Amino – The sustainability vs. profitability debate

Today’s business leaders are coming to the conclusion that profitability and sustainability are not mutually exclusive. In fact, creating strategies on environmental, social, and corporate governance (ESG) programs has been gaining significant momentum for companies that are looking beyond the traditional bottom line to measure their impact. Yet, balancing thin profit margins with long-term sustainability goals and regulatory compliance requires sound principles, a well thought-out plan, and strong leadership to achieve optimal shareholder and stakeholder value.

Of course, there are many reports that draw a direct correlation between sustainable practices, share prices, and business performance. Just follow the money. According to a 2021 global survey by FTSE Russell, an index provider, sustainable investment is now standard globally where 84% of asset owners are either implementing or evaluating sustainability into their portfolios.  Analysis by BlackRock, the world’s biggest asset management company, found that in 2020 more than eight out of 10 sustainable investment funds performed better than share portfolios not based on ESG criteria.

If protecting the environment and investing in employees weren’t enough, this market validation is a major motivator to unite financial outcomes with sustainability ones. The strategy shifts sustainability from a ‘nice to have’ to an essential corporate imperative.

Based on experience gained at Amino, we’ve outlined some core areas that focus on sustainability goals – without sacrificing quality or profits.

• Create a circular supply chain

The circular economy model is gaining lots of attention because it is designed to reduce companies’ environmental footprint and operational waste, while leveraging resources efficiently. Essentially it means businesses create supply chains that recover or recycle the resources used to create their products. It is a supply chain that is sustainable – and traceable – at every stage.

There are many details to be considered, including use of recycled plastic or paper instead of plastic, type of glue being used, transport methods. Which suppliers are willing to be audited for compliance? If they are part of a conglomerate, will the parent company also be willing to be audited? And are they as committed to sustainable manufacturing processes?

The use of recycled plastics for devices and accessories is an obvious step in the road to sustainability. However, to do this and retain high quality standards requires considerable effort and expertise. For example, when manufacturing electronics, careful control of the raw materials is required to ensure that the finished product meets all relevant standards, such as the safety and flammability standards of plastic material for parts in devices, which dictate the use of fire-retardant materials. This requires the manufacturer to not only use recycled materials but also ensure that they are traceable and for the composition of those materials to be known, so that the finished product meets all relevant safety standards.

To reach a high percentage of recycled materials in the device it is essential to use recycled materials for all surfaces rather than just those in the chassis that are unseen by the consumer. That dictates that a high-quality surface finish can be achieved while using recycled materials where consistency of the source plastics is not as high as with virgin material. This does not need to be a compromise, but rather a case of understanding your materials and their capabilities.

Packaging should be as small as possible. Increase the amount of recycled and recyclable packaging while reducing the number of paper inserts in each box. Rather than print set-up and user guides, only include the safety details necessary to comply with regional regulatory requirements. The safely leaflet can include a QR code and URL indicating where relevant collaterals can be found online. Even with printed materials, plant-based inks and glues can be used rather than the petrochemical-based alternative commonly used.

Take for instance a set-top box package. It typically includes related items like cables. Cables are traditionally wrapped in plastic bags which while recyclable, may not be easily recycled by consumers and often end up in landfills. Other options include biodegradable plastic bags and paper ‘ties’ to secure the cables.

At Amino we have found that the use of recycled packaging adds approximately 8% to our packaging cost. However, as technology improves and becomes more widely adopted, we believe this will decrease.

• Commit to energy efficiency

An area of ongoing focus is energy. Power consumption is tightly tied to carbon emission. One kilowatt hour produces approximately one pound of carbon dioxide. There are many statistics flying around about the true impact of video streaming on carbon emissions as the growth in internet traffic has surged the last few years. Nonetheless there are improvements to be made.

One effort to help reduce the streaming carbon footprint is the Voluntary Industry Agreement with a mission to improve the energy consumption of Complex Set Top Boxes within the EU. The primary objective of the Voluntary Agreement is to continue improvements in the energy efficiency of set-tops without jeopardizing their intended uses and functionalities. This underscores the trade-offs between reducing power consumption and consumer experience. Achieving the lowest stamp of power ratings means many peripherals on the CPE will also need to power down. The effect means that coming out of standby might take longer, which we believe is a compromise most consumers will accept because of the environmental benefit.

This then becomes a consumer education issue to communicate the environmental benefits of waiting a few more seconds to power up, which can have its own pay-off by building brand loyalty with environmentally conscious consumers.

• Reject planned obsolescence in favor of upcycling

One of the most infamous examples of planned obsolescence comes from Apple. In 2018, the company was found guilty, and subsequently admitted, to the fact that older iPhone models were slowed down through iOS updates. They were ordered to pay a hefty fine and, it can be argued, their reputation was damaged in the process.

In a pay TV example, the operator business model is to provide a service to the consumer. It is therefore important that every aspect of service is considered for the entire lifespan of a subscription. From the point that the consumer subscribes to the service and receives hardware through to and including replacement of a device years later is important.

The point is to prevent obsolescence – planned or not. Software should extend the life of a device to avoid costly hardware replacements. Device ‘upcycle programs’ allow operators to radically overhaul the software and services deployed in a customer’s home without any changes or upgrades to the consumer’s hardware – and keep devices in use rather than in landfills. Think of the environmental effects of remotely updating firmware and apps, as well as helping customer service agents resolve support issues without sending a technician, in a truck, to the consumer home.

Summary

There is an incredible opportunity for industry leaders to shape a profitable future for their businesses by adopting sound principles of sustainability into their overall strategy. Going further, integrating sustainability into the corporate culture can have profound effects in other areas of the business including job satisfaction of employees, the strength of customer relations, or even the effectiveness of a company’s board. A focus on sustainability can have a knock-on effect to help companies be more resilient during market downturns.

While it’s not always easy being green, the effort has undeniable potential to help people, the planet – and yes, profits.

Learn more about Amino’s Upcycling Program here, and download the company’s latest ESG report.