Ross Consulting & Solutions: Balancing enviro...
Ross Consulting & Solutions

Balancing environmental sustainability improvements and economic constraints

Sustainable business model (Source: Ross Consulting & Solutions)
Sustainable business model (Source: Ross Consulting & Solutions)

This article is focused on showing why sustainability core businesses are better positioned to anticipate and react to economic, social, environmental, and regulatory changes, and presents a profitability case: PET new fibers nonwovens geotextiles vs. PET recycled fibers nonwovens geotextiles.

Managing costs are important to the success of any business as such, they are the greatest point of leverage to a business success. In the geotextiles business it seems to be a never-ending focus of the majority of activities. It would seem that managing costs while maintaining/improving quality is the constant work of geotextiles producers and materials suppliers alike. “How much are the results connected with financial efforts?” is the question to answer in this case study.
The pandemic brought to our attention the deep industry sustainability crises and the as a solution to it: the sustainable business model. Governments are open to invest and to create partnerships for environmental reasons, sustaining corporations to progress in addressing sustainability. Most companies have a statement of social purpose, many are signatories of the UN Global Compact and support the Sustainable Development Goals (SDGs).
Up to now the sustainable business model is defined differently, according to The main important approaches of the sustainable business model definitions are:

1.      Attracting funds – meaning taking advantage of partnerships which enhance resources and activities through EU or national programs.
2.      Creating extended customer value and business value through an extended approach to customer value, while preserving the natural heritage.
3.      Creating positive value for stakeholders attracting new customers categories or satisfying in the highest one the existent one.
4.      Supporting technological social, and organizational innovation, creating a bridge between mainstream business and sustainable innovation research.
All these approaches of the business model are valuable and any of these definitions are not complete, but a compilation of the 4 of them (Fig. 1).
As not mentioned yet are the limits, vulnerabilities and risks of the sustainable business model, but without them the general overview of the sustainable business model would not be complete. Worth mentioning as limits are attracting funds while treating sustainable and environmental management separately from core business operations, creating extended customer false value, e.g. selling products as recyclable while not recycled, creating stakeholders lost or supporting the false technological social, organizational innovation.
Thus, to eliminate the risks of switching to a sustainable business model, is the ultimate managers assessment to assure that sustainability and sustainable competitive advantage fuse properly.
When switching from core business model to a sustainable business model, there are several general aspects of such a change that need to be considered.

As presented in the Harvard Business Review, a comprehensive business case for sustainability by Thensie Whelan, professor at NYU Center for Sustainable Business, and Carlie Fink, sustainability researcher at the same center, the mainstream business leaders have the erroneous perception that one can have profits or sustainability, but not both, a belief having its roots in Milton Friedman’s 50-year old, but still influential, thesis that the only purpose of a business is profit. This theory was contributed to as a hangover from the 1970s and 80s, when low quality, high priced environmental products failed in the market and early socially responsible investing delivered low returns.
A mainstream business is focused on customers. Their needs and preferences are at the center of business demand and the final business purpose is to fully satisfy them. The main core of the business remains people, technology and knowledge. They are the engine the business uses to achieve its goals and they are fueled by marketing identifying the future customer’s needs, by research and development of new technologies and new products, having the ultimate leverage of costs in order to achieve profit.
The sustainable business model is focused on achieving the needs of its customers while living sustainably. Practically, the same customers and the same needs are referred to, but the approach the business adopts to satisfy its clients is sustainable. From this point of view, the switch from mainstream business to a sustainable business model is possible. How this sustainable business model works has already been discussed and comparing to the mainstream business model its purpose creates competitive advantage through all stakeholder – customers, employees and shareholder engagement. To achieve its goals this system requires enhanced research and development to find new sustainable solutions, to have a marketing able to build customer loyalty with the final purpose of obtaining an increased profit.
Switching to a sustainable business model (Source: Ross Consulting & Solutions)
Switching to a sustainable business model (Source: Ross Consulting & Solutions)
With a mainstream business turning to a sustainable model business the business chain is not complete. At the end of the chain there is still the Recuperate-Recycle-Reuse business model. These kinds of businesses are mostly governmental, but the feasibility of the sustainable business model relies on them, meaning that it is useless that someone uses a recyclable package, if nobody recuperates it and so on. This kind of business has preserving the environment as its focus, has a strong research and development, they have a high control of costs, they do not use the marketing being connected through governmental networks with the customers, and have an increased rate of profit.
Nonwovens geotextiles, mainly used for roads and drainage, are permeable. Nonwovens are used in geotechnical constructions such as roads, drainage systems, retaining wall systems, duct banks and pipe trenching. Their functions are filtration, drainage, separation, erosion, control, container, and reinforcement. The main polymer used to produce nonwovens geotextiles is polypropylene (PP), followed by polyester (PET), and polyethylene (PE).
The nonwovens industry and IGS preview a CAGR increasing rate of 10.7 %/year in 2021 for nonwovens geotextiles, which is a very promising rate. Europe is the leader of nonwovens geotextile consumption, while North America and Asia-Pacific are almost equal, followed by South America. Finally, the Middle East and Africa have, as expected, the smallest consumption of nonwovens geotextiles.
Nonwovens geotextiles used for roads are materials that are employed in civil engineering construction led by the government. Therefore, in this case, marketing plays no role as formerly mentioned, the competition is actually among the national producers and for the case here, a new PET fibers nonwovens geotextile and a recycled PET nonwovens geotextile were chosen. The production price confirmed by American and Chinese producers stayed at 1/4 of the production of new fibers. Another assumption is that raw materials represent 40 % of production costs, a quote still pretty good for Eastern Europe.
PP is the most used raw material for nonwovens geotextiles, being more expensive than PET. On the other hand, recycled PET utilization in nonwovens geotextiles is at present less than 5 % of the entire market. The revenue for 100 m2 sold of PET and recycled PET nonwovens geotextiles is also presented in Fig. 3.
Nonwovens geotextiles profitability case (Source: Ross Consulting & Solutions)
Nonwovens geotextiles profitability case (Source: Ross Consulting & Solutions)
The raw materials costs in % presents prices decreasing from PP to PET and recycled PET, meaning that a recycled PET nonwovens geotextile should have a production price that is only 1/5 of a PP nonwovens geotextile, currently the most used ones.
Based on the presentation “Balancing environmental sustainability improvements and economic constraints: a case study in nonwoven geotextiles” held at the International Nonwovens Symposium on June 9-10, 2021

Corina Ross
Ross Consulting & Solutions

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