MIT Sloan’s Sustainable Business Lab (S-Lab) offers students the opportunity to collaborate with companies to solve real-world problems. By applying intellectual rigor to sustainability challenges, students are empowering leaders everywhere to take action in personal, professional, and policy spheres. Over the course of 12 weeks and under the guidance of MIT faculty mentors, teams of four students devise strategies to help companies meet their sustainability goals. Here is a closer look at the 2017 S-Lab projects and their results.
The client: 1% For the Planet is a nonprofit organization that partners high-impact environmental nonprofits with businesses that contribute at least one percent of their annual sales to environmental causes through certified, direct giving.
The challenge: 1% For the Planet aims to grow the annual giving generated by their network from $18 million to $35-$40 million or more by 2020.
The task: Help 1% For the Planet shape and market its new programs and pursue its increased giving goal; test this goal through market research to ensure the company is targeting assertively and realistically.
Key insights: Two factors drive giving and determine what cause people choose to give to: 1. Personal passion for the cause and 2. peer recommendations. Data also play a key role in defining giving, with an increasing mindset of "instant donation + instant feedback" about what the contribution is going towards. Recommendations for 1% For the Planet include:
The client: Allagash Brewing Company has been producing handcrafted, Belgian-style beer in Portland, Maine, since 1995.
The challenge: Allagash seeks to further stimulate Maine’s economy, while reducing the company’s environmental impact. To do so, it hopes to purchase even more ingredients from within its own state—specifically, it has committed to annually purchasing 1 million pounds of Maine-grown grain by 2021.
The task: Devise a road map to help Allagash achieve its goals, while considering the variety, quality, and availability of Maine-grown grains, including barley, wheat, and oats. Generate an ecological and economical comparison between Maine grown-grain and grain currently grown in and purchased from the Midwest.
Key insights: The company’s decision to invest in local grains or not boils down to company values. The 1M-pound local grain initiative will cost about $390,000 more than if Allagash was to purchase those grains from the Midwest, however, we estimate that it will create approximately 20 more local jobs and ~55,000 fewer kg of carbon emissions. It is worth evaluating the potential branding effect of purchasing more local grains, which could generate positive marketing and reception from consumers as Allagash positions itself as a more sustainable craft brewery. This branding could potentially increase revenues, thereby offsetting the higher cost
The client: Amazon specializes in internet retailing, content creation, and cloud computing, striving to be Earth’s most customer-centric company.
The challenge: Amazon hopes to demonstrate to both Millennials and Generation Z consumers in the US and India that Amazon Prime constitutes “responsible consumption.” Sustainability initiatives are one way to engage these customers and incentivize them to join Prime.
The task: Craft a market assessment that includes: a literature review regarding sustainability preferences and expectations of Millennials and Gen Z, any benchmarking on previous attempts to deliver sustainability focused experiences to these audiences, and ideas for prototypes that could test Amazon’s ability to connect with these consumers.
The approach: Explored existing studies on the attitudes of U.S. and Indian Millennials and Gen Z consumers on sustainability and a range of environmental concerns.
Key insights: In light of the quality of available research on Indian consumer attitudes about sustainability, the reliability and validity of our conclusions might not be an adequate foundation for immediate action. Recommendations for Amazon:
The client: One of the world’s oldest independent biotechnology companies, Biotech discovers, develops, and delivers worldwide innovative therapies for people living with serious neurological, autoimmune, and rare diseases.
The challenge: Biogen invests significant capital and resources into its sustainability efforts, yet the company is not sure whether its customers are aware of, or to what degree they care about, these initiatives.
The task: Help Biogen gain a deeper understanding of the importance of its sustainability efforts to its customers with an eye toward how it can better align these initiatives with current customer needs and future trends.
Key insights: Key Biogen stakeholders are not generally aware of the company’s sustainability initiatives. Environmental sustainability matters, but is not front-of-mind for most customers (excluding contract manufacturers). Biogen’s leading environmental sustainability position might make it a more attractive business partner. Sustainability efforts are unlikely to impact patient purchasing behavior, but could impact how Biogen is perceived by its patients and improve general public opinion of the company. There is a clear, undeniable trend that sustainability, both the environmental and social aspects, is becoming an integral part of the biopharmaceutical industry landscape and one of the key factors that will determine companies’ competitive positions in the next 5-10 years. Low customer awareness and gaps in understanding of social sustainability issues create a unique 5-7 year window of opportunity for Biogen to become an industry leader in social sustainability, capturing a privileged position with its key customers.
