Charmaine: The last few years of intense change and challenge have altered how many of us think about and interact with the world. A myriad of environmental, public health, geopolitical, and economic stresses have forced us to reflect on the impact our actions can have on places and people near and far, for better or worse. This shift in mindset is now being mirrored in our shopping habits as these things so often are. For the East Asia and Pacific region, climate change poses a particularly daunting challenge to environmental stability and economic growth. According to the World Bank, the region includes thirteen of the thirty countries most vulnerable to the impacts of climate change. There is a new generation of consumers who expect the brands they shop with to have business models that take looking after the planet and its people into account. One indication of this trend is the fact that 57% of shoppers in Asia Pacific prefer to shop with retailers who stand up for social and environmental causes, according to Adyen's Retail Report. In addition to consumer demands, governments around the world are reinforcing this message by setting ambitious targets to reach net zero in the next few decades. To win and maintain the loyalty of customers and grow a business, ESG, that is environment, social, and governance standards, need to be firmly integrated into a merchant's strategy.
Shalini: By linking ESG commitments to measurable standards and metrics, a company really builds credibility and trust among its stakeholders. The focus on greenwashing or rainbow-washing or purpose-washing, if you like, is a good thing because it actually supports consumers to make choices in line with their values, and it also ensures market integrity.
Charmaine: Welcome to Behind the Figures, the podcast that goes beyond the stats to explore the trends shaping the retail, restaurant, and hospitality sectors, and share expert advice on how to leverage the latest technology and innovation to make the most of it. I'm your host, Charmaine Yee. In this episode, we'll be exploring why merchants need to take sustainability and ESG seriously, and how a greater focus on these issues is changing and enriching the way companies interact with their customers, as well as creating new opportunities to grow. The importance of looking after our environment has been known for a long time, whether it's recycling more of the things we throw away, or thinking twice before printing out a document. As individuals, we have been making an effort to live more sustainably. But taking care of the environment is not just the responsibility of consumers or environmental charities. As Claudia de Pieri Carrazza, Impact Manager at Adyen, explains, there is a greater understanding that if we're going to successfully combat climate change, companies have an incredible capacity to make a difference, and also influence others to do the same.
Claudia: So the world's problems today are so big and so challenging, that I think we've realized that it's not only up to the not-for-profit and governmental sector to be able to be the ones who are creating solutions for these problems. The corporate sector has to also be part of this change. If we look at the world's challenges, we're slowly crawling out of a pandemic and poverty and inequalities are on the rise. And the record of people displaced around the world has just been broken, with now over 100 million people being in a refugee status. And not to mention, of course, the huge issue of climate change, which is intensifying all of these problems. So these are big issues, and the corporate sector is realizing, I think, that they have to be part of the change. The corporate sector has the reach, they have the influence, and they have the means as well to do something about these problems. And while traditional business was all about profit, the view of a successful business has changed and successful businesses these days does doesn't just care about profit, but also looks at people, planet, and of course, purpose. That is the model of a new successful business.
Charmaine: For businesses then, the model and measurement of success is changing. To be successful means taking into account how your brand can positively impact the environment and the community it serves. At the same time, it's clear that customer preferences are also changing. Consumers are increasingly considering the green credentials of the brands they want to be loyal to. For Scott Meneilly, former CEO of restaurant chain, Sushi Sushi, and food franchise experts, Retail Zoo, this is a trend that is here to stay.
Scott: There's been an enormous shift over the last few years in terms of the environment and that push for the environment. And people are talking about carbon neutral in 2050. And it's becoming very common and very real. And I think that consumers are, nowadays, a lot more aware of environmental impacts, and a lot more aware of products and where products are actually coming from, where they're being sourced, how are they being sourced, what is the impact for them, how natural is the product. So there's a real shift in the world about people caring about the world, and protecting the future for their children and others to come. And with consumers, they want to feel good about where they're shopping. So where you're shopping says something about you, your personal brand, your personal philosophies. And if you are going to shop somewhere, you want that to enhance your personal brand and to align with your philosophy. So consumers want to buy from places that are aligned with them, and their thoughts, and beliefs. And people in the corporate world understand that at one point, but we also understand our role in the world. So it's not just about making money, it's about doing the right thing. So your brands are conscious about: Are they using materials that are recycled? Or are they upcycling materials? How long is it going to be sustainable for? Are they engaging with third parties that share the same views and philosophies as they're doing? And you want to create an ecosystem that is all driving forward based on the shared beliefs and the common good of improving the planet.
