Moving the Needle on Sustainability

Idea in Brief The Usual Approach Most sustainability initiatives today focus on improving the sustainability of products and operations in legacy or adjacent markets or on achieving sustainability gains by exploring new markets with a more diverse set of products. A New Frontier Leaders should also embrace a new path to sustainability, in which brands actively partner with customers to achieve ongoing impact. The Strategies This article describes a practical framework for creating sustainability strategies that take into account both dimensions—markets and customer engagement. The model lays out the four key ways that legacy companies can nurture growth in their sustainability efforts. Practically every day one company or another announces a new sustainability commitment or launches an ad campaign about how it’s helping people and the planet. Many of those initiatives focus on improving the sustainability of products and operations in legacy or adjacent markets or on achieving sustainability gains by exploring new markets with a more diverse set of products. This is a variation on the classic “where to play/how to win” strategy, familiar to most executives. Fewer leaders, however, are exploring an important new frontier in sustainability, in which brands actively partner with customers to achieve ongoing impact. In this article, we describe a practical framework for creating sustainability strategies that take into account both dimensions—markets and customer engagement. Developed in discussion with Reckitt, the $16 billion consumer-packaged-goods giant, the model lays out the four key ways that legacy companies can nurture growth in their sustainability efforts: fertilizing, in which a brand stays in its existing market but adds a sustainability “nutrient” to the product or service; transplanting, in which a brand serves new customer needs by extending the sustainability benefits of current offerings or related new ones into adjacent markets; grafting, in which customers are incorporated into the brand’s current sustainability strategy by changing how they use the product or service; and hybridizing, whereby companies adopt a new sustainability purpose to drive a major repositioning of the brand in new markets while asking customers to change too. Each of these strategies has unique requirements and will have ripple effects across and beyond the business, from R&D and marketing communications to supply chain operations and partnerships. Embarking on this journey is demanding, but as brand leaders such as Reckitt (whose portfolio of health and hygiene brands includes Lysol, Air Wick, and Finish), along with Schneider Electric, Mahindra Group, and others have discovered, the payoff in sustainability benefits and business performance is worth it. The Sustainability Role of the Customer Before we examine the four strategies in more detail, let’s take a look at the two primary ways that customers can drive sustainability. For many brands, the role of the customer is simply to purchase the product. Companies meet their sustainability goals by improving the environmental and social performance of their products, operations, and supply chains. They invest resources in using clean manufacturing processes, sourcing components from Fair Trade–certified vendors, and so on, and the sustainability benefits accrue when customers make the decision to buy the product. We call this sustainability via purchase. For other brands, sustainability gains depend on customers’ adoption of key usage behaviors: running a dishwasher on “eco” rather than the regular cycle, for example, or recycling the aluminum capsules from a coffee maker. The brand must persuade customers to change their post-purchase behavior in order to generate benefits—this is what we call sustainability via participation. Strategies that require changing consumers’ habits are more challenging, but they can deliver the greatest sustainability gains. The Four Strategies Not every strategy will be appropriate or feasible for every brand. It’s important to understand the requirements and challenges of each in order to pick the strategy that will deliver the greatest sustainability impact and business gains for the brand. Firms can clarify their thinking by imagining the four strategies as quadrants in a 2×2 matrix, with markets along the horizontal axis and customer engagement along the vertical axis. See more HBR charts in Data & Visuals Fertilizing. With this strategy, the brand stays in its existing market and adds a sustainability benefit to the product or service. The customer’s role is simply to make the purchase. Brands should pick this strategy when the greatest gains can be achieved through either product modification or changes to the supply chain. The brand’s key message to customers is “We’re taking responsibility for sustainability, and you need only make the purchase.” The fertilizing strategy is most commonly used by legacy brands. It is also the easiest to adopt or expand. Reckitt used it to add sustainability benefits to its Air Wick air-freshener brand. Its new planet-conscious Botanica line is made with natural, responsibly sourced ingredients, and its packaging uses recycled materials. (Disclosure: One of us, Challagalla, has worked as a paid adviser to Reckitt.) Companies should make sure that their fertilizing strategy is not actually corporate opportunism. It takes little effort to bolt a sustainability claim onto a product without providing meaningful environmental or social benefits. This all-too-common practice can backfire and often provokes customers’ anger. Brands can avoid a customer backlash by demonstrating that the sustainability claims they are making are real and consistent with the brand’s legacy. In 2018, the Carlsberg brewery launched a new packaging system in which a novel glue holds the beer cans together, replacing the plastic six-pack rings, well-known to be a hazard to wildlife and a major contributor to ocean pollution. The new packaging is expected to reduce plastic waste by more than 1,000 tons a year after it is fully rolled out. Transplanting. This strategy occurs when a brand extends the sustainability benefits of current offerings or related new ones into adjacent markets. Transplanting is best suited to companies that stand to reap the greatest sustainability gains by focusing on a broader range of customer needs. The key message to customers is “We will provide new sustainability benefits by broadening our scope; your job is to follow us into this new market.” The sustainability benefit delivered by the offering should be as important to customers as other differentiators, such as convenience, price, and performance. At the start of the pandemic, Reckitt’s Lysol brand team saw an opportunity to think beyond the product’s traditional positioning as a surface sanitizer in the consumer market. It transformed its brand purpose from a cleaning product to a health and well-being offering. Leading with its new “keeping people illness-free” purpose, it focused on selling Lysol wipes and infection-control advice to businesses, which in turn relied on Lysol’s brand strength to reassure customers that they were taking the pandemic seriously. A brand that uses sustainability to enter a new playing field must deliver a benefit that’s valuable enough to compel customers to embrace the new offering rather than merely shrug when they first encounter it. The sustainability benefit should be as important to customers as other differentiators, such as convenience, price, and performance. Schneider Electric, a global energy-technology company, got these points right when it shifted focus from its traditional electricity-distribution offerings (such as relays and circuit breakers) to the new market of energy-efficiency services. In the early 2000s Schneider recognized that reducing carbon emissions was becoming as important to companies as cutting costs. It saw an opportunity to embrace a new sustainability purpose and provide a fundamentally new type of value for its B2B customers. They needed only to purchase Schneider’s integrated hardware and software solutions (such as smart thermostats that automatically lower the temperature when a building is unoccupied) to reap both benefits. With this new strategy, Schneider’s sales more than doubled over 15 years, and its stock price quadrupled. Walmart, for example, hired Schneider to manage its Gigaton project (aimed at avoiding one billion tons of emissions by 2030), and STMicroelectronics brought in Schneider to help it reach carbon neutrality by 2027. Firms that change their playing field by entering new product categories must watch out for rivals that may leapfrog them with superior sustainability benefits. Traditional oil companies, for example, have invested substantially in ethanol-based biofuels that can be blended with gasoline, reducing emissions by up to 50%. But Neste, a Finnish oil-refining company, has catapulted past these competitors by developing renewable fuels that require no mixing with gasoline, reducing emissions by up to 90%. Ahead of the 2020 plastic-bag ban in New York City, photographer Tony Cenicola documented the many bags collected by graphic designer Sho Shibuya, who has acquired more than 200 of them since he moved to New York from Tokyo, in 2011. Grafting. Brands using this strategy put a spotlight on a sustainability issue within their current product category or market and find ways to encourage customers to change their behavior to help address it. This strategy is best suited to brands that have a competitive advantage in their current playing field and for which additional sustainability gains rest in the hands of customers. The brand’s message to them is “We’re in this together, and we need your help to make meaningful progress.” Nike has successfully pursued a grafting strategy with its long-standing commitment to gender equality as a key part of its sustainability agenda. By the age of 14, girls drop out of sports at twice the rate boys do. Nike’s Made to Play initiative works with community partners to increase girls’ access to sports opportunities and to recruit and train female coaches. But as one Forbes contributor observed, “Empowering women athletes takes more than just inspired marketing….It takes merchandise.” Nike has invested heavily in developing innovative sports gear for girls and women, and this has become an important revenue stream, growing from less than 