The client: A Boston-based registered investment advisor, Breckinridge focuses exclusively on the management of investment-grade fixed income portfolios, and today boasts approximately $26 billion in assets under management.
The challenge: While a number of academic and industry studies have looked at environmental, social, and governance (ESG) issues and their impact on the performance of public equities, ESG impact on corporate fixed income has received little attention to date. Breckinridge is interested in understanding ESG issues and their impact on corporate fixed income, as well as how ESG matters in corporate bond analysis and performance.
The task: Prepare a comprehensive research report that explores the relationship between MSCI and Sustainalytics ESG data, credit rating agency ratings, and the investment performance of corporate bonds. And discover whether the sustainability of a company influences the performance of its corporate bonds.
The approach: Along with Breckinridge, the student team leveraged both quantitative and qualitative research methods in order to find smart, sustainable investment recommendations for managers of fixed-income portfolios. The project was developed around two primary components:
Key insights: The team observed the following two trends in terms of the relationship between ESG scores and corporate fixed income: 1. ESG integration might not satisfy every sustainability-oriented investor, however considering these extra-financial factors in the credit research process might offer downside protection that should be valuable to anyone regardless of interest in sustainability; 2. ESG criteria is expected to become increasingly more relevant in the market’s determination of credit quality as ESG methods develop and the pressure for sustainability increases. Based on analysis, it is recommend that fixed income managers:
The client: Colgate is a multi-billion-dollar consumer products company that provides oral care, personal care, home care, and pet nutrition products.
The challenge: By 2020, Colgate aspires to expand access to affordable health and wellness products for millions of people in underserved communities. The company is now seeking to formalize their strategy and develop meaningful ways to tell their story to stakeholders both internally and externally.
The task: Help formalize Colgate’s strategy to evaluate and communicate global, affordable product offerings, pricing models, and distribution; outline the issues and actions the company must consider and expand upon moving forward.
Key insights: Current Colgate sustainability efforts are tactical, but should be aligned under a cohesive global strategy. Regarding communications, Colgate should consider:
The client: An international nonprofit organization, Environmental Defense Fund (EDF) devises transformational solutions to our most serious environmental problems—forging science, economics, law and innovative private-sector partnerships.
The challenge: EDF’s Oceans Program works to improve fisheries management across the globe. Within the Ocean’s Program, the Fishery Solutions Center (FSC) uses a Supply Chain Decision Support Tool designed to help staff identify the best way to intervene in their supply chain, but the tool is too complex to be used as a first step. FSC seeks to improve this toolkit for internal staff and consultants who diagnose barriers to sustainability, design successful management reforms, and monitor progress across interacting systems that shape fisheries.
The task: Develop a new, easy-to-use Supply Chain Classification Tool by accruing and analyzing notes from interviews with EDF staff and partner organizations, then generate a user-friendly document outlining best practices for engaging with sets of actors in seafood supply chains.
Key insights: Research and interviews revealed a need for a simple tool that could help EDF staff members quickly and easily classify the supply chain in which they are working. This is especially relevant for staff entering a new geography and being exposed to a new supply chain, as it is unclear how to learn the moving parts of the complex network of supply chain actors. Suggestions for EDF/FSC include:
The client: Enel Green Power, NA (EGPNA) provides renewable energy in many forms, from solar and wind to geothermal and hydropower.
The challenge: EGPNA seeks to improve the sustainability of its supply chain, but does not have an understanding of what components have the greatest impact. EGPNA has processes for managing sustainability in the construction, commissioning and operation of its facilities, but lacks a framework for its supply chain operations.
The task: Create a framework for evaluating the sustainability of the components of EGPNA’s supply chain. Offer recommendations on how to develop a repeatable process that will enable EGPNA to embed sustainability into its supply chain.
The approach: Assess the process used to evaluate EGPNA’s products to determine what worked and what didn’t. Complete a 2x2 assessment of EGPNA’s critical products so they can understand which to address and how to plan for the rest of their products.
Key insights: Recommendations for EGPNA include:
The client: The global apparel retailer Gap Inc. is comprised of many brands including Gap, Old Navy, Banana Republic, Athleta, and more, operating approximately 3,600 stores globally.
