The summer of 2022 is one of the hottest on record for multiple locations. Extreme weather events are occurring with increasing frequency. People are becoming more aware of the encroaching dangers of climate change by simply stepping outside.
To that end, executives at product companies are in the hot seat. With the future at stake, building a sustainable product cycle is no longer a vague aspirational value—it’s a tangible necessity.
Climate impact has become an increasingly prevalent factor influencing the spending habits of consumers. Can you begin by talking a bit about this growing trend?
ERIC: This started in the late ‘80s when the United Nations published an article called “Our Common Future” — an encouraging development for the sustainability cause. More and more consumers started to exercise their voice, whereas previously it had only been smaller pockets of society.
By the ‘90s, consumers were boycotting McDonald's for their use of styrofoam clamshell packaging—and that pressure prompted McDonald’s to switch over to paper-based packaging.
Fast forward to today and you have certifying bodies that are governing both green and sustainable product claims. There’s now consumer awareness and deep demand for those sustainable products. And that only continues to grow.
RAY: We've seen other mandates along the way with environmental compliance, for instance, restricted hazardous substances (RoHS) and waste of electronic equipment that came up in the early and mid-2000s. These two initiatives were focused on getting cancer-causing materials out of the products (e.g. lead, cadmium, mercury, etc.) and how to properly dispose of and recycle electronics (e.g. batteries, laptops, and cell phones).
But this is a bigger, different problem because that was focused on things that were within our control, and climate change is not as easily controlled by what products get built with what components.
Today, you've got the Net Zero Coalition with the UN trying to reduce greenhouse emissions as close to zero as possible by 2030. And other countries have made stronger commitments to Net Zero by 2050, like France, Denmark, Spain, Hungary, Luxembourg, and so forth. They're passing laws to drive and support the mandates now.
At the end of the day, while brands and companies are trying to be socially responsible, it's gonna take the combination of brands, companies, and country mandates, such as fines and other things at an economic level, that will make climate-friendly policies a reality versus being aspirational.
What are some ways your own consumer habits changed in the past few years in an effort to be more climate-friendly?
ERIC: We've all adopted key habits into our daily routines. For example, there are some simple things that I do such as avoiding single-use plastic bottles or bringing reusable bags to the grocery store.
I’d also mention the advent of electronics recycling. It’s no longer just cell phone manufacturers that are doing this, but other companies, too, that are helping provide more value in recycling different products. I've certainly used all those services.
RAY: At a consumer level, I look at each product individually. If I have choices between brand A and brand B, and I do a little research and I find that one of them fits more of my commitment to zero carbon, or they're more socially responsible, I'll typically go with that brand and even pay a “little bit” more to save the planet.
What are some examples you've seen of product companies evolving their business processes to address their climate impact?
ERIC: A couple of the major areas of evolution I have seen are 1) simplification of packaging and 2) designing for recycling or a circular economy. Building on what Ray mentioned about cell phone recyclability, almost all mobile phone manufacturers today have some sort of buyback program or recycle program, and that's become a part of their business model now.
These programs tend to be a win-win for the consumer because they’re able to see value for their act of recycling by incorporating those products back into the circular economy.
RAY: To build on the point Eric's making about packaging and delivery, people are looking at “whole flows”—meaning the whole flow of how a product goes through manufacturers. So, for example, are the manufacturers they're using in their supply chain focusing on net zero carbon? Is there any waste along the logistics path? And, of course, sustainable packaging design is key.
One barrier to successful implementation of the net-zero goals is consumer adoption and willingness to pay more to save the planet. During his keynote for Propulsion 2022, Alex Garden, Chairman and CEO at Zume, said:
“As much as people want to do the right thing and know they have to, they're not in a position to pay a premium. That's why it's so important that technology provides products at comparable prices that happen to have the side effect that they're better for the environment.”
RAY: Related to Eric's example of the McDonald's styrofoam box, the output of the products that Zume makes today is packaging for food, medical devices, and lots of other different applications.
When it comes to making choices about products—whether you're a Gen Z, Millennial, or Baby Boomer like me— we're all well aware of the reality of global climate change.
I agree with what Alex Garden pointed out about products needing to be both sustainable and provide more value to succeed. Without a better product and more capabilities consumers aren't going to pay for the premium. Generally speaking, to buy a more environmentally friendly product, there are limits to the reasonableness of what people will pay. Almost akin to what I would say is a “global climate change tax” on top of what they're already paying for the product.
Plus, we’re seeing inflation. So everybody's wallets are being hit hard.
For us to manage our way through this, it's going to be incumbent for companies—to Eric's point—to design sustainability through that whole flow of their product.
How do subscription-based product models help a company have a more sustainable supply chain?
ERIC: A key part of the subscription product economy is that it centers around the lifetime value of a customer. It is not solely determined by creating a product with planned obsolescence—as in having to plan for the next version and the next version, etcetera.
Having a longer-lasting product means you're able to deliver ongoing customer experiences, which create a better value for your customer and a better value for you. Such subscription services also have a higher margin, so it is truly a win-win for both product companies and consumers.
Propel’s partner, Silicon Expert is leading the charge for environmental data management and compliance. What are some of the benefits enterprise users would gain from integrating this kind of data directly into their product lifecycle management and quality management platforms?
ERIC: With respect to environmental concerns, Silicon Expert is aggregating environmental compliance data for certain markets so that, as products are designed, they'll meet specific local requirements from the start. Moreover, it helps customers be proactive as supply chain availability changes and also helps them identify new equivalents when they become available.
RAY: Propel customers have all of that attribution from the Silicon Expert integration—plus, cost information as well. The platform’s ability to indicate the complete cost at any particular revision in real-time is going to help companies make sure that—as they design to be more environmentally compliant—they understand the cost impact of doing so.
When it comes to commercialization, how can becoming more environmentally compliant help product companies reach more markets?
ERIC: As companies are designing their product and selecting components, they can no longer just consider cost or function, they must also incorporate regulatory requirements. Doing so ensures their product can be sold in certain targeted geographic markets.
If you don't meet those requirements, you're somewhat locked out of those markets, or else there may be penalties or fines. You’d be effectively impacting the potential revenue of the company overall.
RAY: We saw this back in the early 2000s when the original restricted hazardous substance (RoHS) became a mandate. If I recall the story correctly, when Sony built their PlayStation, it wasn't environmentally compliant as it included some restricted substances. And right around the Christmas timeframe, it was being launched and shipped and was trying to go into Great Britain. And they got rejected at the port and turned around. They weren't able to deliver those products because they didn't meet the country’s regulations.
Earlier we talked about Net Zero by 2050 with France, Denmark, Spain, and other countries—they’ll start adopting threshold mandates for products meeting carbon neutral or net zero standards. And those countries will start turning brands and products away and won't allow them to be sold there if they fail to meet the standards.
But for now, without those mandates, it's on the brands themselves to be good stewards of their market.
For more actionable advice on supply chain sustainability, we recently chatted with Kevin O’Marah, co-founder of Zero100, who details a new way of thinking in the session: “Reaching Carbon Zero and Supply Chain Balance.”