10% of its revenues in the 1990s to about 25% today. The success of a grafting strategy lies in changing consumer behaviors that are often cultural norms or long-standing habits, a prospect customers tend to resist if they feel pressured. One of the most effective ways to get consumers to participate in a firm’s sustainability agenda is to frame requests to change behavior in terms of what consumers stand to lose if they don’t change. This method is based on the psychological phenomenon known as loss aversion: Studies show that people would rather avoid a loss than make an equivalent gain. Reckitt understood this when it leveraged its Finish dishwashing detergent brand purpose—“save water for tomorrow”—to change the conversation with consumers in Turkey, a country facing dire water shortages as soon as 2030 if consumption patterns don’t change. The brand discovered that in half of Turkish households, dishes were rinsed before being placed in the dishwasher, a colossal waste of water. It developed a “skip the rinse” campaign to show consumers that if they put dishes directly in the dishwasher and used Finish Quantum detergent, formulated specially for this purpose, they could save up to 57 liters of water per load. In parallel, it partnered with media companies, dishwasher firms, and Turkey’s water resources department to educate consumers, asking them to contemplate the conditions facing the next generation, which might have to manage on less than half as much water. These campaigns increased brand awareness and reversed market-share losses for the product—and reduced water usage in dishwashers by 20%. Another key way to get consumers to participate in a brand’s sustainability agenda is to make doing so their easiest choice. In Switzerland, for example, Nespresso provides free packaging and home pickup by the postal service for its used coffee capsules. In France, the retail chain Leclerc provides customers with “reusable, recyclable, and exchangeable for life” hessian bags to make the switch from plastic bags simple. (For more on how to shift consumers’ habits in pursuit of sustainability goals, see “The Elusive Green Consumer,” HBR, July–August 2019.) Companies considering a grafting approach must pay special attention to issues of perceived fairness, a requirement for any strategy that depends on consumer participation. If customers feel that the brand is asking them to shoulder the burden of its sustainability agenda while it sits idly by, they’ll resist. To underscore its partnership with Turkish consumers, Finish launched an array of water-protection projects, including engaging with an NGO and a local government to revive Kuyucuk Lake, an important wetlands conservation site, and working with the Industrial Development Bank of Turkey to create a water index that tracks the country’s water resources. Hybridizing. This strategy involves brand reinvention with two simultaneous shifts—expanding into a new market with a new sustainability purpose and a major repositioning of the brand while asking customers to change their behavior—each dependent on the other. The message is “Let’s together change rules, roles, and habits to make this industry more sustainable.” This is the boldest shift, and it often requires a new way of competing. A hybridizing strategy is a good option for firms with slowing or stalled growth or an overly narrow approach to solving customer, environmental, and societal problems. For Vanish, the laundry additive and stain remover, Reckitt initially adopted a fertilizing strategy that focused on reducing the carbon impact of its supply chain. But given the high environmental and social costs of the clothing industry, the brand realized that its sustainability efforts didn’t go far enough. It made a decisive move into a new playing field—“circular fashion,” an ecosystem in which clothes are sold with the intention that they will be reused and disposed of responsibly—and invited customers to participate. According to Reckitt’s chief marketing, sustainability, and corporate affairs officer, Fabrice Beaulieu, the key was to help reduce waste by enabling clothes to “live longer.” Vanish leveraged its original brand promise—clothes that are cleaned more gently hold up better over time—to launch a partnership with the sustainable UK laundry service Oxwash to extend the life span of clothes. More recently, the brand partnered with the British Fashion Council to nudge consumers to embrace circular fashion, relying on the promise that used clothes look more vibrant and last longer when washed with Vanish. This represents a major shift in Vanish’s sustainability strategy and demands significant changes in consumer behavior. It will take years to gauge the program’s impact, but early results are encouraging. A hybridizing strategy is a good option for firms with slowing or stalled growth or an overly narrow approach to solving customer, environmental, and societal problems. The $19 billion conglomerate Mahindra Group likewise adopted a hybridizing strategy to extend its reach and sustainability impact. A leader in agricultural equipment, Mahindra’s Agri unit decided to transform its strategy, putting sustainability at the core with a promise of creating “a nation of champion