Charmaine: Consumers in APAC are seeing the brands they shop at as an extension of themselves and an important reflection of their own beliefs. We know that the best brands put the customer experience at the heart of what they do. And that customer experience needs to include demonstrating that your brand takes sustainability seriously.
Scott: You have to look after your brand. And if you are doing negative things to people or planet just for the sake of profit, then your brand is more likely to come under fire. And then if it does come under fire, you're going to get less customers coming through your door, you're going to generate less revenue, less profits, so we're gonna start to go backwards. So everybody that is in profit-making organizations, they're all there to drive profit, to build their business, to continue to grow, to be sustainable. And to do that, you've got to look after your customer base. And if they're all for the environmental piece, or the ESG piece, which is where it's shifted now, that's where your focus needs to be. And a lot of companies are now moving to measuring their triple bottom line, not just their profit line. So it's people, profit, and planet, and making sure that you can measure that against something and see that you are in the black with all three.
Charmaine: It's evident there are strong commercial benefits for brands who take a more sustainable approach to their operations. However, less than 30% of APAC brands visibly support specific social or environmental causes. According to the Adyen Retail Report, businesses who don't take a stand are missing out. Adopting sustainable practices helps the brand build and maintain customer loyalty. And this means it has an increased chance of remaining profitable over the long term. But what does it mean to be a sustainable business? And how do companies begin? Whether you are just starting on your sustainability journey, or your plans are more advanced, Shalini Samuel, Director of Certification and Standards Learning at B Lab, the non-profit network that provides the well known B Corp certification to companies that meet high standards of social and environmental performance, has some advice for brands wanting to develop a sustainable business strategy.
Shalini: I'd say start by listening, listening to what's going on around you before you develop your thinking can be absolutely game changing. By looking at the context you're operating in with fresh eyes, apart from the things you may already know, you will also notice the stakeholder voices you may not have heard before. So you know, start with the housekeeping things like whether there are compliance drivers, regulatory drivers, and then think about whether there are particular stakeholder sensitivities in your context that you need to be newly attuned to. Are there also environmental and social sensitivities in your operating context? So really do a scan of the context in which you're operating and evaluate some of the key issues that might arise. And then there's some decision-making work to do, where you might start articulating your values and your strategy. So what is it that you as a business really care about? Why are you even thinking about sustainability? And what does the strategic approach to measuring your impacts and intentions look like? And then you might want to think about the different management systems that you've got in place as well and how a sustainability strategy would be integrated with existing management systems that you've got. And this way, you'll be able to consider the feasibility of your thinking, what resources you already have, and what dedicated resources you might need as well. And so once you've thought about the context, your vision and your goals, why you're doing this, and you've thought about the interaction with different management systems already in place, you can then really start picking, choosing, and prioritizing what you actually want to measure and manage. There are a lot of different impact management and sustainability reporting frameworks out there, as well as standards and guidelines that can actually provide a suite of indicators that you might want to measure. And as you're testing out the standards that might work for you, that might actually lead you to kind of revisit your context and iterate your goals as well. But bearing in mind also that some industries may have specific industry codes in addition to compliance drivers that might influence your sustainability strategy. So in a nutshell, first, get to know the context you're operating in, hear your stakeholder voices, then articulate your vision and goals, and consider your existing management systems and to pick, choose, and prioritize where you want to invest your energy in measuring and managing your impact.
Charmaine: Some great advice there from B Labs’ Shalini. When assessing B Corp’s certification, B Lab measures companies’ entire social and environmental impact, along with their accountability and transparency performance. Around 5000 companies have B Corp certification, and hundreds of thousands more use their publicly available assessment tool to help build and refine their sustainable strategy. A core part of the B Lab philosophy is having targets that can be used to measure a company's ESG commitments. But are targets useful for companies that are not seeking a formal assessment? And what are the benefits of adopting a structured approach?
