Sweetgreen's customer promise of sustainable, locally sourced ingredients poses a supply chain challenge as the company scales, and exposes Sweetgreen to significant climate change risk.
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Great read! Your question about the labor force is an interesting one, and I was intrigued by Juan’s point about automotive industry workers forming unions to minimize lay-offs related to digitization. Funnily enough, when I started to do some research on how labor unions are reacting, I found an article from the 1980s where a similar shift was occurring! In 1984, General Motors (GM) was investing in significant automation increases in their factories through the use of robots and other technologies. In the end, it seems as though the United Auto Workers union decided not to fight against the technology, acknowledging that automation was a necessary step to increasing car quality and securing the number of jobs that will remain once the innovations are put in place [1]. This was a good lesson to me that the digitization we see today is simply the next iteration of a production improvement process that has been occurring for decades as new technologies emerge. I wonder if as the technology exponentially improves, the impact we will see on the labor force will be similarly much greater than it was back then.
Amanda’s very interesting article and the comments posted caused me to reflect on how companies should respond to political pressure like that which Ford received from Trump. As Amanda points out, the economic realities of producing in the US are not optimal from a long-term business perspective. Moreover, like Bill, I was very struck by the economics of job creation here – $3M+ investment per job is a much higher number than I would have anticipated!
There is a huge difference between companies responding to actual political policy changes (e.g., threats of changes to NAFTA or China trade war) versus just words from politician (e.g., Trump’s tweets). By moving its production back to China, Ford could be setting a precedent for limiting the impact of politicians on the strategy of specific businesses. As the Washington Post points out, it is generally the role of government to influence the conditions businesses operate in to encourage local production, rather than interfering in specific business decisions as occurred in this case [1].
This essay and the many thoughtful comments were fascinating The implications of Brexit on Tesco and the broader UK food business are very complex and interesting to learn about.
Like ES, I was surprised that Tesco responded to the effective price hike of imported goods with stock-outs, given how undesired stock-outs are for retails and for the customer experience. That made me curious about the impact on Brexit on CPG companies across the globe, who were at the receiving end of that decision and are exposed to significant losses through Brexit. Euromonitor did an interesting analysis of which CPG companies will be most affected by Brexit, based on the premise that exposure to Brexit losses is driven not only by amount of UK sales the company has, but also by the elasticity of the category the CPG plays in. One finding was that Nestle is most exposed to Brexit financially, even though Unilever has the most UK sales, because Nestle’s core products (pet care, bottled water) are generally more elastic. [1] In addition to UK-based companies like Tesco, it will be interesting to monitor the impact of Brexit on the global CPG industry as the timeline and actual mechanics of Brexit play out.
[1] http://blog.euromonitor.com/2017/03/brexit-impact-largest-fmcg-companies.html
This was a really interesting article. I don’t know much about LVMH, and am impressed by their internal carbon fund as well as the way they are tackling this challenge within many of their 70 brands individually.
Artemis’ point that LVMH consumers have the WTP to absorb the cost increase is really interesting – it is true that consumers of those products are not very cost sensitive. However, there is obviously a limit to the amount LVMH will be willing to either 1) increase prices or 2) reduce margins in service of sustainability.
To justify significant sustainability investments, I think LVMH should leverage its position as an influencer to make consumers want sustainable luxury goods, and use their sustainability investments as a marketing tool and potential competitive advantage. A powerhouse of brands like LVMH is in a unique position to influence consumer preferences, and make sustainability top-of-mind for luxury customers. The good news is consumers are already interested in brands investing in sustainability: a 2016 report on the luxury industry and sustainability indicated that millenials are “twice as likely to buy from brands with strong management of environmental and social issues” [1]. I could imagine marketing tactics like sustainability labels on special-edition sustainable products, or even opening a retail store in a net zero-energy building. As an example, Walgreens opened a net zero-energy location in 2013 in Evanston, IL [2]. The buzz and brand goodwill from efforts like this, paired with brands as influential as those in LVMH’s portfolio, could generate enough sales to offset at least some of the required investment, while making a significant positive impact on the climate.
[1] http://blog.positiveluxury.com/2016/01/20/2016-predictions-luxury-world-sustainability-innovation/
[2] http://news.walgreens.com/press-releases/general-news/walgreens-debuts-nations-first-net-zero-energy-retail-store-in-evanston-ill.htm
Thank you for the great read, Eduard! Like Maha, I fly a lot, and never understood the impact of high temperature on flight delays – I learned a lot from your article.
I share Alex and WL’s concern about airlines prioritizing short-term profitability over long-term sustainability investments.
However, I do think airline operations are more exposed to the immediate ramifications of climate change than Alex indicated. Climate change needs to be top of mind for airline carriers not only because of high temperatures grounded flights, but also because of the huge disruption and cost to airlines when natural disasters occur. Research suggests that global warming may contribute to more frequent and intense storms and floods [1]. These events are extremely disruptive to airlines. This year, we had many hurricanes and earthquakes, and most major airlines reduced their revenue estimates; while this occurred for many reasons, weather-related losses certainly contributed. For example, Southwest estimates losses of $100M in the third quarter of this year alone related to natural disasters [2]. If natural disasters continue to increase in frequency and intensity, this will have (and already is having) a very tangible impact on airlines’ operations and profitability. The magnitude of these losses may be the incentive the airline industry needs to ramp up climate change in the nearer-term.
[1] https://earthobservatory.nasa.gov/Features/RisingCost/rising_cost5.php
[2] https://www.bloomberg.com/news/articles/2017-09-28/southwest-air-says-natural-disasters-to-cut-revenue-100-million