farmers.” In October 2020 it introduced Krish-e, a “farming as a service” offering, with the goal of radically increasing the yield and income of struggling farmers. Krish-e rents tillers, sprayers, and harvesters and offers advisory, digital, and precision-farming services, including facilitation of on-site operations. Along with the new product offering, Mahindra worked to persuade farmers to abandon approaches they had used for decades and learn completely new ways of growing crops. Developing a Strategy All four brand strategies in our matrix use a sustainability purpose to capture value for companies, either by gaining greater share of wallet in an existing market (fertilizing and grafting) or by entering adjacent markets or creating new ones (transplanting and hybridizing). Executives can identify which strategy is optimal for each of their brands using an iterative four-step process, starting with a close exploration of a brand’s existing sustainability purpose and strategy. Examine your current approach. Start by identifying your brand’s current sustainability strategy. Ask yourself: Is the brand’s competitive position strong in its current playing field? Does the current sustainability strategy resonate with customers? Could sustainability contribute more to the brand’s business performance? Could sustainability serve as a platform for further innovation and growth? Your answers will help you identify opportunities to either reinvigorate your current strategy or move to another quadrant. Consider the farming industry. A careful examination of those questions reveals that the agricultural business is ripe for innovation. Farmers around the world are struggling to make a living, and trusted brands are in a strong position to help them improve sustainability performance throughout the crop-growing life cycle. Map the customer journey. Next, map how customers use your product to accomplish a goal; or, as Clayton Christensen put it, ask yourself, “What is the job customers are hiring your product to do?” Be mindful that your offering is most likely just one among many applying for the job. As you map the customer journey, look beyond your brand and consider that different customers may pursue different brands or even product categories to accomplish the same task. Mahindra’s Agri unit originally focused on selling agricultural equipment to farmers. But to build a nation of champion farmers, it needed to examine exactly how farmers pursued their goal of earning a living and producing healthy crops. It set out to deeply understand farmers’ end-to-end process, from choosing what crops to cultivate and which seeds to use to planting, growing, and harvesting. Mahindra also conducted a comprehensive review of other firms in its competitive set that provide products or services at each step of the farming process. Gauge stakeholders’ impact. With a clear picture of the customer journey, assess customers’, competitors’, and your own sustainability impact at each step. A good approach is to construct a matrix using the United Nations’ 17 Sustainable Development Goals as column headers and each of the customer journey activities as defining rows; then indicate the impact of each activity on each of the development goals. Farming has potential negative impacts related to several SDGs, including water management (goal 6), eroding soil (12), and overusing fertilizer and pesticides (12). Next, identify the stakeholders involved in each activity. For example, farmers use pesticides at a certain stage of the growing process. They may overuse the chemicals, but that may be because the products are of poor quality. If so, both farmers and the supplier contribute to negative sustainability outcomes for that activity. For Mahindra, this suggested an opening for a profitable initiative combining education, equipment, and the better or more thoughtful use of pesticides to improve both sustainability and farmers’ yields. Choose your strategy. The choice of where to play—whether to stay in your existing or an adjacent market or create or move into a new one—will be informed by your analysis of customers’ needs and sustainability gains throughout their journey. The choice between sustainability via purchase or via participation will be informed largely by your analysis of whether customers or other stakeholders are or can be key drivers of sustainability gains. If we consider Mahindra Agri through this lens, we see that adopting a hybridizing strategy checks all the boxes. With Krish-e, Mahindra seized an opportunity to move into new markets with new products while also helping farmers transform their practices. The impact has been dramatic: Krish-e has increased farmers’ yields by up to 15%, cut their costs by 8% to 12%, and increased their profits by as much as $79 per acre. . . . Optimizing brand sustainability strategies is a complex and demanding journey. But by rationalizing each brand’s position and trajectory within the framework, companies will see their sustainable brand initiatives generate increasing environmental, social, and reputational benefits as they enhance competitiveness and business performance.

Moving the Needle on Sustainability

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