In today's corporate world, regardless of the type of industry, there's a greater recognition of the fact that every business impacts society in some way. Society, in general, has a keen eye on the future, and within that lies lots of hope. Customers have a strong impact on whether corporations will be successful over the long run. Successful corporations must also be forward-thinking. The relationship between companies and society suggests a trend in the direction of sustainability for the future. Corporations that make a commitment to being sustainable will need to be innovative and socially responsible to be successful. Individuals, companies and society will benefit from setting and achieving sustainability goals for organizations. Another benefit of the sustainability trend is that we all benefit from the reduction of waste within the environment.
One of the most recent examples of how to integrate sustainability measures into a corporate strategy is Prada S.p.A. The company has set the bar for other luxury brands and corporations in all industries.
Prada Sets a High Bar for Achieving Innovation in Sustainability
Prada S.p.A. closed the deal on a 'Ǩ50 million sustainability loan with Crédit Agricole Group with a term of five years. Other companies have taken their shot at integrating sustainability into their strategies, but this is the first deal of its kind in the luxury products industry.
Both Prada and the lender identified artisanship, energy savings and circularity as their main priorities in the transaction. Prada selected three objectives from an agreed-upon list. To live up to its part of the arrangement, Prada will need to achieve certain sustainability targets. In exchange, Crédit Agricole Group will decrease the interest rates on the loan. The criteria for reduced interest rates include:
- Obtaining LEED Gold or Platinum certification for a certain number of its stores.
- Meeting a set number of training hours for its employees.
- Meeting targets for using a material called Re-Nylon, a sustainable nylon substitute for the production of goods.
Both companies agreed that coming to terms with how to measure the sustainability criteria in a tangible way was a challenge. The parameters are not tightly fixed. There is room for flexibility in the arrangement as Prada takes steps to achieve a more eco-friendly culture. Prada's chief financial officer, Alessandra Cozzani, is optimistic about the arrangement. In a statement, she said, 'This transaction demonstrates that sustainability is a key element for the development of the Prada Group, increasingly integrated into our strategy.'
Prada joined such companies as Chanel, Gucci and Burberry in announcing that it would discontinue using animal fur in its collections. Shortly after the announcement, Prada launched the production of travel bags made with Econyl regenerated yarn, which is created by combining recycled plastic waste from oceans, fishing nets and textile fibers. The brand is called Re-Nylon, and it launched with six styles of bags. Prada has also made a commitment to convert all the virgin nylon that it normally uses into Re-Nylon by the end of 2021.
This is just one of several sustainable issues that Prada initiated in 2019. The Italian company also owns Miu Miu, Church's and Car Shoe.
The Growth of Sustainability-Linked Loans
According to data from Environmental Finance, Crédit Agricole is a visible contender in the sustainability-linked, or green-lending, market. This innovative market rocketed from just $5 billion in 2017 to a respectable $40 billion in 2018.
The two companies share a bit of history together. Crédit Agricole financed Prada's Hong Kong IPO in 2011. Crédit Agricole also closed lending deals for sustainability-linked loans with Enel, a natural gas distribution company, and Swire Properties in Hong Kong.
Mario Ortelli, managing partner of the luxury advisory firm Ortelli & Co., believes that now that luxury companies and their consumers have increased their awareness of sustainability, a lot of other companies will be motivated to seek out sustainability-linked loans. Certain industries, such as oil, gas and mining, where risks are greater, may make greater moves toward sustainability-linked loans. Ortelli notes that any company in the luxury market can seek and obtain green loans, as the operational models are essentially the same.
Sustainability Initiatives Popular in the Fashion Industry
Prada also signed onto the Fashion Pact at the 2019 G7 Summit in France, along with 21 other brands. The fashion companies made a pact to meet the following three key sustainability goals:- Eliminate greenhouse gas emissions by 2050.
- Reduce single-use plastics by 2030.
- Support innovation to destroy micro-fiber pollution.
Carlo Mazzi, Prada's chairman and executive director, notes that Prada actually started a few sustainability initiatives five to seven years ago. In an interview with Vogue magazine, Mazzi said, 'We are very focused on sustainability. We know that we have to invest; it's clear that we have to make efforts.' Mazzi also spoke of the importance of saving energy and raw materials. Prada has invested in an energy-efficiency plan and opened three new garden factories in Italy that were designed by Guido Canali to call attention to the importance of nature.
During the Vogue interview, Mazzi also spoke about the importance of changing the culture of people to embrace sustainability. Mazzi believes that the younger generations are already in favor of sustainability, and it's just a matter of time before sustainability becomes a common language the world over. He believes that customers of the future will consider sustainability a top priority in their lives. Mazzi also stated that the majority of consumers will share the sentiment for the importance of sustainability and that the masses will force politicians to be more supportive of it as well.
With an eye on assisting corporations in their quest to create sustainability initiatives, Diligent Corporation designed a governance intelligence software solution called Governance Intel to give visibility into the real-time information boards need to stay current with all sustainability news, trends and innovations. Governance Intel is a game-changer in the world of sustainability, as it gives corporations a competitive edge by aggregating the news and research they need most and bringing it right to their fingertips.
