Sustainability

Strategic innovation in fashion: Master students enhance H&M group’s sustainability path and competitive edge

Business strategy, Circular economy, Sustainability, Technology /

Disclaimer: This article is based on case studies chosen by Catherine Schoendorff during her July 2024 class at Harbour Space University Barcelona. The insights presented are derived from analyzing H&M Group’s 2023 annual and sustainability report. The students did not engage directly with H&M or its representatives. The course aimed to foster entrepreneurial thinking, understand CEO decision-making, lead change, and highlight pathways for business model innovation that meshes sustainability and digital business transformation. In a world where fashion trends come and go, the need to blend digital business transformation with sustainability remains constant. Imagine a group of visionary Master’s students stepping into the shoes of industry giants like H&M, armed with fresh ideas and innovative strategies to revolutionize fashion. This isn’t just an academic exercise—it’s a blueprint for a regenerative, more circular future. Figure 1: H&M Group’s Circular Customer Journey (Source: Annual and Sustainability Report 2023, page 22) Sustainability is a critical priority for several reasons. It is essential for regulatory compliance, which serves as a business’s license to operate. Mostly compliance drove sustainability efforts. However, it’s time for senior leaders to embed sustainability as a core element of entrepreneurial thinking and business vision. This ensures regulatory compliance, propels the company to its next exciting chapters, and shields against business models that exploit resources without regard for social and environmental impact. The challenge – reimagining a fashion giant H&M Group, a global fashion powerhouse with over 5,000 stores in 70 countries, has set an ambitious goal to become 100% circular and climate-positive by 2040. For instance, H&M collaborates with Canvaloop, an India-based startup that converts agricultural waste into eco-friendly fibers. This collaboration exemplifies H&M’s commitment to reducing carbon emissions and promoting sustainability in the fashion industry. Figure 2: www.canvaloop.com/fibres  H&M’s 80% stake in Sellpy, a second-hand fashion leader, demonstrates a commitment to circular fashion, with over 20 million items resold across 24 markets. While this aligns with H&M’s sustainability goals, it contrasts with the ongoing promotion of hyper-fast fashion. The challenge ahead lies in reconciling these efforts—ensuring that circular initiatives aren’t overshadowed by the pace of fast fashion, but rather integrated to build a truly sustainable business model. But how does a company of this scale transform its operations to accelerate its 2040 target and create a unique competitive edge, especially with pressure from competitors like SHEIN? The students were tasked with reimagining H&M’s sustainability strategy, focusing on denim jeans—one of fashion’s most iconic items. They aimed to augment H&M’s strategy with fresh, innovative ideas and conceive new revenue streams using restorative and regenerative models. A structured approach to transformation: innovating through circular efficiency For this purpose, a comprehensive playbook was designed to enhance sustainability while uncovering new revenue streams and collaborative opportunities. This approach addresses current sustainability challenges and paves the way for innovative business models. The playbook ensures a seamless transition from the normative-strategic layer to the strategic-operational layer and back, enabling a new company vision, mission, and purpose: Comprehensive report analysis: Examine the company’s latest annual and sustainability reports with multiple AI tools to establish a baseline for current practices, goals, and areas for improvement. Product line focus: Select a specific product line as a starting point. The students concentrated on denim jeans, creating scalable solutions for quick implementation. Business Model Canvas mapping: Capture existing key activities, resources, and partners for the chosen product line (value proposition). Circular economy integration: Apply circular economy principles to key activities and resources, focusing on the 7Rs framework (Reduce, Reuse, Recycle, Recover, Redesign, Remanufacture, and Repurpose) and reverse logistics. Propose changes to the existing business model, such as increasing the use of recycled materials and implementing take-back schemes. Business model adaptation: Work on changing and adopting new key activities, resources, and partners for the changed value proposition. The aim is to identify areas where sustainability leads to groundbreaking solutions through collaborative innovation and create additional revenue streams. Strategic alignment: Use tools like e.g. the Ecosystemizer strategy map to ensure proposed innovations align with the company’s broader market strategies and long-term goals. Figure 3: Adapted Degenerative – Regenerative Spectrum 7. Impact assessment: During the entire playbook process, evaluate the restorative and regenerative process on the degenerative – regenerative spectrum. 8. Implementation planning: Evaluate ERP solutions that integrate circular business models. 9. Scalability planning: In the next step, develop a roadmap for scaling successful initiatives across other product lines or the entire business This playbook challenged students to see where they truly are on the degenerative – regenerative spectrum to propose transformative changes for H&M’s sustainability strategy. Innovative collaborations: pioneering sustainable solutions A key element in H&M’s case was the analysis of a potential collaboration between H&M, IKEA, and a startup called FAB.Brick. This partnership would take the concept of textile recycling a step further by repurposing unsold products into bricks for furniture, creating a closed-loop system that benefits multiple companies while reducing waste.  Figure 4: FAB.Brick offers a range of innovative products made from recycled textile waste. Pictures publicly available by FAB.Brick. FAB.Brick is recognized for its innovative approach to transforming textile waste into durable construction materials. By partnering with this startup, H&M and IKEA could leverage their existing collaboration focused on recycled textiles, which has already led to significant advancements in understanding the chemical content of post-consumer textiles. This approach goes beyond a joint industry study, initiated in 2019 (Textile Exchange Sustainability Conference), that aims to increase the utilization of recycled materials while ensuring safety and compliance with environmental standards The collaboration with FAB.Brick aligns seamlessly with H&M and IKEA’s commitment to sustainability and their goal of using 100% recycled or sustainably sourced materials by 2030. By integrating FAB.Brick’s expertise in waste transformation, the partnership could not only address the issue of unsold inventory but also contribute to the development of sustainable furniture products, which could be also used by H&M and IKEA for some of their store concepts. While SHEIN’s model is based on speed, variety, and low costs, H&M’s strategy emphasizes integrating sustainability with strategic growth, while raising

