Sustainable product design can help businesses identify new models
Companies often realize benefits beyond emissions reduction when they implement sustainable product design strategies, and these benefits can help organizations pivot toward more sustainable opportunities and business models.
Sustainable product design optimizes a system’s life cycle for maximum environmental, economic and social benefits, and reduces environmental and social costs. Product design is a key to sustainability for manufacturers because, according to the European Union Joint Research Commission, “over 80 percent of all product-related environmental impacts are determined during the design phase of a product.”
According to a new survey of 900 senior product design and engineering leaders at manufacturing enterprises across multiple industries, these benefits include higher revenue-growth rates, more appeal to capital investors, higher levels of customer satisfaction and employee engagement, and even cost-reduction opportunities. In this article, we’ll take a high-level look at how sustainable design in the short term can set the stage for a longer-term shift toward new ways of doing business.
Better customer loyalty and employee engagement
Customers’ expectations around sustainability are changing their buying behavior. According to Salesforce’s 2022 State of the Connected Customer survey, 66 percent of customers said they’d “stopped buying from a company whose values didn’t align with theirs,” and 78 percent of customers said a company’s environmental practices influence their purchasing decisions.
The data from the manufacturing leader survey supports the idea that sustainability can enhance customer loyalty. Among organizations that said their costs increased due to sustainable design implementation, 51 percent said an increase in loyalty, market share and/or revenue growth has already offset those costs. In the same survey, 70 percent of leaders reported increased levels of customer satisfaction after sustainable production was implemented. Employee satisfaction improvements were reported by 79 percent of organizations in the survey.
Organizations that develop sustainable product design processes can iterate them over time to support circular strategies such as designing products that are easy to repair and maintain, which can be resold on the organization’s marketplace or that are designed for recycling.
Stronger revenue growth
Because customers increasingly seek out sustainable products, it’s not surprising that 73 percent of the surveyed manufacturing companies reported revenue growth after implementing sustainable design practices. This growth can help offset the transition to sustainable design in the short term. It can also substantially boost the bottom line over the longer term.
For example, one technology enterprise reported in June that its sustainability efforts contributed $3.5 billion to its 2021 commerce sales. The company expects to find more sustainability-related revenue growth when it adds the ability to track those decision-making factors among its consumer and small-business customer bases. Also consider the Patagonia brand, whose commitment to repair, reuse and a brand-sponsored resale marketplace for its products has helped annual sales grow to an estimated $1 billion-plus since 2019.
Sustainable product design principles focus on minimizing material waste, energy and water consumption, and fabrication and transportation resources. So, while it’s not a given that a sustainably designed product will cost less to produce, there are opportunities to reduce material, manufacturing and distribution costs when rethinking the production process.
Moving sustainable thinking to the center of the design process as the first step on the path to circularity is the key to optimizing performance now and maintaining viability over the longer term.
For example, redesigning a piece of medical equipment to use less of a costly coolant could lead to a marked decrease in material costs. If that piece of equipment is also redesigned to require fewer assembly steps, that can save the manufacturer energy and water. And if the sustainably designed equipment is lighter or better packaged for more efficient truck transport, the company can save on fuel costs during transit. These cost reductions may be even more valuable if scarcity or supply chain issues drive up resource costs in the long term. And the savings can be invested in new initiatives as part of a sustainable business model transition.
Ability to attract more capital
Once an organization starts implementing sustainable design and realizing some of the other benefits mentioned above, it can also become more appealing to investors, who are already expected to grow ESG funds to $30 trillion within the decade. That’s because sustainability practices can reduce risk across key areas, such as supply chain and commodities costs, by reducing the amount of materials the company needs for production or the amount of fuel needed to produce and distribute their goods. Sustainable design-focused companies can also lower their risk of regulatory penalties related to emissions and strengthen their position in the market with more revenue and stronger customer loyalty.
As a result of these factors, 76 percent of the surveyed product manufacturers reported that they’ve seen an increase in their ability to attract capital, which can support the expansion of sustainability initiatives and the evolution of a sustainable business model.
A strategic position for an increasingly competitive future
Despite the potential benefits, just 22 percent of the manufacturers in the survey said sustainability is already a key element in their design processes, and just 8 percent reported conducting regular assessments of the environmental impact of their product design processes. A shift in mindset, culture and priorities is the first step to making product design more sustainable and to pave the way for sustainable models of doing business over the long term.
As consumer and business customers seek out more sustainable products to buy, investors look for more sustainable companies to invest in, and regulators impose more rules on operating in a world with increasingly scarce resources, sustainability is no longer a nice-to-have. Moving sustainable thinking to the center of the design process as the first step on the path to circularity is the key to optimizing performance now and maintaining viability over the longer term.