Here’s a hard truth: Sustainability rarely comes cheap. Overhauling ponderous and antiquated systems—which are often inextricably linked to other equally ponderous and antiquated systems—usually requires significant infusions of time, manpower and capital. So who is responsible for picking up the tab? The short answer is: everyone.
Funding sustainability innovations can be tricky for manufacturers because it involves an element of risk, according to Nikhil Hirdaramani, director of Hirdaramani Group, a family-owned apparel maker based in Sri Lanka.
“We can invest in sustainability maybe for one particular customer, but will that make us uncompetitive with another customer?” Hirdaramani asked at a panel discussion at the Copenhagen Fashion Summit in Denmark earlier this month. “It’s something we want to do, but being sustainable can be a paradox because we want to continue for the next generation but in order to do that we also need to have a business going forward.”
HSBC knows about the power of collaboration as a risk-management strategy. In April the bank partnered with Walmart to launch a new green finance program that rewards carbon-cutting suppliers with better loans terms. Such “co-creation” with its clients, businesses and private investors is important, said Burcu Senel, global head of client propositions, global trade business, at HSBC, which pledged in 2017 to provide $100 billion in financing by 2025 to combat climate change.
“Because this is collective work, we really need to be over-communicating and over-engaging across the various parts of the organization within the financial and corporate [worlds],” she said. “And collaboration is quite key to get a diversity of thoughts and experiences with all of our different hats.”
Hirdaramani advised businesses not to forget second- and third-tier suppliers, either.
“We need to start thinking about how we can engage into this whole innovation,” he said. “Because it’s in our interest to have the whole supply chain be sustainable, not just a few.”
Philanthropists are another essential component of the financing puzzle, said
Precious Moloi-Motsepe, head of the Motsepe Family Foundation in South Africa. They’re less fettered by institutional bonds and can afford to be patient.
“This is long-term investing,” she explained. “As philanthropists, we are able to invest in innovation but we’re also able to invest in scaling projects that seem to be successful. We’re able to invest in the implementation of the projects themselves and we’re able to invest in advocacy work.”
Because organizations like Moloi-Motsepe’s have no agenda other than to “make the lives of the poor better,” they are able to engage with a wide variety of stakeholders from government officials to union leaders to brand owners. It’s even more crucial, therefore, that everyone speaks the same language.
“It is very important that companies that come and invest in Africa or in India use the same standards, like the ESG: environmental, social and governance,” she said.
Senel of HSBC praised the Sustainable Apparel Coalition’s Higg Index, a suite of tools that measures environmental and social performance, for not only creating a common set of metrics but also manifesting progress for companies in a visible way.
“For banks, it helps us develop the right financing solutions that are fit for purpose so we can collaborate in the right way as well,” she said. “We’re all on a journey but it’s a journey that’s evolving and there may be some experimenting and exploring.”