The challenge: Gap’s Athetla brand seeks a low-impact, e-commerce packaging solution that aligns with its broader commitment to sustainable operations and communicates that commitment to customers. Their current packaging solution (a heavy, difficult to recycle plastic mailer) does not align with the brand’s commitment to sustainability.
The task: Propose a suite of options to replace the plastic mailer currently utilized by Athleta, outlining the sustainability benefit, cost, durability, requirements to implement and other relevant factors for each option—offering a solution that supports the brand’s 2020 sustainability goals.
The approach: The student team segmented the project into three distinct phases in order to arrive at three critical outputs for Gap Inc. and Athleta:
Key insights: GAP Inc. should consider not only a packaging solution, but also the implementation and communication strategy for the new packaging solution. Despite the innovations in other materials, given the constraints and the sustainability of the source material, poly is still the most practical option.
The client: Founded in 1958 in Medellin, Columbia, Grupo Familia is a consumer goods company and pulp and paper manufacturer, with seven manufacturing facilities in four countries and commercialized products in more than 20 nations around the globe.
The challenge: The Grupo Familia Foundation (GFF) strives to collaborate with recycling groups in rural areas of Colombia, creating community systems that promote adequate trash disposal. The company is interested in expanding strategic plans to support 16 waste recycler associations. The company requires a robust set of key indicators that can measure the social impact of its activities and improve its allocation of investment.
The task: Formulate a set of key social impact indicators that are relevant, observable, understandable, specific, and time-bound, and help the company adapt new initiatives and strategies.
The approach: The student team borrowed Deming’s PDCA (Plan, Do, Check, Act) chart to define methodology, starting with defining the scope of the project, the frameworks, and stakeholders, followed by a preparatory phase for an on-site visit, interviews, data collection and framework development; an on-site “Go, See, and Assess” data collection and verification and ending with a plan of action for GFF that will restart the PDCA cycle over again.
Key insights: Suggestions for Grupo Familia by KPI Category:
Solar lamps and compostable toilets for small warehouses
The client: Just Greens LLC (DBA AeroFarms) is a high-tech, data driven vertical farming company that uses 95% less water and achieves 130 times the productivity of regular field farmers—optimizing produce for taste, texture, appearance and nutritional density.
The challenge: AeroFarms wants to develop an additional business model that would be both profitable and socially responsible. From their experience with Phillips Academy Charter School, they believe demand exists in school systems for Grow Towers that would provide educational and nutritional value. While AeroFarms has an understanding of its own material and service costs of working with a school, they lack a clear understanding of how much schools might value the installation of grow towers.
The task: Provide a clear recommendation to AeroFarms with respect to how it could sell Grow Towers to schools, including the possible impact on improving childhood nutrition and a potential business plan.
The approach: To investigate the business potential for expanding AeroFarms’ grow tower technology into schools, the student team identified an appropriate segmentation of schools, interviewed 10 key stakeholders schools, and forecasted the critical factors of customer acquisition for the company.
Key insights: AeroFarms could attempt to establish a pilot program within affluent school communities in regions with inclement farming weather. However, research revealed that capital investments over $20,000 are extremely rare for this type expenditure. Depending on AeroFarms’ ability to reduce the price of its unit, the company should consider either targets a revenue-driven model with affluent communities that sets baseline educational attainment indicators or establishes a “non-profit” arm that subsidizes high-need school programs and strengthens AeroFarms’ brand visibility. Alternatively, the company might adopt a hybrid business model strategy.
The client: Patagonia is an American outdoor and adventure apparel company widely known for its environmental activism, high quality gear, and leading edge commitment to high road employer practices.
The challenge: As an accredited member of the Fair Labor Association (FLA), Patagonia has committed to ensuring that workers in their supply chain earn compensation that meets their basic needs and provides some discretionary income. Patagonia is interested in reliable aggregate data about what workers are paid, the value of benefits provided to them by suppliers, and the supplemental overtime hours worked to meet a basic standard of living, to understand how far each of their suppliers is from a living wage target.
The task: Compile detailed compensation data from a variety of factories that, when analyzed, might lead to concrete conclusions about current compensation levels and possible strategies for improving compensation.
