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On Running Goes Oil-Free, Adidas ‘Strong’ in ESG

On Running is officially moving away from petroleum-based resources, unveiling the creation of a new foam material for its footwear, CleanCloud, made using carbon emissions as a raw material. It’s not alone in its environment-positive actions as Adidas earned strong marks for its ESG posture.

On, the Swiss performance running company that went public in September, says it is the first in the footwear industry to explore carbon emissions, specifically EVA (ethylene vinyl acetate) foam, as a primary raw material for a shoe bottom unit that could be used for other parts and products in the future.

The Roger Federer-backed brand says it had been working on the CleanCloud material for four years, collaborating with Austrian chemical and circular material solutions company Borealis and carbon recycling technology provider LanzaTech, the same innovator Lululemon tapped to make clothing out of captured emissions.

The overall goal is to exchange all bottom units from On shoes currently made from EVA foam with CleanCloud. This includes the whole lightweight Cloud range, The Roger franchise collection and a part of the active lifestyle assortment.

Powered by its CloudTec cushioning technology, On had an ongoing commitment within its innovation team to explore solutions dedicated to finding a petroleum-free alternative to use long-term for its footwear. The running footwear manufacturer already made significant progress across other areas of material innovation, releasing a 100 percent recyclable Cyclon shoe made with more than 50 percent bio-based material derived from castor beans.

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The company also has a goal to use only 100 percent organic cotton in its apparel collection. As of May, On says it is ahead of schedule with 87 percent of garments incorporating the organic fiber.

The brand has remained steadfast in its sustainability commitments amid strong demand, completing a total redesign of its packaging in 2020 that avoided the use of 7 tons of black ink, 18 tons of paper, 15 tons of plastic and 160 tons of CO2 equivalent.

“It’s a win-win situation: we are capturing emissions before they pollute our atmosphere and are at the same time moving away from fossil-based materials,” On co-founder and executive co-chairman Caspar Coppetti said in a statement. “Innovation is at the heart of our brand, and after four years of intense research, we are very proud to announce this supply chain coalition with our world-class partners LanzaTech and Borealis.”

The process to develop the CleanCloud material involves technology from LanzaTech that captures carbon monoxide emitted from industrial sources such as steel mills or emissions from landfill sites before being released into the atmosphere. Once captured, these emissions enter a patented fermentation process. With specially selected bacteria included in the process, the carbon-rich gas naturally ferments and is converted to liquid ethanol by the bacteria.

This natural fermentation process is similar to that of conventional alcohol production, namely beer brewing. The ethanol is then dehydrated to create ethylene, which is then polymerized by Borealis to become EVA (a copolymer of ethylene vinyl acetate)—the versatile and lightweight material that On starts with when creating a performance foam for shoes.

A graphic displaying the ClearCloud production process.
A graphic displaying the ClearCloud production process. On Running

LanzaTech combines genetic engineering, artificial intelligence and mechanical and chemical engineering to manufacture chemicals using a process that soaks up carbon rather than emitting it.

“We are showing the world what is possible when we rethink how we source, use and dispose of carbon,” said Jennifer Holmgren, CEO of LanzaTech. “By converting pollution to products, we can see that someday everything in our daily lives will come from recycled carbon. We are excited to be on this journey with On and Borealis to bend the carbon curve, keep our skies blue, and create a sustainable future for all.”

Borealis provides the circular and renewable plastic solutions that are essential to creating the EVA foam for CleanCloud. The company’s partnership with On and LanzaTech is in line with its EverMinds ambition, designed to further accelerate circularity development.

“With our creative partners On and Lanzatech, we are proud to co-create circularity in carbon, and decouple plastic from its reliance on fossil-feedstock,” said Lucrèce Foufopoulos, executive vice president, polyolefins, innovation and circular economy solutions, Borealis. “Through innovation and collaboration, we continue re-inventing for more sustainable living.”

Strong sustainability, ESG strategies, rank Adidas

As On continues its advancements, a more established footwear brand known for its eco-friendly initiatives received a strong ESG score from S&P Global Ratings.

Adidas, which has collaborated with Allbirds to drop what they say is the performance shoe with the lowest carbon footprint on the market, was assigned an ESG evaluation of 85 out of 100, and a 79 out of 100 ESG profile score. S&P highlighted the German footwear and athleticwear giant’s “strong preparedness,” which bolstered the evaluation number from the profile score by six points.

The 95 organizations S&P Global Ratings has profiled worldwide have an average score of 67, indicating that Adidas performed well as the first apparel company the the firm evaluated.

A high ESG evaluation indicates a business is relatively less prone to experiencing material ESG-related events, and is relatively better positioned to capitalize on ESG-related growth opportunities than entities with lower ESG evaluations.

In a research note, S&P Global’s sustainable finance analyst Anna Liubachyna wrote that Adidas’ evaluation score reflected the firm’s view that athletic company has a strong emphasis on innovation, supply chain management and customer engagement, noting that it has developed its sustainability strategy earlier than many industry peers.

“Adidas is committed to reducing and ultimately ending plastic waste, a goal it plans to realize through its innovative solutions and collaborations with industry stakeholders. The company minimizes its high exposure to supply chain risks by strong and long-lasting partnership with its suppliers, compliance with its supply chain code of conduct, regular assessments and improvement measures in case of non-compliance,” Liubachyna wrote. We view Adidas’ preparedness as strong. The company is well positioned to navigate disruptions and capitalize on opportunities, which its strategic objectives reflect. Its focus on innovation and partnerships supports its long-term sustainability agenda.”

In evaluating ESG preparedness, the report also highlighted Adidas’ long-term growth model, particularly its pursuit of organic growth, the expansion of its direct-to-consumer (DTC) business and its increasing demand in growth markets such as China.

The brand, which is an investor in the recently public fiber innovator Spinnova, has objectives to make nine out of 10 products sustainable by 2025, and already uses plastic intercepted from beaches and coastal areas as an alternative to virgin counterparts. In 2021, it presented its first shoes made from regenerative mushroom-based “Mylo” material, replacing leather.

“In our view, the wide applications of Adidas’ sustainable innovations and technology will help the industry scale up production of sustainable products, which will ultimately reduce average unit costs and sales price to make the products accessible to more consumers,” the report said.

S&P Global Ratings’ ESG evaluation is a cross-sector, relative analysis of a businesses’ capacity to continue to operate successfully, factoring how ESG could affect stakeholders and its potential direct and indirect financial impacts.

The firm defines “stakeholders” as employees, the local community, government, regulators, customers, lenders, borrowers, policyholders, voters, members and suppliers.

To compile the rating, S&P Global establishes an ESG profile that assesses the exposure of the business’s operations to observable ESG risks and opportunities, and how the entity is mitigating these risks and capitalizing on these opportunities. From there, the ratings agency assesses the firm’s long-term preparedness, namely its capacity to anticipate and adapt to a variety of long-term plausible disruptions.