The made-to-order footwear brand Hilos is looking to help pave the way for a new understanding of the costs and benefits of sustainability.
Speaking at Sourcing Journal’s Sustainability Summit Wednesday, CEO and co-founder Elias Stahl described one of Hilos’ first steps into this space, a case study the brand conducted with Yale.
“It was really important to work with a third party, not just because we believe them more than our own internal findings, but because it shows that we’re serious about actively learning,” Stahl said. “This is a new space, new technology, we really want to understand it better, and we want to make it available for everyone. So, the first piece of it was understanding the environmental impact that we had and how that compared with other brands.”
According to Stahl, the study found that manufacturing products on demand and taking them back at the end of their life cut carbon in half and water usage by 99 percent. “More interesting” to the co-founder, however, was that the circularity component contributed less to emission reductions than both on-demand and zero-waste manufacturing.
Hilos is now working with the NYU Stern Center for Sustainable Business (CSB) to show how on-demand production affects the full value chain. “The issue that we’re facing with the industry today is that we’re reducing upfront costs to afford downstream waste,” Stahl said. Typically, each team within a larger brand is accountable for different elements of value loss, he said. The design team, for example, does not pay attention to how much is spent on discounting or what are the return rates.
“Ultimately, when we work with another brand, we offer a completely different level of technology performance and a higher cost, but that eliminates downstream inventory, carrying costs, discounting for overproduction, and so it should contribute a net benefit on the cost side as well,” Stahl said. “This kind of work allows us to really gauge and measure what that looks like from a brand’s perspective.”
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Hilos weighs these costs and benefits using what NYU’s Return on Sustainability Investment (ROSI) framework. According to ROSI senior research lead Chisara Ehiemere, this system allows brands to observe the improvements that “mediating factors” like operational efficiency, customer loyalty and innovation enable.
When working with clients—her team has collaborated with businesses in apparel, as well as food and agriculture—Ehiemere said she first looks at their key issues, then assesses their practices and defines benefits. The ROSI methodology allows brands to quantify those benefits with monetization tools that define their return on investment after five to 10 years.
“There is this issue or tension between accounting and the fact that some of the typical corporate accounting mechanisms that are utilized do not recognize some of the benefits of sustainability,” Ehiemere said. “So, if you’re looking at avoided costs, if you’re looking at trying to do something ahead of regulation coming in and really being able to take advantage of moving early and doing things quickly. That’s not something that’s really recognized within corporate accounting.”
Chana Rosenthal, the principal and founder of reDesign Consulting, worked with NYU’s ROSI team to develop the Apparel Industry Sustainable Strategies Framework. The project identifies eight key areas where companies can implement sustainability and breaks them down into concrete practices that a company can enact. So, where circularity and innovation make up one of the framework’s larger strategy areas, investing in take-back programs is one practice within that category.
Rosenthal shared one such example from 2020. Looking at a take-back partnership between ThredUp and Reformation, she said NYU CSB determined the collaboration yielded a net benefit of $1.9 million in one year.
Though ROSI has already made its apparel framework available online, Ehiemere encouraged companies to reach out if they wanted to work together on building it out even further.
“We really want this research to be very practical, we want this research to be very collaborative,” Ehiemere said. “We hope that you will go in, you’ll use the tools, you’ll put in your company data, and if there’s strategies that you’re working on and ideas that you have that you would like to share and see included, there’s definitely an opportunity to feed that back to us because the product is most useful to the industry when it is reflective of the different strategies that the industry is utilizing.”