Key insights: Corporate living wage initiatives cannot live in the social sustainability office forever. For a paradigm shift to occur in the industry, fair compensation principles must be adopted across all of a brand’s operations, including sourcing and marketing. As the Fair Trade
USA and Workers Rights Consortium models prove out, worker empowerment and organization is core to bringing about long-lasting change in factories. Patagonia should consider:
The client: A nonprofit behavior-change and environmental sustainability organization, Rare seeks to improve conservation results in areas of high environmental importance across the globe—including small-scale coastal fisheries, sustainable agriculture, and water use across Asia and Latin America.
The challenge: Rare is constantly in search of innovative techniques to promote long-term conservation. They have recently developed an impact-investing fund for sustainable fisheries in Indonesia and the Philippines, and would like to explore the viability of investing in the development of a smart mini-grid for local communities in the developing tropics.
The task: Help determine the feasibility, potential offtakers, regulatory and policy issues, and complimentary investments in cold chains or other fish waste reduction strategies; develop an investment model, workplan, and potential partners in country or otherwise; document any alternative and relevant climate mitigating investments that arise during research; analyze impact for mitigation of Green House Gases (GHGs) and improvements to fisheries value.
The approach: The student team conducted research using published materials on the Philippine business environment, impact investing, cold chain technologies, and fishery management. It also conducted numerous primary interviews with a variety of experts and stakeholders, including Rare staff on the ground in the Philippines, the MIT Energy Initiative, social entrepreneurs, and the renewable energy company UGE International.
Key insights: The foundational knowledge, criteria matrix, and review of a variety of business models and technology solutions the student team provided should serve to guide Rare in the next phase of sourcing and evaluating investments. In light of this research, Rare should consider the following next steps:
The client: Toyota is one of the largest global automotive Original Equipment Manufacturers in the world. Toyota Mobility Foundation in Japan works to advance mobility around the globe and actively explores ways to address the mobility needs of underserved communities, including low-income populations.
The challenge: Toyota Mobility Foundation seeks to promote shared mobility services to accelerate the adoption of Alternative Fuel Vehicles (AFVs) in combination with other transportation systems, and the prospect of autonomous driving as a key stepping stone toward achieving its goal of improving mobility access in underserved communities.
The task: Identify opportunities and challenges of introducing AFVs in shared mobility services in lower income communities, and evaluate under what conditions AFV-based shared mobility can be a sustainable business opportunity and accelerate AFV adoption.
The approach: The student team employed the Sustainability Oriented Innovation (SOI) framework developed at MIT Sloan School of Management. According to the SOI framework, for a new business opportunity to be sustainable, it must be good for customers, the business, and the system. This report applies design, market, and systems thinking to analyze two different scenarios.
Key insights: According to analysis, shared mobility services as they exist today do not serve a high percentage of low-income markets. The main barriers these services face are affordability and reliability. However, a smart, targeted public policy could help bridge this gap, making shared mobility affordable for low-income households, while still creating a profitable business opportunity for Toyota. Through sufficient customer demand and viable business models, shared mobility can scale to a new mode of transportation system that improves urban inter-modal mobility, increases vehicle utilization through ride sharing, reduces car ownership, encourages more efficient mobility behavior through price control, accelerates the vehicle purchase cycle, increases the demand for and use of fuel-efficient vehicles, and, thus, contributes to reducing carbon emissions. Toyota should consider:
The client: The World Resources Institute (WRI) is a global environmental think tank, whose Aqueduct project provides open access, web-based, global water-risk mapping tools that help companies, investors, governments, and other users understand where and how water risks are emerging worldwide.
The challenge: The signature tool of WRI’s Aqueduct program is a Water Risk Atlas—widely used by companies and investors to measure exposure to water-related business risks. In order to actualize the long-term value of the Atlas as an open-source tool, WRI seeks a sustainable funding model by 2019 that will yield at least $1 million annually, reliant not solely on donor goodwill and interest.
The task: Propose a sustainable funding model to support the long-term maintenance and improvements to the Aqueduct tool, backed by sound, fact-based research, and a clear description of both risks and opportunities.
The approach: Research spanned three phases:
Key insights: Water risk assessment is important, and need for assessment is growing. Aqueduct has a strong brand and is considered the “gold standard” for step 1 water risk assessment. However, WRI is undercharging or offering this high-value service for free. Aqueduct, with its strong capabilities and reputation is well-positioned for a sustainable future. The following potential business ideas could increase funding from $640,000 in 2016 to over $1 million: