Redesign consumer company ecosystems to scale sustainability

Consumers want help to live more sustainably

When we asked companies what drives their sustainability activities, 88% said the need to respond to consumer and market trends was “highly significant.” But when asked how they were using their ecosystems to improve sustainability, only 62% said they were collaborating to educate consumers or influence how they use their products. And they were considerably less focused on influencing how consumer views will take shape in future. When asked about their plans for the next three to five years, only 22% cited educating consumers around sustainability as a top-three critical business issue.

Findings like these are sometimes challenged with the assertion that there’s a difference between what consumers say they want and how they actually behave. Fundamentally, those living in richer economies are often unwilling to sacrifice “the good life” and those living in poorer countries want to see their quality of life improve. But attitudes are changing. Consumers – and not just younger generations – are reflecting on what “good” for them looks like and deciding it isn’t one that jeopardizes the future of humanity.

As values shift, so does behavior: 43% of consumers say they have more possessions than they need and 69% would rather try to repair products than replace them. For example, some forecasters predict that secondhand apparel sales will grow three times faster than apparel overall and pass US$200bn in global sales by 20261.

Regulators need help to shape effective policy

From carbon and plastic taxes to regenerative farming incentives and new reporting requirements, policymakers around the world are reshaping the regulatory landscape. For some companies, this is creating complexity and confusion. There will be many more initiatives like this as governments try to meet agreed sustainability targets in 2030 and 2050. Consumer-facing companies will have to respond to these new measures, but they also have an opportunity to help shape them to maximize their positive impact, by working more closely with regulators.

It’s reasonable to think that close public-private partnership would help create regulatory frameworks that support the kind of collaboration needed to deliver sustainability; 78% of those surveyed agree with this sentiment.

Yet given a choice of priorities, only 6% said joining forces with policymakers was a top-three critical issue for collaboration. And only 6% intend to prioritize investment in their capacity to shape regulations, standards and legislation related to sustainability. This is another missed opportunity to set the agenda in a way that creates value for everyone. Closer corporate involvement should be about creating better, smarter, more effective regulation – not trying to block change or limit it.

For example, recycling is more effective when regulators and companies can work together to provide the right waste materials that can be processed by local infrastructure. If the two are not aligned, recyclable waste is shipped long distances to other facilities or sent to a landfill site. And, in the UK, most municipal authorities can’t recycle soft plastics, so grocery retailers have stepped in to fill that gap by inviting shoppers to bring packaging back to the store for them to recycle.

Companies can also work with regulators to set consistent standards of measurement. This helps to create a level playing field by enabling companies to assess their impact, and how they can improve it, alongside that of their peers and partners.

An unbalanced ecosystem is a design failure

Companies are trying to collaborate on sustainability, but these efforts can be ring-fenced. This means that when projects do work, they are hard to scale and do not deliver their full potential value – for the business, its stakeholders, or for people and the planet.

This underperformance is a failure of design. Different partners have different interests and needs; when companies collaborate, these needs can be prioritized in a way that can lead to unhelpful tensions and conflicts, making it harder to achieve scale and execute on strategy.

Fundamentally, we need to move from narrow “business ecosystems” to broader “stakeholder ecosystems” that integrate a wider and deeper pool of participants. This approach takes a more holistic view. It requires an understanding of what the various parties involved need, who they are dependent upon, where they are creating value and what interdependencies they have with each other. It also casts the net wider, in terms of which partners or groups could be usefully included, what their needs are, and how they should be prioritized.

Policymakers and consumers are not the only stakeholders who tend to be left on the margins, however, their fuller integration would have the greatest impact. This will drive better value creation for everyone involved and deliver more meaningful progress.

Where are the biggest opportunities?

All companies have the opportunity to create or protect value – both for their business and more widely – by optimizing their ecosystems around sustainability. How any specific business can best do this will depend on its overall strategy on sustainability.

Our research invited leaders to characterize their approach through one of four lenses.

Purpose-led organizations are more open to gearing their ecosystems toward consumer use and education (69%) than reputation-led organizations (56%). This reflects a greater willingness to take a lead with the consumer rather than shape activities around consumer expectations.

While 54% of risk-led organizations see the faster implementation of new sustainability priorities as a critical ecosystem priority, only 7% of value-led organizations share this view. Instead, they see greater access to skills and solutions (30%) and better operational efficiency in the supply chain (29%) as their top priorities.

So, if a risk-led company wants to achieve greater impact by bringing regulators more closely into its ecosystem, a useful shared goal would be to define better metrics and reporting standards. Purpose-led companies might be better off trying to shape regulations that enable best practices.

And when it comes to integrating the consumer, reputation-led companies might focus on building trust and transparency to guide consumer choices, while a productive focus for value-led companies would be to co-develop goods and services that curate better consumer behaviors.

A holistic view of the ecosystem creates value

Greater clarity around where the biggest opportunities are for any particular business will help leaders to create value faster – which will be better for their organizations and the world as a whole, as the clock is ticking.

The risk is that trying to optimize one part of an ecosystem or value chain, without a clearer holistic view, can lead to actions that don’t fully support – or even undermine – things the business is trying to change elsewhere. For example, 89% of consumer product companies are collaborating on sourcing raw materials more sustainably, but just 65% are collaborating on the product design and manufacturing processes that would define their procurement needs. You can’t define the right sustainable sourcing strategy if you don’t recognize the interdependencies between how you design, source and make sustainable products.

Retailers have a pivotal role as they are the ecosystem player with the closest – and often most trusted – relationship with the consumer. Potentially, this gives them the power to both orchestrate the supply ecosystem and also influence downstream activity. Can they use this power to shape consumer behavior and the regulatory environment, and close the loop between manufacturers and consumers? For example, retailers already use loyalty schemes to reward customers; why not use them to reward consumers for shopping more sustainably? If they can extend the life of the products they sell through repair and reselling services, it doesn’t just help the environment, it lengthens and deepens the relationship they have with their customers.

Consumer-facing companies have long been uncertain and on the defensive about their role in creating a sustainable world. However, to build a sustainable future companies need to take action and leverage the value of their network to create change. Is it also a heavy responsibility?

Challenges for all leaders to consider

1. Is your ecosystem thinking bold enough?

An effective ecosystem is more than a web of touchpoints between an amorphous group of players with little in common apart from a business relationship with you. To create something that really works requires a bolder vision of the kind of transformation that ecosystems make possible. Don’t limit yourself to what feels doable today. Be brave and build what you need, with clear intentions and considered design. Central to this is deciding the role you want to play. There are many ecosystem models companies can consider. Many leaders will seek to orchestrate the ecosystem around their organization. However, this isn’t always how the greatest total value is created, and some ecosystems would benefit from being convened independently.

2. Are you taking a holistic view on what your ecosystem needs to thrive?

There’s obvious value in considering the needs and priorities of all your stakeholders, but given the scale of the sustainability challenge – and the related opportunities – what more could you do? An optimized ecosystem is led by values, where the needs and interests of a full range of participants are acknowledged, understood and prioritized appropriately. Regulators and consumers must be fully included.

3. Does your ecosystem deliver to your own business needs and values?

Ecosystems are about mutual value creation, and this has to include your business too. There should not be any disconnect between your organization’s need, values and commitments and what the ecosystem delivers and how it operates. When engaging with a broader ecosystem on sustainability, make sure you are clear about the desired outcomes for your business, not just those of the wider community of stakeholders you work with.

4. Are you engaging with your ecosystem or integrating it?

As ecosystems become larger and more complex, the interdependencies between their participants grow rapidly. If this network of connections is not understood, action taken with the best intent can cause more harm than good. Conversely, participants who work together can create exponential value – for themselves and all stakeholders.

5. Can your ecosystem strategy shape new behaviors?

What consumers want is changing fast. The COVID-19 pandemic experience and the deepening multiple crises facing the world are transforming attitudes and behaviors that appeared to be deeply rooted. If you focus on “giving consumers what they say they want,” you may miss the opportunity to serve deeper needs and intentions that are only now taking shape.