Expert Guest
Matt Scanlan
CEO & Founder Naadam
Matthew founded Naadam after spending two years on Wall Street. Finding the work unfulfilling, he quit and decided to travel. In Mongolia, he was inspired to transform the cashmere supply chain by purchasing wool directly from remote herders for fair prices. “Naadam is on a mission to democratize cashmere by translating transparency into real sustainability, better prices, and better quality for our customers at every possible turn.”
Introduction
Bjorn Bengtsson and guest Matt Scanlan, CEO of luxury cashmere company, Naadam, explore how to design a business model based on sustainable principles and how such approach can translate into a brand narrative which can be meaningfully conveyed to consumers. We explore how such a business model can be more efficient than a traditional model and what it means in regard to investment in know-how, business processes and people. The discussion will also consider supply chain transparency and consumer expectations of fashion businesses in the future.
Sustainable Business Models
A sustainable business model is one in which sustainable concepts constitute the driving force of the business. Fashion companies which employ sustainable business models frequently operate from a global perspective and therefore usually take into account the impact of its own operations on the communities where they work. As Scanlan discusses in his talk, Naadam’s sustainable business model was inspired by his early nonprofit work serving nomadic herding communities in Mongolia. Unlike regular business models, sustainable business models provide measurable ecological and social value, in addition to economic value. The supply chain involves suppliers who take responsibility for their own as well as the company’s stakeholders. On the consumer end, customers feel motivated to take responsibility for their consumption. The major principles within this framework include resource efficiency, social relevance, localized engagement, longevity, ethical sourcing, and work enrichment. Taken together, this business model provides value to the customer, natural environment, and/or society.*
Transparency
A transparent business is one that openly shares certain key information about its company operations to the public. The value of transparency is becoming increasingly important to consumers as there is heightened distrust of corporations. Many people assume that corporate goals are focused only on profits, the fixation on which may lead to unethical practices in corporate activities especially if those practices are hidden from public view.*
By revealing what has been traditionally kept private, companies show that they are committed to high ethical standards with the added benefit of helping consumers make better, more informed decisions about their purchases. In the fashion industry, transparency is most valued in pricing breakdowns, internal processes, and hiring practices. Everlane, an American apparel brand, is pioneering the movement for greater transparency in their operations, making it one of the fastest growing sustainable fashion companies. In fashion, companies adopting more transparent practices hope that consumers will be more likely to support such a business because consumers can better understand corporate decisions behind the making of their clothes.
“To... build up your credibility I think you have to have levels of recognizable transparency. You have to be able to show what “end-to-end” is. You have to be able to validate those claims for people.”
Key Takeaways
Transparency and Honesty Are Competitive Advantages
“I have not recognized that [any] competitor of ours had some sort of advantage by not being sustainable. In fact, I think a lot of the things that give us that unique competitive advantage are because we are sustainable. Because of the way we built our supply chain, our products cost less because we removed those inefficiencies in the supply chain. Because we have that transparency we know we are getting better quality. So now I can deliver better quality at a lower price than anybody else.”
-- Matt Scanlan
Making Mistakes is Part of the Learning Process
“It’s funny, people really like to sensationalize rapid growth and e-commerce businesses. The reality is a lot of hard work a lot of trial and error. A lot of mistakes were made in the process of getting there. What we focused on originally was how to make really good product. We knew that if we were authentic about how we did it and ended up getting a better product, then that story, that process, was ultimately going to distinguish the brand once we invested in it. And once we did [invest], it started to grow really quickly.”
-- Matt Scanlan
Embrace the Learning Process
“[Fully knowing our supply chain] has become a differentiating factor in terms of our value proposition to the customer. Not only from the storytelling side, but ultimately because of the pricing, we can deliver [along with] the quality based on the transparency... So think about it this way, if you know every step that exists within a system, inevitably you also know all of the inefficiencies in that system. You know the things that you can take out that might improve costs but not hurt quality. So we [are thus able to] analyze the entire system.”
-- Matt Scanlan
Believe in Your Sustainable Vision
“It wasn’t easy. If had I not always, I think, delusionally believed in my myself and my mission, I would have failed multiple times already… But l believed in myself. I believed in what I thought was right. And I believed in the learning process that I thought I was going to undergo and I understood that I had a unique perspective... Everybody has an idea for what you really should be... Everybody has an opinion. And you need to trust your own [opinion], your instinct, and your vision above everything else.”
-- Matt Scanlan
Ask Yourself
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What does the term “transparency” mean to you?
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What environmentally sustainable practices could your business or organization re-evaluate?
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What actions, have you or could implemented in your business for a better sustainable practice?
Continue Your Learning
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“Naadam is on a mission to democratize cashmere by translating transparency into real sustainability, better prices, and better quality for our customers at every possible turn.” Visit their website at: http://naadam.co
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The 2018 FTI Report from NGO, Fashion Revolution, has created a methodology and ranking system to measure fashion brands’ commitments (or lack thereof) to transparency within their operations. From the FR website: “We believe transparency is the first step to transform the industry. And it starts with one simple question: Who made my clothes?”: Fashion Transparency Index Report 2018
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“How Transparency Became a Top Priority for Businesses, and Why You Should Care” is a good primer on the trend towards transparency within business and how business of all types can benefit: https://www.entrepreneur.com/article/295739
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The world’s leading consulting firm, Mckinsey & Company along with the Business of Fashion, have produced The State of Fashion 2018, which gives an overview of the fashion industry along with key analyses and their predictions for the industry’s future.
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Sourcemap, “the world’s largest database of supply chain maps” allows users to supply chain mapping brands across a number of industries, fashion and beyond. Please visit their website at: https://open.sourcemap.com/.
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NGO Global Fashion Agenda, and Boston Consulting Group, co-created the “Pulse of the Fashion Industry Report,” an “annual in-depth assessment of the fashion industry's environmental and social performance.” Link to the reports here: https://www.globalfashionagenda.com/publications/
FOOTNOTE
* Martin Geissdoerferab, Doroteya Vladimirovaa, and Steve Evansa. “Sustainable Business Model Innovation: A Review,” Journal of Cleaner Production. Vol. 198, (October 2018): 401-416, https://doi.org/10.1016/j.jclepro.2018.06.240.
* Alton, Larry, “How Transparency Became a Top Priority for Businesses, and Why You Should Care,” Entrepreneur, June 14, 2017, https://www.entrepreneur.com/article/295739.
