Tag: Sustainability

Reducing the environmental impact of logistics: the GILA Project

Posted on | by Beatrice Grillo | Leave a Comment on Reducing the environmental impact of logistics: the GILA Project
The international project GILA, sponsored by the German Federal Ministry of Education and Research, is designed to contribute to global efforts in reducing absolute GHG emissions from logistics and enhancing resource efficiency to thus meet the Paris Agreement’s objectives

 

Like all other business sectors, logistics can adopt more sustainable practices to reduce emissions and enhance resource efficiency.

The GILA project – run by a German, Italian & Latin American Consortium joined by the School of Management  – is designed to reduce the environmental impact (especially carbon impact) of logistics, focusing on sites that play a connecting role within transport chains, such as warehouses, consolidation/fulfilment centres, distribution centres, cross-docking sites or micro depots/city hubs, as well terminals at maritime or inland ports, freight and intermodal terminals or cargo terminals at airports.

In order to achieve the overall objective, two main research areas will be addressed:

  • best practices and future requirements, services and concepts for sustainable logistics sites within an energy and resource efficient transport chain
  • establishment of a methodological framework for assessing the environmental performance of logistics sites

The targeted methodological framework for assessing the environmental performance of logistics sites helps gain enhanced transparency and a robust basis for decision management and for the targeted identification and definition of measures to reduce CO2 emissions.

The Fraunhofer Institute for Material Flow and Logistics is responsible for leading the project and its scientific implementation.

The industry partners are: Arcadis Germany GmbH, developer of logistics sites, P3 Logistic Parks, skilled in sustainable industrial properties and market development. GreenRouter is mainly responsible for the calculation of GHG emissions of logistics sites, while Fercam, Flexilog, Conad and Prysmian group contribute through their expertise and experience of their own logistics sites.

The School of Management of Politecnico di Milano, as academic partner, contributes with its know-how on green logistics concepts, while the Universidad de los Andes brings a Latin American perspective and experience on the environmental performance of terminals.

Sharing best practices will help participating companies to be prepared for future trends and demands within logistics networks and to pave effective pathways towards zero emissions logistics by 2050 and the sustainable transformation of the sector.

The project will enable industry to use the outcomes in future planning and the implementation projects of new investments in logistics sites infrastructure, e.g. city hub distribution, new greyfield warehouse projects or sustainable transformation of existing warehouses, transhipment sites and terminals.

 

Air transport sustainability: a PhD in collaboration between easyJet and the School of Management

Posted on | by Beatrice Grillo | Leave a Comment on Air transport sustainability: a PhD in collaboration between easyJet and the School of Management
Diego Babuder, easyJet pilot, will undertake the four-year Executive Research Path of the PhD Programme in Management Engineering

 

This year the School of Management of the Politecnico di Milano, in collaboration with easyJet, is launching an Executive PhD in Management Engineering focusing on sustainability in the airline industry. The course focuses on the challenges and opportunities that digital innovation can have in this area, with a particular focus on how airlines can contribute to the de-carbonisation of the sector and reduce the effects of climate change.

Environmental sustainability is a cornerstone of easyJet’s development strategy and in 2019 it decided to offset emissions from the fuel used on all its flights to meet the global challenges of climate change. “Investing now in the research and development of revolutionary technologies such as hybrid, electric and hydrogen-powered aircraft is the best way to effectively address the global challenges posed by climate change for this sector. This is a historic moment for commercial aviation and we intend to play a leading role in the transition towards solutions capable of significantly reducing the impact of aviation on the environment” – explains Lorenzo Lagorio, easyJet Italy country manager.

“The transition to more sustainable and circular industrial systems is an unstoppable process and for commercial aviation it represents both a challenge and a great opportunity. This is not just about technological innovation, but an overall transformation of business models with systemic impacts at sector level that will lead to the emergence of new supply chains – comments Paolo Trucco, Professor of Industrial Systems at the School of Management and head of the research project with easyJet – It is a source of pride and great stimulus for us to be able to study and address these phenomena through a research and training partnership with a leading company in the sector such as easyJet. It is also significant that this collaboration is centred around the doctoral studies of one of their pilots; a demonstration of how the development of human capital underpins the ability of organisations to transform themselves and take advantage of all the technological and operational opportunities to make their business more sustainable”.

Diego Babuder, easyJet pilot for over 7 years, now a new PhD student at the Politecnico, has a degree in air transport management from the UK and has collaborated with the Politecnico di Milano on the lessons of the first level master’s degree in “Fundamentals of the air transport system”. “I am convinced that air transport can play a leading role in combating climate change and set an example for many other industries. There is a lot of enthusiasm for the various research areas that are currently underway, starting with the development of hybrid and electric aircraft and the production of sustainable fuels.”