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How partnership ecosystems drive greater value through collaborative innovation and synergy

Business strategy, Consulting, Ecosystems, Sustainability, Team collaboration, Technology /

In today’s fast-paced and interconnected world, workplace dynamics are shifting significantly. While competition has traditionally driven innovation and growth, an increasing number of companies are finding value in fostering a more collaborative environment. This blog explores why this shift is happening and how it benefits companies, their employees, their clients, and others. The Shift to Collaborative Practices Changes in global markets and technology have necessitated a more collaborative approach in workplaces. For example, the rise of cross-functional teams across different geographical locations has made collaboration essential. Companies like Google have led the way, showing that collaborative organizations can innovate much faster. Ecosystem Partnerships: Extending Collaboration Beyond Company Boundaries In addition to fostering internal collaboration, many companies are now engaging in ecosystem partnerships. These ecosystems involve multiple organizations working together to create and capture more value collectively than they could individually.  Partnerships can include joint ventures, strategic alliances, and beyond that include various forms of cooperation across industries and sectors. The power of these networks lies in their ability to combine diverse strengths and resources, driving innovation and efficiency. For example, tech companies often partner with academic institutions to leverage cutting-edge research, while retail giants collaborate with logistics firms to optimize supply chain management. Example: Starbucks and Spotify A notable example of a successful partnership is the collaboration between Starbucks and Spotify. In 2015, these companies partnered to enhance the customer experience in Starbucks stores by integrating Spotify’s music streaming service. This allowed Starbucks to create unique playlists for customers while providing Spotify exposure to Starbucks’ extensive customer base. The collaboration improved the customer experience and drove engagement for both companies. Starbucks baristas could influence in-store music, enhancing their work environment and customer interactions. Meanwhile, Spotify benefited from increased brand visibility and new subscribers among Starbucks customers. To understand this collaboration, it’s essential to differentiate between strategic partnerships and ecosystems. A strategic partnership is a formal agreement between organizations to pursue common objectives while remaining independent. These partnerships leverage strengths to gain a competitive edge, enter new markets, or enhance offerings. On the other hand, an ecosystem is a network of interconnected organizations collaborating to create additional value. Ecosystems foster a collaborative environment that benefits from shared resources and innovation. Sometimes, strategic partnerships influence ecosystems, creating a synergistic effect that benefits all participants. This can happen when the partnership drives innovation by combining expertise, expands reach by leveraging each other’s markets and customer bases, or enhances value by offering better propositions to all participants. In the case of Starbucks and Spotify, their partnership evolved into an ecosystem influence by driving customer engagement with integrated music, allowing baristas to improve their work environment and customer interactions. Additionally, Spotify accessed Starbucks’ customers, boosting visibility and subscribers. This cross-industry partnership exemplifies how strategic collaborations can evolve into influential ecosystems, benefiting all involved. This cross-industry collaboration entices all parties to think laterally, allowing new manners of leveraging resources for innovation and cooperation; or in some cases, coopetition. Benefits of Ecosystems Over Traditional Partnerships While partnerships in terms of joint ventures or alliances bring relatively short-term benefits to two companies, ecosystems go beyond this. An ecosystem is a network of partners and are long-term relationships, providing value for multiple parties. These parties collaborate within or outside of their industries to create value on a larger scale. Governance in Ecosystems Successful partnership ecosystems require careful governance. With governance, we aim to address questions such as who has access to what information? Who creates value, and who captures value? What is the level of openness? How do you regulate behavior, and assign roles and responsibilities? What are the rules for data ownership? How is the created value distributed among the ecosystem partners? And so on. Companies need to establish clear communication channels, define mutual goals, and create mechanisms for resolving conflicts. Important governance mechanisms include determining who has access to what information, who has decision rights, and how partners are curated. Effective data management is also critical. More details on governance can be found in resources like BCG’s publication on managing business ecosystems. Benefits of Embracing Collaboration When diverse minds work together, the potential for innovation increases exponentially, leading to broader market reach, increased innovation capabilities, access to new expertise, sharing knowledge, and more. Collaboration also helps in pooling resources and talents, which reduces redundancies and increases efficiency. This not only cuts costs but also speeds up the execution of projects. A collaborative environment tends to be more supportive, leading to higher job satisfaction and lower turnover rates. According to a Gallup poll, 85% of employees reported higher job satisfaction in collaborative settings. Additionally, collaboration brings different perspectives together, which is crucial in solving complex problems. A study by Stanford University demonstrated that teams solving problems collaboratively stick to their tasks 64% longer than their solo counterparts. Challenges to Implementing Collaborative Structures Introducing a collaborative culture in a traditionally competitive environment is not without challenges. These include resistance to change, the silo mentality among departments, and communication barriers. Overcoming these obstacles often requires significant changes in corporate culture and leadership strategies. To achieve growth beyond organizational boundaries, it’s essential to cultivate a mindset ready to embrace an ecosystem approach. To achieve growth beyond organizational boundaries, it’s essential to cultivate a mindset ready to embrace an ecosystem approach. Without this mindset, expanding value outside current limits becomes challenging. Therefore, the first step is to engage leadership in discussions about the benefits of operating within an ecosystem and to encourage the adoption of this perspective throughout the organization. Curious about getting started, or seeking growth within a current ecosystem? Reach out to The Value Department below!

