Consumers today, especially younger buyers, are in the market for more environmentally friendly products - and the good news is, their options are only growing. Hosts Shannon Murphy and Erin Shea look at how the trend towards conscious consumption is driving change in just about every industry, from fashion to food to home decor. In this episode we dig into how tech is powering green innovations in a wide range of industries. We hear from business leaders about how this force is not only good for the Earth, but good for your company's bottom line, and we ask: as the buying power of Gen Xers and Millennials grows into the trillions, how will this trend change our markets over the next decade?
Consumers today, especially younger buyers, are in the market for more environmentally friendly products - and the good news is, their options are only growing. Hosts Shannon Murphy and Erin Shea look at how the trend towards conscious consumption is driving change in just about every industry, from fashion to food to home decor.
In this episode we dig into how tech is powering green innovations in a wide range of industries. We hear from business leaders about how this force is not only good for the Earth, but good for your company's bottom line, and we ask: as the buying power of Gen Xers and Millennials grows into the trillions, how will this trend change our markets over the next decade?
Featuring Jon Matuszewski, Jefferies' Equity Researcher, Simon Powell, Jefferies’ Global Head of Thematic Research and Dominic Lester, Jefferies’ European Head of Investment Banking.
Also featuring:
SIMON POWELL
...if you add up all the plastic that's ever been made and consumed in the world, it's over 8 billion tonnes…
ERIN WALLACE
...26 billion pounds of textiles are sent to landfill each year….
NICK GREEN
...I want to be healthy, but I also want to be part of healthy communities. I want to be part of the healthy planet.
ERIN SHEA
I’m Erin Shea
SHANNON MURPHY
And I’m Shannon Murphy. This is Invisible Forces - an original podcast from Jefferies.
On this show, we investigate the unseen influences that drive our spending, our saving and our global economy. Things like Customization - Urbanization - and Inclusion.
ERIN SHEA
We’re asking, in the next five years, how will we be living? Where will we be living? What will we be buying? And why?
And today - how can we make sure the things we buy are actually good for the world? Today’s invisible force is conscious consumption.
SHANNON MURPHY
Consumer awareness of where products are coming from and how they’re made has grown enormously over the past few years. The growing climate crisis has made even mainstream consumers aware of their “carbon footprint,” and eager to find ways to mitigate it, which often means “voting with your wallet.”
And like almost everything we’ve spoken about so far this season, this consciousness has only been accelerated by the COVID-19 pandemic.
NICK GREEN
If you think about it, one of the big impacts of COVID is that at some level, everyone had to become a conscious consumer. You know, everyone, all of a sudden had to think about where their food is coming from and is it safe? Can I trust the place that I'm buying my food or my products? Everyone is thinking much more about their own health, the safety of their family.
ERIN SHEA
That’s Nick Green, the co-founder and CEO of Thrive Market, which he describes as an online hybrid of Costco and Whole Foods. We first met him in episode two, talking about how his site is able to connect customers with affordable, high quality organic products tailored to their dietary needs.
But even with the pandemic, when many people are thinking about their own health first and foremost, Nick says that he is seeing that conscientiousness extend outwards as well.
NICK GREEN
I think a lot of people are also, either despite their isolation and work from home or shelter in place, really wanting connectivity to other people and wanting to feel like they're part of the solution. I think a lot of people want to do good. And when you see a global issue like a pandemic, I think it also makes people more attuned to our collective fate as humans and to other global issues like environmental responsibility and climate change. So I think one of the big impacts when we look back on this pandemic is going to be that it accelerated conscious consumption.
ERIN SHEA
Businesses like Thrive Market have seen how important it is to respond to the invisible force of conscious consumption. Their members are interested in both the environmental and human impacts of their food.
Nick and his co-founders started the company in 2014 with a particular mission: to make healthy living affordable for everyone. They work on a membership basis, which costs just $60 per year. But they don't want even that fee to exclude anyone.
NICK GREEN
We actually want to make sure that anybody, even those people that can't afford our membership can also access the platform. So we actually built that into the actual DNA of the membership and had every paid membership on the site sponsor a membership for a low income family.
ERIN SHEA
Philanthropy is baked right into the business model, and their environmental impact was a consideration from day one, even before most mainstream consumers were thinking about that.
NICK GREEN
You know, when we launched with carbon neutral shipping, a lot of people didn't know what that was. Um, now we get as many inquiries about carbon neutral shipping as we do about, uh, about free shipping. So the conscious consumer movement is exploding. We're obviously there for that opportunity and we're also there to accelerate it.