Shalini: By linking ESG commitments to measurable standards and metrics, a company really builds credibility and trust among its stakeholders. The focus on greenwashing or rainbow-washing or purpose-washing, if you like, is a good thing, because it actually supports consumers to make choices in line with their values and it also ensures market integrity. Markets are desperately in need of coherence, consistency, and comparability in both ESG as well as impact reporting. The latest benchmark report by the Responsible Investment Association of Australasia shows that the most significant area for improvement for capital providers is in the allocation of capital to benefit stakeholders. Over the long term, consistent and comparable ESG reporting will factor into wiser capital allocation decisions, which will in turn yield positive stakeholder outcomes at scale. Positive stakeholder outcomes will in turn ensure stable operating environments for companies to operate in, so really everyone wins. For companies interested in meeting the needs of multiple stakeholders right now, especially in the face of current environmental, social, and economic challenges. They will also need robust, consistent, and comparable standards and metrics so that they can continuously and holistically manage and improve outcomes and meaningfully engage in changing the economic system for the better.
Charmaine: The transparency brought about by clearly measuring your company's progress and impact will give confidence to your consumers, staff, and investors. Being able to demonstrate authentic ESG efforts helps brands connect with their community, make a difference, and stand out from the competition. One company that has embraced this philosophy is Australian furniture company, Koala. Here's Belinda Judd, Koala’s Director of Group Financial Control, to explain the brand's principles.
Belinda: So the one thing that I do love about Koala is that sustainability and ESG have been part of Koala since day one. So we have built this into our business model, our partnerships with organizations such as WWF, and our commitment to people, planet, and our products, as part of how we do business. So it is built into our economic model. It is built into our plans, we have a true commitment across those three pillars of our sustainability strategy.
Charmaine: However, being sustainable does not mean trying to solve every problem the planet faces. Instead, it's more effective for brands to focus on the areas where they can make the biggest difference.
Belinda: I think as a business, you have to understand what you can reasonably have an impact on. And that's where you start to design your ESG strategy. For example, there are 17 global sustainable development goals for the UN. We've chosen seven or eight at Koala out of those 17 that we actually have an impact on and have a chance to change, build out from there a realistic structure of how you're going to get there. What can you absorb through your business in terms of cost structures, it's really important not just to think about offsetting, and paying for what you're doing, it's about how do you change what you're doing to improve. It's not always about giving the cash. So it's end-to-end design, end of life for products, and you want everyone to be involved. So we have a sustainability champion from every team. We're really passionate about it at Koala. Everybody's getting involved, everyone's understanding how they make an impact in their individual roles, no matter if you are in customer service, finance, and product design, marketing. Everybody knows how they make an impact. We launched our sustainability strategy within the last 12 months for that sort of next to three year view of what we're doing. And it's something that we want to make front-facing to our consumers. We want them to understand what we are doing with our with our products, and what we are doing for the planet, and also for our employees. It's a huge employee value proposition. I think we all know how hard it is to attract and retain good talent at the moment. And it's something that we really lean into. We focus on those three pillars of planet, people, and product. So planet, we look at through our partnerships with WWF. We have been supporting WWF since 2015, we've donated over $4.8 million to charities in total, WWF has been $2.6 million of that. We are helping koalas, we've helped green sea turtles, glossy black cockatoos, and we're really committed to keeping koalas and getting koalas off that endangered list by 2030. We also remember 1% for the planet. So we support 1% for the planet, which means we give away 1% of our gross sales annually for the good of the planet, people, and animals. And it's a really important partnership and we're so proud that we're a member. In terms of our product pillar of our sustainability strategy, we're in a really unique and a great position here where we design all of our products in Australia. We've got a local design team that has ESG at the forefront of what they do. So we are working with organizations such as FSC to find sustainable timber for our products. We've just released a rug that's made out of reclaimed plastic bottles. We are looking at alternative fabrics, we've released a cork sofa previously. We're looking at different alternatives too, that are much more sustainable, not only from the point of where we putting them into our products, but through that entire lifecycle. We are working towards a goal of circularity with our products. We are also proud to be B Corp certified, we stick to the highest social and environmental standards. We're pretty stoked to be part of a group of companies working towards being a more inclusive and sustainable economy.
Charmaine: Caring more about the planet is an idea that unites people all over the world. In Asia Pacific, we are seeing consumers take this topic more seriously with 60% of shoppers refusing to shop at a retailer if they are aware of ethical issues within their supply chain, such as allegations of poor working conditions. More than half prefer retailers that track and/or mitigate their social and environmental impact. Consumers around the world are taking environmental, social, and governance concerns more seriously. But like other areas of the customer experience, companies need to consider local culture and preference when expanding their sustainability efforts beyond their home market.