Sustainability and companies: towards a hybrid model

Posted on | by Angela Leone | Leave a Comment on Sustainability and companies: towards a hybrid model

 

In recent years, the issue of sustainability, also thanks to the agendas of economic and financial institutions at European level, has increasingly been brought to the centre of the debate.
This is why we asked Raffaella Cagliano, Professor of People Management and Organisation at the School of Management of the Politecnico and Director of the Master in Sustainability Management and Corporate Social Responsibility at MIP, how sustainable behaviour by managers and businesses can have an impact on society.

Let’s start from the basics: when we talk about sustainability in business, what exactly do we mean?

Today, companies should no longer be focussing exclusively on achieving profit  ̶  and therefore solely on shareholder satisfaction  ̶  but must act for the benefit of a wider set of stakeholders, who also have different objectives, such as the sustainable development of our society, both from an environmental and social point of view.
It is, however, difficult for companies to achieve these goals by themselves. In order to make a significant contribution, it is important that several players work together: businesses, the non-profit world, public administrations and civil society. The issue of partnerships is essential in this area: only by joining forces can we make a significant impact.

But what is driving companies to take this path right now?

It has been a long-term process, although we are now seeing an increasing awareness of these issues, especially on the part of the younger generation, who are more attentive and who are no longer willing to work for realities that are not perceived as sustainable. It is therefore important for companies that want to continue to attract talent and sell to these segments of the population to move in a new, more sustainable direction.
Not to be underestimated is the growing emphasis on these issues at the level of European public institutions, through a series of policies that encourage sustainable development. I am thinking of the Green New Deal, to name just one.

Finally, there is also the feeling that this pandemic has somehow revitalised consciences, raising people’s awareness of broader issues than was the case in the past. But this is only a further push to an already well-established phenomenon.

So something has already changed.…

Yes, indeed it has. It is precisely this growing focus on social and environmental challenges that is bringing companies closer to some of the logic of the non-profit world.

We are facing a sort of hybridisation: while on the one hand, “traditional” companies are becoming increasingly aware of their impact on society, non-profit concerns are using business models typical of the world of enterprise to make themselves economically sustainable and reinvest profits in the goals – social or environmental – for which they were created.

It is precisely this convergence between the two sectors that leads us to explain why MIP does not include specific programmes dedicated to the non-profit world in its educational portfolio.

Rather, the school decided to address the issue of sustainability by thinking about the business function concerned. While it is indeed true that all managers should have expertise on the subject, given the central role of sustainability in creating value, there are also some areas that deserve a more specific approach.

So, while we have created the International Master in Sustainability Management and Corporate Social Responsibility for those who need to set a company’s strategy with a view to sustainability, for those who want to apply it to the productive core business of industrial companies, there is the Master in Sustainable Industrial Management.

Then there are the International Master in Circular Economy & Green Management, which focuses on environmental objectives, and the International Master in Social Innovation & Entrepreneurship, which discusses how companies and start-ups can address and overcome major social challenges.

Finally, specific attention is paid to the financial world, with the International Master in Sustainable Finance. In fact, dealing with sustainability in this particular area involves two different tiers. On the one hand, more and more financial institutions are including sustainability in their parameters for evaluating and choosing investments; on the other, companies must both manage their financial assets by including a logic of sustainability, and know how to interface correctly with the financing bodies, which are changing perspective.

Such a wide range of courses shows a definite interest in the topic. After all, MIP is the only Business School in Europe to have received B Corp certification, which attests to its commitment to combining profit, the search for well-being for society and attention to the environment…

I don’t believe that we can teach sustainability if we are not putting it into practice ourselves. MIP is a company, which first has to apply those principles that it then teaches in the classroom.
For example, we have always demonstrated a strong interest in the social aspects of sustainability, such as inclusion, equal opportunities, and access to training. Just look at the Gianluca Spina Association, which, with its scholarships, guarantees access to the Masters to deserving young people who might otherwise have difficulty in obtaining such a place.
In recent years, however, we have also committed ourselves to embracing other aspects of sustainability, such as reducing food waste, the use of paper and plastic and the proper disposal of waste.
For these efforts, we have also been awarded B Corp certification. Being the only Business School in Europe to have received this certification must not be an end in itself, but a starting point on a path of continuous growth. Precisely for this reason, the School is developing a strategic plan aimed at improving those aspects of sustainability that still need a further push.
The idea is to become one of the world’s leading business schools in transmitting this message  ̶  as well as obviously wanting to build a better future for everyone.

How can traceability improve sustainability in the global coffee supply chain?

Posted on | by Marta Re Ferrè | Leave a Comment on How can traceability improve sustainability in the global coffee supply chain?

Food supply chains garner public attention for sustainability; traceability is one of the possible solutions, but is it always the case?

Verónica León-Bravo, Assistant Professor, School of Management, Politecnico di Milano

 

Sustainability in the food industry has recently gained a great deal of attention, as this sector faces several challenges regarding scarce natural resources to be preserved, attention to consumer’s health and safety, communities’ economic development around the world, food and packaging waste, land and water consumption, and unfair trade relationships. Moreover, consumers today opt for food that is not only tasty and nutritious, but also of high quality, grown responsibly and with specific characteristics or origin, which in turn calls for better and more efficient traceability. Consequently, food companies are developing varied initiatives, assessment policies, standards, traceability systems and reporting tools with sustainability purposes.

During the current health world emergency, food chains are also struggling with menaces on their products’ health and safety. As is the case of a few Brazilian poultry exporters who were suspended by China in July 2020 due to concerns about possible Covid-19 contamination in the containers. China established certain restrictions and newer or different certification requirements for food products coming from several countries, with the aim of avoiding a new outbreak, although no evidence that Covid-19 could be transmitted though food existed. Another case was related to Ecuadorian shrimp exports to China, which were suspended in July 2020 because of similar concerns relating to the containers, though the shrimp and inner packaging tested negative. How can companies in producing countries ensure buyers the quality and, even more critically, the health and safety of their products? Around the world, improved traceability could be the key for supply chain continuity under risky or unexpected situations.

Through its Food Sustainability Lab, the School of Management at the Politecnico di Milano is dedicated to studying the elements shaping and determining the food supply chain efforts to become sustainable, and improve its sustainability; thus, a broad multidisciplinary team is running several research initiatives in this area, given the interest and relevance for the academic community, companies and society at large.

One of the research lines is focused on the traceability systems implemented along the supply chain, in particular for food commodities, such as coffee, that involve actors dispersed around the world. Commodity chains are highly fragmented and long, with many very small producers in low-income countries, and several intermediaries are needed to ensure the product flow from origin to consumption. According to the International Coffee Organization, coffee consumption is steadily growing globally, reaching up to more than 169 million bags in 2019-2020. Producers (exporters) are mainly located in South America, Africa and South-East Asia, with Brazil being responsible for 43% of production. Global consumption registered close 119 million bags in 2019-2020, with the largest importers being the European Union and the United States [1]. Consumers in these markets increasingly demand coffee that is not only safe but also ethical, organic, generates a low carbon footprint, etc., requiring the supply chain to demonstrate traceability throughout the chain.

Traceability systems available in the market are said to help actors in the chain not only to track the product from origin to final consumption, but also to respond to the need for mandatory and voluntary quality standards, certifications of origin, and to create the basis for reporting sustainability-related practices and performance. The benefits of traceability could be spread along food supply chains: for managing risks, maintaining consistency and specific product features, and keeping a chain of custody. In addition, traceability helps to achieve operational efficiencies, increased productivity and reputational benefits.
Nonetheless, traceability requires substantial investments in technology and processes aimed at tracking goods along the supply chain. Cost is still proving to be a difficult barrier to overcome, especially in the initial production phases. Current debate in the literature also questions whether traceability systems are driven only by quality assurance expectations, or are also somehow related to sustainability needs and goals.

The research team at our School involved in this project is composed by Prof. Federico Caniato, Federica Ciccullo, Verónica León-Bravo and Giulia Bartezzaghi. Currently, we investigate the traceability systems implemented in the coffee supply chain, providing a taxonomy of solutions and characterizing how these systems are applied, in terms of technological display, information width and depth, as well as considering their relationship with sustainable value creation. The analysis of the case studies (including different stages in the chain, located in different geographical regions) revealed how the implementation of traceability systems along the coffee supply chain could be influenced by the targeted information width and depth, along with the supply chain tier, country of origin or company technological capabilities. On the other hand, it is observed that the link between traceability and sustainability, especially for coffee roasters, might be influenced by two main contingencies: volumes purchased and product type. Indeed, one of the companies being studied explained that dealing with large volumes makes it impossible to trace all the details up to the producer, especially for non-certified products. On the other hand, another company, using advanced technology for traceability, highlighted the precise information they are able to register and communicate while buying smaller lots from certified coffee producers. Besides, we found traceability and sustainability to be disconnected when they are both implemented but managed separately and not aligned. Whereas, traceability and sustainability can be synergistic when both followed a common strategy and are consistent with each other, i.e., the level of detail in the traceability system corresponds to the scope of sustainability practices.

Maintaining consistency and keeping a chain of evidence (e.g., benefits of traceability) are efforts incurred during the current health crisis as companies worked hard to apply newer and stricter safety measures that needed to be shown to international buyers. For instance, the Brazilian Ministry of Health and the slaughterhouses affected by the Chinese restrictions are working to reverse the bans and started testing the cargoes with the aim of demonstrating to buyers that the food is not only sanitized in the plants, but also before transportation. Similarly, Ecuador improved shipping protocols and applied the required quality standards, allowing shrimp exports to China to be resumed in August 2020. These two examples also show that different actors in the supply chain need to work together to apply health and safety measures, that in turn need to be demonstrated to the downstream actors, thereby ensuring traceability and transparency along the supply chain.

There is no doubt that adopting traceability could bring varied benefits to companies in the food supply chain, but for improving sustainability, it might not be enough. Sustainability in food supply chains needs attention from varied angles. Traceability implementation in a commodity supply chain is one of the projects currently being developed at our School. Other research projects in place are observing different food supply chain configurations, such as short supply chains, and their implications for sustainability; or analyzing the added value of information obtained in the assessment for sustainability with a supply chain-wide perspective.

Managing sustainability along food supply chains is still a work in progress that requires multi-tier involvement for reducing ‘distances’, reaching common understandings and better performances; and thus, achieving food security, improved nutrition and sustainable agriculture as called for by the United Nations Sustainable Development Goals.

 

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[1] http://www.ico.org/prices/new-consumption-table.pdf 

From technology to luxury, via MIP: the experience of Merry Le

Posted on | by Chiara Vasta | Leave a Comment on From technology to luxury, via MIP: the experience of Merry Le
MBA Alumna tells about the success achieved at the Mark Challenge, a competition for startups in the luxury & yachting field. A result also made possible by the ability to best exploit one’s skills

 

There’s a phrase, attributed to André Citroën, founder of the French auto manufacturer, that goes more or less like this: “Knowing how to do something is nothing without making it known.” Because sometimes the biggest challenge isn’t finding an excellent idea and developing it. It can be much more complex to effectively describe it, especially when faced with a varied audience, with different educational backgrounds. How do you convince everyone? It was the question asked by Merry Le, who after attending the Master in Business Administration programme at MIP Politecnico di Milano became the business strategy lead for Moi Composites. The company, a spinoff of Politecnico di Milano, is active in the 3D printing on demand market and received the Special Award in Yachting from the Mark Challenge, a competition for startups in the luxury sector. «Our patented technology, Continuous Fiber Manufacturing, allows production of unique products in a more efficient and economically accessible manner», explains Le. «Characteristics that go hand in hand with the production needs of a luxury sector like yachting, where customization is regularly desired.  The Mark Challenge seemed to us to be the right forum to promote the unique advantages of our startup. There was one main obstacle: since it is a technological process innovation, it was difficult to make the more technical aspects comprehensible».

 

The importance of a good pitch

Merry Le and her colleagues, all four hailing from MIP and the Politecnico, thus decided to take advantage of their knowledge network, including MIP professors: «We presented the project to several people to get feedback on its effectiveness. So we simplified the language and made some messaging more clear. The actual presentation, then, involved a further complication», says Le, «because it took place in the middle of the Covid-19 health emergency,  everything was done online». But the strategy of Moi Composites paid off, because Merry Le and her colleagues were awarded and won the possibility to present their pitch to the Monaco Yachting Clustercommission. Not only: the presentation itself was voted by the public as the best pitch. «A success that I and my colleagues achieved, thanks also to our different backgrounds, which allowed us both to develop a solid business plan, and to work with an innovative technology.»

 

The future of luxury between personalization and sustainability  

The characteristics of Moi Composites’ business are well suited to the latest developments in the luxury market in general, and not only of the nautical industry: «The current trend is that of personalization. Customers are increasingly looking for tailor-made products suited to their specific needs. It’s a trend accompanied by an increasing demand for environmental and social sustainability, as well as circularity», continues Le. «I am convinced that, despite Covid-19’s major impact on the economy, and thus also on luxury, we are more prepared to face the change.  The 2008 recession struck suddenly, taking everyone by surprise; but because of that crisis people now learned how to manage recovery and to become more creative and proactive.»

 

The wealth of the MBA  

Merry Le attended the Master in Business Administration at MIP because, after years of a career, she felt the need to broaden her expertise: «The world is changing rapidly, and it’s increasingly important to be able to count on skills that allow you to best understand and face changes underway». An American from the East Coast, after 14 years in the aerospace manufacturing industry, today Merry Le, in her new position as business strategy lead, can use the knowledge acquired during the master’s. Not only: the project work with which she participated in the Mark Challenge was proposed to her by MIP. And if you consider that Moi Composites, with headquarters in the nearby town of Pero, was created thanks to the support of Politecnico di Milano, it appears evident that MIP’s strenght isn’t limited to education, but can also provide a geographically near productive fabric, made up of high-level companies that are constantly seeking professional skills of the same calibre. «My experience was fantastic», concludes Le. «I would recommend the choice of an MBA to anyone. What attracted me most was the emphasis on tech and big data, but more generally I felt the need to learn something new in a new environment, not just to improve and fine-tune the skills I already had. Further value added is provided by the heterogeneity of the class: the students came from 20 different countries, and this allowed us to be exposed to new points of view. An invaluable wealth».

Amazon Innovation Award 2020 – PrimePeerz, an innovative and sustainable project

Posted on | by Marta Re Ferrè | Leave a Comment on Amazon Innovation Award 2020 – PrimePeerz, an innovative and sustainable project

Five students in their second year of the Master’s Degree in Management Engineering have won first prize in the Amazon Innovation Award 2020, with the PrimePeerz project.
Giorgio Damuzzo, Nicola De Giusti, Simona Esposito, Fulvio Gargiulo and Romain Lerouge faced the competition as an integrative project during the Logistics Management course held by Professors Alessandro Perego and Riccardo Mangiaracina, going up against 300 other students from Italian and French universities.

They decided to work on sustainability: they were tasked with devising an innovative solution for the processes of product pick-up, packaging, shipping and returns, which would be as efficient as possible and at the same time would result in a reduction of CO2 emissions, an issue which is very important for Amazon at the moment.

The team’s idea focuses on “last mile” delivery, the core concept is the relational economy of human beings, with the intention of exploiting the existing social ties between Amazon’s large customer base in order to reduce the company’s environmental impact.
PrimePeerz aims to establish further consolidation points in the downstream logistics network, by aggregating orders from customers that are linked to each other, thereby reducing the number of shipments, the resulting transport costs and greenhouse gas emissions.

“We are very pleased with the victory, because it shows that we have managed to capture both academic interest and recognition from Amazon, and for us this means we have reasoned in the right way.”

The award, postponed due to the current epidemic, includes a trip to Seattle, where our students will present their idea to managers at Amazon’s headquarters.

Amazon has selected their project to represent the Politecnico di Milano at the national finals, in competition with the Politecnico di Torino and Rome Tor Vergata. In the final, which took place remotely on April 17, Amazon then decreed their project as the winner of the contest.

“It was a shame for us not to be able to celebrate the victory all together physically and to be able to meet Amazon’s representatives in person. We hope to make our dream come true and visit Amazon’s headquarters in Seattle once the health containment measures are completed.”

BlackRock Hackathon: a green experience!

Posted on | by Beatrice Grillo | Leave a Comment on BlackRock Hackathon: a green experience!

Milano Digital Week (MDW) is a social initiative hosted every year by the City Council of Milan to inform the public about challenges and issues in the digital environment. Among keynotes, roundtables and workshops, the organizational committee launches initiatives aimed at engaging companies and citizens in shaping the future of digital. The BlackRock Hackathon is an example of such public involvement.

At the beginning of 2020, Larry Fink, BlackRock’s CEO, announced that environmental sustainability would be at the core of the company’s investment strategy. This was a bold decision made by a global leader in the industry. Following the news, the company decided to launch a challenge aligned with UN SDG (United Nations Sustainable Development Goal) #13: Climate action. The goal of BlackRock’s Hackathon was to create a tool, leveraging big data and analytics, to support investment professionals in taking environmentally informed decisions for their clients.

Hackathons are generally demanding, as participants are asked to develop a thorough, innovative solution in an incredibly short amount of time. Personally, I found this one even more challenging for two reasons.
I signed up to the event as an individual. I was reluctant, at first. Building something with people you have never met before in just 36 hours is not an easy task: you need to create a common ground of communication style and understand how to push your ideas, among other things. Then I remembered something I had learnt some years ago: if you wish to grow and achieve great things, you need to exit your comfort zone ̶ so that is what I did. Luckily, I got along quite well from the start with Mattia and Stefano, my teammates, and, since the team is the key, everything was downhill from then on. And, despite the struggles and the little sleep, we managed to have fun and achieve our goal: winning the hackathon.

Furthermore, the contest addressed a quite complex issue. Despite improved willingness from companies to disclose their environmental impact, the greatest obstacle remains data availability. Whichever solution you want to design, you need to take this into account. Another crucial element was the type of product to present. How are users going to benefit? Which channels to use?

Throughout the competition, teams were supported by BlackRock professionals: in our case, the mentoring was extremely useful. Mentors helped us reason better with regard to the choices we were making by questioning them constantly. In the end, when we prepared the pitch for the jury, Mattia, Stefano and I had motivated our choices so many times that we were confident about the idea, and it only took us a few minutes to find the right words to describe it.

After an initial, long brainstorming session, where ideas seemed to pop up from everywhere, we decided to focus our attention on something that could easily be implemented by an incumbent and whose usage could possibly be sold: an algorithm optimizing the environmental performance of investment portfolios. The name? (re)Balance!

Our starting point was the Paris agreement and its stated goal to contain any increase in global temperatures within 2°C by 2030. Upon that, we built a mechanism that allocates money by picking the most environmentally virtuous emitters and securities from among a predefined set of categories (best-in-class approach). Moreover, as a team, we wanted something visual that could communicate to investors how much they are contributing to the goal: something socially valuable; a thermometer, showing how much investors’ portfolios are helping limit global warming.

I am a student of the International Master in Fintech. One could say the competition was basically my bread and butter, as it addressed innovation in the financial industry. Looking at the specificity of the challenge, especially, one could equally add that mastering financial and technological concepts was pivotal to performing well. This is not completely true. First, because the environmental component was relevant. Second, because innovation does not result just from knowing things. You need to analyse, understand and take decisions in an unexplored environment. In other words, you need to exercise critical thinking ̶ and I believe that’s where the Master was a game-changer for me: it taught me to think about what I know and use it in unconventional ways.

 

About the author
 Lorenzo D’Auria 
I am 24 and grew up in Cagliari, Italy. I am a student of the International Master in Fintech at MIP and I hold a BSc in Economics and Management from the University of Trento. My professional interests revolve around the investment management industry and the impact new technologies have on it.