But we think about health as not just the health of the individual, but the health of communities and the health, even of the planet. And I think if you look at kind of a core belief of conscious consumers, whether they explicitly think about it this way or not, I think that's actually it, right, it's that like, I want to be healthy, but I also want to be part of healthy communities. I want to be part of the healthy planet.
ERIN SHEA
And it’s not just food that these conscious consumers are concerned with -- but what it comes packaged in as well.
SIMON POWELL
I saw some recent survey data that said after climate change, plastic pollution is number two in terms of concerns that people have in the world, especially in developed markets. And we've all seen the images, we've all seen the data in terms of how much plastic is making it into the ocean.
SHANNON MURPHY
That’s Simon Powell - he heads up Thematic Research here at Jefferies, and I had a chance to speak to him about the report he put out earlier this year on plastic waste. When we think about the invisible force of conscious consumption...that data he talked about is so important: plastics pollution is such a major concern for people.
SIMON POWELL
So, you know, the numbers are staggering. Growth in plastics is growing faster than global GDP. We're now at 450 million tons a year of virgin plastics being produced. And if you add up all the plastic that's ever been made and consumed in the world, it's over 8 billion tons.
SHANNON MURPHY
8 billion tons. And given how long it takes plastic to break down, more than half of that plastic is still lying around somewhere on the planet, in a landfill, or somewhere in the ocean. That sounds bad, but it’s even more complicated than that.
SIMON POWELL
Plastics actually play a very important role in society. And some of the best use of plastics is in food wrapping. Now, a lot of us would say, well, that's actually a bad use of plastics, but when you look at how you can wrap food in plastics, and it has a longer shelf life, and to give you an example, if you don't wrap cheese in plastic, it'll last seven days, maybe 10, but if you wrap it in some kind of a film, it can last 180 days in the fridge. So when you think about food waste and you think about a world without plastic, and then you translate that into wasted food, you can potentially have a far bigger issue.
SHANNON MURPHY
The real problem, says Simon, is the lack of truly good recycling options.
SIMON POWELL
We really are drowning in plastics, but what stands out is that the recycling rates in many places in the world are incredibly low. Europe kind of tops the scale at 30%, but the U.S falls woefully behind it, less than 10% of all plastics recycled. And when you run the numbers and you say, what would it take to reduce the amount of virgin plastic coming into the chain every year, you'd need to go to more than 50 and 60% of all plastics in the world being recycled. And it seems like that's not going to happen.
SHANNON MURPHY
And unfortunately, Simon says the pandemic could put us even further behind in those recycling goals -- for example, here in New York City, we have delayed our plastic bag ban. And the CDC is encouraging restaurants to use individually wrapped and disposable plastic utensils -- which is hygienic, sure, but pretty wasteful.
Plus, when the price of oil is as low as it’s been lately, producing new plastic can be way cheaper than recycling it.
SIMON POWELL
These lower oil prices tend to put everyone in the recycling business on the back foot, because if the price of the virgin product has gone down, then the price at which you can sell a recycled, either traditionally recycled or chemically recycled product has to go down and therefore the margins get squeezed.
SHANNON MURPHY
Until the invisible force of conscious consumption becomes strong enough to MAKE industries do better at recycling, Simon says that our best hope is in technology.
SIMON POWELL
We need to use less, we need to recycle more, but I think the way out of this is through innovation. So a lot of the recycling that we do today is we melt it down and high grade plastic ends up as lower grade plastic. But if you could break plastic down, back down into the raw molecules that it originally was in oil, then you've got a chance of true 100% recycling taking place. So one of the things we highlighted in the report was chemical recycling as an industry, very few people have heard of, that we think could be transformational in this whole space.
SHANNON MURPHY
And it’s possible those innovations aren’t too far off. I also spoke with Dominic Lester, the European head of investment banking at Jefferies. He’s hopeful that new technological developments will help solve the plastic problem.
DOMINIC LESTER
There's a company in the UK and they have developed a technology that it's effectively an additive, that you drop into the existing manufacturing processes for plastic packaging that effectively changes the chemical composition of the polymers of the plastic.
SHANNON MURPHY
Essentially, it makes the plastic biodegradable. And if it works, it could be a game changer.
