Last spring, I took a class at MIT called “Sustainability Laboratory (S-Lab)” that gave me the chance to research sustainability in the chocolate market. Our class project was to research and analyze European markets to determine if they are attractive enough for U.S. companies to export to.
This project was very interesting because I was able to learn a lot about fair trade. Below is a chart showing the historic trend of the fair trade market in the UK. Even though coffee and bananas, which have relatively long histories as fair trade products, are a large part of the fair trade market, other categories, including chocolate, show stable growth.
Sales of fair trade certified products in the UK
The MIT teams used three criteria to evaluate the attractiveness of the fair trade chocolate market:
1. Fair trade consumption per capita
2. Chocolate consumption per capita
3. Fair trade retail value of each country
We used the chart below to integrate these three criteria. On the X axis is chocolate consumption per capita. Countries with higher chocolate consumption have more attractive markets. On the Y axis is fair trade consumption per capita, which shows each country’s tendency toward fair trade products. Countries with higher fair trade consumption have more attractive markets. The bubble size denotes the fair trade retail value. Countries with larger bubbles have stronger potential to sell fair-trade-related products.
From the above chart, we found that the UK, Germany, and Switzerland are very attractive in the European market. However, we also found that the U.S. market is prominent and attractive and has substantial growth potential. This finding was surprising for me. I had thought European countries were far ahead of the U.S. in terms of sustainability, but it turns out there is already a large market for fair trade in the U.S. What I learned from this is that companies should not target their sustainability products only to European countries but to the U.S. market as well.
-Koji Omiya
For my undergraduate thesis, I wrote about the Dow Jones Sustainability Index (DJSI). The DJSI plays a very important role in evaluating sustainability from a financial market standpoint.
The DJSI is an index that Dow Jones and SAM Group, a rating agency for social responsibility investment, established in 1999 as the first index based on SAM’s social responsibility investment criteria. SAM Group analyzes the largest 2,500 companies in the Dow Jones Global Total Stock Market Index, and then selects 10% of those companies to be components of the DJSI. The DJSI was adopted as a benchmark by asset management companies in 16 countries, whose total assets currently amount to $6 billion.
SAM Group evaluates the companies based on three criteria: economic, environmental, and social sustainability.
Source: Dow Jones Sustainability Index
Below is a chart that shows the DJSI’s performance since its launch in 1999. When compared to the Dow Jones Industrial Average (DJIA) and S&P 500, its superior performance can be seen. After 2005 the DJSI exceeded its benchmarks (DJIA and S&P500). What’s more, the DJSI has been resilient in the market crunch in 2009. These phenomena, I think, represent the long-term superiority of sustainable companies. I believe the DJSI’s performance shows that social and ecological sustainability is consistent with economic sustainability.
In addition, I think there is a positive feedback loop for the DJSI’s superior performance that is supported by the financial market.
Corporations are increasingly motivated to be selected as composites of the DJSI. Here I have linked to comments by DJSI component companies PepsiCo and Novartis.
The DJSI is a fantastic measure of the sustainability performances of listed companies. But the DJSI cannot evaluate unlisted companies; therefore, we need other indicators to evaluate the sustainability of those companies.
-Koji Omiya
Although I am Japanese, I lived in Germany for seven years when I was a child with my family. Germany is very progressive in its recycling-and-reusing activities, which furthered my interest in ecological sustainability. I majored in economics at Waseda University, in Japan, and wrote my graduate thesis (“Analysis of Dow Jones Sustainability Index”) about how the financial market responds to sustainability.. After seven years of professional experience in the banking industry, I had had many chances to talk to company CEOs about their visions and about the coexistence of economical and ecological sustainability.
Last September I started studying at MIT Sloan School of Management, which has given me numerous opportunities to learn management, leadership, and business skills. Through classes such as “Sustainability Strategy” and “Sustainability Laboratory,” I became even more interested in sustainability business. (For more information on sustainability at MIT-Sloan: http://mitsloan.mit.edu/sustainability/.) One of the Sloan faculty members kindly introduced me to Merida as a sustainability-oriented company. I was very impressed with Merida’s engagement in sustainability, and decided to work there for the summer.
At Merida I have worked on several projects, including:
1. Merida’s sustainability metrics
Merida has several product lines, such as abaca, sisal, wool, and paper; and each has a different supply chain. For this project, I am concentrating on supply chains that go through the Boston warehouse, analyzing their electricity consumption and wastes. I am working with Zairo Cheibub, Director of Sustainability and Supply Chain, to establish a metrics of Merida’s economical and ecological activities based on my analysis. Zairo will continue this project by applying the Boston warehouse metrics to other facilities to establish an integrated metrics.
2. Financial analysis
I have analyzed Merida’s financial data and compared it to listed peer companies to gain valuable insight into Merida’s positioning in the rug market. I discussed with Merida’s management how Merida can keep its activities consistent with its positioning.
3. Inventory analysis
Merida has various kinds of products, which makes inventory control very important. I worked with Robert Segal, controller, to analyze how Merida purchases raw materials when it is launching new products.
4. Japanese market analysis
Merida’s products are available in Japan, my home country. I have researched how Japanese people evaluate Merida’s products and analyzed their purchasing of rugs in general. I learned that Japanese people are becoming more and more interested in sustainability. I believe Merida can respond to their growing preference for sustainable products.
Working at Merida has given me fantastic opportunities to learn how companies can work toward both economical and ecological sustainability. I have gained valuable experience and insight related to sustainability and will be sharing more of what I have learned in a short series of posts.
-Koji Omiya
