Impactful Investment Opportunities in Consumer Goods Brought by Hedonistic Sustainability
At True North, our investment thesis centres around 3 thematic areas: Climate change, health & wellness, and finally, urban intensification. As part of urban intensification, we have identified sustainable consumption as being an important related trend for impact investment.
The past century has brought us immense economic and social progress, contributing to a rapidly growing population and rising middle class, driving urban intensification – especially in frontier and emerging markets. As global wealth and purchasing power increase, a “culture of consumerism” emerges, where we are consuming resources at a much faster pace than our planet can sustain [1]. According to the UN, global population could reach 9.7 billion by 2050, and global consumption levels will triple to 140 billion tonnes per year [2]. The amount of resources needed to support our current lifestyles would be equivalent to three planet earths’ worth [2]. Since 2000, the average material footprint per capita, which defines the total amount of raw materials consumed by a single person, has increased to 12 tonnes per year, up by almost 40% [3]. Our rising consumption habits and the increased production of material waste are also positively correlated, and without further action, global waste could see a 70% increase by 2050 [4]. It is clear that our rate of resource consumption and waste production is no longer sustainable at current levels, and immediate action is required. But action should not solely rely on sacrifice by the consumer– after all consumption levels are expected to increase over the next few decades. We believe that in order to consume sustainably, we need to reimagine our idea of sustainability and bring products to market that are inherently better for the environment and society.
In the UN’s 12th Sustainable Development Goal, Responsible Consumption and Production, sustainable consumption refers to the use of materials and energy in a way that minimizes impact on the environment [5]. The call-to-action centers around individuals and industries reducing, reusing, and recycling waste. This is in line with traditional definitions of sustainability, where sustainable consumption is thought to come with a compromise – that in order to be responsible and environmentally conscious as consumers, we must consume less or accept a standard of product quality lower than we are used to. But the concept of hedonistic sustainability challenges this compromise. Coined by Danish architect Bjarke Ingels, the seemingly paradoxical term refers to the idea that sustainability should not come with a trade-off, that sustainability can exist without decreasing quality of life [6]. Sustainability, then, is the new paradigm to build for, and the question becomes: how can businesses create products in a way that does not harm the environment, but also does not give up the quality and comforts that we are used to? We believe that from the perspective of consumerism, sustainable consumption is when the product is made with the environment in mind and provides a better human experience – without the need for quality or performance sacrifice.
Of course, there is a business case for sustainability too, and products can be designed and produced in a way that is better for the environment and quality of life, while still being economically profitable. By adapting production processes, for example using compostable or biodegradable materials in consumer products, businesses can maximize societal value at a lower cost to the environment, and contribute to sustainable consumption practices. Sustainable consumption is not solely driven by businesses – we as consumers prefer to buy sustainable products. In an NYU Stern study, sales for products that were marketed as sustainable grew 29% to $113.9 billion between 2013 and 2020, and the trajectory is set to continue [7]. Consumers’ preference toward sustainable products is true for other markets as well: In Europe, growth in sales for sustainable products outpaced those of their conventional counterparts, and retailers report that 60% of their overall sales come from sustainable products [8]. These trends can be seen across multiple consumer product categories, such as fashion and footwear, food and beverages, and beauty [7, 8]. For example, Allbirds, a New Zealand-based footwear company, has become increasingly popular for their shoes made from environmentally friendly and natural materials. Allbirds uses sugar cane in the place of petroleum to produce the soles of its shoes, highlighting the company’s commitment to providing a more sustainable and better-performing sneaker. Caffé Vergnano, an Italian heritage coffee producer, makes compostable coffee capsules, offering users of Nespresso machines an eco-friendly alternative to their coffee. Lush is a well-known beauty brand that gives consumers more sustainable options to beauty and skincare, as many of their products have natural ingredient formulas and are sold package-free or in recyclable paper and containers. There is a clear consumer preference toward sustainable alternatives to conventional products, that are made from more environmentally conscious materials and offer superior performance compared to the products they replace.
True North is always excited to discover innovations that are good not just for the planet, but that also improve the quality of the original ideas they replace. Recently we chose to partner with and invest in Callaly, a UK-based femcare company that is a great example of this. Callaly offers plastic-free, organic and biodegradable tampons, pads and liners, tackling the lack of innovation in the menstrual product space and making traditional period care more environmentally friendly (even their packaging is biodegradable), and believes that consumers deserve more sustainable options than market incumbents offer. By focusing on sustainable alternatives to conventional products like tampons and pads, Callaly recognizes that environmentally thoughtful period care does not have to come with a sacrifice. True North is proud to include the company in our Impact Fund I portfolio.
To learn more about our True North Impact Fund I and how we connect investor capital based on the UN SDGs with impactful ventures around the world, please contact Fund Manager, Kai Chen (kai@truenorthimpact.com).
[2] UN - Goal 12: Ensure sustainable consumption and production patterns
[3] Our World in Data - Material footprint per capita, 2000 to 2017
[4] World Bank - Global Waste to Grow by 70 Percent by 2050
[5] UN Environmet - Sustainable consumption and production policies
[6] TED - Hedonistic Sustainability
[7] NYU Stern - Sustainable Share Index™
[8] Intracen - The European Union Market for Sustainable Products