At CNBC’s Evolve Global Summit, Adidas CEO Kasper Rorsted said he expects the fashion industry to be forced to improve its sustainability practices as it faces closer scrutiny of its poor record. However, he believes many companies are still not getting enough commitment.
“We consider sustainable development to be an integral part of our business model. And this is where businesses struggle, ”Rorsted said. “They try to ensure sustainability through donations. What we have done is we have been making products for almost seven years with a high content of reusable material or reusable plastic and reselling them. And also being able to create competitive products the way they do. And we have been very keen on setting aggressive goals.
He added: “But, the most profound difference for us is that we make it an integral part of our business model and, if we are successful in sustainability, or when, we are also successful as a business.”
The conversation with CNBC’s Sara Eisen came as Adidas last February set new sustainability goals, including commitments to use recycled polyester in all products by 2024, to reduce its carbon footprint of 30% by 2030 and to become climate neutral in all production by 2050.
Adidas called its sustainability plan a “three-loop strategy,” involving partner Parley for Oceans and promoting a sustainable lifestyle among customers.
Asked about the most difficult hurdles to overcome in reaching his sustainability goals, Rorsted said these efforts face different challenges at different stages.
“If you take the first recyclable ocean plastic shoe, when we announced this shoe, of course, from a price point, it wasn’t very competitive because the costs were very high,” he said. . “So first it was a cost issue, then you had a scaling issue, which you always do around your new products if you take this, which was made to be redone. , where we completely recycle all the pieces of a shoe and build a new shoe on it. So you have tech elements, challenges, cost challenges at every given step. And then aggressive targets. And that’s a challenge in itself. But I think many challenges are around innovation and putting in place the right cost where that makes it a competitive offer, because in the beginning it never will be.
He said that Adidas conducted a recent survey which showed that 70 percent of the brand’s consumers prefer to buy sustainable products; However, Rorsted said it’s always important to provide consumers with choice.
He noted that Adidas recently introduced its first fully recycled Stan Smith model with mushroom leather, but still offers traditional Stan Smith models in leather.
“Over time consumers will want it, and I think you need the choice of both now, and that’s what we are offering,” Rorsted said. “For a very long time, Stella McCartney said we were going to make a Stan Smith shoe without leather. And that’s what we brought to the market. And, over time, it will happen, but we have to give the consumer a choice of both. And as long as we can provide the consumer with a product that doesn’t compromise on performance or price, the consumer will end up being very open.
He said consumers shouldn’t expect to pay more for a Stan Smith shoe without leather.
“We think our problem should be to develop the underlying technology to make sure we don’t overload,” said Rorsted. “And we’ve seen that as well. While they say they’re willing to pay for sustainability, consumers ultimately want to pay the same for sustainable products over unsustainable ones. They put the burden on our side and of course we put a lot of effort into new technology, new manufacturing and ways to make sure that over time we keep costs down.
He said Adidas faced the same cost issues with the oceanic plastic Parley shoe introduced in 2015. Rorsted said: “Today we are making about the same margin on this one as on a normal shoe. . That wasn’t the case in 2015. And, right now, we’re not having the same marginal problem as the normal Stan Smith, but over time we will.
Adidas also made headlines recently for working with Allbirds to create Futurecraft.Footprint, a carbon-free sneaker. The model has a pairwise carbon footprint of 2.94 kg of CO2 equivalent emissions (CO2e), a metric that takes into account other greenhouse gases, including methane, for a more holistic tally of the climatic impact of a product.
Rorsted said this unique partnership was driven by the need to share knowledge and expertise to reduce costs. He said, “For us, the cost is more important than the competitive aspect. This is where you see a goofy partner and come together, but for us being successful in sustainability is more important than competing with each other.
When asked if Adidas thinks they are ahead of their competitors, including Nike, when it comes to sustainability, Rorsted said that perhaps because of stricter regulations in this area, European companies in general, believe they are ahead of many other regions when it comes to sustainability. He said Adidas has increasingly amplified sustainability over the past two decades.
“We see ourselves as a leader in sustainability,” said Rorsted, “But we welcome anyone who takes a step forward, and that’s why we also establish collaborations… even with our competitors. We believe we have a leading position in this area. I don’t see anyone coming out with those kinds of shoes or products that are fully recyclable or with the relationship we have with Stella on fully recyclable hoodies. I think we have a head start.
Photos courtesy of AP, Adidas