DOMINIC LESTER
So if you can simply take all of the positive attributes of plastics, but effectively change the composition of the plastic, such that it does actually biodegrade in the environment, leaving no microplastics, then you’ve solved the problem. and these guys seem to have a real solution around that.
SHANNON MURPHY
There are so many considerations to take into account when you’re deciding how to spend your dollars -- is this product harming the environment or accelerating climate change? When I’m done with it, will it biodegrade, or end up cluttering up a landfill somewhere?
And when it comes to the next industry we’re going to talk about, the answers to those questions aren’t always easy to face.
ERIN SHEA
The fashion industry is one of the worst offenders when it comes to environmental impact. In fact, it is ranked as the second largest polluter in the world, only outranked by the oil industry.
ERIN WALLACE
26 billion pounds of textiles are sent to landfill landfill each year, and one garbage truck full, which is how, just imagining that, which is about almost 1700 clothing items are burned in landfill every second.
ERIN SHEA
That’s Erin Wallace, the VP of integrated marketing at thredUP. They are the world’s largest online thrift store, and a huge part of what’s called the “circular economy.” That’s a system where we can pass on or share goods we’re done with, as opposed to just sending them to a landfill. It’s a way to try and combat “fast fashion” - which is clothing that’s made and sold cheaply, and which has a massive carbon footprint. ThredUP has been around for over a decade, and they’ve had a front row seat watching the rise of conscious consumption.
ERIN WALLACE
From the time I entered the industry to now there's been a massive shift towards sustainability. When I started, though we knew it was a more sustainable option and better for the planet, nobody cared. That was not something that you could use in marketing. That was not something you could use in recruitment, whereas today, you know, we know greenwashing is a huge issue with companies. People are actually leveraging these things, whether they can stand behind them or not because they have so much power to consumers. And that shift we're seeing is only accelerating, in our most recent resource resale report that we just put out last month we saw that nearly half of the consumers say they plan to buy more sustainable fashion in the next five years.
ERIN SHEA
Like Erin says, consumers, especially young consumers, are becoming more and more concerned with sustainability. They take the environmental impact seriously. And so does thredUp.
ERIN WALLACE
If everyone in the US bought a single used item, instead of purchasing that item new this year, it would save about 6 billion pounds of carbon emissions, which is the equivalent of taking half a million cars off the road for an entire year. So buying a used garment has a huge impact and obviously like small actions completed at scale make a real impact and really move the needle. So that's kind of what the way that we look at it is we make thredUP as accessible from a price point and a brand point and a shopping point for every person in the United States and hopefully beyond, to be able to participate in the circular economy.
ERIN SHEA
So this trend towards sustainable fashion is on an upward trajectory, and Erin was gratified to learn that COVID-19 couldn’t slow them down.
ERIN WALLACE
You know, even during this period during COVID, 70% of consumers agreed that addressing climate change is more important than ever. And quite frankly, that was something that we were really interested in taking a temperature on, because there was such a trend line, accelerating towards sustainability and circular fashion. We wondered whether with the onset of the pandemic, whether those efforts and that trend line would be derailed a bit and we're really heartened and encouraged to see that that has not happened at all, if anything, it's only strengthened.
SHANNON MURPHY
The trend towards conscious consumption doesn’t just affect what we eat and what we wear -- it’s also starting to show up where we live.
We heard from Jon Matuszewski in the last episode. He works in equity research at Jefferies, and in episode 3 he shared his research on the new trend of urbanites moving out to the suburbs. We brought him back to talk about his other area of expertise -- home improvement.
And traditionally, Jon says, the home furnishing space has had a massive ecological footprint. Just as we heard about ‘fast fashion’ earlier, ‘fast furniture’ is a real problem.
JON MATUSZEWSKI
I know the EPA has come out and they've talked about 10 million tons of furniture and up in landfills each year, which is a shocking number.
SHANNON MURPHY
But luckily, Jon says that in recent years, the home improvement and furnishing space has undergone its own green makeover.
JON MATUSZEWSKI
What we noticed was a lot of these brands in the home space really lead with things like ethical labor standards or utilizing eco-friendly materials in their product. And I think that's something that definitely, you know, resonates with today's consumer more so than prior generations. That transparency does come with a little bit of a higher cost for the consumer, but, depending on the consumer, it seems like many are willing to pay up for that. You know you could take a look at, in the home space, a company like Pottery Barn. I mean, they are definitely vocal about their commitment to sustainability. They have a line of products that are green guard certified, and they've talked about recently, that kind of green guard certified product outpacing the growth of non-certified product that they sell.