2020 – Responsible Luxury is no longer a passing fad

Posted on | by Marta Re Ferrè | Leave a Comment on 2020 – Responsible Luxury is no longer a passing fad

As the second fifth of the 21st century begins, no industry can avoid the challenge of boosting its sustainability. Luxury is no exception to this, but what if responsibility were an inherent part of luxury?

Alessandro Brun, Associate Professor of Quality Management, Director of Global Executive Master of Luxury Management and Founder of the Sustainable Luxury Academy

As the end of 2019 approaches, we are now suddenly realising that a fifth of the 21st century has already passed. And that an idea murmured by a choice few at the turn of the century has now grown to become the buzzword heard everywhere. No sectors can escape from public demand for a more sustainable and ethical business!
This is particularly true when it comes to the premium & luxury segment of most consumer goods sectors: from fashion to jewellery to beauty, the conversation about “responsible luxury” is now ubiquitous.

On 8th November, Prada’s US headquarters played host to a conference entitled “Shaping a Sustainable Future Society”: the third event in the “Shaping a Future” series which, this year, focused on Social Sustainability. On 5th December, Assolombarda (the Lombardy chapter of the Italian Entrepreneurial Association) hosted the event “4sustainability”, which saw 200 players from the textile and leather supply chains collaborating with international coalitions (such as ZDHC, Leather Working Group, Textile Exchange) and leading luxury brands in an attempt to develop reliable and shared measurement systems to assess sustainability performance. On 20th November, the Politecnico di Milano hosted the Responsible Luxury Summit, marking the third anniversary of the founding of the Sustainable Luxury Academy. This is merely the tail end of an extremely intense Milan autumn season for me and my team at the Sustainable Luxury Academy: earlier on, 10 Corso Como (a concept shop blending lifestyle, culture and commerce) hosted “A New Awareness”, whilst the Fashion Film Festival Milano hosted the conversations “FFFMilanoForGreen”.

It is important to explain why sustainable luxury is not a trend, let alone a passing fad. Sustainability is one of the central themes of the paradigm shift taking place in the business of luxury.
Before illustrating what is going to happen in the luxury sector in the 2020s, let us briefly recap what has happened to luxury iver the past 3 decades. In December 1998, professors Jose Luis Nueno and John A. Quelch published a paper in Business Horizons entitled “the Mass Marketing of Luxury”. They explained the reasons behind the double-digit worldwide growth of the luxury market since the mid-1990s, and concluded the paper highlighting a challenge, namely that top managers of luxury brands would have to decide “how far to democratise the brand through line extensions, junior product lines, affordable accessories and expanding distribution.”
This was extremely effective – perhaps even too effective. In 2007, American journalist Dana Thomas published a very illuminating report on how managers of top luxury brands had addressed the above challenge, and asked some questions worth pondering: Has the luxury of some products got lost? Have prices gotten out of hand? Has distribution become too widespread? In fact, the renowned Altagamma Worldwide Luxury Market Monitor labels the period from 1994 to 2000 as the “sortie du temple” of luxury brands, followed – in the years 2001-2008 – by the democratisation of luxury.

Why did this happen? As per Nueno and Quelch’s writings, the “nouveau riche […] can afford to indulge in the purchase of luxury brands, but lack the experience and confidence to discriminate”. What happened during the democratisation was a surge in the middle-class consumption of luxury goods. This global trend is called “trading up” (a neologism coined by American authors Silverstein and Fiske in their book “Trading Up: The New American Luxury”). As such, the middle class can also afford (albeit less frequently) to indulge in the purchase of luxury brands nowadays.
Whilst the publication of “the Mass Marketing of Luxury” marked, on the one hand, the beginning of the democratisation of luxury, it also heralded, on the other, the death of luxury as we (at least the lucky ones) knew it.

What happened in the first two decades of the third millennium is clear to everybody. According to the Altagamma report published in spring 2019, the global market of personal luxury goods grew from USD 76B in 1996 to USD 260B in 2018.

Given the evolution of the past few years, both in terms of Personal Luxury Goods and in the luxury sector more generally, it is now important to look ahead and try to understand what is about to happen. Global trends in Luxury in 2019 are well summarised in the NExTT framework by CB Insights, under which which trends are classified according to their market strength and industry adoption:

  • Trends with a high level of adoption but low strength are considered Transitory: Attracting Millennials with Collaboration is classified in this group.
  • RFiD Tagging, Authentication Tech, Ethical Consumption and Lab-grown Luxury Materials all belong to the Threatening trend group: adoption is still low, but their strength is high.
  • Necessary trends are characterised by both high strength and widespread adoption: here we have Pop-Ups, the Resale Channel, and Luxury Streetwear.
  • Trends like Luxury Goods on the Blockchain are considered Experimental, due to their low strength and low adoption level.