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Dynamic shifts in the consulting world: from tech integration to evolving focus and new work practices

Consulting, Sustainability, Team collaboration, Technology /

Consulting has long been the backbone for businesses seeking strategic and operational guidance. Traditionally focused on offering advice on management and strategy, the consulting field has seen a radical transformation in recent years, adapting to a rapidly changing business environment. The New Frontiers in Consulting Consulting isn’t just about boardroom strategies anymore. Today, it encompasses a wide range of technologies and disciplines, reflecting the complex challenges modern businesses face. Embracing Technology and Digital Know-How In today’s digital-first world, staying ahead means staying up-to-date. Companies are not just looking to adopt new technologies; they want to fundamentally change how they operate. This is where consultants come in, bringing expertise in the latest technologies to help businesses streamline operations and stay competitive. From integrating advanced data analytics tools to implementing comprehensive digital platforms, consultants are more tech-savvy than ever, guiding companies through their digital transformation journeys. Generative AI and Digital Transformation There’s an increased focus on integrating generative AI into consulting services. This technology is not only enhancing the analytical capabilities of consultants but also revolutionizing client interactions and service offerings. Additionally, there’s a strong demand for digital transformation consulting as companies seek to leverage new technologies to improve efficiency and competitiveness.  Independent and Gig Economy Growth The consulting landscape is seeing a shift towards more independent and freelance consultants. This change is influenced by the growing gig economy and the flexibility it offers both consultants and their clients. More companies are willing to hire external consultants on a project basis, which allows them to manage costs effectively while accessing specialized skills. Data-Driven Decision-Making Utilizing data analytics for decision-making continues to be a crucial trend. Consultants who can provide data-driven insights and recommendations are in high demand, as businesses look to navigate increasingly complex market dynamics and make informed strategic decisions. Increased Use of Artificial Intelligence (AI) AI is becoming more prevalent in consulting for automating processes, enhancing decision-making, and providing deeper insights. Consultants are leveraging AI to offer smarter, more efficient, and accurate recommendations. This includes everything from predictive analytics to natural language processing tools that help in processing large volumes of data more effectively. Changes in the Focus of Consulting Specialization and niche expertise have become paramount as businesses seek tailored advice in areas such as AI and ESG. There’s a notable shift towards purpose-driven consulting, where consultants help companies align their strategies with broader social goals, reflecting a deeper change in corporate ethos. On top of this, the emphasis on ESG (Environmental, Social, and Governance) consulting highlights the growing importance of sustainability and ethical operations, driven by regulatory requirements and public scrutiny. Specialization and Niche Expertise: As the business environment grows more complex, there’s a rising demand for consultants who specialize in specific industries or functions. This trend is driving consulting firms to offer more tailored services and expertise, particularly in areas like AI, machine learning, sustainability, and hybrid work models, as clients value consultants who have a strong grasp of their industry’s nuances, which can lead to more insightful and actionable recommendations. Purpose-Driven Consulting: Companies are increasingly expected to operate in a way that aligns with their stated missions and values. This has led to a rise in purpose-driven consulting, where consulting services are not just focused on profitability but also on achieving broader social goals. This trend reflects a deeper change in how businesses view their roles in society and necessitates consultants to help companies align their strategies with their values. Focus on ESG (Environmental, Social, and Governance): There’s a growing market for consulting services that help companies improve their ESG strategies. This trend is driven by increasing regulatory requirements and a stronger public focus on corporate responsibility. Consultants are expected to guide businesses in enhancing their sustainability practices, ethical operations, and governance structures. This shift is not just about avoiding risks or complying with regulations; it’s about helping businesses become better corporate citizens and leaders in sustainability. A Shift in the Way of Working Consulting firms are experiencing a significant shift in their way of working, marked by several trends. There’s a notable emphasis on results and ROI, compelling consultants to showcase the tangible impact of their interventions. Additionally, the rise of remote and hybrid work models is reshaping the traditional way of working, with clients embracing the convenience and flexibility offered by hybrid and virtual engagements. Lastly, the increased integration of Artificial Intelligence (AI) is revolutionizing consulting processes, empowering consultants to deliver smarter insights and more efficient solutions through automation and data-driven decision-making tools. Emphasis on Results and ROI: Consulting firms are now more than ever expected to demonstrate the tangible impact of their interventions. There’s a heightened focus on results-driven consulting, where the success of projects is measured in clear ROI terms, encouraging a more accountable and performance-oriented consulting practice. Remote and Hybrid Work Models The shift towards remote and hybrid work continues to influence consulting practices. Clients are increasingly comfortable with remote consulting services, which reduces the need for travel and allows for more flexible engagements. This trend is changing the traditional consulting model, where face-to-face interactions were the norm. Increased Day-to-Day Use of Artificial Intelligence (AI) AI is becoming more prevalent in consulting for automating processes, enhancing decision-making, and providing deeper insights. Consultants are leveraging AI to offer smarter, more efficient, and accurate recommendations. This includes everything from predictive analytics to natural language processing tools that help in processing large volumes of data more effectively. Evolution Over the Years These trends mark a substantial shift from the consulting practices in the past which primarily focused on cost-cutting and efficiency. Today, the role of a consultant is more dynamic, involved, and intertwined with the success of a company in the digital age and beyond. As businesses navigate more complex landscapes and stakeholder expectations, consultants have become indispensable partners in their growth and transformation journeys. At The Value Department, we’ve observed these shifts in the industry. As more and more of our clients face increasingly complex challenges, our approach has evolved to meet these new demands with innovation and a keen focus on

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“Waste + Information = Resource” How digital technologies like blockchain fuel the circular economy

Blockchain, Business models, Circular economy, Sustainability, Technology /

In a world increasingly conscious of its environmental footprint, the potential of digital technologies in driving the circular economy is a topic of great interest at The Value Department. This topic was the focus of a presentation delivered by Fleur Boos and Bob Gravestijn at #TheNTWKSummit23. Let’s first give some meaning to the buzzwords! View our presentation here! What is the circular economy and what do we mean by a sustainable approach? A circular economy is centered on the idea of resources being kept as long as possible within the economic system. Materials that have undergone an entire lifecycle, from production to end-stage, are returned to the economic system as an input.   A sustainable approach that focuses on minimizing waste and maximizing resource efficiency through a closed-loop ecosystem How can blockchain help the circular economy? Digital technologies can play a significant role in promoting this circular economy. For instance, Blockchain enables a central, immutable ledger of transactions, bringing higher levels of transparency across the supply chain, ensuring traceability, ethical sourcing, and more effective material flows. The technology is composed of several layers, including the application layer, aggregation layer, asset layer, and consensus layer, each playing a crucial role in its functionality. Combining those: Waste + information = Resource.  And this is not only theory or future dreaming, several organizations are already leveraging blockchain to support the circular economy. For instance, Lockheed Martin enhances supply chain management and aerospace manufacturing processes using blockchain technology. Similarly, Tex-Tracer with Fujitsu technology utilizes blockchain technology to enhance the traceability and transparency of textile supply chains, promoting sustainability and ethical practices in the textile industry. In addition, IBM Food Trust leverages blockchain for transparency and traceability in the food supply chain to improve food safety and reduce waste.   Other examples include Plastic Bank, which incentivizes plastic waste collection using digital tokens and blockchain technology for recycling and job creation, and Circulor, which uses blockchain technology to track materials and products’ lifecycles, improving social and environmental standards. Or Gainforest.app employs blockchain technology to monitor, report, and verify reforestation and conservation efforts for sustainable land management. And many more examples are out there – contact us to get introductions! What are the potential barriers to integrating blockchain in the circular economy? While promising, Blockchain technology comes with its own set of challenges. Blockchain’s impact on power consumption is a critical aspect to consider. The energy consumption varies depending on the consensus algorithm used, such as proof of work, proof of activity, proof of elapsed time, proof of capability, proof of burn, proof of authority, proof of stake, and proof of history. Understanding these algorithms and their energy footprints can help in optimizing the use of blockchain for sustainability. Other challenges include scalability, interoperability, integration with legacy systems, and protection of sensitive and confidential data.   Working toward how we can overcome these challenges is crucial to maximizing the potential of blockchain in the circular economy.   If you’re interested in learning more, send us a message and we’ll be happy to share the full presentation filled with more examples – we believe you’ll find it insightful! In the meantime check out a preview by clicking the button below. Don’t hesitate to reach out to us via message if you’d like to learn more about this interesting topic. View our presentation here!

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Why it is important to measure the impact your business model has on the economy, the environment and people?

Business strategy, Sustainability /

There are various environmental, social and governance (ESG) standards, frameworks, ratings and rankers, when it comes to how sustainability is measured and achieved. Delving into these standards, including new standards from the European Union (EU), is hard work and time consuming. And conflicts with the reason why you as a company are seeking for this information and guidance.  Hopefully, you want more than just compliant.  You want to be a responsible business and position sustainable behavior at the heart of your business model. The myriad of ways sustainability performance is accounted doesn’t help. Yet standards alone have the capacity to drive consistent sustainability disclosure. Reporting that is in the public interest, and independent.   The EU has introduced a classification system, a “taxonomy”, of sustainable activities, with criteria for when they may be defined as sustainable. If your business activity is listed in the taxonomy and you fulfill all criteria, the associated revenue, capital expenditures and operational expenses with that activity are considered “EU taxonomy aligned”. From 1 January 2022,  all large or listed companies are required to report their EU taxonomy alignment, along with relevant non-financial information that helps investors, financiers or the public to assess your ESG performance.  In this regard, the EU defines all large companies as companies with more than 250 employees, and with more than 20 million euros total assets on the balance sheet or revenues of more than 40 million euros. Small and medium sized companies (SMEs) may report on a voluntary basis. But the proposal will extend the scope of sustainability reporting requirements to all companies (except listed micro-companies).  The aim of the EU of introducing a standard like the EU Taxonomy is to promote investments in sustainable activities. And the financial sector can play a key role in a transition to a sustainable world; because of the capital flows that run through the financial sector. Banks can contribute by taking sustainability criteria into account in credit decisions and offering customers sustainable products. In short, in the (near) future your non-financial information and ESG performance will play an essential role whether a bank will invest in your company or provide a loan. So, it’s time to act now! However, most small businesses don’t have the capacity or money to focus on sustainability or a sustainable strategy to reduce emissions. Consequently, the lack of access to finance will play a key preventing factor in their future operations. One can make the assumption the path to a sustainable future is much easier for a large corporate than for smaller SMEs. As access to capital markets is generally not at the disposal of the smaller companies that make about 90% of the businesses globally, providing half of all employment.  As capital is a key enabler of a sustainable supply chain, the supply chain participants – large corporates, banks and governments – need to collaborate. They can co-invest, provide liquidity, share knowledge on how to strategize sustainability, and pass on innovation and technologies across the supply chain. To create or modify incentives to persuade supply chain partners to behave in ways that are best for everybody. To make sure supply chains work well and its participants interests are aligned.  Techniques as receivable finance and Supply Chain Finance, in general, can play an important role in achieving what’s best for your company, your business model, your supply chain, and to what extent you’re ‘sustainable’.  Want to learn more about how that works? Call now to learn why our service is right for you, and let’s work together! Alternatively, maximize your toolkit with actionable insights on how regulatory changes, business strategies and innovative financing structures are evolving around the ESG issues. A lot of information can be found at BCR’s Receivables Finance ESG and Sustainability webinar; see the full program here: https://bcrpub.com/events/receivables-finance-esg-and-sustainability-webinar.

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