Belinda: So when we launched in Australia, something such as sustainability and commitment to the planet was absolutely forefront as part of our brand. So we've had a partnership with WWF from very early on and it was something that obviously with the name of “Koala” was something that really resonated with our consumers. So this we naturally then launched in Japan, with a really similar offering, ecommerce only through our own website direct to consumer. We've got these great partnerships with nature, with people, planet. That didn't work out as well as it did in Australia or needed some modifications. So what we've seen in Japan, there's a slightly different view on that ecommerce shopping experience and we are constantly doing A/B testing with changing our site to make the navigation a little bit more logical for that Japanese consumer, which is different to how the Australian consumer likes to use the site. We've also learned a different way of talking about sustainability. So leaning into local WWF projects or leaning into things inside that local Japanese community, which are still aligned with our values, but slightly different to what we're doing here.
Charmaine: Getting customers involved in the causes your brand cares about is an important part of any sustainability plan. As we've seen, consumers have been a huge catalyst for change, and want to spend time with brands that take care of people and the planet seriously. Whether it's offsetting the carbon footprint of food packaging or supporting a local children's charity, by keeping customers engaged in your sustainability initiatives is another way for merchants to create a long-lasting relationship with their customers. And here to share how merchants can get customers involved in the causes your business cares about is Adyen’s Impact Manager, Claudia de Pieri Carrazza.
Claudia: So Adyen's philosophy of making an impact is through leveraging our technology. And we look at how we can leverage our technology to help our customers with their own CSR strategies. We do this through our Impact product, which enables our customers to add in a donation or a contribution to a climate action project into their checkout process. Now, we've seen big success with this product. And namely, because while adding in a donation in checkout is not a new feature, of course, we've done it in a way that we feel can be adopted at scale. And we do that by lowering the barriers for our customers, making sure that it doesn't have any impact on their business operations, making sure that there are no fees associated with this product. And giving them the flexibility as well to choose the charities which they would like to support. Some of our customers are really mature in the charity partnerships that they have and are very mature, having these partnerships sometimes for over decades, and others are just starting out in their CSR journey. And they're working on making their supply chains more sustainable, for example, and they're really busy with that. And that's a priority, which is understandable. And these organizations haven't yet focused on expanding the partnerships outside of their organization.
Charmaine: Adyen's Impact product is also constantly evolving, to meet changing customer needs, and the desire to create more opportunities for people to support the causes that matter to them the most.
Claudia: We decided to create Moments that Matter, and Moments that Matter was born due to the overwhelming demand that our merchants had when the Ukraine war broke out. Our merchants were coming to us and saying what we want, we want to do something and we want to do it quickly. And we were then up and running within two days with our first campaign or our first appeal with UNHCR, which is the UN Refugee Agency. And we were able to facilitate this global partnership on behalf of our merchants. We saw that there was an appetite from our customer base that they like to either respond quickly in moments of crisis. But also there are points in the year where giving is heightened, so for example, the holiday season or during different awareness days, so you'll have Earth Day or International Women's Day. And we want to even further lower the barriers for our merchants to do something in these times because often priority can be on business practices. So if we can ensure that our merchants don't have to worry about facilitating a charity partnership, we can do that for them. And we can also create the story of which they can then join in on and in solidarity, we can create a lot of impact. With the UNHCR campaign for Ukraine, we've already raised two and a half million euros through the product of which Adyen is doubling. Because with Moments that Matter, we will double dollar for dollar, to ensure that there is the most impact possible. What's exciting me the most in this space, is the sheer scale of which these initiatives can be applied. If you think that every single transaction that is happening around the world would equate in a donation for a good cause, think about how much money that we could facilitate or that could be facilitated towards the Sustainable Development Goals. You have the ability potentially to tap into this epic amount of fundraising through such a simple action. Consumers shopping, they're already buying something for themselves or for a loved one. And adding on a contribution to a good cause is such a small action but can equate in such a big impact.
Charmaine: That final message from Claudia is a really important one. Small steps can make a big change. And that's true, whether you're a customer adding a charity donation when you settle a bill or a brand taking its first steps to have a more positive impact on the planet. So wherever you are on your sustainability journey, we hope you've enjoyed this episode of Behind the Figures, and don't forget to go where you listen to your podcasts to check out our other episodes.