Where does sustainability fit into licensing? (Part 1)
Part 1 of a 2 Part Series (see part 2 here)
Consumers are now far more aware of the damage that some items are doing to the environment, with many beginning to take action by refining their consumption habits and being more responsible. Brands have also been adopting sustainability plans and extending them into licensing agreements in order to address the surging concerns about the health of our environment. After all, half of digital consumers say that environmental concerns impact their purchasing decisions - the impulse to go green is clearly gaining momentum.
That being said, how do we define sustainability, and where does this fit into licensing agreements? At the moment, brands are finding that their definition of sustainability is falling into two categories: how products are made, and how they’re packaged. Within the world of licensing, many are now emphasising the need to pre-agree these terms before a deal is approved, and while the terms and requirements are still being defined, licensors and licensees are moving ahead with sustainability programs across materials, manufacturing, and packaging.
Furthermore, it is safe to say that the knowledge of the supply chain has improved dramatically, whether it is the brand owners, licensees or consumers that are buying the products. The specifics around sustainability are also becoming more detailed within licensing agreements too. For example, where previous agreements would state that licensees should be using recyclable materials, newer agreements are starting to raise the bar by requiring that the packaging come from an FSC source, and that the materials being used should be 100% sustainable materials. In other words, licensors and licensees are now having to navigate the nuances of sustainability requirements.
Driving this sustainable growth within the licensing industry will require a change to business practices, be it through embracing new materials and production techniques or re-imagining packaging through a greener lens, all without sacrificing financial growth. Having said this, these are the factors that will help future proof both our industry and our world. Whilst this is immensely positive, these new sustainability measures don’t come without a price. The base cost for creating sustainable products is remarkably higher than that of mass-produced items, leading to a 10 - 15% premium at retail.
However, this is a chance for brands to create new edges for competitive advantage. Let’s consider fashion sustainability and licensing with clothing brands as an example. Seeing as material sourcing and textile production are two very important areas of operation for any fashion company, both of these things can contribute to a brand’s overall perceived value. Textiles contribute to the final product value proposition, and certain customer segments are able to appreciate the fabric itself, more than the brand of the product. The importance of textiles in this regard can be corroborated with ingredient branding strategies, allowing the brand to focus on emphasising a particular element of the product’s fabric. Ultimately, the promotion of the particular quality of what is inside the product becomes part of the persuasion to pay a premium price.
At the end of the day, there is no definitive rulebook when it comes to sustainability in licensing agreements. There are no specific guidelines, and while it is safe to say that there is a place for sustainability within the world of licensing, how it fits into it will undoubtedly change with time. Tune in to our second instalment for specific real-world examples of brands that have pioneered innovative sustainability practices within their licensing agreements.