Here it is quite easy to envisage a scenario in which multiple trends are pointing in the same direction. Luxury brands cannot pretend to be blind to the power of millennials. Their voices called for bulky trainers – and all brands reacted by offering Luxury Streetwear. But millennials are also asking for more transparency, exploiting simple solutions (hence why a “simple” RFiD tag is considered Threatening whilst the Blockchain is not relevant at the moment) to provide more visibility throughout the supply chain. They are requesting environmentally-sustainable practices – calling for brands to stop the use of controversial materials (lab-grown materials could be the solution to such issues as incidental animal cruelty or materials which negatively affect endangered species, as well as ’blood’ diamonds) – as well as establish socially-responsible practices – to the point that ethically-responsible consumption poses a significant threat to some brands.

Before taking any action, brands should seek a deeper understanding of the meaning of being responsible.

Being responsible nowadays means being open and embracing new technologies – to guarantee cleaner processes, a more efficient use of resources, more opportunities to reduce, reuse, recycle, – whilst at the same time going back to the industry’s roots – the heritage of luxury is in the artisanal processes, craftsmanship and savoir-faire, where the talented artisan was at the heart of the company, never to be considered a mere “human resource” in a big industrial, profit-oriented organisation.
Being responsible also means using storytelling in the right way: that is, using it as a means to connect or reconnect disconnected departments in the organisation. European artisans in the Middle Ages, the age of craftsmanship, were one-man shows, taking care of sales, product design and manufacturing. Today, the storytelling of a truly luxurious brand has to focus on the supply chain. The heritage of some brands – and even of some iconic items – is deeply rooted in sustainability. One need only think of the history of Ferragamo’s cork wedge shoes and the Gucci bamboo bag, two defining items in the history of fashion, both launched in years in which – due to sanctions – Italian companies could not make use of very basic and desperately-needed materials. Italian genius proved stronger than adversity, though: in the 20s, during the dictatorship in Italy, it was not possible to import steel from Germany; Ferragamo replaced the steel shank necessary to support women’s shoes, inventing the world-famous wedge using cork from Sardinia; meanwhile, in 1947, post-WWII, Gucci launched a new bag whose handles were made out of bamboo, a material that could be imported from Japan without restrictions.
The Swiss shoemaker Bally was founded in 1851, as the result of Carl Franz Bally’s desire to create more jobs and improve the lives of local residents. In its golden years (in 1916, when the rest of Europe was crippled by the World War, it had 7,000 employees), Bally was providing employees with unmatched social and healthcare benefits.

When somebody asks me whether sustainable luxury is an oxymoron or an opportunity, I can barely contain my smile when mentioning the above cases. Sustainable Luxury is neither an oxymoron nor an opportunity. True luxury is inherently, quintessentially sustainable by its very nature. Hence, sustainable luxury is a necessity.
I dream that, one day, all consumers will say “If it ain’t sustainable, it ain’t luxury”. That day is coming soon.

Impact investing: so far, so fluid

Posted on | by Marta Re Ferrè | Leave a Comment on Impact investing: so far, so fluid

As sustainability and impact take on a primary role in the business agenda and amongst financial players, impact investing has been growing steadily, but still falls short of having a clear and structured character. A fluid situation that pays testament to its salience, but that may also hinder its future development.

Mario Calderini, Full Professor of Social Innovation School of Management, Politecnico di Milano

The term ‘Impact Investing’ was coined in 2007 by the Rockefeller Foundation. It can be defined as a class of investments in companies, organisations and funds with the intention of generating a social and environmental impact alongside a financial return. It sets itself apart from mainstream finance by including social returns in the investor’s expectations, and yet it diverges from philanthropy and grant-making because some financial return, or at least return of capital, is expected.

Nowadays, the global Impact Investing industry is still in its nascent stages. Nevertheless, according to the report published in 2019 by the Global Impact Investing Network, the size of the Impact Investing market is growing at an impressive pace: compared to 2018, the volume of capital invested grew by 13%, reaching a total of more than $514 billion. Indeed, considerable public and private capital has been and will be deployed to fund organisations with the mission of addressing social needs; in that sense, the projection for future developments is optimistic.

As a matter of fact, 2019 has been a very significant year for impact investing. The newly-central role of the sustainability agenda, together with many other signals coming from the very heart of the economic and financial system – including the now world-famous letter by Larry Fink, the CEO of Blackrock, or the manifesto of the American Business Roundtable, together with the resulting cover pages of many influential newspapers around the world, such as the Financial Times and the Economist – have officially established sustainability and impact as the new normal amongst financial players.

It is for this reason that the period from late spring 2018 to the summer of 2019 was defined as the golden year of sustainability and impact, to mark the fact that sustainability and impact are no longer lateral, marginal or side issues in the business agenda, but rather they have made their way to the very heart of it. Mainstream economic and financial players are increasingly positioning themselves as proactive forces in the search for solutions to the most pressing environmental and social challenges being faced today. Whilst many are heralding this as excellent news, some others, on a note of scepticism, warn of the possible opportunism and ambiguity that this phenomenon could bring with it. Whatever the interpretation, it is without a doubt that this could represent a very significant paradigm shift.

