a better choice,” Amy Roberts, vice president of government affairs for the Outdoor Industry Association explains.
While the Eco Index does provide a methodology that is easily applied across categories, it is only in Phase 1 roll out and there are still some big questions to address. For example, some survey questions rely on estimates from suppliers, which could call into question the accuracy of a score; and currently there is no total score, although one may be incorporated during later phases of the project.
Despite the fact that it’s still a work in progress, the Eco Index has proven that a focus on sustainability can impact the bottom line. Even at the most basic level, programs that reduce, reuse and recycle frequently lead to cost savings. According to the Eco Index website, Patagonia’s efforts to encourage its supply chain to adopt more sustainable practices have resulted in eleven of its textile mills adopting the Bluesign standard, allowing Patagonia to reduce the costs and time associated with monitoring those vendors.
A Wall Street Journal article reports that, in and effort to improve their Eco Index score, “Brooks got rid of moisture-absorbing silica bags, which turned out to be ineffective, and stopped stuffing the insides of shoes with tissue paper. As an added benefit, the “green” changes reduced the cost of the shoe box by 38%.”
With both proven bottom line impact and growing consumer feedback favoring green minded companies, as a business leader, are you adequately engaging your customer around your sustainability efforts?
Many consumers cite that they recognize that sustainability and social responsibility is a developing conversation in the business world and they want to hear about the work in progress. They don’t expect companies to have all of the answers, but they do expect a response.
As the Eco Index, and tools like it in other industries, moves toward a more consumer-facing model, there will be increased incentive for companies to incorporate sustainability in all facets of their business from product design to supply chain. Will you be a leader in green innovation, or will you be left standing in a pile of tissue paper and silica bags?
Sequoia Lab is a boutique consulting firm powered by the strength and reach of the Sequoia tree. We partner with companies to create innovative, profitable, and sustainable business models.
For more information, please contact:
Tel. +1 (646) 825 1878
Sequoia Lab consultant Emily Cangie contributed to this article.