The youth today are increasingly worried about environmental and social issues: this has a direct effect on how Millennials and Gen Zs are spending their money. For example, 64% of Gen Zs and a comparable percentage of Millenials prefer to buy sustainable brands. What’s more, 54% of Gen Zs are prepared to pay an additional 10% or more for a sustainable product. Increased concerns for both social and environmental sustainability has propelled many brands to reconsider their business models.
With the onset of the COVID-19 pandemic, many inequalities have been brought to light, consequently bringing forth questions of the role of capitalism in society. However, not all companies have approached this new movement towards social and environmental impact equally. In this article, we take a closer look at how more and more companies are adopting a socially-conscious approach and what it means for the future of business.
A socially positive angle to business isn’t new: for the past several decades, the concept of ‘social entrepreneurship’ has gathered more and more popularity. However, not all socially responsible companies conduct business in the same manner. On one end, there are businesses like Warby Parker, an eyeglasses brand, that donates a pair of glasses to children in developing countries for every pair purchased. On the other are companies like Zidisha, a peer-to-peer micro-lending service, which maintains social impact as the core of their business model. Even big corporations like McKinsey and Bain have dedicated a significant proportion of their resources to advancing social and environmental causes through pro-bono consulting. More companies are also seeking B Corps certification which is awarded for implementing and maintaining standards that seek to maximise benefits and reduce harms to people, the planet, and communities. As of July 2020, there are over 3,400 B Corps across 150 industries and 71 countries. Familiar brands with the certification include Ben & Jerry’s and Innocent drinks.
With these changes in mind, one could argue that capitalism is on the way to a better tomorrow. However, not everyone’s efforts are transparent. In response to increasing concerns about fast fashion and its negative impacts on people and environment, companies like H&M and Zara have launched their own ‘ethical’ fashion lines that have been accused of ‘greenwashing’. ‘Greenwashing’ refers to the practice of conveying a false impression of how environmentally-friendly a product is to deceive the consumer into believing a particular company has the planet’s best interest at heart.
H&M, for example, launched an ethical clothing line and is planning on bringing in more items made from Circulose, a sustainable yarn. However, these efforts pale in comparison to H&M’s overall impact on the planet through their regular product offering. Even within their ‘Conscious’ line, it is hard to find precise information about how much product material is recycled. Since it has been accused of ‘greenwashing’, H&M has made improvements with regards to sustainability claims but it will still be a while until their Conscious strategy may truly be called conscious. Zara was criticised for similar vague claims about sustainability, highlighting the fact that consumers and regulators alike would like to see more concrete commitments from brands.
Most recently, H&M and Zara, amongst many other fashion brands have been implicated in sourcing cotton from Uighur forced labour camps in China. China is the world’s largest cotton producer, with 84% of its cotton coming from the Xinjiang region where the internment camps are located. Since the UK has accused China of “gross and egregious” human rights abuses with regards to the treatment of the Uighur people, this issue has gained increased media attention. It will certainly be interesting to see how this increased publicity affects consumer attitudes towards those brands.
There is more hope for socially- and environmentally-minded businesses set up by youth though. Creator Fund, a student-focused VC, recently released a report regarding student-founded companies which found that the most popular sectors for student-led companies were Healthcare and Food & AgroTech with 15.7% and 10.5% of startups being in those sectors, respectively. The Sustainability sector also came joint-fourth at 5.9% alongside FinTech. The popularity of FinTech is also significant as these technologies often empower users that cannot access traditional financial services. This shows that the youth of today aren’t just prepared to change their consumption habits to achieve a better and fairer planet, but are also actively looking to contribute to the advancement of sustainable development.
RiceInc is a great example of a student-founded business that seeks to improve both social and environmental outcomes. Through lending rice dryers to farmers, the company saves up to 20% of rice from being wasted in the traditional sun-drying practices. The company is run by Lincoln Lee and Kisum Chan, who started the business whilst still studying in University College London as part of The Hult Prize, a student social entrepreneurship competition. The team went on to win the whole competition and $1 million in seed funding. Since winning in 2018, RiceInc has launched its own sustainable rice brand which can be pre-ordered now.
With the rise in socially and environmentally-oriented ventures, there has also been a rise in funders of such projects. Chris Sacca, known for his appearances on Shark Tank and early investments in Uber, Twitter and Instagram, has returned to the world of Venture Capital with an investment in Lowercarbon Capital, a firm focusing on businesses that lead the planet towards net-zero carbon emissions. In Europe, a new fund, Pale Blue Dot, aims to invest in 40 carbon-positive companies with a fund of €53 million. There is also more money available to mission-driven founders, from existing VCs like Atomico, who closed an $820 million fund, to back founders achieving “positive, transformational change”.
The movement of the private sector towards social good is commendable, but it will not solve all problems. There is still a pressing need for people to remain active in the public forum and to campaign for better policies that help transform our societies for the better. The rise in socially-conscious businesses has improved the choices for consumers who wish to use their wallets for good. As Gen Zs enter the job market, their buying power will increase and so will their influence on companies big and small. As citizens and consumers, it is therefore important for us to keep both politicians and businesses accountable for their promises to help build a fairer future for all.
Author: Maria Slobodina
Editor: Chloe Lee