SHANNON MURPHY
Consumers now are interested in sustainable, ethical furnishings, and they are willing to pay more for it. New eco-friendly furniture brands are popping up, and legacy home furnishing brands are creating more sustainable products to meet that consumer demand. And just like almost every other trend we’ve talked about this season, Jon says technology is enabling and accelerating this change.
JON MATUSZEWSKI
You know, over time, we've seen a larger percentage of the refrigerators and the washing machines, an increasing percentage of those being quote smart. So, you know, we would expect more of these devices that we use every day to have smart capabilities. So, you know, in our view, there's, there's no reason why you shouldn't see other devices and appliances follow that same trend.
ERIN SHEA
Now when we think of smart home appliances, we might think of a thermostat, a doorbell, or a TV. But smart, environmentally friendly home appliances go much farther.
Halio glass makes smart-tinting windows. Glass that has the ability to shift from totally clear, to almost completely opaque. It relies on a technology called electrochromic glass.
Tom Quinn is the president of Halio Glass North America.
TOM QUINN
As the glass tints, it also has a positive impact on solar heat gain. So you could reduce the amount of heat coming in through the windows from the sun. It's sort of like a big pair of sunglasses for the building. And that of course has a great benefit to energy and energy efficiency and taking pressure off of the HVAC system in a building. So you save money and use less energy and burn less carbon, and um, you know we've seen upwards of 20% reduction in energy required and that's for the full load of the building.
ERIN SHEA
Halio glass is cloud-integrated, which means you can operate it from an app or even using voice control. Tom said this cloud-integration will lead to big energy savings down the line.
TOM QUINN
The other thing that I think is exciting from a sustainability and energy perspective is, you know, because we're in the cloud, we also have the ability to integrate with other building systems. So you can imagine as smart buildings become a thing, what really happens is you want to put a call it a ‘brain in the cloud,’ and that brain is really set out to optimize all those different siloed systems.
ERIN SHEA
So the smart windows can interact with a building’s thermostat and determine when they need dim to keep out heat, for example.Right now, these smart windows are only in commercial buildings, but Tom says they could be in private homes by as early as next year.
The number of conscious consumers who want to buy sustainably is growing - in fashion, food, and home furnishings. And companies are taking note of this, and making real changes to produce more environmentally friendly goods to meet that need. But on top of being healthy for the planet and its people, Nick Green from Thrive Market wants other business leaders to know that sustainability is profitable too.
NICK GREEN
We started as a mission driven business. We are still driven by the exact same mission from the day that we launched. And I think one of the things that we think there's a huge opportunity to do is create a template that can inspire other businesses to become more conscious. And one of the most exciting things about conscious consumers is that they're going to demand that businesses are more conscious. But I do think there's a skepticism in some cases that business can be done in a way where those conscious decisions are also profitable.
ERIN SHEA
A company like Thrive Market is able to make a business case for operating in a sustainable and ethical way.
NICK GREEN
So one of the things that we're most proud of is that we have not only grown very fast, but tracked a path to profitability, that when we did our zero waste fulfillment centers, we actually had a positive ROI on that. You know, that when we're doing carbon neutral shipping, we are paying for carbon offsets, but we're also getting a benefit from our members who are really supportive of us and more loyal to us as a result. The best companies, the last few decades have been amazing at delivering utilitarian value, but haven’t always been driven by values and mission, I think the best companies in the next few decades are going to have to have both.
SHANNON MURPHY
The buying power of Millennials and Gen Z combined is nearly $3 Trillion and growing, which will magnify conscious consumption in the future. I’ve seen this first-hand with my own teenage daughter, and so has Thred-Up’s Erin Wallace.
ERIN WALLACE
I have two gen Z children and I'm just so hopeful, their generation is really inspiring.
ERIN SHEA
It’s clear that older generations can learn something from younger generations, who are voting with their wallets for companies that reflect their values, and applying pressure to those that don't.
Like Nick Green said, this is an amazing opportunity for businesses to embrace these values too and help build a sustainable economy for all of us.
Thanks for listening to Invisible Forces - an original podcast from Jefferies. I’m Erin Shea.
SHANNON MURPHY
And I’m Shannon Murphy. Don’t forget to hit subscribe in your favourite podcasting app so you never miss an episode. Next time - how the pandemic has brought our need for safety to the forefront, and how that’s affecting what we’re buying and how we’re behaving.
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