Strictly speaking, the perimeter of Impact Finance excludes the approaches generally defined as ESG or thematic approaches. Impact Investing is a radical approach to investing in solutions for a better future, and its radicality translates into placing the intentionality-measurability-additionality triad at the centre of the definition of impact investing. Such a radical definition is crucial to identifying generative finance as a counterpoint to extractive finance, a solution-first way of investing, supporting business models that are suitable for promoting concrete creative solutions to emergent social issues whilst also remaining economically sustainable, or even profitable.

Since 2016, Tiresia, the Research Centre for Impact Innovation, Entrepreneurship and Finance at the School of Management of the Politecnico di Milano, has been delivering its annual Impact Finance Outlook, offering a comprehensive overview of the Italian impact investing market.

The first Tiresia Impact Outlook, in 2016, concluded with the consideration that the impact investing sector, as strictly defined, was still in a fluid, experimental phase, uncoordinated and slowly transitioning towards a clearer, more structured configuration. A snapshot that was not entirely different from the international one at the time, in its full development.

Quite surprisingly, the results emerging from Tiresia Impact Outlook 2019 are not significantly different. According to a definition of impact investing based on the intentionality- measurability-additionality triad, the perimeter of the industry still remains relatively small, characterised by a group of consolidated pioneers. The assets under management that qualifies as ‘impact’ total nearly 700 billion, although when we apply an even stricter definition of impact investing, this figure is reduced to just over 200 billion. This represents a relatively very small amount of assets, if compared to the total assets that are now being labelled as ESG or sustainable investment. Nevertheless, this also reflects an interesting feature of the Italian market on the international scene, namely that it is characterised by a significant level of real attention to the aspects which generate social impact and value. We may describe it as a very meaningful niche, potentially able to act as a role model for the more broadly-defined sustainable finance industry currently undergoing a transformation.

Having said this, the ecosystem of impact investing in Italy shows some signs of vitality and innovation. Operators are trying to organise their activities in a more structured way, in terms of both fundraising and asset allocation. These operators face three main problems. The first is linked to the scarcity and weakness of investment opportunities, and subsequently deal flow. An overabundant provision of capital with respect to actual market opportunities is pushing equity investors to face up to reality in two fundamental ways. The first and most virtuous of these consists of providing strong and direct managerial support to invested companies. This translates into providing not only non-financial services, but also structured partnerships with accelerators and incubators, both public and private, in order to engage proactively in the establishment of a pipeline proportionate to the size of the actual impact assets under management. The second, more controversial approach consists of relaxing constraints in impact screening, including target companies that do not entirely comply with the impact triad as eligible investments.

The second obstacle is linked to exit strategies, which yet remain largely undefined due to the lack of organised markets where the value of impact projects can be adequately assessed.

Thirdly, Tiresia’s report demonstrates the lack of convergence and shared interpretation amongst investors regarding the qualifying elements of impact investing. There is no agreement on the notion of impact risk on impact metrics – which are far from being standardised -, on governance models needed to guarantee so-called ‘mission-lock’ and the balance between financial and social objectives, and finally, not even on the nature of the fiduciary duties involved in impact investing. As a consequence, this potential asset class is beset by severe classification problems, hampering the development of the industry.

As a final remark, although we collected several elements indicating a remarkable growth in impact investing for the next ten years, we believe that the tipping point for a genuine and radical impact industry is still a long way down the road. This is mainly due to the lack of attention from public policy makers, poor infrastructural conditions and the persistent lack of business models that are at once robust and genuinely oriented towards social impact objectives.

Crafting culture for sustainability. The student hackathon

Posted on | by Veronica Rafaniello | Leave a Comment on Crafting culture for sustainability. The student hackathon

Join us to craft a sustainable culture!

POLIMI School of Management organises an interdisciplinary hackathon for WSM.

On January 08-09.01.2020, the next generation of managers, designers, policymakers and opinion leaders come together to create novel ideas as well as illustrative suggestions for sustainability in fashion under the moderation of Dr. Hakan Karaosman.

You are invited to join us to lead the change and act upon the solution.

Overarching Questions
  • How to ensure environmental and social sustainability across multiple layers from design and production to consumption and communication?
  • How to establish connections between different disciplines for sustainability?
  • How to engage civil society to be part of the solution?
Key Dates
  • Expression of interest by 20.12.2019
  • Notification of acceptance by 27.12.2019
  • Hackathon on 08-09.01.2020 at POLIMI School of Management
The Way Forward
  • Expression of interests and CVs must be addressed to Hakan.karaosman@polimi.it by no later than 20.12.2019
  • Invited participants will work in groups under the supervision of academics on 08-09.01.2020 at POLIMI School of Management
  • Each group will create posters and deliver pitches at the end of 09.01.2020
  • All participants will be invited to WSM FASHIONREBOOT on 11-12.01.2020
Registration

Register here to participate