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Businesses Are Facing a New Reality. These Are the Ones That Are Succeeding.

They’re taking responsibility for their effect on people and the environment.

By Peter Lacy
View the original article here.

Astrid Stawiarz Getty Images for UN Global Compact

Astrid Stawiarz Getty Images for UN Global Compact

Evidence is mounting to show that the frequency and ferocity of extreme weather events is intensifying on a global scale. From severe droughts to powerful storms, we are living in an increasingly changeable, uncertain, and unpredictable world.

You don’t have to believe in climate change to accept this new reality. Resilience and the ability to manage challenges impacting us and our environment are of far greater importance to both business and society. Take the recent destructive hurricanes in the U.S. and the Caribbean, or the devastating floods in Nepal, India, and Bangladesh that represent a stark example of this new reality and of our growing vulnerability.

The role of business within this new reality is changing. Businesses have a critical role to play in helping solve the challenges we face through providing services and solutions that support society. In fact, businesses that do not adapt their models run the risk of eroding trust and ultimately, forfeiting customer loyalty.

Uncertainty in the world—from extreme events, to declining natural resources, to the changing skills required for employment—gives forward-thinking C-suite leaders an opportunity to adopt conscious capitalism through the incorporation of key elements like trust, collaboration, and stakeholder orientation into day-to-day business practices. And, as consumers increasingly demand that their brands reflect these objectives, companies that want to remain competitive will need to adapt by joining the circular economy.

At its most basic, the circular economy replaces the current wasteful linear economic model. Instead of organizations relying on finite resources, they conduct sustainable business. They find renewable resources. They remove waste at every stage, from sourcing to recycling—creating a business model that restores and regenerates, rather than depletes and throws away. They look at how products are made, who makes them, and where, as well as how those same products are recycled or sustainably retired. In fact, adopting a circular economy model is not simply about products and services but also the way we do business as companies. It presents an opportunity to move beyond simply meeting sustainability standards to a solution that transforms the current model of business and one that can create a competitive advantage for the leaders.

Leading companies are still innovating, but now in a way that takes responsibility for their effect on people, the environment, and the state of our world. And they have realized that—contrary to popular belief—doing so can still be profitable. Accenture research shows a potential $4.5 trillion reward for achieving sustainable businesses by 2030. And a number of companies are already making progress toward this aim.

Rubicon Global, for instance, a pioneering U.S.-based waste management company that connects customers directly with independent waste haulers, is disrupting the current waste disposal model to reduce waste to landfill, while passing on $1 million in savings to its clients across 80,000 locations.

Nike, another leading example, is rapidly transitioning toward its closed-loop vision with a bold target for FY2020: zero waste from contract footwear manufacturing going to landfill or incineration without energy recovery. To date, 70% of all Nike (NKE, -0.43%) footwear and apparel incorporates recycled materials, using 29 high-performance, closed-loop materials made from factory scraps.

As the circular economy and conscious capitalism take hold, the C-suite is taking note: 64% of UN Global Compact CEOs say sustainability issues play a central role in their strategic planning and business development, while 59% of CEOs report that their company can accurately quantify the business value created through their sustainability initiatives, up from 38% in 2013.

The circular economy, a critical aspect of this change, is already happening—so much so that the World Economic Forum Young Global Leaders, in collaboration with Accenture Strategy and in partnership with Fortune, recognize leaders through The Circulars, the world’s leading circular economy award program. The Circulars, presented each year at the World Economic Forum Annual Meeting in Davos, attracts entries from individuals and organizations across business and civil society, from global giants such as Unilever to innovative startups such as Method. A winner at The Circulars in 2015, Method was built on wholly circular and sustainable principles, ensuring 75% of its products are cradle-to-cradle certified, meaning they are designed and produced in a socially and environmentally responsible way. Method has eliminated countless toxic chemicals from homes by using natural inputs.

These are just a few examples of organizations driving value through circular economy innovation—there are many more. In a world in which conscious capitalism is becoming mainstream, the circular economy has a significant role to play in enabling businesses to make the transition whilst continuing to deliver value to customers, shareholders, and society. As more businesses take the lead, the opportunity that the circular economy represents will become a reality.

Green Is the New Black: Levi’s, Nike Among Marketers Pushing Sustainability

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Responding to a consumer behavior shift By Joan Voight

Levi’s boasts of designer jeans made out of used plastic bottles. Nike tempts runners with knitted sneakers that it claims cut manufacturing waste by 88 percent. These products may be the tip of a marketing iceberg, as new research shows a growing pool of global consumers are demanding that mainstream brands be sustainable.

“It’s not about offering a niche green product,” said Jonathan Kirby, vp of global men’s design for Levi Strauss. “We’re working to build sustainability into everything—from the cotton fields to our supply chain, to our stores, to our designs across product lines.”

Case in point: Each pair of Levi’s Waste<Less collection of jeans, launched in Spring 2012, is made from about eight recycled plastic bottles, Kirby said.

Nike takes a similar approach with the FlyKnit shoes it debuted last year, which are marketed as a high-tech advancement using yarn instead of leather uppers for a better fit and a reduction in waste. “FlyKnit is a great example of our innovation and commitment to products and services that are better for athletes, our planet and our investors,” said a company rep. “We’ve seen a strong response from runners and it’s safe to say it’s going to be a big [sales] year for FlyKnit.”

Numbers confirm that shoppers are increasingly seeing green. More than a third of global consumers, including 40 percent of millennials, view style, status and environmentalism as intertwined, per a 2013 survey by brand consultancy BBMG. These consumers love shopping and overwhelmingly desire responsible consumption. “For them, sustainability has changed from being ‘the right thing to do’ to being ‘the cool thing to do,’” said Raphael Bemporad, BBMG’s chief strategy officer.

Target is tapping into the trend with its “Sustainable Product Standard,” unveiled earlier this month. Household cleaners, beauty and baby products that pass the standard will be advertised with the “Choose Well” designation and get unique product placement, said a company rep. “This new standard is a first step toward sustainable innovation in our full product assortment,” she said.

In contrast, consumer goods companies like Unilever, Johnson & Johnson and Procter & Gamble are playing catch-up, with green initiatives focused mainly on the supply chain, said Bemporad.

J&J, for instance, recognizes 34 of its consumer items as sustainable through an in-house “Earthwards” evaluation, which includes R&D, marketing and the supply chain. The plan is for “marketing to leverage Earthwards’ claims for brands, such as Neutrogena and Johnson’s, in ways that relate to the products’ core benefits,” said Paulette Frank, vp of sustainability for Johnson & Johnson Consumer Companies. “We’re still learning how to communicate and engage with consumers on our product sustainability improvements,” she added.

But the CPG giants risk becoming outdated as green design and marketing become the new normal in their categories. “It’s the ratchet effect,” said Nigel Hollis, chief global analyst at brand consultancy Millward Brown. “Look at the way Method spurred Clorox to launch the Green Works products. Once one brand in a category incorporates sustainability in a way that benefits the consumer at a fair price, it is tough for competitors not to respond in kind.”