Takaaki Houda: Between Profit and Sustainability

2023/12/21

Are you familiar with Allbirds sneakers? While sneakers generally have a high dependence on petroleum in their production process, the company's products are environmentally friendly, focusing on renewable materials such as wool and wood. They have three stores in Japan, located in Tokyo and Osaka, and also sell online. Or have you ever eaten a hamburger made with plant-based meat alternatives, such as those derived from soybeans? The taste is almost the same as a regular hamburger. Meat alternatives are also said to have a relatively low environmental impact and eliminate the need to slaughter animals. These products are designed with the "E" (Environment) of ESG in mind. Interest in ESG has been growing in both financial and consumer markets in recent years; various surveys have shown that investors are expected to incorporate ESG into their investments and that ESG influences consumer purchasing behavior.

Allbirds went public on NASDAQ in 2021, and Beyond Meat, a manufacturer of meat alternatives, did so in 2019. Although both companies were initially welcomed by investors and saw their stock prices rise, that momentum did not last long; as of November 2023, both companies' stock prices are at less than 10% of their peak levels. The concept of providing a positive impact on society while delivering returns to shareholders is ideal and represents the form of "new capitalism" being sought. However, the reality is that equity investors are impatient and did not wait leisurely for both companies to achieve profitability. In fact, the sales of both companies have not grown as much as initially projected. This suggests that changes in consumer behavior have not kept pace.

Few investors or consumers would disagree with the opinion that corporate activities and products should be made "green" and sustainable. However, there is still no consensus on how to support this shift in corporate activities. While startups have led many innovations and social transformations in the past, seeing the struggles of the two aforementioned startups that champion green and sustainable practices suggests that shifting social values as a concept—without an overwhelming improvement in convenience for people—may be too heavy a burden for startups. So, which entities in the business world should take the lead? This lingering uncertainty will serve as the source for my next research.