The premium typically paid at retail for sustainably-sourced products can be reduced by taking a “measured” approach to implementing strategies from factory floor to retail store, retailers said during a panel discussion at the recent virtual Sustainability in Licensing Conference.

Simple steps
That strategy can be as simple as gradually changing materials in the supply chain. For example, UK retailer Asda replaced synthetic cotton with a sustainably sourced version, but is continuing for now with polyester materials, which command a premium, said Jade Snart, Senior Sustainability Manager at Asda.

But defining sustainability – whether it’s using biodegradable and recycled materials, requiring factories use a “closed loop” system to recycle solvents and other materials, reducing the use of plastic, or some other form of environmentally responsible packaging or production – is a work in progress when it comes to licensing.

Contractual terms?
In some cases, licensees are being required to submit plans to brand owners outlining environmental and sustainability efforts before a deal is approved, but those terms aren’t  written into contracts. In others, specific requirements are being included in agreements.

“There is no way every brand and licensee can align with every retailer’s sustainability strategy, but making small changes in operating practices collectively can make a difference,” Snart said. “It is better to focus on smaller achievable goals and not do all of it at the same time.”

Yet that gradual strategy comes amid surging consumer demand for sustainably-sourced products that seemingly will make environmental responsibility table stakes for retailers, brand owners and licensees alike. That demand is especially strong among coveted Millennial and Gen Z shoppers where demand is the highest. For example, 62% of Gen Z and Millennial shoppers prefer to buy sustainably-sourced products and many are willing to pay a 10% or more premium for them, according  to a  survey conducted earlier this year by the research firm First Insight.

“The brands are starting to recognize that with sustainability there is something they can talk about” with consumers, says Ben Poate, VP of Sustainability and Innovation at The Marketing Store, which supplies toys for McDonald’s Happy Meals. “Five to ten years ago it was not, for a majority of brands, a big topic within their communication pipeline.  It was a supply chain strategy that was part of their corporate social responsibility reporting that made them feel good, but it was not something consumers were interested in. Now it is being brought to a customer facing position whether [via] promotional links, activities, campaigns or messaging.”

Among recent developments:

• Products of Change has formed a working group including, among others, Discovery, Natural History Museum (UK), Nickelodeon and Lego, to draft guidelines that will serve as advisory for licensees and licensors “so there is parity as far as to what each party is being asked to do,” says Products of Change Director Helena Mansell-Stopher. The guidelines will be aligned with retailers’ sustainability programs. “We have to start with an advisory because a lot of people don’t know how to put [guidelines] in place,” said Mansell-Stopher. “Licensors have a say in where they want to be headed” in terms of sustainability and “licensees have to figure out how to get there.”
• Levi’s in October launched in the U.S. its SecondHand take-back and resale program that lets consumers sell their pre-worn jeans and jackets for credits toward future purchases. Levi’s sells those pieces through the SecondHand microsite or in its stores globally. (Patagonia has a similar program called Worn Wear.)
• Asda in October opened its first 9,000-sq.-ft “Let’s Cut Out the Waste” sustainability store in Middleton, UK that features 30 “refilling” stations where consumers can refill containers with household staples such as cereal, cleaning supplies, pasta and coffee. It plans to open another five within the next year, says Snart. It joins Marks & Spencer and Sainsbury, which have tested refilling stations this year, and Waitrose, which added them last year.
• Animation studio One Animation developed its own an outdoor biodegradable bamboo dinner set and sugarcane-based ecoblocks block toys that launched in August on Amazon with characters from its Oddbods pre-school series. It is focusing distribution on ecommerce, “which can be more environmentally friendly from a packaging point of view since “there is less need for elaborate packaging to entice a consumer” than on a standard retail shelf, says CEO Sashim Paramanand. It also licensed UK packaging supplier Keco for Oddbods children’s meal boxes (to be available at 7,000 fish and chip shops across the UK) made using both paperboard from Forest Stewardship Council (FSC)-certified forests and vegetable-based inks.
• UK department store Selfridges earlier this year launched a five-year “Project Earth” sustainability program that features clothing rental, beauty pack recycling and services to organize product repair.
• Fast-fashion retailer H&M set a target of having 100% recycled or other sustainably sourced materials by 2030, with an ultimate goal of moving to a “circular” model in which all products can be reused or fully decomposed.